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Analysis of Royal Theater’s Practice of Showing Commercials

Analysis of Royal Theater’s Practice of Showing Commercials. Presenters: Dr. Chapman and Dr. Rogoff. 1. Agenda. Background: Chapman The Case for Fraud: Chapman Survey Goals: Chapman Survey Results: Chapman Ethical Issues: Chapman Strategic Issues: Chapman Conclusions: Chapman

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Analysis of Royal Theater’s Practice of Showing Commercials

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  1. Analysis of Royal Theater’sPractice of Showing Commercials Presenters: Dr. Chapman and Dr. Rogoff 1

  2. Agenda • Background: Chapman • The Case for Fraud: Chapman • Survey Goals: Chapman • Survey Results: Chapman • Ethical Issues: Chapman • Strategic Issues: Chapman • Conclusions: Chapman • Recommendations: Chapman 2

  3. Speaker: Dr. Chapman Background • A Patron is dissatisfied • Sat through 20 minutes of commercials before the movie started • Allegation of fraud on Royal Theater’s part • Threatens to file class action lawsuit. 3

  4. Speaker: Dr. Chapman Misrepresentation vs. Fraud • Fraud distinguished from misrepresentation • Prima facie case for fraud 4

  5. Speaker: Dr. Chapman Prima Facie Case for Fraud • A plaintiff alleging fraud must prove: • A representation was made • The representation was false • When made, the representation was known to be false • The plaintiff relied on the representation • The plaintiff REASONABLY relied on the representation • The plaintiff suffered damage (economic loss) as a result 5

  6. Speaker: Dr. Chapman Justifiable (Reasonable) Reliance • Reliance must be reasonable • Starting time specified in: • Newspaper ad • Marquee • Employee • Movie ticket • General public knowledge 6

  7. Speaker: Dr. Chapman Damage – Economic Loss • Damage resulting from reliance • Opportunity cost - 20 minutes of lost time • Nominal • Punitive Damages 7

  8. Speaker: Dr. Chapman The Case for Fraud • Conclusion: • First four elements easy to establish • Difficulty establishing reasonable reliance and damage • Tommy HAS A WEAK case for fraud. 8

  9. Speaker: Dr. Chapman How Widespread is Discontent with Commercials? • Your theater’s reputation and financial viability depend on your patron’s opinions of this behavior. • Objective – estimate the percentage of all theater patrons resenting commercials. • If less than 5% resent the commercials, Royal Theater should consider going to trial and defending any lawsuit. • If between 5% and 20% resent them, cut showing time of ads by 50% provided Tommy files lawsuit. • If more than 20% resent the commercials, Royal Theater should consider settling with Tommy and discontinue ads. 9

  10. Speaker: Dr. Chapman Interpretation of Survey Results • A survey is a sampling of the population. • Out of 100 responses: 12 patrons or 12% resent the commercials. • We can be 95% confident percentage of moviegoers who resent commercials is between 5.6% and 18.4% • Results indicate that Royal Theater should cut showing time of ads by 50% if Tommy files lawsuit. 10

  11. Speaker: Dr. Chapman Ethical Issues • Decision to state movie starting time as 1 p.m. • Traditional View - Costs vs. Benefits • Impact of decision on STAKEHOLDERS: patrons, owners of theaters, employees 11

  12. Speaker: Dr. Chapman Costs • Potentially agitated customers • Potential legal liabilities • Perception of “tricking” a captive audience to increase revenues 12

  13. Speaker: Dr. Chapman Benefits • Increased revenues • Public service announcements • Buffer grace period • Entertainment 13

  14. Speaker: Dr. Chapman Ethics Summary • Tommy’s case for fraud is weak, but Royal Theater should be prepared to respond. • Royal Theater is behaving in an ethical manner, but opinions of patrons must be considered for longer term viability. 14

  15. Speaker: Dr. Chapman Strategic Thinking • The Whole Picture: Long term changes in business environment that could affect Royal’s profitability: • Consumer attitudes about commercials prior to films • Competing forms of entertainment • Competing theatres • Changing demographics • Changes in government regulations • A Sense of Direction: All of these could impact future decisions to show commercials. 15

  16. Speaker: Dr. Chapman Long Term Recommendations • Consider changing theater operations to avoid future lawsuits and attract more patrons • Advertise movie starting times more clearly. • Reconsider the number of commercials shown before each movie. • Treat consumer complaints courteously • Consider innovations to bring in more customers 16

  17. Addendum: Confidence Interval

  18. Addendum: Confidence Interval

  19. Speaker: Dr. Chapman Interpretation of 2nd Survey Results • Out of 300 responses: 60 patrons or 20% resent the commercials. • We can be 95% confident percentage of moviegoers who resent commercials is between 15.5% and 24.5% • This answer extends across two of the decision rules: either cut the ads by 50% or discontinue ads entirely and settle with Tommy. 19

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