When he picks up the last piece of sweets he picks it up, eats it, looks
up, because there are no more, the kids look up as well
and they start screaming, ET starts screaming and chaos ensues.
And so that's the story that you have to keep in mind.
What you may not know, is that the small pieces that ET picked up, were a small
candy called Reese's Pieces produced by a company called Hershey's.
Okay, and so, what I want to discuss now is the back drop to this story, the
commercial back drop to this particular story.
Okay, so we call it the chocolate wars.
And keep in mind, these are fictitious numbers that we're using.
Universal Studios, which were shooting ET at the time, they were charging, or
they were approaching Mars, saying, well, do you want to place a
product in this scene in ET? If you do, we're going to charge you
$1 million for that. If that had happened, if Mars had agreed
to that offer, then Mars' gross profits would have increased by 0.8
million, so 800,000 and Hershey's would have decreased by
100,000. So, to find the net profits, we have to
include the payment for that, which is 1 million.
So, Mars' gross profits would have been minus 0.2 million.
Hershey's, they didn't pay anything, and they suffered, 100,000 in loss of
sales. If product placement had taken place by
Hershey's, which is actually what took place, what happened, Hershey's gross
products would increase by 1.2 million and Mars' profits decrease by
0.5 million. So again, if we calculate the net
profits, this is going to be 1.2 minus 1, and that's positive 200,000.
If there's no product placement, it's just business as usual, nothing changes,
no profits change. So, that situation, obviously,
is something that was highly strategic because what happened depended on what
the other firm did, and so on and so forth.
So, how do we draw this? We can't really draw a matrix, as we'll
see in a second. So, how do we take into account the fact
that we have sequential decisions here? We draw what's called a game tree.
