Misaligned incentive

Over at GigaOm, Robert Young has come up with an ingenious response to Mark Cuban's cinema marketing challenge. Mark asks:

"… How do you get people out of the house to see your movie without spending a fortune. How can you convince 5 million people to give up their weekend and go to a theater to see a specific movie without spending 60mm dollars."

And Robert's solution is an elegant use of both word of mouth and the existing market conditions. He suggests that the ticket stub from any film should be redeemable by a third party for a discount to see that film in the future. Thus when I discuss how much I enjoyed Pirates of the Caribbean with a friend, I can pass her my ticket stub entitling her to a discount on the film if she goes to see it. Neat.

At the risk of complicating the model, I'd suggest something of a twist would really make it fly. As it stands, the model has its incentives misaligned. See, the solution we're looking for is one that encourages people who have seen a film to pass on their recommendation that the film is good. But by making the ticket stub good for a rebate on someone else's future ticket price you're not rewarding the recommender but the people they happen to make the recommendation to. Perhaps they'll try and sell the stub at 50% of its face value. That still doesn't align the incentives - they'll just get paid once for spreading the word.

So the twist I propose is this. The ticket stub gets linked to the credit card of the guy who bought it (person A). It's redeemable by a third party for a dollar (or whatever) off the price of their ticket to that movie. Call the second cinema-goer who redeems the stub person B. When they redeem the stub and get their discount, person A gets a few cents credited to his card for having made the recommendation - he gets rewarded for taking the time to (successfully) persuade them to see the film. If person B persuades more people to see the film, person A gets a few cents when they buy their tickets too. It's technically trivial to track who originated the sequence of cinema visits, so the person who acts as the catalyst and is responsible for all the subsequent people going to see the film can be identified and rewarded commensurately.

What does this do to the dynamics of the cinema ticket market? First, it vastly increases the value of the opening night - there's a first mover advantage in this chain of rewards. Perhaps tickets to opening nights would have to auctioned off. Second, it encourages the recipient of the ticket stub to go to the cinema themselves as quickly as possible - theyw want to get in that value chain as early as possible. Most of all, though, it rewards the people - the mavens and the super-connectors, to use the Gladwell lexicon - who are most effective at getting other people into the cinema. If your most effective marketing tool really is word of mouth, it's important that the people who really had the beneficial effect on your ticket sales are tracked and rewarded. Perhaps they'd make a few thousand dollars each per film. Perhaps for a blockbuster one guy who sets off the whole chain could make a million dollars. Good. It'd be cheaper than the $60 million Mark Cuban posits such ventures currently cost.