Chuck E. Cheese seeks to destroy 7 billion prize tickets

There is a thing called gift card breakage. It’s been about 10 years since I worked for a company that did this, but… the deal is you figure out how many gift cards are redeemed after a certain age, like 5 years. If that is 50%, you can claim 50% of your outstanding value of gift cards older than 5 years as profit.

It’s just a statistical model; the gift cards are still valid and can still be redeemed. It’s just, when you have a large enough pile, you can statistically predict fairly accurately how much won’t ever be redeemed.

It is very similar to the breakage companies take on accounts payable. They know as an account gets older and older, the likelihood of it getting paid goes down. So they know an invoice unpaid after say, a year, has a certain percentage change of never being paid, so they try to bundle it up and sell it to someone else for more than they would be able to collect on the bundle, less expenses. Those bundle buyers (debt collectors) try to buy it for less than they will collect. Fun games all around.

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Destroy the bits of paper – how? Burn-em up? Toss-em in a landfill? Pulp-em for newsprint or toilet tissue?

Unfortunately, it’s not that easy, as pallets of ticket are not inherently pleasant to dive into. You’re going to need a lot of ticket fluffers to see your dreams through to fruition. If only you had a few railroad cars of Chuck E. Cheese pizza to grease the wheels, so to speak.

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I can tell you that as a prime herder of an elementary schooler, each trip to the rat palace comes along with trying to carry strings of hundreds and hundreds of tickets. Multiply that by probably hundreds of kids a day at each location, and you get into really large numbers really quickly.

We’ll have to see how the electronic format works for them, because I suspect that, for children, having a stream of physical tickets spew out of the machine is a large part of the appeal. Numbers blipping up on a readout telling you that your card is being charged with ticket credits just won’t have the same appeal.

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Thank you, I didn’t know the term!

Back in the day when I was in microfinance, we used a similar strategy for arrears and loan write off. Loans would be written off the books after a certain period of time (say, 180 days) but we still collected on them. Any amount collected after write off went into “other income” and could be used as the Institution saw fit.

There was no legal infrastructure to sell off bad debt to debt collectors, which was not a bad thing at all. It made us better lenders, in that we wouldn’t lend to anyone we calculated couldn’t repay, which also meant we didn’t put borrowers unnecessarily at risk.

(Edited for clarity)

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It’s that slightly odd American use of bankruptcy not to mean actual cessation of business but a chance to restructure without being shut down by creditors.

According to the court application, permanent shredding and ‘proper disposal’ which is not discussed further.

**It’s a profit deal! **


Source: clip posted to YouTube by user Mark McCool on 2017 06 11 from the movie The Jerk, 1979

Edit to add source

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Ok, so I had no idea that the parent company was named CEC Entertainment. With the understanding that Chuck’s middle name is actually “Entertainment” does that mean that the parent company is a shortened version of “Charles Entertainment Cheese Entertainment?”

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So it costs 2.3 million to destroy tickets for 9 million in prizes? That ratio really shows how little value their prizes have.

I used to stop by Circus Circus casino when I was in Reno because the carnival games were a loss leader. I would always win a few furry things for a few bucks. Letting you feel like you are on a lucky streak, whence they would take the shirt off your back at the tables I didn’t play.

Perhaps since these tickets are worth so little, use them as a loss leader. Give every kid in school a roll, and at least their parents will buy some overpriced pizza.

Damn…and here I am sitting on 2 billion prize tickets that I was saving up for my retirement. I should have cashed out before all this bankruptcy business, but I was waiting for the exchange rate to fluctuate in my favor.

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