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New Box Office Futures Market Could Allow You to Bet on Movies
Last week, members of the U.S. Commodity Futures Trading Commission approved the creation of something called the Trend Exchange, a market that would enable people to invest in box office revenues, just like any other stock. The commission must still approve the creation of specific contracts, and we'll have to wait until June 7th for a final decision. But, as the Huffington Post reports, Hollywood has wasted no time in voicing its dismay. Calling it "an online gaming platform that could be easily manipulated," Hollywood execs have vehemently opposed the creation of a new futures market. In support of their argument, they cite a financial reform bill, currently under deliberation in Congress, that would outlaw its existence, anyway. The MPAA and several other industry organizations have all signed a petition calling for the prohibition of any futures market.
Veriana Ventures, the company that first proposed the Trend Exchange, promises to stand behind its brainchild, saying that it could give smaller studios a boost by encouraging more people to finance movies. CEO Rob Swagger rhetorically posited, "How can an exchange that helps create liquidity be criticized when it really helps bring new dollars to an already struggling economic situation?" Futures commission member Bart Chilton approved the proposed market, but stipulated that he remains unconvinced that the market could avoid manipulation, or help investors to hedge risk. In a statement, Chilton said, "I have not heard any arguments to persuade me that 'movie futures' generally can overcome some fundamental design flaws."
We're not entirely privy to how a futures market actually functions, but we still find ourselves a little bit uneasy about turning the box office into a stock market. We appreciate the idea of involving regular investors in the otherwise cloistered business of Hollywood, but we can also easily imagine a scenario in which people begin going to movies purely out of financial interest. Call us idealists, but we've always enjoyed watching movies as pieces of art -- not as glorified stock portfolios. [From: Huffington Post]
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Comments
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Subscribe to commentsbullsfan2006Apr 20th 2010 10:55AM
Box Office receipts can already be "wagered" on through many offshore sportsbooks and non-US exchanges such as Intrade. Intrade right now has multiple binary strike contracts on 4 upcoming movies.
If the "cast and crew" of these movies aren't already making a killing in these markets, perhaps information on these productions isn't so secretive after all? The internet is like a chat room on steroids. Nothing is kept under wraps regarding movie buzz - everyone has access to it.
The rumor mill started cranking yesterday about the disaster that the Green Hornet movie is becoming, and that isn't scheduled for release until December.
By the way, the Trend Exchange is targeting institutional traders only, and these contracts would not be available to your average Joe on the street unless they traded them through an intermediated broker who had a clearing relationship with an approved FCM.
It's the Cantor Exchange offering that would allow you to trade these movie futures through your credit card. These are two separate business models being proposed. The CFTC staff TWICE recommended Trend Exchange approval to their commissioners, but the "political animals" that head the CFTC were frightened by the media blitz created by the entertainment industry against it.
And know this - their objections are directly related to the attempts at transparency into box office receipt calculation that these markets would offer. The Trend Exchange would have access to the exact raw data from the theaters (point of sale) that the studios have. Yet a 2-year review of these numbers shows a standard deviation of 2% between the actual raw data and the studio-published box office number.
So much is tied to box office numbers (merchandise, contracts, compensation, royalties) that the studios like to "play with" or "massage" these numbers to help their bottom line.
These attempts to hold these CORPORATIONS to the same accurate accounting standards that every other business needs to adhere to should be applauded, not condemned!
Also, these products are being proposed as exchange-based, federally-regulated, centrally-cleared instruments. The mortgage-backed derivatives that caused the recent financial meltdown were over-the-counter (OTC), off-exchange, UNREGULATED instruments.