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UPDATES WORST IDEA EVER? Wall Street Plans Futures Exchange Tied To Box Office
Back in December 2008, Nikki reported that a leading Wall Street brokerage house, Cantor Fitzgerald, was seeking permission from U.S. regulators to set up a futures exchange to trade contracts on the expected weekend box office of major motion pictures. Now the Cantor Futures Exchange is about to launch and and begin taking these bets in what she called it the “Worst Idea Ever” since studios can make bets on their own movies to increase total revenue or hedge losses. Now I can tell you that, in a system that could have come right from Las Vegas, contracts will trade at $1 for each $1 million of box office business, for making over and under bets on gross estimates worked out months in advance. I agree with her: I just don’t how turning the film industry into a cousin of sports betting is constructive, but I do see how it could lead to bad things in a business already fraught with conflict of interest issues.
The plan has been in the works for almost five years, I’m told. That predates the near collapse of the financial system, some of which was blamed on short-selling and the preoccupation with creating wealth while not actually building anything. How is this different? The notion that film financiers, even studios, can hedge their investments by betting against estimated box office gross is a little chilling. Baseball’s hit king Pete Rose was thrown out of the sport and denied entry into the Hall of Fame for betting on his team. What is a star or director going to think if he discovers his film financier or studio bet against the film they worked so hard to make?
Will there be temptation by a hedge fund that backed a slate of movies to find out about test screening results to inform wagers? Filmmakers have trouble enough keeping their test screenings off the internet. In the new betting system, whispers about early reaction to a film becomes valuable currency, the way that early injury reports are to sports bettors.
So how is this good for moviemaking?
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ABSURD with a capital “A.”
I’ve been trading on the Cantor Fitzgerald owned HSX for years now (am up to 200 million HSX$) , just for fun obviously and it is neither a dependable nor particularly interesting way to ‘invest’ anything other than pretend dollars. I wouldn’t even momentarily entertain the idea of putting real cash down on something to which I have no actual ownership and in which I would receive no actual dividends. It’s just Vegas style gambling pure and simple. A silly idea that will go by the wayside very, very fast.
If you’ve been on HSX for years and only have $200 million, you definitely shouldn’t entertain this idea.
How much do you have?
There are actually two firms — Cantor and Veriana — pursuing such markets. Their plans indeed are dangerous. How can these markets ever free themselves of insider trading? I don’t get it. They should not get approval, but I fear they will.
This won’t be good for anyone except those insiders who participate and are privy to the testing info.
There are so many regulatory issues at play here.
Oh, and short selling was not a cause of the financial meltdown. It’s a good gauge of a company’s current short-term financial viability.
I love it! Why the hell not.
I completely agree — if someone wants to put down their own money, who are we to stop them?
It looks like some people are missing the point.
If above mentioned actor/director thinks his/her movie is so great, they can take some money from their multi million dollar paycheck and invest in the movie, thus taking more money from the financier (or employer) if they are right! Free market baby!
A financier putting up $30 million does not care about anything other than making their money back, and rightly so. If this allows them to feel safer about funding films think about how this could help create and fund many more movies in the future.
You’re looking at this the wrong way: if the risk of funding films can be alleviated, then more films can be made with less artistic influence, and more freedom.
Hell, exhibitors have been betting on films for years. I don’t mean with their screens, I mean the bookers and executives personally who get inside knowledge from trade screenings and distributors and then make investments, then back them up (or down) in their exhibition contract negotiations. It’s harder to do now that movie companies are vertically integrated, but it ain’t new. It’s the short-selling that can be destructive.
I look forward to stuff like smear campaigns to eliminate potential attachments… sabotage at the theaters to minimize box office numbers… on-set “accidents”… plants at the review sites… forged/leaked work-in-progress edits and early draft scripts… the mob forcing the lead of an “Eight Men Out” reboot to deliberately tank the project… too-big-egos-to-fail… toxic backstage derivatives… screen credit default swaps…
Uh… is that consumer financial protection agency almost ready?
These are all things people will, and have tried, but correct information is always available, and skilled/successful traders have made a skill telling which is which. For example, on eBay there are often scammers selling products they don’t actually have (and thus, will never actually ship to someone who buys and pays for them). However, there are signs that someone is a scammer that a wise buyer or seller often recognizes–not all the time, but often. Sure you get burned once in a while, but yet eBay for the most part is a remarkably efficient market.
Plus, you’re ignoring the fact that studios have for a long time faked information: fake scripts, fake onset reports, fake reviews, incorrect estimated box office numbers, etc etc etc… Yet somehow the public and HSX traders (as a prime example) often see through all the false info. How is this? Because often times the studio will release fake information about a film’s awesomeness which reads like a PR release because it is written by the PR department (or an assistant who peppers their “review” with cast and crew credits and profuse praise); Because the available information conflicts (what I call “sketchy”)…because we don’t trust all sources of information equally. For example, if a source of information provides inaccurate info some of the time, I’ll value their future information accordingly. People (be they traders or not) aren’t dumb. And yes, just as in life, occasionally we all get burned, but here your analysis of the possibilities and your belief in studios as monolithic all-powerful deities who can pull fast ones over and over on unsuspecting consumers/traders is woefully one-sided and inadequate.
Except I’m not only talking about just gaming public relations and ebay-like fraudsetrs whose accounts have ratings… I’m talking about the potential for conflicts of interest, pressures to sabotage projects, insider trading, and less openness in the creative process. None of this helps the film industry, none of this helps the public.
It’s one thing to trade shares of a media company, it’s another to trade shares of a particular movie. You’re trying to argue from some kind of free market position– that the integrity of people’s reputations will somehow keep everything in check. But what this plan really represents is a massive corruption of the free market. There will suddenly be financial incentives for third-party players to disrupt the manufacture, marketing, and distribution of one film and promote another– not on the merits of the product, but simply to upend market expectations as an end in itself.
Adding this “noise” to the system would create an external pressure on the movie industry by GAMBLERS to have shitty movies do unexpectedly well and commercially viable movies tank (presuming you can short films..) Good movies are hard enough to make, but adding this extra ingredient of potential sabotage by gamblers (who unlike the stock market do not own part of the movie in question) does not benefit anyone except maybe a few who are willing to create more havoc in Hollywood then there already is.
Can’t these people just bet on the weather or something?
AMERICA HAS LEARNED NOTHING FROM 2008-2009. what a joke. but at the same time everyone is desperate for cash…
This sounds like the most boring way to lose your money ever!
its no different than sports, tracking reports and historical data are no more or less reliable than the historical data that is available to the sports books. worst case scenario some people make some $$.
It’s a total crap shoot; you just can’t predict what will fill seats and what won’t. Lot’s of people dissed ‘Avatar’ even after they saw it. Even if you backed it, you’d lose on ‘Valentine’s Day’, which looked like a bust on it’s way out the door. You’re way better off with Hog Bellies.
I give you 100 to one that 2012, the third Batman installment is nominated for and Oscar.
( no gambling intended)
Oh come on, it seems that society these days is completely possessed by fear. Recently we’ve chosen to become fearful of markets, speculation, information (in the form of insider trading). As a student of economics I can assure you that *all* trading of any form, in stock markets, bond markets, or otherwise is INHERENTLY “insider trading.” People trade based on the information they have, regardless of its source. Anti-insider trading policies actually discourage a market clearing (that is, keeping information from flowing freely restricts a markets ability to correct itself). When information can’t flow freely for fear of being labeled “insider trading” then the market price doesn’t accurately reflect what is known about a good, firm, or film in this case. I’ve read one economic paper which suggests that getting rid of anti-insider trading regulations would yield net benefit to society because when things like toxic assets are being traded (as occurred in the markets for mortgage derivatives which has caused so much trouble) SOMEONE SOMEWHERE knows that they’re problematic, and that someone would likely share the information with others who would then avoid the stock, sell it short, etc…resulting in, potentially, no market for such toxic assets. In fact, the problem with the recent mortgage derivatives market catastrophe could be laid at the feet of regulations which discourage the sharing of relevant information.
In this case, most of the FEAR I’ve heard is that studios will hedge their bets on a film by selling a film they think will perform poorly over the long-run short, and buying a film long that they think will perform well over the long-run. Note: airlines and oil producers already hedge their bets in oil markets, this is partly which keeps oil prices from spiking more than they already do, and what keeps air travel prices as consistent (and low) as they are. If Skywest (for example) wasn’t so good at hedging their bets using these markets, you’d be paying a lot more for your Vegas-Los Angeles commute. The problem with the above assertion that studios (or others) who know of a films poor quality will short it and screw the market (other investors) out of their hard earned money is the idea that only the studio will know of a film’s poor quality and will maintain perfect control over the information relating to that fact. Somehow (to the market and the consumer’s benefit) information about a film’s poor quality often leaks out. If nothing else, it’s often very difficult to make a downright BAD film look good in a trailer. Copious amounts of research (much of which I’ve read) suggests that the primary driver of a films opening weekend revenues, and thus, of a film’s long-term prospects is quality of marketing materials and degree of exposure to consumers of those materials. The public has a knack for smelling a stinker before it’s released, and this is in part because you can’t sugar-coat shit. It still looks and smells like shit.
Additionally, this sort of baseless fear comes from a misunderstanding of a derivatives/speculative market. In this case, if a studio, knowing how bad their film is, tries to short-sell it, doing so essentially tells the market that others (identity unknown) think the film is currently overpriced by the market and the price drops in response. A speculative market like Cantor requires that each BUY be offset by a SELL. If someone is trying to SELL (short) a film heavily than the price will drop as other buyers respond by offering less and less.
Lastly, research has shown that such markets are often the most accurate predictors of a film’s box office performance. Why is this? Certainly some traders are “insiders” but insiders aren’t necessarily always right, and if someone with more or less information trades on their information than the price of the stock responds accordingly, essentially delivering that information indirectly to the market.
These fearful posts are merely written by those who are uninformed. Besides, fear mongering *is* so popular these days! I have yet to see a lucid post discussing the pros AND cons of speculative markets like Cantor.
The reason it’s called “hedging” is because individuals and firms use these markets to hedge their losses. You can’t make crap and then expect the market to not know it. If it’s crap the market will know it, the price will be low, and the only thing a producer/financier will be able to do is take the edge off their losses–not make any money.
In fact, this could be a GREAT thing for film making. What if the ability to take the edge off losses makes studios more willing to gamble on risky premises (rather than merely pumping out sequels and remakes and “safe” bets)? What if we get more original material out of Hollywood now that studios can hedge their bets?
While speculative/derivative markets appear to be little better than betting. They are dramatically different in one way: information. As the information changes, so does the price. These are not games of chance, with statistical odds that can be calculated (I’m minoring in statistics as well), they are games and markets of information. Information about a film’s quality and marketing pushes a film’s price up, information about a film’s poor quality and lack of marketing (or bad marketing) lowers a film’s price.
Consider yourself informed. Disclosure: I have a portfolio worth nearly $1 Billion on HSX, and a portfolio which–at it’s height– approached $24,000 on Cantor during the beta period. That is, I know a lot about these markets, their pros AND their cons.
Explanation too long. Couldn’t get through it.
Abe and others- this is just another way that shysters can create a new bubble in the midst of our rapidly deflating bubble economy where nothing of value is produced in this country anymore and everyone is betting on something.
Look around. The public is so infantilized that it hopes and dreams of the big roll of the dice as its way out of poverty,debt and feudal slavery. Wall Street has completely taken over and spins worthless scams like derivatives that are not backed by any assets whatsoever in a virtual cyclotron of money making frenzy.
I predict that Cantor will be scamming via Facebook within the year to troll for easy young customers,housewives and unsuspecting gambling addicts. It will become an immense bubble and will all crash inside of 2 years with the shysters on Wall Street making off with the cash.
this is the next big bubble on Wall Steet, don’t kid yourself. It combines the two most combustible elements. Hollywood and gambling.
The difference between this and futures trading (and airlines, oil etc… hedging their own markets) is that those firms are trading an actual good. This is betting on the end revenue on someone else’s good. You’re betting on data. Information that is largely meaningless when plucked out of context.
I just don’t get it. It’s betting.
Nor do I see how studios will be able to reduce their risk through this market. If there is a seller then there is a buyer. Can they really get enough buyers on this gambling stuff to hedge their position? Do you really want to buy from a studio that is shorting their product when they know more about it then you do?
I think the fear of derivatives and “shorting” is completely overblown, and the original poster’s understanding of the financial crisis is unimpressive, but I fail to see the upside on making bets on the gross sales of individual products.
Abe, you are spot on. Everybody else on here seems to be repeating wall street buzz words that they heard on MSNBC.
For indie producers, this could be an essential tool to help mitigate risk for investors. It would also potentially allow the studios to be a bit more cavalier with the projects they decide to greenlight.
If you understand it, you understand that a producer or studio can’t “tank” their film in order to make a profit because the market would never pay out more than the initial investment in the film PLUS their “bet”.
The only big insider risk is that an actor or director would bet against the film and then trash it relentlessly in the media. But that is a risk for the studios, not the “little guys”.
Recently we’ve chosen to become fearful of markets
Gee, I wonder if the near-collapse of the world economy had anything to do with that?
The fear is not of markets, but unregulated markets. Markets where you can create financial instruments that have no inherent, underlying value, that are effectively gambles between 3rd parties about the success or failure of someone else. Sound familiar? Or maybe you’ve never heard of credit default swaps?
As a student of economics I can assure you that *all* trading of any form, in stock markets, bond markets, or otherwise is INHERENTLY “insider trading.”
Really? Tell that to everyone in prison for insider trading.
Anti-insider trading policies actually discourage a market clearing (that is, keeping information from flowing freely restricts a markets ability to correct itself). When information can’t flow freely for fear of being labeled “insider trading” then the market price doesn’t accurately reflect what is known about a good, firm, or film in this case.
This is insane. A corporation may elect to keep certain information proprietary and private for competitive advantage or other perfectly valid reasons. Trade secrets, pending mergers, business strategies, product development, etc. are all privileged to management at their discretion. So until you’re willing to force Apple to make all their source code, product rollouts, and personell data “flowing freely” to the public, then you must not allow corporate insiders to trade based on that privileged information.
There is necessarily a wall between public and private information, and the market price reflects what is known publicly You can’t have a healthy market with some people trading on inside information and everyone else trading based on what’s publicly known.
In fact, the problem with the recent mortgage derivatives market catastrophe could be laid at the feet of regulations which discourage the sharing of relevant information.
Again, you are fucking out of your mind. The problem with the recent catastrophe can be laid at the feet of Wall Street taking advantage of the deliberate elimination and non-enforcement of regulation for the previous decades. This resulted in an ever-inflating bubble in real estate, which mirrored a bubble in mortgage-backed derivatives, which also went out of control and was ultimately unsustainable.
The problem was compounded by a complicit Fed, useless ratings agents, investment banks grossly over-leveraging themselves, and an administration’s ra-ra cheerleading about wanting an “ownership society”.
Oh yeah, and the proliferation entanglement of trillions of dollars worth of overvalued, credit default swaps. See above.
Had information about who owned what in the tangled derivatives market been made public, the system may have been less likely to go out of control. But that calls for MORE regulation, not less.
Note: airlines and oil producers already hedge their bets in oil markets, this is partly which keeps oil prices from spiking more than they already do
This is true but irrelevant. Not that oil prices are a particularly persuasive example.
If nothing else, it’s often very difficult to make a downright BAD film look good in a trailer.
You’re killing me with that one.
In fact, this could be a GREAT thing for film making. What if the ability to take the edge off losses makes studios more willing to gamble on risky premises (rather than merely pumping out sequels and remakes and “safe” bets)? What if we get more original material out of Hollywood now that studios can hedge their bets?
You REALLY think that studios are eager to get their HSX accounts all set up so they can make money off their movies? No. The way they invest in their movies is to MAKE THEM. The way they hedge their bets is to MAKE MORE THAN ONE.
Come on.
While speculative/derivative markets appear to be little better than betting. They are dramatically different in one way: information. As the information changes, so does the price. These are not games of chance, with statistical odds that can be calculated (I’m minoring in statistics as well), they are games and markets of information. Information about a film’s quality and marketing pushes a film’s price up, information about a film’s poor quality and lack of marketing (or bad marketing) lowers a film’s price.
Yes because mortgage derivatives worked AWESOME. Those statisticians did a fantastic job at evaluating risk, and the expectations of investors not only mirrored reality so well, but it helped make the real estate sector robust, stable, and profitable for decades.
Thank you deregulation! Thank you derivatives. We need so much more of this!
You’re right about one thing, the government pushing greater home ownership was the root cause of our financial meltdown. It wasn’t just one administration, it went all the way back to the Carter administration and really started in the Clinton administration, when they began to aggressively enforce the Community Reinvestment Act Carter put in place. When Obama was a civilian he was part of it too, partnering with Acorn to successfully force banks to grant risky loans to people by accusing the banks of being racist and threatening to sue under these housing acts if they didn’t do it. That was the stick.
In addition you had the carrot of the government using Fannie and Freddie to implicitly back all these loans, taking the risk of defaults off of the lenders’ backs to a large extent. And since the banks were being forced to grant these risky loans to low-income owners by the force of law, you can hardly blame the banks for trying to spread the risk with the “credit default swap” insurance plans. Those plans were HARDLY the cause of the problem, they were simply a result of the unwelcome government intervention. Of course they extended and magnified the crisis a bit, but we were on the path to seeing this happen eventually no matter what because the government thought it was doing the “right” thing and was not going to stop until the financial system crashed and burned and they had no choice. The Bush administration and the Republican Congress tried to get all this to stop, but the Democrats blocked it procedurally every time.
The whole thing went so far above and beyond government regulation. It was true government ACTIVISM that completely circumvented the principles of the free market. If the government had simply stayed out of the housing sector and let the free market run it, then no lenders in their right mind would have been willing to take the risk of granting all these bad mortgages that eventually threatened the financial system. Reasonable regulation is one thing but what we have goes far beyond that, When an unaccountable government, that can print money at will and doesn’t have to balance a budget, tries to actively influence and run through the force of law such a big sector of the economy, as they did with housing, it is a recipe for absolute financial armageddon every time. And now I’m looking in your direction Medicare, Social Security and Obamacare.
You are so wrong.
You’re right about one thing, the government pushing greater home ownership was the root cause of our financial meltdown.
Well, you could also call that “the American dream”. This clusterfuck of an economy had many parents, but probably the most significant was the lack of regulation– not enough government. Not too much government. 100% in opposition to your claim.
Blaming Fannie and Freddie is an easy accusation for an ideologue to make, but it ignores that fact that they held only a very tiny percentage of sub-prime mortgages– that the mortgage bubble was driven by 99% privately-held institutions who were FALLING OVER THEMSELVES to make insane loans because they could sell them for profit. This wasn’t government activism, it was unregulated capitalism run amok.
Consider the fact that countries like Ireland and other western european states had a similar crisis without any Freddie or Fannie involved. How about the fact that the COMMERCIAL real estate market also bubbled and is crashing– again, subprime loans had nothing to do with it. Not to mention the regularity of boom/bust cycles that occurred in the pre-Depression when there was little regulation…
Blaming “government activism” is pure insane right-wing bullshit. It does not match reality in any way. There needed to be MORE government regulating our economy. And there should be nothing too-big-to-fail. And if the government swoops in to save a bank or industry, they should be nationalized and the CEOs made to do hard labor.
[Credit Default Swaps] were HARDLY the cause of the problem, they were simply a result of the unwelcome government intervention. Of course they extended and magnified the crisis a bit
“magnified the crisis a BIT”? Again, you are nuts and have no idea what you’re talking about. The unregulated market of CDSs and other derivatives made what would have been a serious but manageable crisis of a particular sector of our economy into a full-blown threat to the planet’s entire economic system.
Go do some basic research. You’re totally delusional.
If the government had simply stayed out of the housing sector and let the free market run it, then no lenders in their right mind would have been willing to take the risk of granting all these bad mortgages that eventually threatened the financial system.
Nobody believes that. Not even Alan Greenspan. Nobody except the most delusional ideologues.
The Bush administration and the Republican Congress tried to get all this to stop, but the Democrats blocked it procedurally every time.
That was so absurdly funny you made my dog laugh.
[Bunch more lunacy]
Okay, I think it’s clear where you stand. Enjoy the cognitive dissonance of your right-wing fantasyland. No point in talking any further.
W
It should also be mentioned that Fannie and Freddy were selling off their mortgages (Which at their high point were 50% of the market) under false ratings. That is, they were selling sub-prime mortgages to Wall Street firms as prime mortgages. Needless to say, that was illegal. But Fannie and Freddie are well protected by powerful Democrats in congress and a few select Republicans.
So Fannie and Freddie were buying up sub-prime mortgages, eliminating their risk from lenders, thereby encouraging the rapid growth of the sub-prime markets, and then selling those sub-prime mortgages to other firms as prime mortgages, thereby hiding the risk.
Fannie and Freddies books looked great and its leadership made all their bonuses (the leadership of Fannie and Freddie is tradition where Democrat political operatives went to cash in). When Fannie and Freddie was finally audited and caught in their book cooking, the Bush administration tried to stop it (but clearly was not willing to fight very hard, or put their political clout at stake over it) but Fannie and Freddie had very powerful friends.
Anyone who talks about the sub-prime crisis and does mention the governments role in creating the bubble, crashing the bubble, the extent of sub-primes contamination into mainstream investing doesn’t have enough credibility to talk about the subject.
That being said, an exchange on Hollywood box office is a ridiculously stupid idea.
Excellent way to see your money evaporate if you’re dumb enough to invest in this crazy scheme.
I read about this in an article called Subprime Goes Hollywood by Nick Baumann of Mother Jones. If I understand this correctly, then if the studio thinks that they can make more money betting against the film, they can sabotage the film to make sure it fails (by cutting the marketing budget, adding unnecessary scenes rather than cutting them, refusing to finance reshoots, etc). This sounds like it could seriously damage the reputations of the producers, writer, director, and actors of the film the studio is betting against. I’m not just troubled by this, I’m horrified.
Now betting on BO just sounds like a game of craps, but if we can start short selling on actual film investment lots/increments, then Warner Bros can do to MGM what Lehman Bros did to Bear Stearns. At the very least, we could all speculate on projects the same way we do in the commodities market – and THAT’s what I want to see, brokers coming into an industry already muddy with middle management and playing hot potato with peoples’ projects and careers. Whoohoo!
Somebody needs to put MGM out of its misery.
There’s no way the SEC will approve this as there’s way too much opportunity for insider trading and market manipulation. Financiers that back distributors could simply short your film and then pull your P & A (which is similar to what Hedge Funds did to Lehman Bros. – they shorted Lehman stock and then pulled their business from them).
I can’t imagine this ever being legal, then again I couldn’t imagine the DRE allowing people to loan up to 125% of the value of their homes.
The SEC has no say in this. It’s the CFTC that regulates the futures markets.
I’ve been playing their “test” version of this, and it looks like it’s set up exclusively to “short” movies and fleece the average buyer. (Well, to be fair, the stock market works the same way). Expectations are set a minimum of 20 to 120 million too high. Being able to trade in this market will require an assload of insider info, so let’s all get ready for the insider trading charges that will inevitably result from this.
I have been playing HSX from the get go. This sounds fun. And if it affords more opportunity for indie financing, I am all for it.
I’ve been privy to a number of conversations about using such a market as a hedge and creating a market for indy and studio feature film shares. The monkey wrench in both is transparency in the process… which is inherently lacking in Hollywood (Nikki Finke, aside).
Indy films are almost always a lottery ticket and, at best, a penny stock. I do like the idea that one could crowdsource the fininacing of an interesting small film with “micro-shares” but trading those shares on an open market is fraught with problems.
Studio films are so dependent on non-disclosed budgets (production, marketing), release slots (watch what happens when a film’s date is moved from July to February) and audience response (no studio shares this info unless the news is good.)
The irony is that the new media types (Google, Amazon, etc.) would welcome this system (if it were as transparent as the stock market) as the engineers love to take apart the process and make it more efficient. I’m sure Jeff Robinov would be happy to open a poor preview post-mortem to the public along with the plans to make the film better or to bury it in late August.
If the SEC allows the HSX plan to fly, I have some MGM bonds I’d like to sell them at face value.
hollywood goy I could not agree more.
I think the great danger here is if the gains on hedging become great enough to influence the decision making process of movie executives (or anyone with a financial stake). A movie that may be merely “good” may do better finanacially if those execs insure it’s trash (be it artistic choices or merely exposing the Director’s dirty laundry).
That’s the great conflict-of-interest that Abe, et. al, seem to ignore. It’s so obvious, I’m not sure any Greened-Eyed-Dollar-Signs can talk it away. (unless there is some sort of cap I missed here?)
As an Executive, your duty is financial, fuck the movie if it means you make your money back. No one has ever heard of that little musical, “The Producers”? Finally, they’d have a legal way to do it.
I wanna be a Producer, have a big flop on the screen. I wanna be a Producer, make it 3D that’s for me! I wanna be a Producer, I can bet online you see. I – Wanna – Be – A – Producer, cause I win — even when I lose!
I too play HSX and participated in both beta versions that C/F created. Its true that the opening bids are priced beyond any truthful boxoffice gross. The price is driven even further up with trades before opening. As for insider info from the studios to the theatre chains affecting the cash out price is a given. For example The wolfman. Wolfman was running about 99 dollars and then the trade screenings started. Wolfman price began to fall hard. On the other hand there is The Blind Side. Blind Side couldn’t get enough traction to make it to 40 dollars and then the film opened and the cash out price was something lik 157. I bought it at 34 because sandra does small town business like no one when its the right movie. (I gleaned this from being an ex booker.) Even with its limited ad budget and somewhat support from WB audiences came in droves. No matter how much insider trading happens before the picture opens its the paying audiences that will create its cash out price. My issues as to why i won’t be “trading” is that there will be too much insider info before opening. nothing is going to stop anyone from shorting when they know before the net knows that a picture that is listed for 3000 screens is having that number trimed in half. Meanwhile everyone that already owns it is screwed cause they bought it with the knowledge that it would be on about 3000 screens not 1,500. Would that trigger investors to a class action suit against the studios and producers? Oh, just to keep tradition…my HSX acct worth is one bil and a half.
So that “insider” knowledge may help someone in the know cash out early and keep their gains, but how much of an influence is that going to have on the overall market? It seems like there would be very few people privy to that kind of knowledge. Unless they deal a massive quantity of shares their action is not going to directly affect the profits of another shareholder. The decision to cut the film’s screens will of course have the devastating effect, but whether or not one insider distastefully profits off some advance knowledge, the devastation will happen to everyone else eventually either way. You are taking the risk by speculating that the film won’t be dropped to less screens and whether that happens or not is on you. This is kind of a bad example too, since I can’t think of any examples where a movie’s expected screen count was dramatically dropped before opening for any reason.
Fox has done this – they did it to BORAT, which actually increased demand (though that wasn’t why they did it)… May have done it to IDIOCRACY as well. It does happen from time to time.