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As expected, the Commodity Futures Trading Commission approved Cantor Exchange’s proposal to begin selling futures contracts based on the box office success of feature films. This was not a surprise, since the CFTC gave a unanimous thumbs-up last week to a similar program proposed by the Media Derivatives-backed Trend Exchange.
The Motion Picture Association of America continues to battle against programs it considers a thinly veiled gambling operation, but the MPAA now will set its sights on Capitol Hill. Tomorrow, the Senate Agriculture Committee will review a bill that is part of a package of financial reforms that will be pushed by Democrats. That bill would outlaw the business that the CTFC at least temporarily has approved in principal.
“Our coalition of film industry workers, creators, independent producers and distributors, business organizations and theater owners, remains united in our opposition to a risky online-wagering service that would be detrimental to the motion picture industry and the 2.4 million Americans whose livelihoods are based on this industry,” said MPAA spokesman Howard S. Gantman. “We believe that the CFTC had ample discretion under the law to reject this proposal by Cantor Futures Exchange L.P. But this is just one in a series of upcoming regulatory steps, and the Commission made clear today that Cantor needs CFTC approval before attempting to offer a box-office wagering service. In the upcoming days, we will continue to urge the CFTC to finally reject both the Cantor proposal and a separate proposal by Media Derivatives, Inc.
“Separately, members of Congress have also raised serious questions about the financial harm that these proposals could cause,” he said. “Senator Blanche Lincoln, chairman of the Senate Agriculture Committee, has introduced legislation that contains a provision banning such box-office wagering services. A markup on this bill is scheduled tomorrow. And on Thursday, the House Agriculture Subcommittee on General Farm Commodities and Risk Management, chaired by Representative Leonard Boswell, will be holding a hearing on the issue.”
For more estimates listed by title, see box office results here...
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If these contracts and hedging instruments are so compelling and valuable for investors, how come none of them are saying anything. The people who run the exchanges want something else to sell, and the studios hate it — ok and obvious.
but this looks like something for sit-at-home day traders to get fleeced by sharp operators familiar with commodity trading —
again, where are the investors saying this really meets a need?
The financial reform bill being considered in the Senate promises stricter supervision of all derivatives, but a ban on only two: futures based on cinema box-office receipts and the price of onions.
The MPAA is so full of it. They merely want to stop these exchanges because god-forbid people not in the industry capitalize on the bad decisions of the majors.
The MPAA and onion farmers; leading the way towards a better America.
god-forbid people not in the industry capitalize on the bad decisions of the majors.
That sentence is so fucked up it’s not even funny.
its not that fucked up. a few commas are missing, sure, but its colloquial meaning is pretty clear
I wasn’t commenting on the grammar. I was commenting on the insane claim that random gamblers who have nothing to do with filmmaking have a god-given right to profit off a film’s failure.
What a douchebag.
Fine. I didn’t take the time to add a comma or two and yes, I’m a douchebag because I’m right.
In the end, you ask anyone at a studio in corporate finance and they’ll tell you this is a smart idea; adding an ability to hedge on a potential box-office loser. That’s a wet dream for a studio’s bottom line.
I hate to break it to all of you but this is a business like any other.
Why not just prohibit Shorting.
That way, if you think the movie will beat the estimates, you can put money on it; but your prohibited from betting a movie will fail to reach estimates. Then, everone would want high box office results.
Simple solution for everyone?
Here’s an example of why this is total scam. I have an account at hsx.com – the play version of Cantor Exchange’s proposed real-money futures exchange. It’s fun… but incredibly easy to manipulate. Today I ‘shorted’ James Bond 23 after reading the article about it in Deadline Hollywood. I had no other access to information about the troubles with the film other than Deadline. With just the information published here, my account made over $500,000 in a few hours as the price of the ‘commodity’ dropped like a rock. Can you IMAGINE what kind of money insiders would have made shorting that on a real-money exchange a couple hours before Nikki broke the news? They’re setting up an internet gambling site – that the general public outside Hollywood will be paying for – no question about it.
This example is totally wrong. JB23 hasn’t even started filming yet. The Cantor Exchange will only IPO movies 6 months or less before their release date. So there will never be a situation where putting off starting a movie will affect a movie derivative, only movies that are done with principal filming will be on the exchange. Also hsx trades by algorithm and not by pairing a buyer with a seller like the cantor exchange, so stocks on hsx can move quickly when everybody sells them, even if nobody is buying them. You also started with a free $2 million in H$ and could afford to buy lots of shares. Very few accounts will have $2 million in real money to start with, and precious few will be able to hold 50,000 shares of a tentpole. JB23 is only down $13.50 (about 16%) today and many stocks miss (or exceed) their opening weekend estimates by 16%. Where is the manipulation? Did you manipulate it by selling it? Did Nikki do it by posting news? When news breaks on publicly traded companies that is unexpected, the share price drops. It happens every day.
ceregon,
The “precious few (that) will be able to hold 50,000 shares of a tentpole” are exactly the problem. Who are they? ABRY Partners? AIG Direct Investments? Columbia Capital? M/C Venture? They are the ones who now pay for the film slates. Now, they can bet against their own films doing well. Who cares that they can’t short their own films six months before release? They still can manipulate the price on the exchange because of their control of information and the inefficiencies of a small market. The whole thing stinks to high heaven, and reading your well thought out response (quite carefully worded – good!), it is clear to me that you know it stinks to high heaven. Just because something is legally sanctioned doesn’t make it morally right.
Years ago, when studios paid for their own development of films out of the film rentals they collected from their distribution arms, the business was counter-cyclical. If the economy when nips-up, the audience would see more films (because they needed to be entertained and they had spare time on their hands). The business did well in recessions. Now, everything dries up during a downturn because the investors run for redemptions on the hedge funds that finance the tentpoles.
Now, lets amplify that effect by opening an exchange that allows the hedge fund to bet against their own bet. The movie industry is one of the last places in the US where smart young people can work to make a product that we actually export to the rest of the world. Wall Street has sucked American industry dry, and now it wants to do the same to one of last industries where we dominate the world. I say hell no! Go back to making bets on bets about house mortgages. Leave motion pictures the hell alone – you’ve done enough damage.
Paul
Thank you Paul. Saved me a lot of typing.
This thing is going to have huge negative consequences.
So true – the US should be incredibly proud of its entertainment industry, because no other country even comes close to the variety & quality of products that Hollywood distributes. If Congress allows people to gamble and profit on the loss of a film’s opening, then who knows to what end some “nutcase” will go through to sabotage a film in order to make a dollar. Unless it’s just a film by Oliver Stone, Wall Street should stay the hell away from Hollywood.
Amen Paul!
great post, Paul. perhaps they should send you to Capitol Hill to make the case. This betting on b.o. plan is a terrible idea, and I can’t believe in light of the mortgage meltdown it is even being considered.
The Trend Exchange will only list movies 4 weeks before their scheduled release date. Their contract size is $5,000 notional value. the two proposed models (Trend Exchange, Cantor) are completely different, but apparently this is no concern to the lazy forum poster who likes to paint with broad strokes.
There are already dozens, if not hundreds, of web sites right now that offer box office prediction contests and/or promote analytical models and strategies for calculating box office performance.
Box Office receipts can also 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 “insiders” such as the cast and crew of these movies aren’t already making a killing in these markets, perhaps pre-release information on these productions isn’t so secretive after all?
The internet is like “word of mouth” on steroids. Once the movie release is announced, the public will quickly pass judgement on box office expectations. This happens right now in unregulated, purely speculative cyberspace. In fact, the rumor mill started cranking Monday about the disaster that the Green Hornet movie is becoming, and that isn’t scheduled for release until December.
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.
These proposed products will be exchange-based, federally-regulated, centrally-cleared instruments. The Trend Exchange will help bring this existing, unregulated speculation into a regulated exchange-based marketplace, complete with all of the inherent financial safeguards that have allowed the futures industry to operate without default for 100+ years.
Futures trading is about managing risk through price discovery and risk transfer. It is about bringing standards, transparency and integrity to the management of economic risks that already exist.
HSX was a fun diversion. This just stinks of potential for abuse and untoward financial behavior.
This is ripe for insider abuse, and Hollywood has a lot of problems.
First, Hollywood is not making money on most films. If Hollywood had hit after hit, why play derivative games, just invest in the movies?
Second, it seems to be more a way for former financers of movies and various insiders to make a huge killing shorting turkeys. Since there are a lot of bombs but few sneak-hits.
Even if Joe Blow bets $200 on a film to tank, he won’t make a lot of money. Serious money is where you bet $1 million or more. That’s pretty much a guarantee for insider trading.
The argument for an exchange would be to allow exhibitors to hedge against turkeys by buying futures contracts. That in itself says Hollywood just can’t reliably produce hit movies. Which in itself is a stunning indictment of writers, producers, and directors. Writers most of all.
Stretch Armstrong the Movie? Battleship? Monopoly? Really, that’s all that we can see?
Once upon a time, Hollywood made Star Wars and Raiders and Lethal Weapon and Die Hard. And no one cared about exchanges or futures because everyone wanted a piece of the next Ghostbusters or Beverly Hills Cop. Which may not have been great art but entertained people for two hours and made lots of money in the process.
It’s the futures market. It’s all based on insider information. Duh.
The person we need to worry about is Nikki herself! I mean, she does get all the inside info first. So stands to gain much from them, let alone a complete takeover of Hollywood. I’m absolutely kidding…just thought you’d enjoy a little pat on the back!
REALLY???? How’s insider trading film contracts any different than someone working for IBM or say a pharmaceutical company that’s developing a new drug. IT ISN’T!!! Insider trading is illegal, those who engage in it will do so at there own peril. On the plus side, studio’s and indies alike can lay off huge amounts of risk just like grain framers who lock in a favorable price long before their grains go to market. Why not allow someone else to assume this risk if they are willing. Won’t this make it easier for studios to open there wallets and make more films???? The only reason the industry is against this is “full disclosure”. These producers and studio execs who build cocaine and hookers into their budgets (or whatever their vice might be) will now have to answer for every dollar spent on a film. That’s why this thing scares the shit out of hollywood.
Movies are not grain.
On the plus side, studio’s and indies alike can lay off huge amounts of risk
Studios are opposed to this, big time. Don’t try to make it seem like this is in the interest of studios.
The only reason the industry is against this is “full disclosure”. These producers and studio execs who build cocaine and hookers into their budgets (or whatever their vice might be) will now have to answer for every dollar spent on a film.
This bullshit keeps getting repeated. Why are all the guilds against this? They want open accounting more than anyone, but they realize this exchange will be a vampire sucking on the entire industry.
That’s why Hollywood is scared. This derivative scheme is completely insane.
You guys don’t know anything about trading, economics, etc. so please stop wasting everyone’s time posting your completely wrong opinions.
YES there is potential for inside trading. Guess what… there is in the real stock market too. There is a lot more money to make, and it would be harder to get caught in the stock market due to sheer volume, liquidity, and complex trading strategies. People go to prison if and when they get caught. You can’t just make $10,000,000 out of the blue shorting or buying some stock that you might have connections to and not expect to be investigated.
This has the opportunity to change the face of the industry as it expands, and allow more capital to flow into these weak markets. Studios can make more movies if they can hedge their risk therefore employing more of you pansies who are worried about someone getting rich because they are smarter than you.
You wonder why people are so hesitant to invest in the movies when people start crying at the thought of an organized financial market.
Trader,
You know damned well that this won’t be an efficient market because of its size. If you don’t know it, then you are “trader” in your imagination only. Just because the CTFC has approved the trading of a futures contract on the reporting of Box Office figures, doesn’t mean that studios will be required to open up their books to the buyers and sellers of those contracts. That is just stupid – like your comments.
The Trend Exchange will only require a studio to reveal how they arrived at a box office number if it differs by more than a standard, calculated 2-year deviation from the actual raw theater data, and then ONLY if the studio has a position in the market that would benefit from the different number.
How can the Trend Exchange know what the real number is? Because they have contracted with the same raw data point-of-sales provider that the studios use, and they have used data from the past 2 years to determine the standard deviation.
Why is there a deviation? Because so much is tied to box office numbers (merchandising, future distribution, compensation, royalties, other contracts) that the studios like to “massage” these numbers to help their bottom line.
And that is what THIS ENTIRE MEDIA BLITZ is about. The entertainment industry is fighting this attempt at transparency into how they calculate their published box office numbers.
Because, since these studios are mostly owned now by publicly-traded companies, the publishing of incorrect financial data is actually wire fraud. And the studios sure don’t want to open themselves up to that risk!
a little harsh, don’t you think?
YES there is potential for inside trading. Guess what… there is in the real stock market too.
Guess what– the movie business is nothing like the oil/farming business. There is a major (willing?) disconnect you’re having in thinking they’re similar. The elements that make a film successful or unsuccessful and the culture in which films are developed, produced, and marketed are not comparable in any way with markets in other commonly-traded commodities futures, no matter how many times you read “Freakonomics”.
You can’t just make $10,000,000 out of the blue shorting or buying some stock that you might have connections to and not expect to be investigated.
Really? Take any big movie that came out recently. How many thousands of people appear in the credits? How many thousands more people do you think were “connected” to that movie in some way who are not credited? Think management, agents, interns, support staff, spouses, etc. Thousands upon thousands made incremental creative and logistic contributions that would be considered “inside” information. In fact, anyone who just gets their hand on a script already has extremely critical “inside” data. So yeah, it isn’t ten members of the Board with privileged information; it’s thousands of people collaborating on a single creative and economic enterprise. And let’s not forget that to maximize BO returns, movies (and trailers) are audience-tested in front of thousands of members of the public before a release. Those screen tests may occur many times in many different markets. And advanced screeners are sent to reviewers weeks before the movie comes out.
If you think it’s going to be easy to identify who in Hollywood had “inside information” that a movie sucked (or was great) before it came out, you’re nuts.
Studios can make more movies if they can hedge their risk therefore employing more of you pansies who are worried about someone getting rich because they are smarter than you.
Yeah, it takes some real smarts to put bets down on the failure of a Hollywood movie. Keep telling yourself that it involves some kind of talent.. and bravery too, right? BTW– How’d you do with those CDSs and CDOs there, genius? No really, I want to know.
You wonder why people are so hesitant to invest in the movies when people start crying at the thought of an organized financial market.
If you want to “invest in the movies”, then invest in the movies. But don’t build a casino to leech off the actual hard work others do and think that means you’re in the movie business.
There are dozens, if not hundreds, of web sites right now that offer box office prediction contests and/or promote analytical models and strategies for calculating box office performance.
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 pre-release information on these productions isn’t so secretive after all?
The internet is like “word of mouth” on steroids. Once the movie release is announced, the public will quickly pass judgement on box office expectations. This happens right now in unregulated, purely speculative cyberspace. In fact, 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.
Nice cut and paste there.
What you don’t mention is that the vast majority of sites w/box office prediction contests do not involve money/gambling and are for amusement purposes only.
Yes, if people want to, they can gamble on it by finding some offshore casino site somewhere. One can bet on anything, and people do. The point is that there is no formal wall street-style exchange set up to facilitate this. Nor should there be.
please stop wasting our time. you obviously don’t know anything about the entertainment industry.
if the studios, and their parent companies, could make more money by allowing this ridiculous scheme to proceed, why would they be against it? if anything, they’d be leading the charge. are you suggesting the heads of those companies don’t understand the market as well as you do?
Trader:
Thank you for pointing out the obvious that so many have missed. I don’t want to be derogatory but the fact is that comments here about non-entertainment related finance are a bit naive. People who have worked on a public company equity deal with a thin float or concentrated holdings or worked on a bank debt deal know what you are saying is correct. Those are the same people who will use these financial tools to lower the cost of capital for films.
Its about time investors got a chance to hedge their ridiculously large bets on very risky non-correlated assets that are difficult (impossible?) to accurately forecast on a consistent basis.
Can someone explain to me how movie futures would work? Like maybe explain it to me like I’m 5?
Here’s how it works. You say, gosh I think that movie will do well. I want to buy some “shares” in it. But nobody who actually owns any part of the movie is selling you any portion of it, so who do you buy your shares from? Well, from someone who thinks the movie is going to do poorly, so they sell you shares that they don’t own, otherwise knows as a short sale. Then the movie comes out, and if it does really well, you get to sell your “shares” and the person who sold them to you has to find a way to buy shares to cover his sale, so he loses a lot of money, since he presumably has to buy them on the open market (from other people like you, who “bought” them pre-release and are now selling at a profit). If the movie does poorly, he gets to buy shares to cover his sale (again, from people like you), but now for less than what he sold them to you, so he makes money. There is no possible way to do this without short sales (for the person who ridiculously suggested that solution), unless Canot wants to be the “house,” which guarantees one party will have a multi-million dollar vested interest in making sure the movies lose money.
So, if the movie does well, you make money, and if the movie does poorly, the guy who “sold” you shares he didn’t yet own makes money, but no one involved in the movie industry gets any of it (you know, the people who took the risk and put up the money to make the movie).
How is that any different than betting on the Lakers? Oh, that’s right — if 15 million people bet that the Lakers will lose, it doesn’t affect the outcome of the game. Fifteen million people betting that a movie will lose money has a huge impact on whether or not that movie makes money — in every window (theatrical, foreign, PPV, DVD, cable, broadcast, etc.)
Goodbye, sleeper hits.
So long, A-list actors doing small indie projects (because like the HSX that this was originally based on, I’m sure you’ll soon be able to trade on components of this “commodity” as well, like actors, directors…maybe even locations).
And a quick reminder — exchange derivatives trading of mortgage backed securities is what caused the financial meltdown in this country.
Do we really want to let these same people destroy our last profitable export?
Bravo! Good explanation.
This will be another destructive derivatives cluster-fuck bubble-con that will generate a lot of fees for the market-makers along the way and a lot of pain for the industry in the end. Perhaps even a Hollywood bailout.
I can just feel it.
And I’m calling it now.
this website often hosts bad language. Do you have a parent guardian? PG – no parents, no guidance, no go……
This idea sucks!!!!! Where the f was regulation on this? Why don’t we start a futures for what grades our kids are going to get in school?!! Or the size of the line at the DMV?!!!
Looks like I’m a little late to the party on this one. Like most things in life, these exchanges aren’t black and white good or evil. They have some potential benefits and some potential hazards.
BENEFITS
1. TRUE REPORTING OF BOX OFFICE.
In order to facilitate the proper functioning of the exchange, studios will have to report true box office figures. No more padding to ‘win’ a weekend, with a later downward adjustment. For those who hope this will lead to proper transparency in accounting, you’ll need to continue waiting for hell to freeze over. Gross Box Office is already publicly available, give or take some adjustments over time. It has nothing to do with the puzzle palace mathematics that is studio accounting – nothing in this exchange will make that more transparent.
2. INFLUX OF CAPITAL
This will only work if the studios and financiers are involved in the exchange. If the market is made up of third-party investors who have no association with the movie business, they will not pump any upside back into the business. Even if studios and financiers use the market to hedge risk, they may not up the volume of productions. The studios are almost all owned by bigger conglomerates. They may be instructed to roll any profits up into the group company rather than re-invest upside in more productions.
3. RISK MANAGEMENT
Anyone involved in the business will be able to hedge the risk of being involved in a particular movie assuming a willing counterparty exists.
HAZARDS
1. INSIDER DEALING
All markets suffer from some degree of insider dealing. ‘Frustrated, seriously’ makes an excellent point about the near impossibility of tracking down an insider with regard to movies. Scripts freely circulate Hollywood months before production even starts. It is impossible to know who has read a script, let alone seen an advanced or test screening.
2. BUBBLE BOBBLE
This is a high-risk exchange. Most people accept that it is more akin to gambling than a genuine commodity exchange, because participants are effectively betting on the box office spread of a movie that is owned, marketed and controlled by a studio. If participants in the underlying market become involved in a high-risk investment market that is based on that underlying market, there is a good chance that they will be crippled when the investment market eventually bursts – and all investment markets go through a boom and bust cycle, so burst it eventually will. Even if the studios and other participants in the underlying market do not participate in the investment market, there is a good chance that they would become involved in litigation when the investment market bursts, as gamblers seek to find someone to blame for their bad decisions.
3. VESTED INTEREST
Right now most people in the movie business have a vested interest in movies being successful. There is the usual competition that exists in any industry with each studio trying to outdo the other, but in general all participants benefit if there is a general improvement in the perceived quality of movies. This exchange will create an entire market of counterparties who have a vested interest in seeing movies underperform. Sometimes those with a vested interest in seeing movies underperform will be the studios themselves, because they stand to make more from hedging a bomb than they do from a minor flop. There will also be a whole bunch of unassociated investors who have no connection to the movie business other than via this exchange, who will stand to make money if a movie flops. Who knows how these investors will try to manipulate public opinion to try to swing a flop? This exchange creates a whole swathe of people who will actively want to see movies fail, and may create conflicts of interest within the studios themselves.
4. COST
The studios, movie producers and financiers will see some kind of compliance cost associated with this exchange, whether or not they choose to participate in it.
5. REPUTATIONAL RISK
The movie industry already has a reputation as an opaque, high risk business. The litigation that will follow this exchange as surely as night follows day will only serve to further diminish the industry’s reputation.
I hope we have learnt something from the past decade. A totally free market does not work. Over time, advantage accrues to certain participants in that market, and they can use that advantage unfairly, or to engage in activity that is counterproductive to the market as a whole. Some things should not form the basis of an investment market because as a society we have higher values than simply making money. We could for example propose an exchange based on whether individuals will recover from cancer. It would be a very efficient way for insurers to hedge healthcare costs but would be utterly distasteful. In the case of the movie exchanges, let’s perform a very simple equation. In the insurance industry, the cost of insurance is calculated by multiplying the probability of something occurring by the consequence of it occurring. If we apply a similar equation here, we get:
BENEFITS
1. TRUE REPORTING OF BOX OFFICE – Probability of occurrence: High, as it is a pre-requisite for the exchange. Consequence of occurrence: It is of very little benefit to anyone other than these exchanges.
2. INFLUX OF CAPITAL – Probability of occurrence: High for the market, low for the movie business. I doubt very much capital will trickle down from these exchanges into the underlying business. Consequence of occurrence: It would be of great benefit to the movie industry if there was an influx of capital into the underlying business. An influx of capital into these exchanges is irrelevant to the underlying industry. Do not confuse the two.
3. RISK MANAGEMENT – Probability of occurrence: Medium. Depends on how actively the studios participate. Consequence of occurrence: Remain to be seen.
HAZARDS
1. INSIDER DEALING – Probability of occurrence: High. Pretty much guaranteed to happen. Consequence of occurrence: anything from an editor making a few hundred bucks on an illicit hedge to a Goldman Sachs style systematic hedge against its own position.
2. BUBBLE BOBBLE – Probability of occurrence: High. Guaranteed that the market will go through bomb and bust. Consequence of occurrence: if the studios become heavily involved in the market, it could wipe one or two of them out.
3. VESTED INTEREST – Probability of occurrence: High. It is an essential function of the market to have counterparties who take an opposing position on a hedge. Consequence of occurrence: A new swathe of people who stand to profit from the failure of a movie.
4. COST – Probability of occurrence: High. Guaranteed to add a new cost layer to the business in the form of compliance and legal costs. Consequence of occurrence: The movie business does not to be spending more money on unnecessary costs right now.
5. REPUTATIONAL RISK – Probability of occurrence: High. Litigation will follow this exchange. Consequence of occurrence: Industry image or that of particular studios further tarnished.
The hazards of this exchange are all very likely, and the consequences of them occurring range from mild to extremely severe. The benefits are far less likely, and do not impact the underlying movie business in a sufficiently positive way to counteract the potential downside involved.
These exchanges are trying to dress gambling up as an investment. They have the potential to be very harmful to the underlying movie business, and as such should not expect the support of the vast majority of people within that business.
You guys are confusing “insider” knowledge with an insider advantage. They aren’t the same thing. You can’t watch a film and know with absolute certainty how it will do. There are black swans all over the place. You could see Transformers and think “Well, this is awful.” You could have been on set with Michael Bay and thought “Why is this robot movie all about the humans?” You’d have then gone out, shorted, and got murdered because the general public does like stupid movies upon occasion. Certain critically adored films do well, others falter without ever being noticed. It’s a very volatile market.
The only real insider edge I can see would be if you knew the marketing budget prior. Because my guess is you’d know how frontloaded your product was, and how many of your marketing dollars drop to the bottom line. Every other player in the game, from grips to directors, has no idea how a film will do financially. They are all just hoping.
Lastly, the studios are heavily against it due to transparency. They continue to operate like the wild west in terms of profit margins. No one really knows what they make on anything. Does no one remember Peter Jackson v. New Line? With investor money in the game you couldn’t get away with the level of shenanigans they do now.
There is way less risk of sheep being led to slaughter by insiders, because fleeced sheep won’t come back. Most people will try it for $100 or $1000, lose, and think “I am not good at this.” The studios should be using it to leverage risk, but they don’t want the tradeoff which is an actual monetary expectation on each product.
Because then they couldn’t come out each and every Monday with “Outperformed expectations! We’re doing excellent!” and have fools write about it. Finke generally sees through that ruse, but plenty don’t. The Stalin-esque ramblings of studio PR flacks rule the day when there’s no objective measurement. A derivatives market, while running the risk of individual investors getting burned, brings a whole lot of eyes on Hollywood’s business. And they definitely don’t want anything to do with that.
Lastly, my guess is very little money will be in this at first. Y’all give the example of millions being thrown in on one side, but given the volumes we’re talking about here I don’t think you could get 100k in the game without crushing the market one way or another.
If you want a problem with the market it’s this: the thing isn’t going to act rationally. But the one on Wall St. has that same problem and no one is calling it illegal.
it’s not what the movie “makes” that is measured.
it’s the box office receipts collected by movie theaters and reported.
this has nothing to do with whether a movie is profitable, or studio accounting or anything like that.
you’re betting on how many people will pay to see the movie at a theater. whoever loses the bet pays the other guy.
you can only “buy” the movie if someone else thinks it’s overpriced and is willing to sell. And if none of the studios can be sellers, for insider trading reasons, who exactly do you think is doing the buying and the selling.
most studio productions are self financed — the “financiers” are really financing the independent movies which will never be traded on any of these exchanges.
its simple. say a movie is projected to earn $200 million. for the sake of this example the stock price for that film would be $200.
if you think the movie is going to make more than that, you would buy the stock at $200 if it went up to $300 you would earn $100 for every share you owned. Same would be true if it went below $200. just like in the stock market. the price for the film will be determined by expected gross. you can also bet that the movie will earn less (short selling).
I believe that the Cantor exchange limits an investor to taking a position of no more than $250k on any one film. That limit will prevent any meaningful “hedging” by studios, theaters, etc.
Hey, if you can bet on the failure of mortgages, why not movies? Seems a lot less unethical to me.
Did anyone play the Cantor exchange when it was open to the public for a trial run?
It had Diary Of A Wimpy Kid at 48mm after 4 weeks of box . (A long)
The Bounty Hunter at 68mm after 4 weeks of box. (A short)
and Clash of the Titans at 268mm after 4 weeks of box. (A big short)
Just sayin…
-RnsW