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UPDATE: The MPAA interim CEO/president Bob Pisano weighed in this morning about the late night congressional vote to leave a ban on box office futures in the financial reform bill. Said Pisano: “We are heartened by the Conference Committee’s actions and look forward to the full House and Senate approving the legislation.” Media Derivatives’ CEO Robert Swagger singled out the lobbying efforts of Pisano as a reason he could barely get in to see representatives before they voted on the bill. Media Derivatives’ only hope now appears to be an attempt to get a waiver to operate since the Commodity Futures Trading Commission gave its approval in a split vote. Given the fervor and momentum for Wall Street reforms and consumer protections that comprise the heart of the legislation, getting a “grandfather” waiver seems unlikely. Swagger, who said Media Derivatives worked three years and spent millions of dollars, might well seek redress in the courts, and singled out Pisano as a potential target.
EARLIER: What a big Hollywood win. It looks as if all that recent MPAA lobbying of the Democratic-controlled Congress on behalf of the major movie studios has finally paid off. Because a ban on movie futures trading was just inserted into the still-not-final legislation regulating the financial sector. Right now leaders for the U.S. House and Senate are trying to reconcile their different versions of the legislation passed by each body. They’ve been at this conference process for two weeks already. The hope is to reach a compromise bill and hold a final vote before the July 4th recess. The legislation contains “sweeping changes” on everything from banks to public company shareholders to auto dealers. And the MPAA, supported by the Hollywood talent guilds and other moviemakers (but not Lionsgate), succeeded in inserting an amendment to prevent the trading of derivatives based on box office results.
The Hollywood Reporter‘s Alex Ben Block was first to report it was approved just before 1 AM ET Friday by the House-Senate conference committee. Chair Rep. Barney Frank (D-Mass) said during a short discussion that while there had been controversy about movie futures, the House conferees were not going to exercise their option to alter the amendment banning movie futures trading. He said they were agreeing to the amendment as written by Sen. Blanche Lincoln (D-Ark.) for the Senate bill. ‘By not addressing it, we have acquiesced in that,’ said Frank. Needless to say, the various firms wanting to launch box office futures trading were pissed tonight, especially since they’d recently received regulatory approval ranging from the Commodities Futures Trading Commission to the FCC.
They’re now talking about a lawsuit.
Editor-in-Chief Nikki Finke - tip her here.
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Yeah! I hope it sticks. hsx.com is great fun – but it should never be made into a real money exchange…. the stock market is already a gambling pit and movie futures would be even worse.
So by that logic you advocate banning the stock market too?
Everything involving risking money is gambling if you don’t know what you are doing.
They can sue the MPAA being “anti-competitive”, as opposed to all other trade organizations that encourage competition. Good luck with that. They are also saying that they’ll be grandfathered in since the CFTC gave them regulatory approval but statutory law trumps administrative regulations any day of the week. They’ll file their lawsuits, with the net effect of wasting even more money than the $10 million they’ve already blown on this nonsense.
I never thought I’d say this: For once– maybe for the first time ever– the MPAA does something good.
Don’t get ahead of yourself….the MPAA will only ever act in their own interests – I don’t get the sense that any of the other participants in the wider film industry have done their own analysis of the possible benefits of this – when they do, they’ll probably realise that true to form the MPAA has robbed them of something that could have been to other people’s benefit.
Focusing on the very specific objections raised about these products implies that if these issues could be resolved, the MPAA would support an alternative concept. The reality however is that the MPAA will never support anything that poses the slightest risk to their monopoly.
More capital into the industry means more jobs, more investment and less reliance on the old big studios – were the MPAA ever going to support that?
I guarantee you, over th next few years another guy will come along and will try to create something to help outsiders access the industry, the MPAA will be threatened and they will find a way to crush the new guy.
Max Keiser who invented the HSX,has been railing about Hollywood futures running down the same path as Enron et al.It will destroy Hollywood with bogus derivatives!
I wouldn’t take anything Keiser says too seriously – just look at the rest of his website and the allegations on there.
And this is a good thing why? The reason Hollywood is fighting so hard against this is because if there was futures trading they’d have to open their books. In which case eveyone would know how stupid the deals are that they make. Stockholders would see things like – oh, I don’t know – 10% of the gross going out to an already overpaid actor or director.
Futures would have made the town honest. But no one in Hollywood wants that. The only town where people can lose money for a studio year after year and end up getting rich. Looks like Wall Street isn’t the only fat cats that use lobbyists to screw over the public.
Bill, with all due respect, are you crazy? Futures trading would be the worst thing for the film industry. If it were allowed to take hold, no one in Hollywood would ever take a creative risk again. We’d have nothing but Shrek sequels. And we’re heading that way now, even without futures trading. Thank God this has a chance of stopping before it started.
You are both crazy. Movie futures, while a bad idea, would have zero impact on how films are made/distributed. The size of the trading opportunity on the exchanges (one had a proposed maximum exposure of $250k) are so small relative to negative and P&A costs that the ability to hedge would never have truly existed. In addition, neither futures exchange would have authority to compel studios to open up their books for scrutiny.
They’d have zero impact on the way they’re made/distributed. Its impact would be on the manner in which they’re financed. The settlement terms would be specified in the contract. If they don’t happen, the trade would be unwound. True, TrendX and Cantor would probably never attain the liquidity necessary to hedge the risk of even 1 film. But, that doesn’t mean there can’t be markets where entire slates of all the studios can and will be hedged.
Zero on production/distribution. Absolutely necessary if they’re going to be continued to be financed.
Can someone explain this reasoning?
If movie greenlights became dependent on the whims of a publicly traded market then it would be a disaster since a market is by nature risk-averse. So, bets would be placed for familiar titles such as sequels (“Shrek 7″), and bets would be placed against anything risky, as in anything new, fresh and original…movie futures trading would’ve been an unmitigated disaster for the film industry and for creativity and originality in general. Thank G-d it’s been stopped.
Trading would start once a film is completed, but before its released. You can’t trade a contract before a movie is greenlighted. It’d be a contract on nothing.
Trading would have to start post-greenlighting, once its in the “can.”
That’s not necessarily true. Investors don’t mind risk … for return. Plenty of junk bonds and stocks get traded all the time, particularly when investors feel safe. Its true that lack of individual investors and dominance of institutional ones means herd behavior, but there’s plenty of appetite for risk in normal times because it means return.
A futures market that is really robust (and the proposed market could well have grown into that) would eliminate the studios as co-financers. James Cameron could flog AVATAR 2 or whatever, and while he’d have to give up the upside (i.e. the return) he could find plenty of folks willing to roll the dice on the risk.
The only thing investors HATE HATE HATE is risk that they can’t dump when need be. Risk that is illiquid. That’s why the exchange was a conceptual threat — it would allow a large pool of investors to dump risk quickly. If they thought that Shrek 7 was likely to fail.
Most of the “risky” stuff is known to be of little audience appeal. No one is going to turn out to see The Reader, or Greenzone, or the Woodsman, or a Woody Allen film. Like Sean Penn movies, they are made to grease the wheels of Hollywood’s crony network. No one expects money to be made from them. They’re also trite and boring, like the script for Easy Rider xeroxed fifty generations.
What this system had the ability to do, was create a way to fund true risk (bucking Hollywood’s habit of making films for execs and insider advantage instead of an audience), like the next Pixar-type movie (generally, PG or lower, family oriented, not particularly violent, humor) … the very things Hollywood hates.
Are you kidding me? They’re already taking few risks as is.
Got to agree with D.Z. here – have you seen what has been released form the start of May? Sequel, Reboot, Sequel, Sequel, Computer Game adaptation, Remake, Comic Strip adaptation, Sequel…futures trading wont have impacted the output at the major studios one bit – they are already focused on eliminating risk as much as possible – and the above list is the outcome.
Futures trading may have reversed that actually. If I am an external financier, knowing I can hedge the box office performance of a title, I might be more inclined to risk my funds.
What it might have done, and we’ll never know now, is democratise finance enough and enable more independent players (who at the moment can not get funding) to access capital to get their ideas on the screen.
Well said. Would be the end of Hollywood.
If risks could be hedged, they’d take more.
Love the all the Kool-Aid drinkers here at Deadline Hollywood. How would having insurance on failing make someone risk adverse? The logic behind that statement is so silly I won’t even address it. You’ve have to be listening to a “lobbying” group to believe something so stupid. You know, like the MPAA.
More importantly, why do you think the studios wouldn’t have to open their books with public trading. Of course they would. That’s how it works. Otherwise someone could just float fake numbers out their about a film’s profits. Of course none of the studios do that at the present time – lol.
I love the film industry. It’s one of the few places along with DC where if someone says the sun rises in West over and over again a bunch of so called smart folks start believing it.
Insurance or an insurance policy = a put or a put option.
A future is something else.
Its locking in locking in a fixed amount money vs. an uncertain revenue stream.
If you put $1 into a film and know you could get a least $1 out or any % thereof of your choosing, why wouldn’t that make you risk adverse.
Bill – That’s idiotic. Futures trading is just a bad idea….plain and simple. Just because someone is overpaid, doesn’t mean it’s illegal or against regulations…it just means it is dumb. That sort of spending will get weeded out through economic conditions as there will be less revenue to go around. Also – how is giving 10% gross to a director hurting the public? This argument makes no sense. I bet you will be pissed when you bet the farm on the over of Karate Kid 2.
Sorry, but you’re the one who is idiotic. But hey, that’s pretty common for the smart people in Hollywood. First off, I never said it is illegal for people to be overpaid. But when things are public and have transparency a lot of stockholders might be pissed.
BTW ding dong. The public is involved in Hollywood because all of the companies are publicly traded. If you or someone else wants to own a company by yourself than it wouldn’t be the public’s business.
If futures required studios to open their books, and make everyone honest, all of the guilds would be excited about this trading scheme (the guilds primarily exist for the writers/actors/directors who aren’t the overpaid people you mention). But they aren’t for it. They actually AGREE with the studios on this one. No one affected by this stupid idea is for it, and yeah, those affected by it have every right to try and oppose it. If that means some paid lobbyist going to Washington giving voice to our perspective, so be it.
I believe that the futures is based on box office results only. No one has to open there books. Box office results are published in Variety, etc.
Sorry to disappoint you.
Futures need to settle on the actual numbers.
Those published in Variety and elsewhere are not the real #s.
Um, since this has already been widely reported regarding what is involved in futures trading I hate to disappoint you. If it went through the studios would have to open their books. Do you really think they would give a crap about futures trading if it was based on BO. You can already get bets on that kind of crap offshore and in England.
You are absolutely correct. A bona fide liquid futures market would force tighter accounting standards and more financial openness (for price discovery) from studios, distributors, and producers, since any derivative financial product needs an ascertainable benchmark value to settle against. It would also result in higher corporate and partnership taxes plus a tidal waves of litigation. The MPAA intends to prevent any (r)evolution in that direction (fiscal honesty and integrity). Its stance against futures is entirely self-serving.
hurray! p.s. anyone know if the film investment tax credit has been reinstated?
Wrong. Futures would be based on DBO, not ultimate profit. Cost margin, and thus the “stupid deals”, would be irrelevant. No transparency necessary.
Let’s not even talk about the possibility of insider trading, betting against oneself and what dreck this would spawn creatively. While I’m all for transparency and more liquidity…this does not seem like the avenue to best achieve those things.
Insider trading does not exist in the future markets.
To an extext they depend on asymetrical information.
Remember: Futures trade with matched counterparties.
If you think you have a “hot” piece of info, there’s someone out there either discounting it or they know something trumping yours.
The only measurement is box office — this has nothing to do with “opening the books” or even profitability. It’s just a way for people who have a point of view on the box office to put up or bet some real money on the outcome. I’m still waiting for a sophisticated investor to come forward and say this instrument is necessary or helpful–they have been silent
The Chicago Mercantile Exchange has been trying to develop a motion picture future for years.
Several banks has also invested years trying to develop one.
Hal Vogel, author of Entertainment Industry Economics and probably the industry’s leading analyst, says such a product is necessary for the industry’s survival.
Hal Vogel, author of Entertainment Industry Economics and perhaps the industry’s leading analyst.
Harold Vogel has never said that a Box Office Futures exchange is necessary for the motion picture industry’s survival.
He sure did.
He’s an investor in our company, too and its what we do.
I can fax you the statement he made regarding futures in our PPM.
imagine an opening like, say, “knight and day” WITH futures trading. they’d have to hire MORE suits to “manage” that risk. what fun!
I’ve said it before and I’ll say it again: The industry has really shot itself in the foot on this way; the MPAAs position being shortsighted in the extremis.
All’s they done is cut themselves off from a very valuable and useful way of hedging the risk of their productions which, if they now want to do, they’re going to have to go back to Congress to do, essentially placing the industry’s future in the hands of that body.
Without better ways of hedging risk, the movie industry has no future. Financing has all but dried out. Rumors are that Relativity won’t be around much longer.
All the models used by the industry are based on the a production’s financial returns being log-normal when they’re not. They’re stable Paretian.
Indeed, all the derivatives which have “blown-up,” mortgages, etc. have done so because their modelling, too, has been log-normal. Its just a stable Paretian world out there.
Every entity that has tried its hands at film finance has used a log-normal distribution with the results that they’ve all have or are losing their investment.
The MPAAs “victory” is a hollow one because it means that it will be done off shore.
Having said that: Both Cantor’s and Veriana’s contracts really did nothing to hedge risk which is not to say that designing a contract which does can’t or won’t be done.
Like it or not there is, however, a gambling aspect to futures contracts. Traders are not sufficient to achieve or maintain liquidity in the futures market. The market needs speculators for that
Ideally done, what will happen is there will be contracts/a market where the the studios and other production/financing entities can hedge the risk of their productions which will also be the world’s largest government-regulated casino with revenues/profits that will dwarf those of every other casino now in existing.
Remember, there are places in the world, India and the Far East most immediatey come to mind, where the populace engages in gambling to a far greater extent than we and where there is a great interest in all things American, Hollywood, the movies, and celebrities not being the least of which.
This is an idea whose time is has come.
The industry needs to hedge risk and there’s too much money to be made from contracts/markets which do so.
Agreed, and with the spiraling cost of production for effects heavy and CGI heavy (why is it costing so much, technology should make it CHEAPER not more expensive) films, and indulgent directors (IMHO the real cost factor), Hollywood will NEED co-financing and those guys will NEED to be able to hedge if the film goes belly up.
Shorts in the market have value — they identify turkeys. Stuff that’s overvalued and really, junk. Ratings agencies are terrible, in determining risk for bonds, but the short market tells you what the real risk is for junk, even if S&P rates it Triple A+.
What’s the implication? Shorts do the crunching, because YES HOLLYWOOD, EVERYONE KNOWS EVERYTHING. They just don’t want to know. R rated movies do poorer than G rated ones. Family movies do better than Horror. Stars have little effect on box office. Certain script writers have never had a hit. Others reliably have hit after hit.
This means a correction to junk movies being flooded into the marketplace, just for cronyism, because the futures contracts will be upside down. Ultimately, it means more good movies (that make money for everyone) and less bad ones.
and yet, every single organized entity in hollywood is against this, not just the MPAA. I don’t know of one high profile person from any facet of hollywood who has pushed for it. hollywood needs to adapt to survive these changing times, and there are several different ideas about how to do that, but it would seem everyone involved in the movie business agrees this is a bad idea.
I agree with aucociscokid- movie futures/speculation will happen. Hell what ARE all these movie news and review sites(Deadline included) if not prognosticators of a movie’s/studio’s success or failure. Admit it all of us who are reading/writing these articles that give us the details of films in development are in our minds thinking, “oh, that sounds like a great idea for a film” or “that’ll flop” or “that’s an interesting casting choice” or “this is the perfect team to bring this story to screen”. It’s only a matter of time before enough people with enough cash decide they wanna put their money where their mouth is. I mean, look at that’s how the derivatives for every other market evolved, right?..
And I don’t know enough about the laws of probability you mention, acociscokid, but I do know enough about trading and Hollywood book-keeping to know that any disclosure of the studios books are irrelevant because their books are cooked in such a way that a film’s budget and revenue can withstand scrutiny long enough to make anyone willing to examine them, give up chasing the money(can I get an “Amen,” Peter Jackson?..). Major studios have already hedged their bets, hedging is inherent in their model: they make one or two tentpoles that get huge P&A budgets(Spiderman for Sony, Iron Man for Paramount, Anything Pixar for Disney, etc.) and then they have the smaller pics that they spend less on but have a nearly infinite upside given the unpredictability of films like Blair Witch and the like. Bottom line: studios don’t need another hedge via a futures market, they’re afraid that any random Jack or Jaqueline trader outside the major studio/movie financing industry(with no interests on the line other than earning modest returns and proving themselves “Hollywood savvy”) will suddenly be able to influence the perceived viability of certain movies that studios would rather not have to answer to anyone for…
Lemme put it this way: any trader with an once of business sense(not even talking about aesthetic sensibility here) who heard the MacGruber concept, saw the script and looked at the $10 million dollar budget for it would have placed their bets against it as soon as it was announced(I mean seriously,that movie wouldn’t even made as much as it has so far if it weren’t for favorable deals the studios have with exhibitioners).
If futures trading were possible, people who want to keep crappy movies from coming to fruition would bet against them. The fact is, no one is able to tell which movies are gonna break out but, 98% of the time you can get a near consensus on what movies are gonna be turds(I’m looking at you, outdated 80′s tv show re-makes).
A movie futures market has the potential to raise more funds for independent productions with original ideas that studios aren’t willing to fully get behind. That would further lessen the gatekeeper role that the major studios currently play in deciding which movies get wide release and marketing money. The studios don’t want that because that means more competition for them and therefore the democrats they helped get elected don’t want that- end of story. I doubt there was any substantial debate as to the pros and cons of movie futures trading…
Can anyone actually argue that elected officials, or anyone else, believe that protecting major movie studios from derivitives speculation is at least equally as important as protecting homeowners from the same?.. Because that is what’s being implied by Pisano’s lobbying/arguments and the arguments that the anti-movie futures commenters are putting forth here…
I’m just sayin.
Well, since you’re “just sayin”, did it have to take five Paragraphs?
Autistickid,
Film financing has not all but dried out. That is where your argument always runs off the rails. You just whistle past this assumption that there will be no sources of financing other than opening a casino to finance films. No matter how much Latin you drop in each post, you will never get past this faulty assumption. The death of the Movie industry has been announced over and over; yet there are still people out there that will spend millions and millions of dollars to get into the business. In fact, there are smart people who will make sophistic arguments to try to get into this game.
PAul
Its survivability is an illusion.
Warner’s could probably make Harry Potters forever.
In one sense, they’re just taking revenues from one and rolling it into the next.
They are not, however, turning a profit.
Their inability to do that is eating into their operating expenses.
Operating expenses is how they turn the lights on every day.
So, while on a revenue basis they can make Harry Potters, there will be no physical space in which to actually film it.
sure, his claim that financing is drying up is false. But does his argument really depend on that?
Instead of saying “the industry will die without the ability to hedge bets”, what do you think about the statement “the industry would grow and be more profitable if it had the ability to hedge bets”?
Wouldn’t the industry be able to take more high-return risks if it could hedge its bets like other industries do?
Sorry Wall Street, you’ll have to stick to making money the old fashioned way…through hedge fund market manipulation, naked shorting and trading on illegal insider information. It’s the American way.
Gotta say it,
Didn’t think I would by the way, but now I am glad the bill was killed today. Futures is a good way to go in my opinion. Anyone can invest in stock, not everyone can invest in movies. Not a very equitable arrangement if you ask me. Limiting oppurtunity by banning futures in any singular market ultimately leads to a limitation of resources, talent, and revenue.
Now the bill can be rewritten without the ban on movie futures.
Paul Q. Merritt
Correction,
Looks like the bill was put back on the table. Curious to know if the ban survived?
In order for the contract to settle, the studios would have to disclose the actual, real revenue of a film.
What is on Box Office Mojo and even to an extent what Rentrak is reporting are not the “real” #s.
Cross-collateralization prevents this, and there’s no way to prevent cross-collateralization.
Don’t know what cross-collateralization has to do with this.
Studios know exactly how much comes in at the BO.
When I’m not trying to write the Great American Movie (details unspecified) in a way that empowers me to go on to helm it, I trade options and futures; a fool’s errand if ever there was one (both are, actually, but that’s another subject ….).
This incredible idea — to create a media-product futures exchange that would allow (indeed, invite, compel …) industry insiders to fleece outsiders the same way they usually do with net profit point-participation deals — would vastly complicate studio/agency and production/distribution politics were it receive a greenlight. The same types and patterns of fraud and regulatory failure that destroyed the interbank CMO/CDO markets during 2007-09 would have occurred while adding an entirely new corruptive dimension to the Development and Distribution Hells that already exist. That most ancient observation about “Hollywood”, it being “as corrupt as money can make it”, would have assumed absurd and self-destructive heights because the ultimate beneficiary of such a futures market could only be organized crime.
The phrase “dodged a bullet” is an ancient cliché. What The Industry actually dodged here was nothing less than a Mt. Everest.
Don’t know how anyone is going to fleece anyone else.
In its pure form – which is not the way that Veriana and Cantor proposed doing it its very simple, would hedge risk and facilitate financing.
In its pure form BO is netted.
A studio “sells” whatever percentage of a film’s backend they wish.
I would imagine most would not want to hedge more than 30%.
It receives that amount from a bank, hedge fund, etc. after the film has been completed, but before its release.
With a proper hedge in place that cash advance becomes as risk free as is possible in the world as we know it.
While the inventory investment of studios and investors in production and development pipelines for films represent bilions of dollars, the value of the inventory is not known until films are released to the theatrical market. As a result, the relationship between the cost of a film and its revenue potential is uncertain at best. Futures offer a way for studios and film inestors to lock-in a fixed sum against the uncertain value of the box office revenues to be realized from a particular film, and alow studios and investors to more effectively finance films through the use of hedges before a film is released. The selling of futures contracts by producers and inventory holders is a classic futures market objective and provides suppliers in many markets with greater production and inventory certainty.
From a studio’s perspective, it would be selling variable revenue rights for a film over a fixed post-release period in exchange for a fixed dollar amount. If a film generates more revenue during the contract period than agreed to in the futures contract, the studio pays that amount to the exchange (for transmittal to one or more “matched counterparties”), which the studio will pay from the excess revenue derived from the film itself. If the film generates less revenue during the contract period, the exchange pays the difference to the studio from payments it receives from “matched counterparties,” which in effect would reimburse the studio for the lost revenue from the film itself.
None of you clowns know what you’re talking about. The truth is, both the MPAA and the two firms pushing for the futures are both grossly exaggerating the impact these futures would have on the industry, for and against.
These are pure derivatives, with no physical deliverables as in the case of commodity futures. It is basically little more than paramutual betting and would have absolutely zero impact on the performance of a movie or the ability to raise money for a movie, just as betting on the horses doesn’t influence their performances or the ability to raise money to buy a horse.
Furthermore, there is no way you could buy enough contracts as a hedge to offset the cost of a production, because there’s a limit any one entity can purchase to prevent a Max Bialystock style short position.
What’s more, they’re not going to carry rinky dink, micro budget productions that might lend itself to a manipulated short position. And it wouldn’t matter even if they did, because the only people that would suffer are the suckers who took the other side of the bet. As far as investors are concerned, they can always sue the producers for malfeasance and the producers wouldn’t risk it anyway lest they are criminally prosecuted for fraud and sent to the pokey.
Box office futures are one thing and one thing only, a speculative tool for non industry people who want to participate in the financial dynamics of the movie business. Nothing wrong with that as long as you come to the table with your own money.
autistickid,
what I love most about your posts is the sophistic assumption that we all agree that film financing is going to disappear.
Paul
Film financing has disapeared.
Its down 80%-90% from 2009 levels.
Foreign pre-sales are no longer being done.
The number of banks making loans vs. film rights is down from 20-40 a year or 2 ago to 8.
Deutsche Bank, Societe Generale, all the hedge funds pumped c. $5 billion in investment over the past 4-5 years are gone.
Schuyler Moore said in his testimony before the CFTC relative to Cantor and Veriana’s contract applications that he alone represents almost $5 bilion in private equity that will not come in until there are better ways of hedging risk. Ditto every other entertainment lawyer in town.
movie stock market is only relevant if you can get INVESTMENT FOR YOUR OWN MOVIE FROM IT.. if it is just people betting on other people’s movies, and it’s just a casino of sorts that does NOT help fund the movies creators, then it’s just a bad idea. get movie makers a SOURCE OF NEW FUNDING via this stock market, that would indeed serve the country. but not just betting on other people’s movies, that invites corruption – the whole system is built upon corruption.. sick and we see it in the gulf..
Because the Cantor Exchange and TrendX serve no commercial purpose, the discussion surrounding film futures has centered on their gambling aspects.
There are entities, however, with a legitimate need to hedge the risk surrounding the production/distribution of motion pictures, not the least of which are the studios themselves which could and would be done on a true futures exchange.
There’s an excellent May 6, 2010, post on Yves Smith’s Naked Capitalism blog by Buzz Potamkin about all the entities and companies (with a few of my own) whose bottom lines are tied to a film’s BO performance and with a legitimate need to hedge that risk of probably several hundred milions of dollars of risk PER FILM.
+ Cable and pay-per view exhibitors such a hotels, casinos, resorts and cruise ships.
+ The theater exhibitors.
+ Owners of the shopping malls where these theaters are primarily located.
+ The studios marketing partners (Audi, 7-Eleven, LG, Diesel, Oracle, Hershey’s).
+ Licensees and merchandisers.
What the legislative ban does is preclude all these entities from hedging their risk, which is bad for them, bad for the economy, and, ultimately, bad for the US which also means you and I.
If one was buying a piece of the film, that would be one thing, and maybe a good thing for independent cinema. But placing 3rd party bets on a BO tally is gambling, nothing more. Is there something wrong with horses or football?
If it had gone through, we could’ve stopped the whole thing in its tracks by only reporting cumulative BO results.
Heaven forbid that business entails risk! Should Barnes & Noble be allowed to short individual books as well? How about our spouses be allowed to hedge their risk in the marriage partnership by engaging in adultery? Have a kid or two on the side just in case?
How are you defining film financing? We are releasing two more films this year over last. The industry as a whole released a little over 500 films last year, and will likely release the same this year. These films didn’t cost 80% less.
Cantor Exchange and TrendX is just fun for gamblers and speculators. People drop $100,000 on a single hand in hold ‘em every night. Relax everyone.
Oversight of financial markets is a net ‘good’ for the economy, but is the US Congress really the best body to make that decision? The CFTC has a more direct understanding of the implications of such a market. The CFTC also has more astute analysis. Congress? They are swayed by whomever is donating to their re-election campaigns. I don’t see how a congressional ban on the futures helps Hollywood. And since Congress doesn’t control markets outside the US, they won’t stop the development of such a market in London, Hong Kong, or Toronto, for that matter. Just as off shore on-line gambling is humming along, so could a movie futures market where international production and financing firms could play outside the rules of the US.
Why do they want to ban future negotiations of movies?
I still do not see a horn of this law. I’m worried about the movies, especially negotiations or whatnot, I can say is more properly plz?
Sorry my enlgish