Thursday, March 11, 2010

Markets In Everything: Movie Box-Office Futures

LA TIMES -- "Welcome to Hollywood's newest version of risky business: movie derivatives.

Two trading firms, one of them an established Wall Street player and the other a Midwest upstart, are each about to premiere a sophisticated new financial tool: a box-office futures exchange that would allow Hollywood studios and others to hedge against the box-office performance of movies, similar to the way farmers swap corn or wheat futures to protect themselves from crop failures."

HT: Scott Jagow

5 Comments:

At 3/11/2010 12:06 PM, Anonymous gettingrational said...

The Cantor Movie Exchange offers a way to make extra cash for no investment at all. "It Pays to Practice" Rewards Program, Round 2 is now in session. You can make up to $100.00 by exceeding you $10,000 virtual dollars seed money.

The promotion ends 3-31-10 and some restrictions apply: Cantor Fitzgerald and applicable movie business associates can't participate (isn't that everyone in L.A.?)

 
At 3/11/2010 1:36 PM, Anonymous morganovich said...

so, i don't get this. i can see how studios would like it, but who is going to take the other side of the trade? volatility in box office receipts isn't going anywhere. someone is taking this risk in the new system.

who is it? what does this hedge?

i don't understand how they plan to generate liquidity in this market.

do you really want to bet about the likely success of a film against the studio that made it?

 
At 3/11/2010 3:35 PM, Anonymous Admiral said...

As a long time player of HSX, which Cantor (CX) is based off of, I was initially very excited by the prospects of this. However, in practice rounds on Cantor, there has been one dramatic flaw, as expected by another commenter here: liquidity.

CX has a lot of potential, but it's a risky endeavor at this point.

 
At 3/11/2010 8:51 PM, Blogger randian said...

who is it? what does this hedge?

A future is a guarantee of a price for your assets in return for giving up the upside, right? I assume this is a way to create a public market for movie rights, rather than selling rights to private investor groups.

My problem would be Hollywood's notoriously fraudulent accounting practices. As the counterparty to the public investors, how could you trust what the studios are telling you?

 
At 3/11/2010 9:05 PM, Anonymous morganovich said...

randian-

but futures are easy to hedge. how do you put off risk on a movie? why would you take the other side of this trade? there are no natural buyers.

the only person who's interested is a speculator, and you are asking them to bet against a much better informed counterparty.

the only way this would generate any liquidity is if pricing were less that expected yields. otherwise, why would anyone take the other side of this trade? this isn't movie rights, it's movie box.

the only way this attracts investors is if studios prize certainty enough to price below expected return. given that they are already taking a portfolio approach to their films, i don't see why they would find that attractive.

this is going nowhere.

 

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