Hooray for the Next Bubble
Box office derivatives - betting box office results et al - is likely to bring the American entertainment industry to the brink in the near future
Hollywood usually embraces all that's trendy and hip. But moguls don't mind seeming like fuddy-duddies as they mobilize their heavy PR artillery against a new business proposal: futures trading based on a movie's box office performance.
Tinseltown got a jolt on Friday when the U.S. Commodity Futures Trading Commission authorized a company called Media Derivatives to create an exchange for movie futures. It would sell contracts that anticipate how much revenue a flick will generate from domestic ticket sales. Buyers would make or lose money based on the actual results.
Trade groups led by the Motion Picture Association of America say that's a form of gambling that invites chicanery. For example, a movie exhibitor could bet against a movie and then effectively throw the game by cutting its ad spending. Or someone could try to manipulate the market by spreading rumors that, say, the star of a big film is in rehab.
What's more, the pay offs for the contracts are based on nothing more than unofficial studio estimates about box office sales. There's no law to prevent a studio from estimating too high, or low.
"After the fiscal meltdown from which our country is still struggling to emerge, we have seen the danger of abusive financial practices," the MPAA and groups representing directors and theater owners said in a statement. "Now is the time to strengthen and stabilize our financial system, not the time to open the floodgates on an untested, and unwanted plan that could cause serious harm to an important American industry and its workers."
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