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The Box-Office: You Can't Bet on It!
by Christopher Stone

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You can bet on July Pork Bellies but not on the Box-Office.

You can bet on July Pork Bellies but not on the Box-Office.
Earlier this year, I published a column about how Cantor Fitzgerald and other investment firms were seeking approval from the Commodity Futures Trading Commission to allow Match-Flickers, and everyone, to trade movie futures the same way we trade milk or pork bellies futures. This spring, it looked as if box-office futures trading would be a done dea by summerl.

Not so fast.

As it happens, the Motion Picture Association of America, Inc., the Directors Guild of America, and other motion picture trade organizations, lobbied successfully against the trading of box-office futures. So aggressive was the MPAA opposition to betting on the box-office that Congress added an amendment prohibiting the trading of box-office futures to the recently signed Wall Street Reform Act.

When, on the afternoon of July 21, 2010, President Obama signed the Wall Street Reform Act into law, the hope for a public futures exchange for the box-office died. Match-Flickers, forget "too big to fail." What the Wall Street Reform Act means to you is that there will be no buying and selling of contracts
A rumor about a pending star death might affect a flick's gross.

A rumor about a pending star death might affect a flick's gross.
based on the value of ticket sales for the first weeks of a flick's release.

Exactly why would the motion picture industry be so strongly opposed to turning America's obsession with the box-office into a full blown futures exchange?

In testimony before the General Farm Commodities and Risk Management Subcommittee, Bob Pisano, President of the MPAA, warned that betting on the box-office would "serve no public interest and, to the contrary, significantly harm the motion picture industry and impose new costs that do not exist today."

But there's much more to industry opposition than what spokespeople tell federal committees.

Trade groups led by the MPAA labeled the idea of a box-office futures exchange "a form of gambling that invites chicanery." For example, a motion picture exhibitor could bet against a movie and then effectively throw the game by slashing the movie's advertising budget. Or, someone could successfully manipulate the market by spreading false rumors that, say, the star of a big film was at death's door, or about to be charged with murder.

Why else would
Box-Office betting feared to create a lemons bazaar.

Box-Office betting feared to create a lemons bazaar.
the MPAA, the Directors Guild of America and other motion picture trade organizations oppose box-office betting? There is a fear that such betting would quickly lead to insider trading and many other illegal activities. The motion picture industry also sounded an important warning to investors: taking bets on the performance of any individual contracts in this case, specific movies is often subject to the blight of "adverse selection" where only poor quality product is available for sale. Nobel laureate George Akerlof dubs bazaars such as these "markets for lemons."

In an industry where the dead, and even the undead, think THE TWILIGHT SAGA, are routinely returned to life, might resurrection be in store for a Box-office Futures Exchange? The entertainment trade newspaper, the Hollywood Reporter, thinks not. As they put it, "Trading of derivatives based on movie box-office is an idea whose time is never going to come."

Others think that the concept may survive and thrive in a private, not public, format. Los Angeles attorney, Schuyler Moore, a proponent of box-office
Leo: King of the World, Again!

Leo: King of the World, Again!
betting, claims that while the idea of an official exchange is dead, there is interest among studios and investors in moving forward with a private placement version. In other words, investors would provide a hedge to a studio on a movie but put no money down in advance. If the picture is profitable, the investor would be paid a return. If it fails, the investor would pay money to the studio distributor.

Might there still be a future for a Box-Office Futures Exchange? What do you think, Match-Flickers?

SUMMER BOX-OFFICE WATCH: To the industry's surprise, INCEPTION won the weekend of July 23-25, with a still dreamy $42.7 million. Meantime, SALT savored second place with an opening weekend box-office feast of $36 million. This was above average for a spy opus, but less spicy than industry expectations.

Overall, business was up a substantial 12 percent the weekend of July 30-August 1, over the same weekend last year. INCEPTION became the fourth flick of the past year to sit atop the box-office perch for three consecutive weeks. The other three were AVATAR, ALICE IN WONDERLAND and SHREK.

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Does advertising, public taste, or overindulged stars determine a movie's box office fate? Christoper Stone explores what's going on behind the box office.

Other Columns
Other columns by Christopher Stone:

The Cautionary Box-Office

Box-Office Holiday Season Heads Up. Part Two

Box-Office Holiday Season Heads Up, Part 1

Quality Is Independent

Oh, the Horror!

All Columns

Christopher Stone
Christopher Stone is the author of the international best seller Re-Creating Your Self. With Mary Sheldon, he co-authored three highly successful hardcover books of guided meditations.

He is a member of the Writers Guild of America, West.

If you have a comment, question, or suggestion, you can send a message to Christopher Stone by clicking here.

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