Film Futurist

It may be of only passing interest you to know that as of this morning, Daniel Radcliffe was trading at $196.94, holding steady as he has for some time now and that Eva Longoria, recently saw a 2% decrease in her value and is now trading at $7.64. But of perhaps real interest is JJ Abrams, who saw a 1% leap to $138.80. And this was likely because the theatrical teaser trailer for his upcoming sci-fi film Super 8 was illegally released on Youtube in the 24 preceding hours.

I know it sounds preposterous but I didn’t make these numbers up. These are real data reported from the Hollywood Stock Exchange, where you can buy and sell stocks and bonds based on real people and projects in the entertainment industry. HSX is a fairly recent acquisition of brokerage house Cantor Fitzgerald, and the precursor to the proposed Film Futures Exchange about which there has been much mumbling, grumbling and gnashing of teeth. On the HSX, which has been around since 1996, you can buy and sell stocks and bonds with funny money called $H — essentially betting on the value of stars, opening movies and now, shows like American Idol. It’s great interactive entertainment. I have friends who are obsessed with the exchange, buying stock in an actor, director or movie literally the minute the project is announced. (By the way, it’s worth noting that these friends are IN the movie business, in which everyone knows everything and no one knows anything.)

So, you might ask yourself, after reading that Cantor Fitzgerald was ready to get into REAL trading of movie futures and then seeing the ensuing bruhaha about Congress possibly banning it, what’s the big deal? Why are Senators Lamar Smith, Barbara Boxer and Dianne Feinstein and the MPAA, DGA, WGA  getting their panties in a twist over some good gambling fun? Well, precisely that – they seem to agree that this kind of gambling, albeit in “futures” form, will destabilize the entertainment business.

Hmmm, let me think about that for a second: I’m a producer and I pitch RED MENACE, my giant menacing alien ladybug epic to five investors. I show them a historical list of box office stats on ET, Jaws all the way to District 9 and I say: “It’s a home run. Obviously.” They hesitate. I say: “I’ve got Tom Cruise in the title Ladybug role and he always brings home the dough” They start coming around. I say: “And, I think I could get JJ Abrams to do it.” They seem more convinced. “I can see the sequels now”. One of the greedy bastards is still not convinced, then I say: “We’ll roll out the red carpet for you at the Oscars. Angelina Jolie will be there.” SOLD!

What part of that conversation seems financially sound? or sane?  If we are to be honest, none. We producers are snake-oil salesmen selling vanity and greed – two very compelling motivators in the gambling business. Just spend 20 minutes at the Bellagio in Vegas and you’ll get my drift. So dare I ask, what is so crazy about buying and selling “innovative” financial products to and about a business patently comfortable with gambling? Ok, I get it: we’re still digging our way out of the hole created by immensely “creative” bankers and their dodgy derivatives. But let’s get to the bottom of this particular product that is being proposed and make a distinction. Felix Salmon explains the trading system simply in his insightful NYT op-ed:

The proposed contracts are simple: they would allow traders to bet on the total box-office receipts of movies in their first four weeks of release. A contract on “Iron Man 2,” for instance, might be trading at $390, meaning that the market is expecting the film to gross $390 million in its first four weeks. If you think it’s going to make more than that, you would go long, or buy the contract; if you think it’s going to make less, you would go short, or sell it. At the end of the four weeks, the contract would expire at whatever the four-week gross is. If you went long at $390 and the film ended up earning $450 million in its first four weeks, then you’d make $60 for every contract you bought.

Simple enough, and a gamble the average speculator could get into for fun (a la vegas) or in a larger stakes way as a method of hedging. And for the record, these are NOT derivatives. Sure, once studios get involved on a large scale, and begin hedging, there will be accusations of insiders “gaming” the system. That is to say if a studio sees more money to be made in sinking a movie and betting against it, they might be more inclined to sabotage a release. But to that I say: um, yeah… that’s being done even without a futures market – ask the long list of directors and actors whose projects got the cabash after a studio decided it would compete with something else they deemed more profitable.

As far as I’m concerned, the only issue that the Hollywood cartel, also known as the MPAA and their pupeteers have is the possibility that any measure of control might be lost to anyone outside of their little circle. Hollywood has been by and large a business of closed doors, secrets and power that benefits a select few. Which is why my friends who play the HSX enjoy their role so much: they are editors, production designers, gaffers – people who are locked out of the big cash that the cartel controls. But they have access to inside information that could earn them a few extra dollars and create a great deal of fun. So I say, why not let the wild cards in?

Hollywood gambles on other peoples money, but they won’t let other people gamble at their expense. “Get the hell outta here!” is what one of my pro gambler friends would say. I certainly took the humor in what a Naked Capitalism blogger suggests while lamenting the invention of film futures: that it is “Wall Street’s revenge on Hollywood” for all the money they’ve gambled and lost in it. I think that’s a little paranoid but funny, nonetheless. They love gambling. We love gambling. That’s all it is.

Let the games begin.