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.

As suspicious as I naturally am of these Hollywood suits and their flawed business models and bad personal style, I’ve still kept one eye on Disney for as a possible game-changer. When High School Musical and Hannah Montana came out of what seemed like nowhere, blew up to become a couple of the most recognizable brands in kids/tween entertainment, who didn’t wonder how the hell that happened? I remember seeing images of tween girl throngs at a Miley Cyrus concert and being stupefied that such a phenomenon could grow out of an original Disney TV character and Disney Radio star.

Granted, we’ve always known that children’s entertainment is the monster of the box office, the DVD and of franchise merchandising because, as we’ve come to understand, children’s tastes are often quite bizarre, obsessive and well, lucrative. This has always been Disney’s “vein of gold”. And when Iger acquired Pixar, he took that idea to an even broader level by acquiring a wholly independent, well-run animation house that again, was in the business of original characters, stories and thus, more franchises. So, despite their public differences, Pixar and Disney have managed to create some of the most memorable, adult-friendly animation in recent history.

Fast forward five years, and Iger again makes a move for Marvel, whose trove hadn’t been completely pillaged and remains filled with lesser known action heros but come with built in fan bases, the possibility of both animated and live-action fantasy content with serious transmedia potential. These moves seemed practical, if expensive, and Iger pulled Disney out of the quaint Mickey-Mouse world into the Pirates’ of the Carribean era. Then as if that wasn’t enough to show Disney’s shareholders that he meant (profitable) business, he goes and fired a whole layer of senior executives (read: old-school) that had been running the company for years and replaces them with a variety of new people, some of whom have little experience in the business of film and TV.

And just as the articles were circulating about his madness, Iger goes and pulls the Alice in Wonderland move: telling theatrical exhibitors in the US and UK that he would shorten the window between the theatrical release of the upcoming film and the DVD release–a move which terrified theater-owners and diminished the grand status 0f the theatrical window. This of course led to some strong words from the UK distributors, threat of boycott and all such manner of protest. Oh, then there was his refusal to make a sequel of the $315 million grossing Sandra Bullock movie, The Proposal which many including LA Times blogger Patrick Goldstein viewed as bizarre, since Hollywood is after all, the sure-bet-sequel town.

This of course begged the question: Is Iger a fool or a maniac? To which I reply: Neither.

The most cynical view of this strategy would be the one taken by critics like Culture Vulture’s Claude Brodesser-Akner, who sees this direction as an aggressive move towards merchandising driven entertainment. But I’m not sure that analysis in entirely correct. While I could never argue that Disney’s responsibility to it’s shareholders to be increasingly more profitable isn’t a driving force in these radical changes, I see the strategy as a real response to the way social media, branding and convergent media are changing consumer/viewer behavior.

Sure, Pirates of the Carribean can have a theme-park ride whereas Sandra Bullock and Ryan Reynolds are pure passive entertainment–but is Iger’s decision to stick with properties that have cross-media opportunities really THAT crazy sounding to anyone who hasn’t been asleep through the advent of social media, interactive entertainment and yes, Miley Cyrus? All this hand-wringing really shows a lack of understanding that Iger’s sharp assessment about the future of entertainment includes the stark reality that for any property to be profitable in age of bit torrent and audience involvement, there have to be multiple streams of revenue that take engagement into serious consideration.

So, no, he is NOT mad. And perhaps somewhere in the wings his largest individual shareholder, Steve Jobs is whispering in Iger’s ear to check out the looking glass of the future.

Over tea in Brooklyn’s train-rattling DUMBO neighborhood, Monello and I spent a few lively hours discussing a broad range of ideas surrounding the practice of Transmedia and what it means to the form and art of the story when we cross into the wild, expansive possibilities of narrative without boundaries. Again and again, he cited examples of  audience engagement AS art, performance, and not simply the necessarily evil creative people have to suffer to get their work seen by audiences. I recognized that as artists, especially filmmakers, the “art” of audience engagement may be the hardest one to embrace yet in constructing the full Transmedia experience, Monello demonstrated how critical it is.

What struck me as we spoke was how accessible and practical Monello was but then I remembered that it was he and his group of collaborators after all, that were responsible for the savvy, practical and explosive phenomenon known as The Blair Witch Project. (He calls that an early, unidentified Transmedia project – which spawned lesser known books and games that expanded the story and appealed to varying audiences) Yet as the same time, I found myself his unbridled love for story and his zeal for the challenge of creating compelling, immersive experiences rather infectious.

Because it was my obsession with rapidly shifting world of narrative form and content that led me to start writing this blog in the first place, I bombarded Monello with questions about how he and his partners at Campfire manage to do what they do, convince brands to let them create cross-platform stories and experiences; badgered him for the requisite end-of-year 2010 predictions; and pestered him for speculations on when Transmedia might go wide. He was gracious and patient with his extensive answers – a limited selection of which I am posting here.

WHAT IS A STORYTELLER WITHIN TRANSMEDIA?
Rejecting the limitations of titles such as “filmmaker”, Monello says stories can be anywhere and on any platform so he privileges the term “storyteller” above all others. When a storyteller is effective, s/he is “conducting” and “orchestrating” a creative narrative experience for an audience, no matter where that might be. He is adamant that audiences should be able to engage as lightly or as deeply as they want, and that all engagement experiences should be built with that in mind – value at very level. Emphasizing that a Transmedia narrative might have a component as low-tech as a paper invitation (which Campfire used in the True Blood campaign), the goal is always to allow the audience to engage, and dig deeper if they so desire.

WHAT HAPPENS TO THE ARTIST/AUTEUR’S VISION IN TRANSMEDIA NARRATIVES?
In designing the narrative experience, Monello says, “the dirty little secret of transmedia narratives: creators have far more control over the story than anyone really lets on.” In more cases than not, when an audience engages with the intention of building/contributing to a narrative, they are playing a role that has been designed by the author of that story. So to all those auteurs nervous about crossing into the abyss of a creative world run by crazed mob fans, there’s nothing to fear. On the contrary, encouraging fans to engage can only increase the value of one’s brand.

WHAT WILL IT TAKE FOR TRANSMEDIA NARRATIVES TO BECOME MAINSTREAM?
Right now, he says he still struggles with mainstream marketing teams resistance “to constructing a convergent multiplatform narrative” because of the splintered way agencies handle all their platforms–hardly ever basing a campaign vision on a unified cross-platform story. Despite challenges on the brand side with which he works,  Monello thinks the Transmedia road is still a lot tougher on the Film and TV studio side where one might expect there to be more story innovation. The ideal scenario, he says, is that a powerful showrunner will initiate a Transmedia project across the board and turn it into audience gold but doubts that will really happen. He believes a more likely scenario is that the “game-changer will come from an indie creator,” not unlike a Blair Witch scenario of the next decade who “with the force of the fans will reformulate the system”.

This Youtube video Ataque de Panico currently has over a million hits, prompting Sam Raimi to sign its Uruguayan director Fede Alvarez to a production deal for a $30 million feature. The LA Times reported this deal as a Cinderella story, courtesy of Youtube popularity, a little help by Kanye West’s blog (!) and special effects mastery.

You have to love how horror sci-fi ideas can be so appealing to Hollywood even without story. Perhaps we are entering the post District 9 era of Third-World Sci-Fi, which I loved, for the record. I won’t really complain about changing the scenery to backgrounds outside of the US but um…that little boy at the beginning – ET, anyone? Lesson #1: Always start your speculative sci-fi with a wide-eyed little boy if you hope to tug at the warm fuzzy hearts of Hollywood execs!

I do think the spectacle of the giant robots is fascinating, especially for a Youtube nugget. It reminds me of that wildly popular viral 405, which back in 2000 seemed like such an enormous feat of fx for early Youtube watchers. I’m not sure what happened to Bruce Branit and Jeremy Hunt after their famed CAA signing. Or for that matter, what happened to the feature based on a plane landing on the 405.

But hey, can someone tell me: what’s a good story worth?

So here’s where I step back and ask: was the success of Paranormal an anomaly in the Blair Witch manner, or is it in fact the beginning of a wave? While I get that this film is probably scarier in a “real” way than say, Saw VI, that paragon of torture porn which it trounced at the box office, I have to wonder if the convergence of all these phenomena at the same moment spells more than just “great content”. There are a lot of “firsts” here: certainly the use of Eventful.com, which until now has been used primarily for live music events; there’s the suddenly powerful force of immediate social media like twitter and of course, there’s the sheer desperation of the studios to make a buck, any buck in the midst of a funding crisis akin to none other in recent Hollywood history.

Assuming that none of these factors are changing anytime soon – ie, access to social media, immediate audience responses (that can make or break opening weekends), and a cashflow issue not likely to be resolved so fast, will models like this soon become ubiquitous? It seems inevitable to me. I’ve always been dubious of Hollywood test screenings and the magic scores that determine whether a movie gets released or not, or if characters or endings should be changed. It seems that at a certain price-point (an din this case rather extremely low), these studio people should be delighted to have ways of gauging audiences interest in their films. It’s such a low-risk strategy that I wonder if Paranormal’s success will send a message to the powers that be.

But of course, the million dollar question remains unanswered: is this a marketing/distribution strategy that will work for a film without this sort of draw – the horror, the midnight screenings, the sheer “viral-ness” of it? And will there emerge other platforms, such as Eventful.com, which can perhaps draw different groups of people to an event they can feel they have participated in bringing to the rest of the public? Certainly, there are some indie film communities springing up around various audience engagement concepts. And I wonder how those will shake out in the months and year to come – since that is really how quickly I believe we will see vast transformation in the world of audience-content relationships.