TLP: Hollywood vs. Wall Street. Not Exactly Great Pay-Per-View.

Thursday, May 20, 2010 , , , 0 Comments

movie futures contracts
The bitchfight between Wall Street and Hollywood continues in Washington over whether investors should be able to buy futures contracts based on the box office take of movies. Think of it as Gordon Gekko against Michael Douglas.

The Commodity Futures Trading Commission approved the applications of Cantor Fitzgerald and Media Derivatives to trade the futures and now is considering whether to approve the first contracts the firms have pitched. The Motion Picture Association of America is trying to shut down production, saying it amounts to gambling that's bad for the movie business.

NYT DealBook:

Both contracts allowed traders to essentially bet on the amount of money the movies would make based on different time periods. If the movie made more or less money than the initial revenue level set by the contract, one side would collect money and the other would lose money. These would be so-called synthetic contracts, meaning that the traders would not own the revenues they were betting on, so they would be purely speculative.

The exchanges and some consultants in the industry contend that this would give Hollywood financiers, including the studios, hedge funds and private equity firms, the ability to hedge their risk on a particular movie by guaranteeing a certain payout by giving up some of the upside or by selling off some of the downside of a particular film.

But the studios were not impressed, concerned by the possible perception that they would be betting against one of their movies from succeeding under the guise of hedging risk.
The MPAA says the idea is too close to gambling and could interfere with the creative process of movie-making. A studio that shorted one of its own movies would destroy its relationship with the filmmaker, the Hollywood argument goes. The Gekko position? Not exactly "greed ... is good," but more that outside investors in movies should be able to protect their investments by hedging through the futures contracts.

However this is settled, probably best to not take investing pointers from Shia LaBeouf. After all, this is about big swinging dicks.

The Lazy Paperboy

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.