Betting The Box Office

The virtual movie box office futures market known as Hollywood Stock Exchange could get some real-world – with real money – competition if either of two proposals clear the U.S. Commodity Futures Trading Commission, which is expected to rule on them this month.

The online trading forums would be similar to futures markets in which investors basically hedge against commodities like corn, pork bellies and natural gas. In the case of box office futures, movie fans, industry execs and speculators “bet” on expected box office receipts, according to the Wall Street Journal.

All six major Hollywood studios, as well as the Motion Picture Association of America, oppose the proposals put forward by Cantor Fitzgerald (which created Hollywood Stock Exchange) and Veriana Ventures, even though they would be the ones most likely to benefit from such an exchange.

According to the Journal, the MPAA claims the proposals “tarnish the reputation and integrity of the movie industry by authorizing legalized gambling on movie receipts.”

Cantor Exchange and Trend Exchange, the two proposed companies, would allow investors to hedge against potential box office bombs by preselling a share of future box office receipts. They could also guard against obvious future hits like, say, the upcoming “Harry Potter” coming up short of projections.

No actual goods or shares in films would be traded under either proposal. Trading would “simply offset deals made in the real world,” according to the Journal.

If a movie doesn’t do as well as expected, investors could still see revenue from presales. If it does better, the investor doesn’t make anything from the additional receipts. But they do get a share of additional receipts when they “bet” on risky movies that do exceptionally well, as sometimes happens with independent films.

Trend Exchange, backed by Veriana Ventures, would require higher minimums of entry that would prevent “amateurs” from participating. Cantor Exchange would allow trading accounts starting with just $50.

Imagine something similar for the concert industry. Who would have loved to be in on Lady Gaga’s tour? Or who would have lost big on Michael Jackson’s O2 residency? The latter begs the question if such a futures market could be viable for concert tours. But don’t bet on it.