Legislation proposed to ban box-office futures
The major movie studios may have lost their first battle over box-office futures trading, but they unveiled a powerful new weapon in response.
Financial reform legislation unveiled Friday by Sen. Blanche Lincoln, D-Ark., contains a provision that would ban futures trading based on box-office receipts.
Lincoln is chairman of the Senate Agriculture Committee, which has jurisdiction over futures markets.
The Motion Picture Assn. of America, joined by the National Association of Theatre Owners, the Directors Guild of America and the Independent Film and Television Alliance, issued a press release today trumpeting the provision and their support of the legislation. It was sent less than two hours after the Commodity Futures Trading Commission approved the creation of a market, from a company called Media Derivatives, intended for entertainment-related futures.
“As Congress moves forward with financial regulatory reform, we are very grateful to Chairman Lincoln for seeking to put a stop to plans to allow wagering on box-office futures, which are based on a faulty understanding of the film business and could cause real financial harm to both the film industry and other Americans drawn in by an online gaming platform that could be easily manipulated,” the groups said in a statement.
Robert Swagger, chief executive of Media Derivatives, said that instead of attempting to ban the markets, companies opposed to them should simply not participate and allow others to reduce the risk of investments in motion pictures by buying and selling futures contracts.
“This legislation is just to protect six large studios while smaller independents aren’t allowed to have this economic opportunity,” he said. “How can an exchange that helps to create liquidity be criticized when it is bringing in new money so entertainment can be created?”
In addition to the proposed legislation, the House Agriculture Committee will hold a hearing on box office futures next Thursday at which MPAA Chief Executive Bob Pisano and others from Hollywood are expected to testify, along with representatives for Media Derivatives and Cantor Fitzgerald, the company behind the other proposed box office market.
Cantor's market will be approved or denied by the CFTC by Tuesday.
-- Ben Fritz