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Federal commission approves box-office futures trading

Box- office futures have passed a final regulatory hurdle, clearing the way for the first bets to be placed in the near future, and overcoming objections by Hollywood that sought to block it.

In a 3-2 vote, the Commodity Futures Trading Commission on Monday afternoon approved a contract created by the company Media Derivatives that would allow traders to bet on the gross receipts that a movie pulls in during its opening weekend.

Media Derivatives already won CFTC approval for the exchange on which these contracts would be traded – the Trend Exchange -- but it needed the CFTC to sign off on the contract in order to allow traders to begin placing positions.

The idea of betting on future box-office receipts has faced vociferous opposition from the movie industry, led by the Motion Picture Assn. of America, which has said that the contracts would be vulnerable to manipulation and could even hurt how movies perform in theaters.

The decision Monday could still be counteracted by legislation that seeks to ban any trading in box-office futures. The Senate has approved such legislation, but it would need to be approved by the House of Representatives to make it into the final financial reform bill.

The Cantor Exchange, a Media Derivatives competitor, is awaiting approval of contracts for its own movie futures market.

[Update, 7:45 p.m.: For much more, see the story in tomorrow's Times.]

-- Nathaniel Popper


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Comments () | Archives (7)

This is just gambling. It's like betting on football games or how many 3's a basketball player will make or how many K's a pitcher will get in a game. Football betting cards are illegal in most states but this is OK?

This is simply legalized gambling. It produces absolutely nothing useful except that some people will get money or lose money for doing absolutely nothing. These financial-types are doing nothing productive. Why not spend all that time and effort to create useful technologies or advances in fields such as biomedicine, computers, or electronics?

Talk about insider trading! Now the cameraman, hairstylist, even the movie delivery boy could be your buddy for inside info.

The weekly reporting of box-office gross receipts is already imperfect. Without an adjustment for non-standard ticket prices and annual inflation, results are nearly meaningless. Opening-weekend revenues (and any futures trading based upon them) must be predicated on the reporting of units (tickets) sold - analogous to Billboard's music sales charts, and not gross dollar figures.

It's unfathomable, disastrous, and unethical. Who's on this idiot commission? I'd have no problem with a REAL film stock exchange, but this is ridiculous, and will quickly lead to studios spending promotional budgets to up their film's score. All it will be is a window onto how much the studio wants a film to succeed.

As has been said, in a real futures market, you're buying contracts for delivery of a commodity yet to be produced, on the theory that producers will sell their inventory early at a discount to raise the cash needed for production. If one buys the contract lower than the market price at the moment one resells the contracts, or at the time of delivery, one makes a profit.

If there was a market for real shares of movies in production, which one could buy and sell up to and beyond the date of release, I could get behind that. It might be a great way to invigorate a moribund independent cinema. But simply gambling on a third-party outcome is absurd and destructive.

There's one hitch:
"Investors" will have to use chips rather than dollars.

I agree, this IS baloney! It's gambling plain and simple, might as well legalize all gambling, and while were at it, marijuana too!


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