How Movie-Futures Trading Could Bring (Gasp!) Truth to Hollywood

You can lie to the press, to your actors, to your wife … but this could send you to jail

News item: TheWrap 4/17: “As Film Futures Trading Clears One Hurdle, New Battle Flares.” “The move came the same day the Commodity Futures Trading Commission unanimously approved the creation of one of two proposed markets that backers say would allow movie studios and financiers to hedge the risk of their investments in motion pictures.”

News item: L.A. Times, Monday, 4/19 “Not Much of a ‘Kick’: The teen superhero film ends up in a tie with the 3-D ‘How to Train Your Dragon.’”

News item: TheWrap.com, 4/19 “Final Box Office: 'Kick-Ass’ Overtakes ‘Dragon.’”

Let’s be honest here — have you ever seen so much tsuris over a lousy $100,000 at the box office?  And I speak as a journalist covering the business, a former studio executive and a present-day producer. This has nothing to do with CFTC legalities; it simply has to do with studio execs lying.

(Old joke: How do you know a studio exec is lying? His lips are moving!)
Please understand, studio executives have always lied — to their wives (No, I’m not sleeping with so-and-so!); to actors (“I love you man…” “Fire him!”); to the press (“Hey, we’re the #1 comedy in Atlanta! It’s a Southern-themed movie, you understand?”).
But those were the bad old days, before movie companies were public companies — responsible to stockholders and state attorneys general — and, more importantly, before computers.
Let me give you an example: Prior to the widespread use of computers in the early 1980s, studio execs could claim anything they wanted. Remember the famous Variety headline: “Hix Nix Pix in Stix” or whatever it was?
In those days, Variety and Reporter “reporters” simply called studio execs to ask how movies were doing. Since the studios owned the theaters, there was no independent way to verify whatever they told you.
All that changed in the early ‘80s, when my old partner, Bruce Binkow (legendarily one of the first two graduates of the famous Peter Stark Producing Program at USC) became editor of the Hollywood Reporter. He was the first journalist to publish actual, nationwide reports when, in I think it was ’82, he first began running a Tuesday full-page chart of the top 50 movies that weekend.
Granted, as late as that, even the Reporter was still relying on studio reports, which could be believed for about 15 minutes. (As Bruce used to say, “In Hollywood, where there’s smoke, there’s usually a smoke machine.”)
But at least they had advanced the old “Stix Nix Hick Flicks” (was that the hed?) and put it into a nationwide, easily understood format.
That, of course, quickly begat competitors, from Variety to USA Today, where the “who's up/who's down” format found an immediate forum.
It got so bad at one point in the early ‘80s, while I was at Newsweek, that our editor ordered up a story about how news about Hollywood was now more popular than the actual Hollywood product (if only he were around now to witness the proliferation of Us Weekly, OK, National Enquirer, the various iterations of People, etc.).
By the end of the ‘80s, it had become collective lying. I’ll never forget sitting with then-New World head (and later president of the Motion Picture Academy) Robert Rehme as he showed me printouts of the weekend receipts of every one of the 25,000 movie screens in the country, down to the penny. Everyone knew the truth, but they still lied.
Why? Because they could — there were no penalties if you were caught.
For example, around the same time, I remember Joel Silver at an American Film Institute seminar, telling how he and Warner Bros. stayed up most of one Sunday night waiting for “that idiot Bob Shaye” to report the numbers of his latest “’Nightmare on Elm Street’ to the Reporter so that they could then report “Lethal Weapon 2” or whatever it was as $100,000 more — allowing them to advertise it as “the #1 picture in the country” for the next week.
Shades of this weekend.
Today, of course, thanks to the internet, with everyone having access to the same kind of computer reports that Bob Rehme shared with me two decades ago, the lying is harder to pull off. Just witness last weekend when, if you read the Monday papers, Fox had claimed the “No. 1” spot with “Date Night” by $200,000 over Warners’ “Clash of the Titans” based upon “estimates.”
By the time Monday was over, Fox had to admit that its “estimates” were optimistic and, in fact, “Clash of the Titans” had won the weekend.
Why is this important? Because in the past, all the lying and mendacity affected only which studio could claim to be No. 1 and how many dollars the studio owed to “gross players” like Eddie Murphy, Harrison Ford or Sandra Bullock based on their box office performance. No one ever really believed the studios’ claim of “No. 1” or “No. 2” much anyway — it was just hyperbole.
And at least a decade ago, even the dimmest actor began to realize that s/hey was being lied to about “first-dollar gross” guarantees. After all, how could “Forrest Gump,” for example (in one famous lawsuit), be the highest-grossing movie of all time (till that time) and yet, as far as the actors’ statements showed, still be a money loser!?!  
So some smart agent at CAA or WMA came up with the idea that the actors’ share would be based upon “what was reported to Variety.” In other words, the actors no longer worried if the studios were lying to the public, just don’t lie to us!
And that’s what freaks out the studios about these new trading exchanges: Since the exchanges will be regulated by the government, the studios won’t be able to lie about box office grosses anymore, at least not without going to jail (and I don’t mean “movie jail” — like where you’re fired from your cushy studio job and given an independent production deal).
OMG! You mean we actually have to tell the truth? And nothing is stranger to a Tinseltown exec than telling the truth. (Does this also mean he has to explain to his wife why his buxom secretary has to accompany him on his out-of-town trips — or explain to his boss that a “$15,000 per night” entertainment expense didn’t include hookers?)
Heaven forbid — is Hollywood actually becoming a business … and not the execs’ personal piggybanks (in the famous phrase)?
If so, bring it on! As an investor in several film companies, I would actually like to know which movie really made money and which was just lied about. But that might actually require those studio VPs to do some work.
Again, heaven forbid! I’m so glad I’m no longer a studio exec. I never liked working anyway.