Firestorm over trading markets based on movie box office heats up even more
The issue of movie futures trading heated up even more on Friday.
At the urging of a Hollywood lobbying coalition led by the MPAA, a federal regulatory commission agreed to push back by one week its review deadline for the first of two new futures-trading markets based on movie box office.
A decision on whether Chicago-based Media Derivatives can proceed to open a new market for institutional investors to trade on predictions of box-office performance had been expected no later than this week.
However, at the urging of a trade group that included the Motion Picture Association of America and the Directors Guild of America, as well as several members of Congress, the Commodity Futures Trading Association pushed back the decision date until April 16.
Word of the delay comes amid confirmation that members of the Hollywood lobbying coalition, as well as representatives for Media Derivatives and the other firm trying to start a movie-futures trading market, Cantor Fitzgerald, have been summoned to Washington, D.C., for an April 22 meeting with Congress.
A Media Derivatives press representative would not confirm this meeting. Calls into the MPAA and Cantor Fitzgerald were not returned at press time.
Also on Friday, the Futures Industry Association joined the list of Wall Street groups lobbying on behalf of the two financial firms, releasing a statement that read: “No one can argue that the moviemaking business is without risk or that there is no need for effective risk management tools. The potential introduction of innovative instruments for managing that risk should be applauded rather than criticized.
“The FIA has no view on whether or not the proposed movie futures contracts will succeed. We encourage the CFTC to evaluate these applications on their merits and let the marketplace decide.”
The MPAA sent out this statement about the future trading associaion’s decision: "We appreciate the Commission’s decision to take additional time to review our concerns about the harm online wagering on box-office futures could do to our industry.”
Meanwhile, Robert Swagger, CEO of Media Derivatives, added in his statement: “At the request of the chairman of the CFTC and after individual meetings with commissioners, we have agreed to extend the statutory deadline for review for one additional week with an understanding that a decision will be made by April 16.”
Both Cantor Fitzgerald and Media Derivatives have spent years and millions of dollars developing new trading systems based on future box-office deliveries.
Both companies were in the final stages of review by the CFTC, which was set to give go/no-go decisions to each.
However, with anxiety running thick in Hollywood about the new systems, the MPAA filed a letter to the CFTC in late March, calling the new systems “legalized gambling” and asking for a delay of the approvals. The MPAA was joined in this effort by the DGA, the National Association of Theater Owners and numerous other Hollywood trade groups a week later.
Earlier this week, several members of Congress, including California Sens. Dianne Feinstein and Barbara Boxer, joined the battle, also asking the CFTC to delay approval of the trading systems so that they could be further reviewed.
On Thursday, the MPAA-led group upped the ante, asking the Commission to reject outright Media Derivatives ability to operate its market.
What’s all the anxiety about?
Studio operatives are concerned that the trading systems, which rely greatly on studio-supplied data, could be easily gamed by insiders.
And with these systems, already in test phases, showing an uncanny knack for predicting performance, there’s fear that box-office futures trading could supply just one more headache to deal with in the run-up to the typical theatrical premeire.
For their part, however, operators of these new systems say they’re wonderful tools for evening out the risks associated with making movies, allowing the over-extended to “short” the market, and the under-staked greater access to blockbuster opportunity.