Box office futures, R.I.P. — thank goodness
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I’ve had a couple — really, only a couple — of people push back at me when I’ve said that CDOs and other exotic financial instruments exist only to enrich their creators, and are societally useless at best, destructive at worst.
Okay, you defenders of useless paper, let’s hear you make a case for box office futures.
Then again, don’t bother. A little-noted part of the financial reform bill that just passed nipped that particular disaster in the bud.
You will recall, of course, that a bunch of entrepreneurial financiers (financial entrepreneurs? what expression am I looking for?) wanted to create yet another futures market, that of movie box office receipts. You can bet that a new movie will open big, or you can bet that it will tank.
It’s gambling, pure and simple, with no redeeming boost to any segment of the economy. I mean, if you are investing in pork belly futures, you at least have the option of taking delivery on the product. What exactly do you do with your box office future?
Movie studios and theater owners lobbied fiercely against it. So much for the lame argument that it gives film producers an opportunity to hedge their bets.
And, in fact, it’s probably easier to cheat at this than it is to count cards in casinos. The opportunities to bribe critics to praise or pan a movie — or the ability of critics to trade in insider information — is boundless. The ways to find out in advance how many theaters plan to screen a new movie — or maybe even to influence that number — are legion.
It is unlikely that this particular betting vehicle had the potential to bring down the larger economy. And truth? I’m not sure I know what gives the government the constitutional authority to ban it.
But I’m glad it did, anyway. No amount of Wall Street gambling is totally risk free to society. And there is the opportunity cost — money not bet on futures could be going out in loans to legitimate businesses, to home-seekers, to students. I’m fed up with feeling (rightly or wrongly) as though my tax dollars — and my stock portfolio — are being held hostage to “innovations” that are of benefit only to the already-rich.
The idea of movie box office futures should have been scotched a nanosecond after it was suggested. But better late than never.
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Wall Street is a world of rich suckers hoping that every other Wall Street guy is a rich sucker.
I don’t understand why insider trading would be a bigger problem with this than with anything else. Besides, it’d be novel seeing a big name actor getting busted for something besides drug possession. I’m no expert so I didn’t really understand your point about futures trading involving physical products, either. Why is that better?
The societal changes: some promising movies would have an easier time getting financed, some disastrous movies would have their funding cut off faster. While that means the horrid US remake of Godzilla would have been aborted, so would’ve Titanic (probably). I doubt it would significantly increase the overall investment in movies, it’d just give more ways of investing than just buying and selling stock in movie companies.
Also, I get the gambling comparison, but counting cards at a casino is really, really hard. Maybe “easier than shooting craps with loaded dice”?
“I don’t understand why insider trading would be a bigger problem with this than with anything else.” Because these kind of financial instruments are not regulated or monitored by the SEC as your run-of-the-mill public stocks are. It’s a big point of contention between, shall we say, Main Street and Wall Street.
In response to another comment. See in context »Okay, I’ll try to answer your questions.
In response to another comment. See in context »(1) I agree with Sam Fletcher re: insider trading. The potential for bribery also makes it much, much worse
(2) When a physical product is involved, you are helping to infuse money into the industry that makes that product. So there’s a societal benefit — unless exotic instruments that exist only to be traded
(3)I cannot figure out how this would help any movie get financing. Remember, you’re betting on box office receipts, by definition something that doesn’t kick in until the movie opens
(4) For people with mathematical skill — definitely not me! — card counting ain’t so hard. But your right, loaded dice would have been a better analogy