MPAA Kindly Asks Washington to Block Betting on Box Office
Apparently the groundbreaking concept of Flop Insurance hasn't quite caught on with the lobbying arm of Hollywood. The MPAA has officially asked regulators in Washington to prevent the opening of a futures exchange based on domestic box-office receipts, which it says would effectively legalize gambling on one of America's most volatile marketplaces. And frankly, studios have enough to contend with these days without having to worry about whether Harvey Weinstein covered the spread on The Company Men.
Two companies have already begun moving ahead with their respective exchanges while awaiting approval from the Commodity Futures Trading Commission: Cantor Futures Exchange, which has allowed prospective buyers to begin funding their accounts in anticipation of an April launch; and Trend Exchange, a smaller organization limited to industry and trade
bettors investors. The latter exchange expects a ruling on its application any day now, which has the MPAA in a rush to reverse whatever progress the sector has made in the previous weeks and months.
According to a letter obtained by the NYT, interim MPAA chief Robert Pisano claimed that the "reputation and integrity of our industry could be tarnished by allowing trading in the movie futures contracts in a manner which allows them to be viewed as the economic equivalent of legalized gambling on movie receipts." He added that studios' or investors' hedging on futures -- i.e. "shorting," or betting on them to lose -- is prohibited by Cantor, thus invalidating one of the fundamental functions of futures exchanges. This isn't true, of course; Cantor's exchange boss said that "flop insurance" privilege is very much a part of his plan, though limited when it comes to a film's own financiers, which is ultimately impossible to gauge as various intermediaries and other front corporations pop up around the market.
To that extent, the MPAA totally understands the toxic mess that could spill over if the exchange got out of hand, or if it was suddenly (if indirectly) responsible for huge public losses if/when ticketbuyers revolt against Captain America or whatever. Moreover, you can't expect folks like the beleaguered execs at Universal to want to open up the Wall Street Journal one day to read about the market's lack of faith in Scott Pilgrilm vs. the World.
So yes, it could get ugly. The commission didn't respond to the MPAA's letter (at least yet, or not publicly), so, as they say, developing...