Congress bans boxoffice futures trading

Supporters weighing in on private version of exchange

Trading of derivatives based on movie boxoffice is an idea whose time is never going to come.

As anticipated, the U.S. Senate on Thursday approved financial reform legislation that includes a ban on treating boxoffice as a commodity which can be the basis of a futures market for investors.

Both Cantor Fitzgerald, which wanted to launch The Cantor Exchange, and Veriana Networks, which proposed Media Derivatives Trend Exchange, won approval from U.S. Commodity Futures Trading Exchange, but have already acknowledged their initiative is dead in the face of an act of Congress.

This is a major victory for the Motion Pictures Association of America and a coalition of other opponents of the concept who battled first to deny approval, and when that failed, to get Congress to ban the practice.

It is also a very visible victory for Interim MPAA CEO Bob Pisano, who was very public and vocal in leading the battle to defeat the notion of futures based on movies, which he called a form of gambling, saying it would be harmful to the movie industry. He also said, counter to backers claims, that movie companies would not use such an exchange as a hedge against risk, as commodity traders in things like pork bellies and orange juice have done for years.

Pisano said in an MPAA a statement after the vote: "Speaking on behalf of a coalition that includes the Directors Guild of America (DGA), the Independent Film and Television Alliance (IFTA), the International Alliance of Theatrical Stage Employees (IATSE), the Motion Picture Association of America (MPAA) and its member companies, and the National Association of Theatre Owners (NATO), I want to thank the Congress for approving this measure."

"After proposals for these speculative gaming platforms came to light, our industry came together to oppose these plans with an unprecedented coalition that included entertainment industry workers, creators, independent producers and distributors, studios and theater owners," continued Pisano. "We are pleased with final passage of this important legislation. Congress has acted decisively to ban proposed trading in boxoffice futures and to make important reforms in the country's financial regulatory system. We applaud the work the bill's authors have done, and of course, the many Senators and Members who supported the provisions to prevent movie futures trading."

This may be a last hurrah for Pisano, who is expected to be replaced soon. Former Senator Bob Kerrey earlier this week confirmed he is in the final stages of negotiating a contract to take the top MPAA job once held by the late Jack Valenti.

It is also a win for Sen. Blanche Lincoln (D-Ak), who wrote and inserted the amendment in the long-in-process Wall Street reform legislation inspired by the global financial crisis and abuse in the use of derivative trading that has come to light. Lincoln is in a tough re-election battle in her home state and while this is not an issue people of Arkansas care deeply about, it will likely help in her fund raising efforts on a national level.

The complex legislation, which President Obama has said he will sign into law shortly, first passed a procedural vote in the U.S. Senate and then was approved by a majority vote. It has previously been approved by the U.S. House of Representatives.

There were few in Hollywood willing to go on the record in favor of boxoffice futures trading. One proponent was Michael Burns, vice chairman of Lions Gate, who said such a market would be useful to independent movie producers and distributors.

Another proponent, Los Angeles attorney Schuyler Moore, who is also an occasional Hollywood Reporter columnist, has said that while the idea of an official exchange is now dead, it is spawning interest among investors and studios in doing a private placement version. In other words, investors would provide a hedge to a studio on a movie or group of movies but put no money down in advance. If the picture is profitable, the investor would get a return. If it fails, the investor would have to pay money to the studio distributor. So in that way, the idea of movie futures may live on, but with a much lower profile.
comments powered by Disqus