finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...

, box office futures is a type of

futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

in which

investor An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...

s speculate on upcoming movies based on their predicted performance.

United States

In the United States the idea of a futures trading in relation to the success of Hollywood films dates back at least to 1996, when

Max Keiser Timothy Maxwell "Max" Keiser (born January 23, 1960) is an American broadcaster and film maker. He hosted '' Keiser Report'', a financial program broadcast on RT that featured heterodox economics theories. Until November 2012, Keiser anchored ' ...

and

Michael R. Burns Michael Burns (born August 21, 1958) is an American entertainment executive and Vice Chairman of Lionsgate, a film studio and global content platform. He joined Lionsgate's Board of Directors in 1999 and became Vice Chairman of the studio in Ma ...

launched Hollywood Stock Exchange (HSX) as a web-based, multiplayer game in which players use simulated

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money ar ...

to buy and sell "shares" of actors,

directors Director may refer to: Literature * ''Director'' (magazine), a British magazine * ''The Director'' (novel), a 1971 novel by Henry Denker * ''The Director'' (play), a 2000 play by Nancy Hasty Music * Director (band), an Irish rock band * ''D ...

, upcoming

films A film also called a movie, motion picture, moving picture, picture, photoplay or (slang) flick is a work of visual art that simulates experiences and otherwise communicates ideas, stories, perceptions, feelings, beauty, or atmospher ...

, and film-related options. After some attention during the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Comp ...

, HSX was bought in 2001 by the financial company Cantor Fitzgerald who planned to turn it into a real-money trading exchange, but the devastation of Cantor Fitzgerald during the

9/11 attacks The September 11 attacks, commonly known as 9/11, were four coordinated suicide terrorist attacks carried out by al-Qaeda against the United States on Tuesday, September 11, 2001. That morning, nineteen terrorists hijacked four commerci ...

put the project on hold. In 2007, Arizona-based entrepreneur Robert Swagger formed Media Derivatives Inc. (MDEX) with the goal of creating an electronic futures exchange for contracts based on box office results. The idea behind MDEX was that it could be used by large film studios to recoup some of the money invested in failing movies by shorting its film on the exchange. Around the same time, Cantor Fitzgerald revived its plans for a real-life HSX and tried to get regulatory approval for it. Before any actual listings or exchanges could be made, a group of film studios, which was led by

Motion Picture Association of America The Motion Picture Association (MPA) is an American trade association representing the five major film studios of the United States, as well as the video streaming service Netflix. Founded in 1922 as the Motion Picture Producers and Distrib ...

, asked the regulatory authorities to ban the practice, stating "that box office futures would be easily manipulated and of no use to the big film companies." The main concern was that decisions that could dramatically change the performance of any given movie at the box office — such as the weekend in which it premiers or the number of theaters in which it runs — could easily be changed on the fly by studios in order to manipulate the outcome. Despite initially obtaining approval from the U.S. Commodity Futures Trading Commission (CFTC), in July 2010, the U.S. Senate passed financial-regulatory legislation which included a provision banning the proposed practice. Lobbying by the

film industry The film industry or motion picture industry comprises the technological and commercial institutions of filmmaking, i.e., film production companies, film studios, cinematography, animation, film production, screenwriting, pre-production, ...

and anxiety caused by the

global financial crisis Global means of or referring to a globe and may also refer to: Entertainment * ''Global'' (Paul van Dyk album), 2003 * ''Global'' (Bunji Garlin album), 2007 * ''Global'' (Humanoid album), 1989 * ''Global'' (Todd Rundgren album), 2015 * Bruno ...

are seen as the main factors behind the decision to ban box office futures.

Iowa Electronic Markets The Iowa Electronic Markets (IEM) are a group of real-money prediction markets/futures markets operated by the University of Iowa Tippie College of Business. Unlike normal futures markets, the IEM is not-for-profit; the markets are run for educa ...

, a group of real-money

prediction markets Prediction markets (also known as betting markets, information markets, decision markets, idea futures or event derivatives) are open markets where specific outcomes can be predicted using financial incentives. Essentially, they are exchange-trad ...

futures markets A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or ...

operated by the

University of Iowa The University of Iowa (UI, U of I, UIowa, or simply Iowa) is a public research university in Iowa City, Iowa, United States. Founded in 1847, it is the oldest and largest university in the state. The University of Iowa is organized into 12 co ...

sometimes trade in future stock dependent on the box office performance of Hollywood films. It can do so because it is not regulated by the CFTC nor by any other agency due to its academic focus and the small sums that are involved, with the markets being run for educational and research purposes.

United States

See also

References

Further reading