Recently an exchange to trade box office success of movies received approval from US market regulators according to Yahoo. Personally I believe this is an amazing idea and I had in fact pitched it as a presentation during an internship as well.
Why I think movies can be a good exchange market?
- Solution to piracy! I think the exchange can actually help in reducing piracy by making common public a shareholder in the movie. People will be much more inclined in reporting piracy if their own financial interests are being harmed by piracy.
- Number of participants: The success or failure of a movie is not in the hands of few people (like sports). The box office success of a movie depends on thousands of moviegoers! Although critics can enhance / dampen the success of a movie but they can’t dictate it. All exchange traded products require the presence of large number of market participants to ensure markets are not manipulated.
- Natural Sellers: Movie producers, distributors, movie halls and investors are natural sellers on the exchange. They can hedge a part of their investment via the exchange.
- Movie Fans, Natural Buyers: Movie fans will like to buy the movies in anticipation of movie doing well. Ofcourse a lot of people will want to buy Twilight Eclipse Opening Box Office rights and it can be actively traded.
- Seed Money to upcoming producers: As far as I understand (and I may be wrong), new upcoming producers find it hard to raise funding and such an exchange can actually help them! The article on yahoo mentioned that big movie houses were against such an exchange and this could actually be one reason for their disapproval.
- Invest in a single movie, not the production house: Investors currently have no way to express a view on the success of a single movie, and have to take view on a production house and hope that all their movies turn out well. By having single movie futures we can remove this.
What are your comments? What do you think about this idea? Please do let us know…