A new way to invest in the film industry

TEXT OF STORY

Bob Moon: Are you ready to put your money where your popcorn is? A couple of box office futures exchanges could let you do just that. One is set to make its debut soon if it wins approval this week -- which would let investors bet on the success or failure of a film. But don't bank on a happy ending just yet. Here's Marketplace's Stacey Vanek-Smith.


Stacey Vanek-Smith: It's kind of like Wall Street meets . . . well, the movie Wall Street.

The Movie Wall Street: Greed is good.

Film futures work like this: Investors bet on how much money they think a movie will make at the box office. If the movie takes in more than expected, investors make money.

Hal Vogel is an entertainment industry analyst:

Hal Vogel: It provides a risk transfer mechanism that should help Hollywood finance films.

Not everyone is so bullish on the idea. The Motion Picture Association of America opposes the exchange, saying it's quote "vulnerable to price manipulation." The MPAA is worried about insider information leaking out from people who may know more about certain films.

Rob Swagger is the CEO of TrendEx, an entertainment exchange set for approval this week. He says the exchange would be regulated, and the movie business could benefit from this kind of speculation.

Rob Swagger: One studio may want to speculate on another studio's films, while that same studio wants to hedge the risk on their own film. Meanwhile, a bank may want to hedge their position so they can lock in their profit margin.

In other words, if a company that was thinking about investing in a film like Wall Street 2, it could also bet against the film's box office opening. That way, the investor would make money if the movie succeeded or if it failed.

The Movie Wall Street: Someone reminded me I once said: Greed is good. Now it seems it's legal.

In Los Angeles, I'm Stacey Vanek-Smith for Marketplace.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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