finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

, box office futures is a type of

futures contract In finance, a futures contract (sometimes called 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 item tr ...

in which

investor An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital the investor usually purchases some species of pr ...

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 and Michael R. Burns launched Hollywood Stock Exchange (HSX) as a web-based,

multiplayer game A game is a structured type of play usually undertaken for entertainment or fun, and sometimes used as an educational tool. Many games are also considered to be work (such as professional players of spectator sports or video games) or art (su ...

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 are: m ...

to buy and sell "shares" of

actors An actor (masculine/gender-neutral), or actress (feminine), is a person who portrays a character in a production. The actor performs "in the flesh" in the traditional medium of the theatre or in modern media such as film, radio, and television. ...

, directors, upcoming

films A film, also known as a movie or motion picture, is a work of Visual arts, visual art that simulates experiences and otherwise communicates ideas, stories, perceptions, emotions, or atmosphere through the use of moving images that are gen ...

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

dot-com bubble The dot-com bubble (or dot-com boom) was a stock market bubble that ballooned during the late-1990s and peaked on Friday, March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Interne ...

, 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 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 In finance, being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This is the opposite of the more common long position, where the investor will profit if the market value ...

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 Major film studios, five major film studios of the Cinema of the United States, United States, the Major film studios#Mini-majors, mini-major Amazon MGM Stud ...

, 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 company, production companies, film studios, cinematography, animation, film production, screenwriting, pre- ...

and anxiety caused by the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

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 educ ...

, a group of real-money prediction markets/ futures markets operated by the

University of Iowa The University of Iowa (U of I, UIowa, or Iowa) is a public university, 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 int ...

sometimes trade in future stock dependent on the box office performance of Hollywood films. It can do so because it is granted a no-action letter by the CFTC 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