The credit crunch and crash are well behind us, judging by a proposal last week in the US by a small American midwest company, Veriana, to launch a financial product based on movies.
“The Commodity Futures Trading Commission (CFTC) is asking for public comment on an application submitted by Media Derivatives, Inc., for designation as a contract market. Comments should be submitted on or before Monday, November 5, 2009.”
The Financial Times reported that: “The MDEX will help movie producers manage the risk that a movie is not produced on schedule or is not produced at all, the risk that the movie production exceeds its budget, the risk that a movie is not released on time, and finally, the risk that the movie is not a success. MDEX will use the Minneapolis Grain Exchange to clear transactions on its markets.”
A more realistic comment though came from the paper’s Lex column:
“Investors in movie derivatives should perhaps be warned to watch the film The Producers, in which an accountant determines that bad shows make more money than good ones.
“Veriana, a media company, plans to set up a movie derivatives exchange allowing studios to mitigate financial risk and investors to trade in the success of a film. Hollywood accounting, though, has an infamous history. In a 2007 lawsuit, now dropped, Tom Hanks claimed co-financiers of My Big Fat Greek Wedding had calculated the film’s gross receipts to be a quarter less than the $370 million tracking firm Mojo reported. And in 2004, strong sales of The Matrix swelled producer Village Roadshow’s coffers, yet cross-departmental charges caused a divisional loss. For investors craving certainty, movie derivatives might not be a Raging Bull.”
A more suitable title might be Boiler Room, The Sting, The Smartest Guys in The Room, Shooting Fish. Any to emphasise the dodgy nature of the idea.
That’s the point about movies, the very people who make them, control the costs, control the ideas and control the way profits are “created” , sorry profits are computed. Why deal with the holders of all the inside information?