In 1977, I bought my first stock. It was Columbia Pictures. I purchased it because the movie, “Close Encounters Of The Third Kind” was being released by Columbia. Watching a documentary on the film’s production piqued my interest in it. Then I bought it strictly on the assumption of the movie being a hit at the box-office, which it was. In addition to financial success, I believe the film was nominated for several Oscars at the Academy Awards too. I lucked out on that investment because Columbia Pictures was bought out before the release. When I first heard about trading movie futures I smiled inwardly as I reminisced about that first stock investment. A riveting trading journey was dawned from the transaction, one I couldn’t possibly have fathomed and am still embarked on to this present day. A movie futures market was a concept tossed around for several years, but it wasn't until 2010 that the Commodity Futures Trading Commission approved it.
The trading business and film industry are both boom-or-bust! Most trading accounts lose money and so do most films. Because they are extremely tough to profit in, is the reason I am so fascinated by the thought of them intertwining.
The film’s box-office receipts qualify as a commodity. Futures markets are very familiar with the agriculture industry, as I am as well. Long before I harvested S&P profits, I was attracted to agriculture. Growing up on a farm and majoring in Agricultural-Business in college, gave me an affinity for futures/commodities markets. The farmer can use futures to protect their crop. Hollywood has believers in the futures market providing a similar benefit. Instead of a crop, the film futures market would enable hedging and soften the risk of a box office flop. For example, a projection is made about a film’s potential gross. Say, an investor projects a film could make $100 million. The investor buys future contracts valuing the expected box-office at $50 million. If the movie grosses $100 million, the investor, then doubled his position by going long.
Film futures exchanges were not around back when I began trading, but their development has taken place for many years. Had they existed, I’m sure I certainly would have traded them; considering there aren’t many markets I have not experimented with throughout my trading career.
Not everyone is a fan of the relatively new blockbuster picking market. In fact, the Motion Picture Association of America vehemently opposed the idea. The government had fears that the futures market would not be unlike an online gambling platform. Moreover, the industry was very concerned about their reputation and insider trading by entertainment executives, cinema owners and other speculators. Insiders could benefit through movie test screenings, marketing budgets and the quantity of showings.
Film futures markets’ main benefit is the capacity for Hollywood to gain leverage in avoiding the risk, which makes film backers anxiety level lessen. With more protection, producers are less dependent on seeking financial partners. An additional economic perk of the film futures markets is the creation of jobs. And you never know, investing in a film may not be your niche, but could lead to your calling.