Bets on movie box office have been placed for decades, but Hollywood Stock Exchange parent Cantor Fitzgerald is ready to launch an actual financial market for domestic B.O.
Cantor has filed for federal regulatory approval for a new commodities venue called the Cantor Exchange. It would allow people or institutions — including the very industry figures making and releasing films — to buy contracts pegged to the first four weeks of a film’s gross.
If all goes according to plan, Cantor Entertainment, a subsid run since May 2007 by former Nielsen exec Andy Wing, will start auction activity in January and then officially ring the trading bell in March.
“This is a seminal moment for the value placed on box office,” Wing said. “If you’re a film fund and you’re in the middle of your slate, you could bet on your own movie. There’s also a marketing play here for a studio. All of the participants in the film business have to consider all alternatives when it comes to keeping funds flowing.”
With shares of media congloms at multiyear lows and major firms such as Deutsche Bank and Societe Generale pulling out of showbiz altogether, there already is concern about third-party financing in the coming years. Studios have benefited from a series of cash infusions from hedge funds, tech entrepreneurs and foreign turf. Wing believes the Cantor Exchange will be a new financial source for studios to tap.
The company describes the contracts as a “next-generation financial management tool” for showbiz. It envisions financiers hedging one pic against a slate of others, creating value through the market as opposed to raising funds from traditional sources in the private equity or corporate realms.
Pending the approval of the Commodity Futures Trading Commission, investors will be able to purchase contracts related to the domestic receipts of a film up to six months before its release.
Wing dismisses the notion that insider trading could taint the new exchange. “That insider information is already out there because of the Internet. There is a lot of historical data out there.”
Cantor, which is known for its legendary trading desk as well as the heavy staff losses it suffered on 9/11, has radically expanded its profile. It has long sought to further leverage the 700,000 registered members of HSX, a Web exchange that allows play-money investment in pics, stars and other elements and lets the virtual Web market determine their value based on real-life events, a la fantasy sports.
A typical HSX user spends about 35 minutes on the site, Wing noted, and the exchange prices often have a significant correlation with opening-weekend B.O.
Wing will front Cantor’s marketing of the new exchange from the entertainment division’s L.A. base, with Cantor’s Gotham trading desk facilitating transactions.