With federal regulators poised to decide whether to approve a film futures exchange, Hollywood studios, exhibitors and unions spelled out a new set of arguments against it, including fears that trading on potential box office receipts would create negative publicity in the weeks before a film’s release with “false, unreliable, and non-economic valuations” of its performance.
The Commodity Futures Trading Commission has a deadline of today to take action on Media Derivatives Inc.’s plans for the Trend Exchange. Another proposal, from Cantor Futures Exchange, is scheduled to get word of the commission’s decision by April 20.
In a letter sent to the CFTC on Thursday, the Motion Picture Assn. of America, the DGA, IATSE, the National Assn. of Theater Owners and the Independent Film & Television Alliance got into greater detail about their reasons for opposition, including fears that price manipulation and insider trading will be next to impossible to police. Their concerns also include the fear that the exchanges will give added incentive to those who want to pirate movies. They noted that a person could short a contract then post the movie on the Internet to depress box office receipts.
They also argued that there was no way to measure futures pricing in the four-week, pre-release trading period, as information such as marketing budgets and distribution agreements generally are not publicly disclosed.
“The risk of depressed box office receipts is more pronounced with box office futures because futures pricing, although lacking any reliable economic basis, could nonetheless affect a motion picture’s prospects by negatively affecting financiers’ and audiences’ pre-release perception,” they wrote.