There’s a good chance this week that Congress will pass, and President Obama will sign, a massive financial overhaul that includes a ban on box office futures trading.
In other words, the two proposals for trading in film futures — the Trend Exchange and the Cantor Exchange — would be stopped even before they have a chance to start.
While the teams behind the exchanges have slammed the Motion Picture Assn. of America for wielding special interest influence on Capitol Hill in getting the ban inserted into the overhaul, that rhetoric, oddly, may turn out to be a shot in the arm for the studio lobby. In recent years, the MPAA has undergone not just layoffs and staff changes, but has endured grumbling from some studio executives who question its relevance at a time when media congloms have their own agendas and own lobbying staffs.
The Capitol Hill opposition involved several studios and industry orgs, such as the Directors Guild, IATSE, the National Assn. of Theater Owners and the Independent Film & Television Alliance. But the MPAA led the effort, and its public face was its interim CEO, Bob Pisano.
For Pisano, who assumed leadership of the MPAA on April 1 just as opposition to the film futures trading was mounting, the ban on box office futures would be an important victory and a case of good timing. He’s been among the candidates to succeed Dan Glickman as the permanent head of the org.
The search committee has been in talks with former Sen. Bob Kerrey (D-Nebraska), signaling a desire to have a well-known Washington hand in the job. But with the talks going on longer than expected, speculation has been rampant about the status of the search.
On Friday morning, after a House-Senate conference committee approved a reconciled version of financial reform, Pisano said in a statement, “We are heartened by the conference committee’s actions and look forward to the full House and Senate approving the legislation.”
The Trend Exchange received approval to trade on box office futures from the Commodity Futures Trading Commission on June 14. Its supporters had hoped that the greenlight from federal regulators would translate into lobbying momentum on Capitol Hill.
But they were up against an environment in which lawmakers were seeking to rein in derivatives, not approve new ones. Although there was never a question that the Trend and Cantor exchanges would fall under the oversight of federal regulators, the proposals got swept up in the drive for financial reform. This also is an election year, and Trend Exchange CEO Robert Swagger said it was “not worth the political capital” for lawmakers to champion film futures.
In the end, no member of Congress stood up to oppose the trading ban provision buried deeply in the massive bill.
In fact, the conference committee did change the language of the ban — but only to make it stronger. It makes the provision effective June 1, 2010, two weeks before the Trend Exchange got the sign-off from federal regulators. Swagger had earlier suggested that the financial bill could not be imposed retroactively to halt his proposal regardless of congressional action. However, the new wording in the ban would seems to preclude that.
Swagger also has hinted at taking legal action, having spent three years and a small fortune to get the proposal off the ground. It’s unclear exactly what form that would take.
In a feisty conference call earlier in the week, he said his company would “look at all means to recover the losses as a result of the misrepresentations” made by Pisano. Pisano had equated the proposals to gambling and said that they would be susceptible to market manipulation.
Cantor Exchange president Richard Jaycobs said at the end of last week that he was exhausted by the furious lobbying campaign but would withhold substantive comments until this afternoon. That is when the futures commission is expected to approve Cantor’s application for a license to trade contracts based on box office returns.
It is likely to a hollow victory.
Jaycobs contends that the committee’s previous vote had nothing to do with the merit of the MPAA’s position on futures trading. “This was about politics, about mood and about MPAA’s strengths on the Hill,” he said.
Jaycobs added that the legislation will prompt his company to re-evaluate its business plan. “Cantor has been committed to entertainment financing broadly and film financing particularly,” he said. “We will now have to look as a firm beyond the futures market issue, and decide whether this remains an area in which we can we help out.”