The movie industry came close to having its own futures contracts. It would have made it possible to speculate on the income during a movie’s first month in theatres.This practice’s roots go back to 1996. Two traders created an online game called The Hollywood Stock Exchange, or HSX. It allowed players to trade with fictional dollars in something they called “MovieStocks®.” This fictional market could consistently provide useful predictions on a movie’s revenues due to so many players speculating on the outcome.
The CFTC began the process to ratify these futures in 2009. In June 2010, they had given acceptance for the so-called movie futures. The CFTC stated:
The contracts are intended to allow participants in the motion picture industry to manage the financial risks associated with the production and distribution of motion pictures.”
The Motion Picture Association of America, representing the six major movie studios, ended up standing up against these contracts. They posited that these futures would open up the possibility of market manipulation. Other concerns included hurting ticket sales and put pressure on studios.Finally, they added that they had no intent to use this system as a hedging mechanism. Congress ultimately gave into MPAA pressure and agreed, tacking on a ban of movie futures onto other financial legislation.
Unfortunately, the Hollywood Stock Exchange went defunct after the dot-com bubble burst. After that, Cantor Fitzgerald bought them out. In conclusion, while Hollywood has a bit of fascination with trading and the financial markets, they still don’t want to get too close. If you enjoy learning more about how trading and the movie industry intersect, check out our other article about trading movies.