Box Office Futures Bid Approved For Media Derivates; Only Congress Stands In Way

UPDATE WRITE-THRU: Last weekend, Karate Kid vastly outperformed estimates, proving that even though the plots of films are predictable this summer, the box office outcome certainly isn’t. It was in that climate that the creators of the new Media Derivatives box office futures business held its press conference after the Commodity Futures Trade Commission cleared the way for his company to hatch the first box office futures market based on the opening weekend performance of Hollywood films. This outcome is far from decided, though and while Trend Exchange CEO Robert Swagger offered gratitude to the CFTC for formalizing approval, he acknowledged the  real battle comes later this week when he heads to DC. There, he will lobby lawmakers to drop language inserted into the Senate version of the pending financial reform law that would prevent the futures business from getting off the ground by making it illegal.

Swagger said he’s still formulating his plan of attack, but he previewed it to journalists. He will paint the MPAA as a behemoth and himself as the small entrepreneur in danger of being crushed by a fat cat special interest using its influence to get its way with lawmakers.  Swagger will try to excise a provision was included in the bill by Arkansas Senator Blanche Lincoln outlawing the box office futures trading proposals by Media Derivatives and Cantor Fitzgerald.

“This is a David and Goliath story, where a large special interest group has rallied its friends in Congress to try and destroy a small business owner, who has followed all the rules,” Swagger said. “The MPAA is trying to get the law changed, and that should be of concern to every American out there…This is the best handout a member of Congress has given to Hollywood in years, the inclusion of 54 words in a document that is 1974 pages long, and one that reeks of special interest. At a time when we are looking at economic reform and wanting transparency, some members of Congress are bending over backwards for the powerfully MPAA lobbying effort.”

Swagger confirms that the hope is to begin bets on opening weekend possibly by the August 20 release of the Screen Gems film Takers. The Media Derivatives plan is to allow bets four weeks before the release of a film, and pay off based on opening weekend results. The market is open to institutional investors and Swagger expected many of them to be industry insiders. Possible participants could range from theater chains who offset risk on a film the chain feels will underperform, to stars whose bonuses are based on box office performance, or a theater that got locked out of a movie title, but can still bet that it will surpass opening weekend estimates.

The real surprise is the depiction of the MPAA as a heavy that is bullying pols, since the industy lobbying arm got involved because its signatory studios opposed the programs, as did all the showbiz guilds. The MPAA has called the futures program little more than legalized parlor game betting. There are fears of potential conflicts of interest. Swagger repeated referred to the MPAA as a “huge special interest group” with a $65 million war chest that is looking to undermine three years of work and millions of dollars that went into bringing Media Derivates to the altar on its futures program.

MPAA president/interim CEO Bob Pisano reiterated the position that the futures programs “Serve no public interest, and to the contrary, can significantly harm the motion picture industry and impose new substantial costs that do not exist today. These are proposals that ought to be under the jurisdiction of the federal gambling and gaming laws, not the federal commodity trading laws. It is unfortunate that the CFTC has now given the go-ahead to a new gambling platform that could be plagued by financial irregularities and manipulation.”

PREVIOUS: Looks like Media Derivatives has gained the upper hand in its quest to begin trading box office futures on feature films. Trend Exchange CEO Robert Swagger will speak to the media at 5 PM Et to describe his plans to launch a futures betting tied to box office performance on the opening weekends of big feature films. Media Derivatives, which previously won approval by the Commodity Futures Trade Commission, got the formal okay to begin its trading program. Cantor Fitzgerald, which also got interim approval from the CFTC, is next up. The MPAA and the guilds have opposed a program it has labeled little more than a legalized betting system, and has pressed its case on Capitol Hill, where the issue is part of a financial reform bill. More details as they come in. The MPAA wasn’t immediately available to comment.

Wall Street Approves Second Box Office Casino With Futures Betting Programs

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