New York Magazine has a really great piece up about the Hollywood Stock Exchange, also known as HSX. HSX was originally a game, using virtual money, that involved betting on the earnings potential of movies. Individual movies are given a price per share based on the amount of speculation from other players, which can rise or fall at any time.
If a movie checks in at $155 per share, as the upcoming The Hobbit: Part One does, that means HSX expects that movie to make $155 million in its first month. Says NYMag: “If that price rises, shareholders make ‘money’; if expectations for the
film sink, their ‘cash’ diminishes; meanwhile, skeptical ‘investors’ can ‘short’ the movie and hope it underperforms.”
In 2008, the company, led by Cantor Fitzgerald, attempted to make HSX a legitimate futures trading market, with real money. The idea behind it is that if HSX accurately predicts a movie’s gross as positive, that can bring in potential new investors and new money. Investing in movies is always risky–why not have a free market that might give investors an inside track?
But Hollywood–and by Hollywood, I mean everyone, from studios to distributors to theater owners–revolted. NYMag suggests that this is because many of the financial dealings in Hollywood are already so suspect that having a legitimate trading market would create the necessity of government oversight–just what they don’t want.
It’s not surprising that an industry steeped in financial shadiness feared such an idea. Despite the casual fluency with which many moviegoers now speak about per-screen averages and week-to-week holds, the way grosses are tallied is largely shielded from scrutiny. A company called Rentrak (which bought Nielsen’s box-office business) compiles the data, and the chief watchdogs preventing a studio from misreporting its grosses are … other studios.
It’s a really interesting piece, if only for the flashbacks of The Producers you’ll inevitably have.