Posts Tagged ‘Motion Picture Association of America’

Blockbuster Movies—A New Investment Vehicle?

September 8, 2010

Blockbuster movies make money—lots of it. The box office totals for the summer of 2010, while not surpassing last year’s total of $4.19 billion, were $4.05 billion. Yes, the ongoing recession had an effect on ticket sales. Still, there was a lot of cha-chinging at movie theaters around the country.

Believe it or not, someone figured out a way to spread the box office wealth. According to an article in the April 28, 2010 Knowledge @ Wharton, an online business journal from the Wharton School at the University of Pennsylvania, the U.S. Commodity Futures Trading Commission (CFTC) approved a futures exchange that will match buyers and sellers of future movie receipts.  That means an investor can purchase a share of a particular movie’s future revenue stream. The exchange is sponsored by New York investment bank, Cantor Fitzgerald.

Not everyone is sold on the idea of an exchange based on a movie’s revenue. The Motion Picture Association of America (MPAA) and the Directors Guild of America oppose this exchange and a similar one developed by an Indiana based company called Media Derivatives. Many at the major studios feel that this would lead to insider trading and people betting against movies and using their influence to make sure that the film isn’t successful.  Of course, that is illegal, but that won’t stop some people with vendettas against those involved in the film. (See my blog entry of December 24, 2009, What Makes a Flop? )

While agricultural future exchanges, such as wheat, corn and pork bellies, are used as a way for both buyers and sellers to hedge their risk, the trouble comes when sellers have more information then buyers. In agricultural future exchanges, both buyer and seller have the same amount of information and the product is a commodity, meaning there is little differentiation of the product. That’s not the case with movies and movie studios. If a seller knows more than a buyer, for example, a movie studio knows that a certain movie won’t do well based on marketing tests, they will sell movies that will be box office duds, so as to get their money but not give any to investors. Since that is a concern, in April 2010 Senator Blanche Lincoln (D) from Arkansas and chairperson of the Senate Agriculture Committee that oversees commodity trading, sided with the studios and placed a ban on the exchange.

I don’t think that is the end of the story when it comes to financing movies. While blockbuster movies make money, they also cost money. So, something else will come along that allows people to invest in the movies.

Note: I am not endorsing any type of investment, nor am I soliciting for any financial or investment company.  The investments and companies mentioned in this blog entry are listed for informational purposes only.



Never Too Early To Promote A Movie Or Is It?

August 4, 2010

The character posters for upcoming Green Lantern movie were released recently at the San Diego Comic Con. You can see the images here:

The movie is scheduled for release on June 17, 2011. Yes, that is almost a year from now.  That leads to this question: Why promote a film so early? One reason is the cost associated with making a movie. According to the Motion Picture Association of America (MPAA), the average cost of making a movie in 2006 was $65.8 million. That figure takes into account movies ranging from blockbusters to little independent films. As for the blockbusters, the cost for Avatar has been reported to be anywhere from $230 million to $500 million, Iron Man 2 costs about $170 million and those are just two recent films.  Since the studios are spending this much money on a film, they obviously want a return on their investment.

Another reason, is that there is so much in the way of entertainment choices, namely cable, DVD’s and the Internet, that the powers that be at movie studios want their film to be top of mind when it comes to answering the question “What do you want to do tonight?” After all, one would hope that the more someone is reminded that a particular movie is coming out, the more likely he or she will go out to see it.

The trouble with promoting a film so early is people will ignore the hype and move on to something else. Some film franchises, like Star Wars, and Star Trek have huge fan bases, so just the mere mention of one of these films being in a pre-production phase will get the blogosphere and fanboys buzzing. Of course, not every film has such a fan base to draw on. When I first learned that a Green Lantern movie was going to be made, I had to look up who the Green Lantern is.[1] Since not all moviegoers write a blog, I wouldn’t be surprised if others didn’t bother to do research on the character.

Will this advanced publicity help or hurt the Green Lantern?  That question will be answered in the summer of 2011. Of course, if it were up to me, I would start promoting a film six months before it is to be released.  I feel that six months is just enough time to build up demand without people tuning out the publicity.  Then again, I don’t run a studio, so my ideas don’t count.

[1] The Green Lantern is a superhero in the DC Comics universe.  The origin story of the Green Lantern goes like this:  A construction engineer, named Alan Scott, was the only survivor of a train accident. The reason he survived was because he was holding a magical lantern. He makes a ring out of part of the lantern and uses the power of the lantern to fight crime.


451 “All American Comics” #16, The Green Lantern Origin and First Appearance, Very Rare 1940. Mastronet Americana Catalog, October 2001, pg. 153