Sunday, October 17, 2010

Hollywood movies: a billion dollar market for speculators

Hollywood and Wall Street have been closely tied in forever. But now this is tricky affair: In a new derivatives exchange to the financial success of films betting investors. Critics warn of wild speculation - and insider trading.

Gordon Gekko is alive. Freshly released from prison, is driving the star villain of Oliver Stone's financial thriller "Wall Street" again soon on the loose - refined 23 years older, grayer and (a bit). The end of September comes Stones continue "Wall Street: Money Never Sleeps" in the cinemas. Michael Douglas will repeat it not only his Oscar role as Gekko, but also his legendary capitalist mantra of 1987. "Greed is good"

But this time he adds a sentence wondering; "Now this seems to be even legal."

Clear: From the illicit Kungel of the eighties has become the permitted Kungel these days of crisis. Stones return to Wall Street is thus a perfect beacon for the era of sanctioned fraud, which culminated in the crash of 2008 / 9. The horrified even the ice-cold crook Gekko "out there have all lost our minds?"

Those who believe, however, Stones critique of capitalism manifest an antipathy between Hollywood and Wall Street is mistaken. On the contrary: the two sides have long been embroiled in a tight affair. Financed many Hollywood films with the help of large banks and hedge funds - the blockbuster "Avatar" as based on funds of two private equity firms. In return, find toppled Wall Street prince refuge in Hollywood: Sun tries to Warren Specter, former president of the lost money house Bear Stearns, most recently as a film producer.

Virtual wagers are from real

Now Wall Street wants to accelerate this cooperation - and profit with a new gamer-vehicle of the unbroken cinema like the Americans. In April, in Chicago to open the site of the world's largest commodity derivatives exchange, CME, another futures market. Where will not be speculating on pork bellies or cattle, but with grossing films.

Cantor Exchange is the project that company is a subsidiary of the financial firm Cantor Fitzgerald. These gained notoriety when she in the attacks of 11 September 2001 at the World Trade Center, lost 658 employees. A week earlier, Cantor had had approved an idea that now, almost nine years later, becomes a reality: the film stock, short-CX.

It is aimed at investors and speculators, with the cinema box office in Hollywood can make a lot of money. Alternatively, of course, lose. It is a real version of Internet Exchange Hollywood Stock Exchange (, which juggles virtual wagers May of Cantor had been bought in 2001 and.

The future CX-participants - lay and insiders, such as movie maker movie-goers - it can bet on the success (or failure) of films, like the CME financial sharks on the rise and fall of foreign exchange rates and commodity prices. Initial deposits may be starting this Monday; the transaction will then be opened on 20 April. Gentle irony on the side: Settled the modern risk Handel over the Minneapolis Grain Exchange - the historic U.S. wheat market.

200 000 potential players

Cantor hopes to cash it vigorously. "I work for a long time in the futures industry, said CX-President Richard Jaycob, a former managing director of the Cotton Exchange New York Cotton Exchange.”None of the products of such a comprehensive stimulus. This is just an enormous potential audience." The virtual competition of alone has 200,000 active "players" who now wants to lure Cantor to real missions.

The bill could rise. Last year, Hollywood films played in the U.S. a total of 10.6 billion dollars, ten percent more than in 2008 - thanks mainly to "Avatar". The most successful film of all time so far earned 2.6 billion U.S. dollars worldwide and gave the News Corporation - Rupert Murdoch's media group, which, the film studio 20th Century Fox is one - a 44-percent profit boost for the last quarter.

Since sense now of course the speculators profit, because no growth market remains untapped. However, probably behind this "remarkable opportunity for investors to provide liquidity" (Cantor-PR) hide anything other than a further mutation of the famous high-tech casinos "(Washington Post), has turned into the Wall Street. A look behind the scenes of the CX - because as everything works as usual.

Suspicion of insider trading

The stock market offers the film title six months before the theatrical release as a Domestic Box Office Receipts (DBOR) for sale at auction - the CX-version of futures contracts. The trader buys them at a price fixed by the retail price: $ 100 for each promises million dollars, the system to merge the strips. After four movies will be charged weeks: Did the film more of a, the investor earns the proportional share ($ 100 per one million U.S. dollars box office difference). Or vice versa.

It's the same system as for traditional transactions. The Ridley Scott-drama "Robin Hood" with Russell Crowe and Cate Blanchett as the middle of May comes to cinema was on the "exercise page" of Cantor's last traded at $ 167,000,000. A DBOR therefore costs $ 167. Is the film a hit and is playing a $ 200 million per contract, the investor earns $ 33. But if he is a flop, playing only 50 million have a dollar; the investor loses $ 117 per contract.

The whole thing smells difficult to insider trading. For the film producers, distributors, directors and other stakeholders as well as outsiders may nitwitted laity. Cantor, they even encouraged: Targeted cover transactions (hedging), they could insure themselves against losses on the CX; they feared a failure of their film.

Unfair advantages to Hollywood connoisseurs

Which raises a valid question: "Who knows more about the film," said Clark Hallren wonder the financial advisor in the New York Times. "The studio, which has shot the film, or the audience?" Critics fear that Hollywood insiders - get to see a movie first - could have an unfair advantage. Also, offer abuse. If a producer speculates on a flop, he could manipulate it internally. For example, when he cuts the advertising budget of the film.

The method also reminds suspiciously of the infamous credit default swaps (CDS) - those financial vehicles, with which the major banks collapse of credit can protect against. At the height of the crisis so they threw themselves into the abyss. This "financial weapons of mass destruction" (investors legend Warren Buffet) had led to the near collapse of insurance giant AIG.

The CX-exchange is just another figment "of the family-risk financial products that have triggered the financial crisis," Nick Baumann writes in the investigative magazine Mother Jones "under the heading" sub prime goes Hollywood. “An allusion to the mortgage crisis of 2008.”That in many ways is a bad idea," he cited the California law professor Lynn Stout.

Seen meets Oliver Stone's "Wall Street: Money Never Sleeps" again to the heart. The film portrays a "corrupt, collapsing world," as it formulates "Vanity Fair" this month in a cover story. But despite the big crowds and a pre-planned gala premiere at the Cannes Film Festival to keep the CX-speculators back yet. Currently, they speak the film a box-office earnings of only 96 million dollars.

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