Media Derivatives 3

Here's a much better explanation of Film Future Trading:

http://jeremyjuuso.blogspot.com/2010...-cycle-of.html

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A very detailed article wasn't it?

I was talking to a friend of mine about Media Derivatives and the MPAA and they were saying one of the reasons the studios are against it, is that it would force more transparency in determining how much films actually make.

It's no secret to anyone that the studios can make Avatar look like it barely broke even. So I can understand why they would not be interested in 'Wall Street' or outside businesses trying to pry into their business model and practices. No one would want that. There may be many other reasons as well, some of which could be good; I really don't know. I am simply fascinated by the whole thing.

It is very interesting to watch how this unfolds, the more that I look into it, the more that I realize there is that I don't know about it. Derivative markets are highly complex, and boggle the mind when you try and figure them out -- hence computers! -- but that doesn't mean they don't serve a purpose. They are essential in many aspects of the economy.

My initial thoughts were that it would encourage film production -- people would fund films -- because they would want to 'bet' or buy and sell futures on them, to make money. You can't sell futures if there are no films. So even if the movies don't make money at least SOMEONE did, and thus they would be willing (or should be required) to fund more films. Right?

The MPAA might say "well we wouldn't make money when the film flopped, and we are forbidden from trading in the futures because that would be classified insider trading."

True. Fair enough. But it seems like the logical solution is to allow the studio to buy 'special' futures/derivatives/insurance at the inception/funding of the film -- from the exchanges --that would insure that if the film does flop, they would at least not lose their capital investment. The studios would be allowed to hedge their risk under certain rules, and non-investors in the film "speculative bet-makers or traders" would be governed under separate rules. This would have the effect of the studios never actually losing money, and not worrying about the trading of futures. They could simply focus on making the best --or most profitable-- films possible. They would do their best to make money, by making good, appealing and even risky film ideas. Like farmers and their crops, they don't usually get involved -- as I understand it, correct me if I'm wrong -- in the futures markets of their crops, they just focus on growing the best and most that they can, and if the crop fails (for whatever reason) at least they don't go bankrupt or lose the farm. Better luck next year. But if the crop is great, they make a nice profit.

In my mind it's also like betting on Football or basketball games. The team players and coaches don't get involved in the betting, they just focus on winning -- doing good -- and collect their money/bonuses when they win big. They can't be stopped from betting for or against their team, but if they don't play well, they will be benched/fired for sure.

Maybe they could just require a tax/fee on Media derivative to go into financing films, or to the studios 'Art film fund', or too film student scholarships. Or the taxes on film futures/derivatives profits could fund the winning script of screenplay contests -- more to bet on. In this way, artsy films or big risk ideas -- Avatar, Star Wars types -- would be made. These films are also the best fodder, being the most speculative and unknown quantities, to trade futures and derivatives on, so it feeds into the system > putting more people to work, allowing more traders who take risks to make big money.

I think the MPAA should work with the box office futures and media derivatives exchanges, find a way to structure the exchanges so that it's a win-win for both. This is entirely possible, it seems.

I don't really know though. I could be way off.

I just hope someone figures out a way to get more artistic and original ideas funded and into production. More people working and making money!

Right?

The debate rages on!