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At the Intersection of Wall and Vine

March 18, 2010

There’s a soon-to-be actualized Hollywood Stock Exchange that will allow traders to buy and short movie futures with contracts based on the domestic box office takes of movies that are soon to be released. It comes replete with all sorts of bells and whistles like scrolling news tickers and IMDB-style “market research.” While I am elated that markets are employed everywhere, I’m not really sure if the idea has evolved to a point of usefulness beyond mere gambling and pricing. At least the real stock market injects capital into business enterprises that might need it; HSX, on the other hand, is purely a betting market. HSX should really allow independent films or music projects to attract capital investment (the point of a stocks to begin with), but of course that doesn’t even remotely appear to be part of the agenda of this industry-generated and industry-focused tool.

At best, its existence is economically useful as an insurance market for the industry. Taking HSX on those merits, let’s hope unsophisticated investors (of which there will be many) do not ignore the possibility of some underhanded hedging by studios or executives who know they have a flop on their hands. A limitation on the studio’s ability to hedge wouldn’t make me feel particularly secure in a risky investment where a director or actor might know better than a studio executive:

Conflict-of-interest issues are handled by limiting the amount a company can hedge through the exchange, so that a distributor could never make more money by betting against a film through futures than by having that film succeed in theaters.

Still, I think there will be many “investors” in such markets that are simply expressing their own consumptive preferences by betting on a movie or an actor. For example, Zach Galifianakis is trading at a pretty high premium right now because his proverbial star has risen. Along the same lines, I have no doubt that the Hangover 2 will continue to attract a lot of positive betting, and maybe the movie will be as great as the original, but I somewhat doubt it given that audiences have more or less figured out what Galifianakis is “about.” What made the Hangover so great was that Galifianakis was juxtaposed against relatively straight-man actors so that his stand-up routine’s blend of off-the-wall social awkwardness came as a total surprise to the audience, and the “is he serious??” question consistently provided a context for the comedic equivalent of shock-and-awe. Now, his schtick is well-known enough that I wonder if audiences will be able to suspend their disbelief enough to actually wonder wondering whether or not everyone else is in on the joke to be surprised by Galifianakis’ antics. Take a look at his latest episode of Between Two Ferns with Ben Stiller and compare it with some of his earlier (and better), pre-Hangover work, and you can tell that unfamiliarity or the suspension of disbelief is somewhat necessary to really enjoy the brand of humor that relies on its shock value. Predictability may be the death of the Galifianakis brand of humor.

Which brings me back to HSX. To voice a Cassandra’s prediction, HSX might disastrously facilitate the kind of relationship where studios inextricably intertwine artistic decisions with profitability decisions–made all the easier by this new “objective” prediction model–while “inefficient” art continues to suffer at the hands of corporate control of the media. One can see the economic value and appeal of HSX from an insider’s or executive’s position, since it makes sense to try to get as much widespread, industry, and market-based research as possible to make one’s rational, industrial calculations, which would hypothetically translate to more support for projects audiences want to see. And yet I still wonder how much that appeal to economic decision-making will accelerate the death of studios where economics are the deciding factor of what to produce. Besides, does an audience even have enough taste to decide what they themselves should/could/might like?

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