Box Office Futures Market Insights

The world of box office futures is fascinating! The first ever box office futures contract was traded in 2000, marking the beginning of a new era in the entertainment industry.

The Hollywood Stock Exchange (HSX) was the first platform to offer box office futures trading, allowing investors to bet on the performance of upcoming movies. This innovation has since been adopted by other exchanges, making it easier for people to participate in the market.

Box office futures contracts are traded on the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE), with the CME being the largest market for these contracts. The CME lists over 100 box office futures contracts per year, giving investors a wide range of options to choose from.

By trading box office futures, investors can potentially profit from the success or failure of a movie, making it a unique and exciting investment opportunity.

Explore further: Dito CME Holdings Corporation

The US Film Betting Market is a new and contentious area. The US Commodity Futures Trading Commission (CFTC) has approved The Trend Exchange, a market where investors can trade futures contracts based on opening-weekend movie revenues in the United States.

The CFTC voted 3-2 to approve the application, despite objections from major Hollywood studios. The contracts allow investors to buy shares estimating the box-office take with the possibility of making gains or losses.

The CFTC argues that the contracts are based on "commodities" and serve an economic hedging purpose. They compare it to farmers protecting themselves from crop risks through corn and wheat futures contracts.

However, two CFTC members disagreed, citing concerns that film box-office revenue is not a commodity. They warned that this could lead to absurd contracts, such as betting on movie star injuries or UFOs hitting the White House.

The CFTC notes that third parties that finance films may protect themselves by hedging risk, such as buying insurance. This is seen as a key benefit of the new market.

The Motion Picture Association of America and other industry groups have come out strongly against the new market, warning of economic damage to the industry. They point out that the new contracts are essentially "over-under bets on a movie's performance."

The Senate version of the financial regulatory overhaul would ban futures trading on movie revenues, but it's unclear if this ban will survive House-Senate negotiations.

Check this out: How Do Founders Pay Themselves from a Seed round

A Domestic Box Office Receipt (DBOR) futures contract is a type of derivative product based on the future box office revenues of an upcoming movie.

These contracts were briefly authorized in the United States in June 2010, but were banned shortly thereafter.

The value of a DBOR futures contract is directly tied to the future box office performance of a specific movie.

The main objection to DBOR futures was that they could be used for insider trading within the movie industry.

Advocates for DBOR futures argued that they would help movie studios hedge risk and enable speculators to participate in the movie industry.

For another approach, see: Black Check Movie

Domestic Box Office Receipt (DBOR) futures contracts were initially approved, but then banned after the passage of the Dodd-Frank Act in July 2010.

The Dodd-Frank Act prohibited futures contracts on movie box office sales, or any index or instrument that could or would mimic such sales.

These contracts were intended to be traded on two exchanges: the Cantor Exchange (now called CX Markets) and the Trend Exchange (TrendEx).

CX Markets continues to operate in the United States as a venue for trading derivatives based on weather events, but TrendEx is no longer operational.

The CFTC originally voted three-to-two in favor of approving the contracts, but one month later, the Dodd-Frank Act banned such contracts for the foreseeable future in the United States.

DBOR futures contracts were to be cash-settled based on revenues from the first four weeks following the film's release.