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Vancouver, British Columbia, Canada
Founder of SoKap, crowdsourcing and crowdfunding go to guy, indie filmmaker, father, mustard maker, meat lover, pseudo vegetarian, devout humanist and overall good moralist.

Jan 10, 2009

Cantor breaks the mold


This is going to be interesting....


LOS ANGELES & NEW YORK--(BUSINESS WIRE)--Cantor Entertainment, which provides various services to the entertainment industry and owns the Hollywood Stock Exchange®, is pleased to announce that Domestic Box Office Receipt contracts will soon be available to the motion picture industry and investor community. Cantor Fitzgerald, its parent company, announced earlier today that it has filed an application to launch the Cantor ExchangeSM, whose first listed product will be Domestic Box Office Receipt contracts.

Domestic Box Office Receipt contracts will offer film finance professionals and traders a new opportunity to hedge and speculate on the theatrical performance of wide-release Hollywood movies. Domestic Box Office Receipt contracts will be a next generation film-financing tool that allows market participants to hedge risk and provides them profit opportunities based on the first four weeks of a film’s box office revenues.


What was originally started by virtual trading specialist Max Keiser www.maxkeiser.com is now, many years later a functioning tool and option for film investment (if they are approved next month).

The plan is to release to the buying community, one film a week on the Tuesday and fill up the investment at a set options price. Once the offer is closed people can begin shorting, trading and leveraging these options over the production period which could be a year in length or more.

The other issue I have is that they are only planning to release studio films with a wide release, but they are planning on only giving back to the investor, revenues generated from the first 4 weeks of box office. Who gets the rest of the money...the studio?

I'm not bad mouthing this system as it is innovative and unique to the business; however, I am questioning whether or not this will solve the problem of film investors constantly losing their principle. And secondly that it does not address the issue of independent film....hmmmm....maybe a pinksheets version of this is in the works somewhere?

cheers

dave

1 comment:

cctang said...

Dave,

I'm extremely, extremely naive when it comes to the film industry. But I do have some experience in other aspects of finance.

My reading of the release is that it has nothing to do with paying your returns with actual box office receipts. It's just an extension of the other "fantasy" exchanges out there... ie, trading "contracts" based on political events (Obama or McCain as president), sporting events, etc.

The only novel component here is that, if you were indeed trying to finance a movie, you can essentially short a large number of these contracts (the "hedging" referred to in the article) through the exchange. The theory goes, this will generate enough funds to actually complete your movie. And *you* as the producer would then close the loop by using the funds you get from box office receipts to pay off these shorts.

A lot of moving parts here, and I'm more than a little skeptical that it will build the massive critical mass needed for this to be meaningful in a financing role.