Tyler Cowen links to a story in the New York Times detailing the opposition of the Motion Picture Association of America to two proposed markets for forecasting movie ticket sales. Of the objections noted in the article, Cowen thinks the key issue for Hollywood is the possibility of a poor market showing making it difficult for a film to get into and stay in theaters. The article also mentions possible market manipulation and insider trading issues as problems.
Robin Hanson addressed the manipulation arguments a few days ago, “Movie Manipulation“:
My research suggests that speculative markets are remarkably robust to manipulation attempts; the more folks try to manipulate, the more accurate market estimates get on average! But with limited funding, I’ve only done a limited number of experiments; I can’t prove no one will ever use a speculative market to purposely influence movie perceptions. And alas this mere possibility of manipulation may seem intolerable.
Part of what the movie industry fears is further loss of influence over pre-release product positioning, but this is clearly an area where “information wants to be free” will overcome the industry’s desire to control the pre-release buzz.
Rumors and reports now spread more efficiently, thanks in part to the internet, and once a film is out the internet gives us “word of mouth on steriods.” Fast Company reports: “Two researchers at HP Labs, Sitaram Asur and Bernardo Huberman, have discovered that you can actually use Twitter mentions to predict how well a movie will do in it’s first couple weekends of release.”
The Fast Company article notes that Twitter analysis method actually outpredicts the (play money) movie prediction market Hollywood Stock Exchange. At Midas Oracle, Chris Masse countered, “You could turn Bernardo Huberman’s study around and say that the HSX traders are not yet using Twitter as a source to the full extent possible.” Now the Twitter angle is public information, that omission will be overcome. (And how soon before Hollywood studios begin mass-Twitter marketing campaigns?)
See also: Deadline, “MPAA Organizes Entertainment Community Opposition To Movie Futures Exchange.”