Will the CFTC allow the newly approved box office futures exchange to actually offer box office futures contracts?

Michael Giberson

As just noted, the CFTC has approved Media Derivatives request to establish Trend Exchange, a box office futures exchange.  At Midas Oracle, Chris Masse reacts to the news by drawing attention to remarks by CFTC commissioners suggesting that it may be difficult for Trend Exchange to gain the subsequent CFTC approvals needed for it to actually offer box office futures contracts.

From a Bloomberg story on the exchange approval:

The CFTC must still approve the type of contracts to be dealt before Trend Exchange can begin. The company has said its first product will center on opening-weekend box office.

Product approval is “a very different question” from exchange approval and raises “significant concerns,” Chilton said in an e-mailed statement. He said he had “reluctantly” concurred in today’s vote.

“We have serious concerns regarding the trading of media contracts and we support a very thorough review of all of these first-of-a-kind products,” CFTC Commissioner Scott O’Malia said in an e-mailed statement.

U.S. Senator Blanche Lincoln, an Arkansas Democrat, today added language banning trade in movie futures to a broader derivatives bill she is writing. Lincoln is chairman of the Agriculture Committee that oversees the commodity commission.

More information from the CFTC here, including links to the order and related.

While the CFTC’s inquiry regarding event contracts seems relevant here, I see no reference to that proceeding from 2008 in the CFTC order or concurring statements issued by commissioners.  Perhaps, too, that is a bad sign.

CFTC approves box office futures market

Michael Giberson

Today the CFTC approved Media Derivatives Inc.’s request to create a futures exchange based on box office receipts.  The exchange “is primarily focused on the development of a variety of products to benefit the entertainment industry with one if its initially proposed products being designed to help mitigate risk and enhance the successful financing of motion pictures through trading of opening weekend domestic box office receipts.”

See also reports at Wall Street Journal and Los Angeles Times.

Media Derivatives’s Trend Exchange market is one of two similar proposals that have been submitted to the CFTC for approval.  The other proposal has been submitted by Cantor Fitzgerald, a Wall Street investment and brokerage company, which acquired play-money site Hollywood Stock Exchange a few years ago.

ADDENDUM: Will the CFTC allow the newly approved box office futures exchange to actually offer box office futures contracts?

Prediction markets for movie box office: Manipulation! Insider Trading! Efficiency! and Twitter!

Michael Giberson

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.”

More about the Haynesville documentary

Michael Giberson

In advance of the screening next week at SXSW, the Austin Chronicle presents a story about Haynesville and its director Gregory Kallenberg.  Here’s a bit of it:

The Rev. Reegis Richard was wandering through a field, hungrily eyeing a dilapidated former school and dreaming of the possibilities, when a Haynesville producer climbed over a fence out of curiosity. Five minutes later, a camera crew was set up, says documentary director Gregory Kallenberg.

It was the sort of serendipitous moment that has guided his documentary, which explores how a massive shale natural gas find in Louisiana is both fueling the dreams of Louisiana’s downtrodden and crushing them, while providing a potential solution to our nation’s energy thirst.

[…] Kallenberg interweaves Richard’s story along with those of Mike Smith, a good old boy who finds himself a sudden multimillionaire from the shale his 300 acres of land contains, and – perhaps the doc’s most gripping character – Kassi Fitzgerald, a single mother who turns into a driven community activist to make sure both her economically depressed neighbors and the environment are treated fairly.

Many views on the Haynesville shale resource

Michael Giberson

The documentary film Haynesville offers a view of the shale gas boom from the point of view of several landowners in northeastern Louisiana. One of the landowners is a sort of good-ol’-boy type who hung onto family land and added to it even as family members moved away. His 300 or so acres of backwoods land made him a multi-millionaire when the gas developers came to town. Another part of the story shows the impact of the gas money on a growing church congregation; the preacher wants to build a new Christian school with the money. The film also follows the activities of a mother who gathers small landowners into a large block to negotiate with the gas companies for both higher payments and contractual protection for water quality and other environmental values.

Haynesville movie thumbnail imageIntertwined in these stories are some talking-head interviews with energy, environmental, and policy experts. I found these parts of the film mildly intrusive – but that’s probably because I already spend too much of my life reading about energy resource policy issues; likely most viewers will find the contextual information helpful. The film should be required viewing for landowners sitting over shale gas resources, especially in areas not used to oil and gas development.

The documentary is making the rounds. A showing is coming up in Houston on March 4, and the film will be part of the SXSW festival in Austin in a few weeks. If you’re interested in more information on the film, check out the website or become a fan of Haynesville on Facebook.

One of the natural gas companies doing a lot of the development of the Haynesville shale resource is Chesapeake. See, for example, their “February 2010 Investor
,” which details their interests and optimism about their work in Haynesville and elsewhere. This three-page document explains Chesapeake’s hydraulic fracturing process, including a description of the (very small amount of) chemical additives that get injected along with a lot of water and sand as part of the fracing. The summary is produced by Chesapeake, so maybe it minimized the possible risks, but the environmental risks do appear to be small. Some information on the topic is included in the Wikipedia article on hydraulic fracturing.

Meanwhile, the new conventional view that shale gas will ensure plenty of domestic natural gas for the United States for the next 100 years remains under criticism from skeptics who believe the resources are significantly over-estimated. Allen Brooks, at Musings from the Oil Patch, provides a review of some recent analysis from skeptics. As I’ve said before, it seems obvious to me that the people in the best position to know – the folks doing the drilling and producing from shale formations – have clearly signaled what they think is true by spending huge amounts of money to secure leases and develop additional properties. Nonetheless, production of vast quantities of gas from shale remains a relatively new commercial activity, so a certain amount of unavoidable uncertainty remains.

“Where the wild things are”

Michael Giberson

Just saw the movie Where the Wild Things Are.

Fantastic. Wonderful. Amazing.

Back when I was king, it was kind of like that.  Only, I had more brothers and sisters when I was king, and they thought they were the king or queen, so it was complicated.

And amazing.

I’m not sure my 13 year-old son was as impressed with the movie, but I think he still thinks that he’s the king.

Power Trip documentary to be aired

Michael Giberson

Power Trip - film by Paul Devlin

Power Trip - film by Paul Devlin

From the inbox comes word that Paul Devlin’s documentary, Power Trip, will be aired this weekend on BBC World and in the PBS World Voices program.  The film tells the story of the efforts of AES Corporation to succeed as the owners of the newly privatized (in January 1999) electric utility in Tbilisi, the capital of the former Soviet Republic of Georgia.

Several years ago, in a post on politics and documentary film, I called Power Trip “one of the best documentaries I’ve seen.” I said:

The film offers a perspective on capitalism and corporations hard to get in the Western world, because in the West so much of the institutional framework is taken for granted. In the beginning only 10 percent of Tbilisi customers were paying their electric bills, because they were used to power being “free” (i.e. provided by the government). Of course, electric power was also unreliable (unless you had good political connections). In Power Trip you can get a flavor of such abstract phrases as “institutional framework,” and why they might matter to making the world a better place.

Should be required viewing for international development professionals and students of comparative economic systems, development studies, or the economics of institutions. Actually, everybody should go see it.

Links to broadcast times June 13 and 14 are available on the Power Trip “Screenings” page.