A Futures Site Coming to Bet on Movie Ticket Sales | Hacker News Reader

A Futures Site Coming to Bet on Movie Ticket Sales

nytimes.com

20 pointsunignorant10 comments

"If the distributor shorts a $100 contract and the movie grosses $50 million, the distributor will make $50, thereby limiting the company’s total losses from a film."

From what they have said, this does not sound like a viable hedging strategy for those in production. There is unlikely to be enough contracts traded. Instead, it seems more like a gambling operation with a CFTC gambling shield. I'm surprised they did this, given how much general anger there still is regarding derivatives and speculation.

...it seems more like a gambling operation with a CFTC gambling shield

Yes. What's next - futures contracts for the next six Powerball numbers?

No no, in the legal markets we call them "speculators", not gamblers.

Seriously though, whether or not a movie does well isn't a completely random process, so it's entirely possible for people outside of Hollywood to have insight into it.

The two differences between financial speculation and gambling are your odds and whether you wear a fancy tie.

The odds are the more important one. If you can make statistical methods that show the risk of loss, you can then assign a premium to that risk and put it on the market. Whether it will get enough liquidity to get past the smalltime remains to be seen.

At least in NY state, the exact odds and payouts are published. So you can certainly assign a premium to the risk involved, and you can do so exactly.

But since everyone knows the odds, the lotto market is perfectly efficient and no one can win in the long run -- this is what makes it gambling.

I remember playing the old Hollywood Stock Exchange (non-cash version) back in middle school. This seems like a fun idea, but how do you rule out the heaps of insider information that exist?

I am curious if the technique described in this paper (http://www.cam.cornell.edu/~sharad/papers/searchpreds.pdf) would give an advantage over the long run. I would imagine that if the majority of bets are placed for entertainment value based on guesses, this could be a quick way to rake in some dough.

Seems like Netflix might have some insight into this market.

Definately. 12M Customers can add movies to their queue prior to it even coming out at the theater. I would wager this is substantially predictive. Netflix could either bet themselves, or as perhaps more likely, sell this information directly.

This will certainly have a positive impact on the quality of films coming out of Hollywood.

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