The Yanks have come up with yet another way to part a fool from his money.
22 Mar 2010 - 12:00 AM  UPDATED 6 Nov 2012 - 2:30 PM

In about a month's time, Americans will be able to bet on the box-office performances of Hollywood movies. The promoters aim to attract the US studios and financiers as well as the average punter.

The brainchild of Wall Street brokerage house Cantor Fitzgerald, it will operate as on online market which will enable participants to trade contracts on the expected box office earnings of major films.

Dubbed the Cantor Futures Exchange, it will deal in contracts valued at $1 for each $1 million of revenues. So a trader who thinks a movie will make $100 million in its opening weeks could buy a contract for $100. If the film rakes in $150 million, the trader makes a profit of $50.

Cantor Fitzgerald owns the web site (meaning Hollywood Stock Exchange), where users place bets using play money for fun. Cantor's president Richard Jaycobs says he hopes to lure a sizable portion of that site's 200,000 users to the real futures exchange.

“I've worked in the futures industry for a long time,” Jaycobs told The New York Times. “And none of the products has the overall appeal that this does. This just has a tremendous potential audience.”

It may sound like a harmless past-time, a bit of fun, but there are real dangers with the scheme. The Washington Post's Steven Pearlstein warns of the risk of insider training, where studios and exhibitors trade contracts using information which outsiders aren't privy to.

“Surely it won't be long before theatre owners and moviegoers begin checking prices on the exchange before deciding which films to show and attend, thereby altering the very outcomes that the exchange is meant to forecast,” he writes.

And because there's no limit on the amount that can be wagered on any movie, Pearlstein raises the prospect that a film that cost $100 million to produce could cause financial losses totalling many times that amount.

Besides, predicting opening weekend figures can be notoriously difficult, even for studios and experienced industry observers. Take Paul Greengrass' war movie Green Zone, which many pundits projected would earn anywhere between $20 million and $30 million in its US debut. More conservatively, executives at Universal told the trades they were expecting an opening in the “upper teens.” There was egg on a lot of faces that Monday morning as the Matt Damon starrer bombed, raking in $14.3 million.

I'm not aware of any gaming facility in Australia which offers odds on movies' performances, although online services such as Centrebet accepted wagers on the Oscars and the winners of So You Think You Can Dance.

I suspect any Oz equivalent of the US movies exchange would fail, mostly because Australians aren't anywhere near as obsessed with B.O. results as the Yanks.