May 6, 2010
A real-life drama plays out before our eyes, a storyline worthy of a box office thriller. The hero in this tale of power, influence and greed is, surprisingly, the financial industry, as represented by Cantor Exchange and MDEX (Trend Exchange/TrendEx). These upstarts, pursuing the American Dream, are trying to offer the masses what they want, i.e. futures products based on movie box office revenue. Our heroes have proceeded with confidence and naiveté. They began their quest long ago with best intentions. They have played by the rules, setting up exchanges to offer movie futures contracts. But along the way they were seduced, perhaps misled into complacence by the very industry they were trying to serve.
Enter our villain – the movie industry, as represented by the Motion Picture Association of America (MPAA). Like Little Red Riding Hood unknowingly inviting the disguised Wolf into her home, Cantor and MDEX played nice with MPAA, seeking its comment, providing information, engaging as friend, rather than battling as foe. All seemed well. The people rejoiced. Excitement was in the air.
Then something happened.
At the last minute, after more than a year of industry outreach, regulatory compliance and public relations, our heroes had the rug pulled out from under them. The MPAA revealed itself for what it truly was, a wolf lying in wait, pouncing at the last moment, enlisting the aid of its many powerful friends in Congress, trying to squelch the products offered by our heroes before the light of day can shine upon them.
Since the battle ensued, positions have hardened, arguments announced. On the villain’s side these arguments run the gamut from legal (the inability of box office futures to acts as hedging vehicles or price basing tools) to financial (market manipulation and insider trading problems) to emotional (the future of the movie industry, even its survival, is at stake if Cantor and MDEX are allowed to proceed!).
Our heroes counter.
But let’s not get caught up in the minutiae of arguments, technical or otherwise. We all know that in the end the side with the greatest political pull and clout is likely to win. On first blush, one might think the movie industry will savor sweet victory down the line, but I have my doubts. Even considering the scorn heaped upon the financial industry in this time of Wall Street bonuses, financial meltdowns, and Congressional hearings on Goldman Sachs, the financial markets are powerful players and their resources and influence rival, even exceed those of the entertainment industry. So the battle is far from over.
But what’s truly bugging me about this made-for-the-big-screen drama is not why, but why now? Why at the last minute? Why didn’t the movie industry come out with its objections earlier? Certainly it had the ability to analyze these proposals before they let us get our hopes up that trading was just around the corner. The timing of their protests is suspicious. If I didn’t know better you might have to excuse me for thinking the movie industry is merely adhering to a script written by an under-appreciated member of the Writers Guild, a story that offers a giant hurdle at the last minute to the epic quest of our heroes, producing maximum drama and a fitting climax in line with the best blockbusters of our time. If Hollywood knows anything, it’s story arc and formula.
But I have another theory. Consider this:
Bob Pisano took over as interim CEO of the MPAA in January 2010 when it was announced that Dan Glickman, Chairman and CEO of MPAA would be stepping down, effective April 1. Glickman, was previously US Secretary Of Agriculture. For the uninitiated, the US Department of Agriculture has oversight of the Commodity Futures Trading Commission or CFTC (corn futures, anyone?). Notably, the CFTC is also the agency responsible for overseeing box office futures.
Why did Glickman leave MPAA? The departure announcement indicated that Glickman would become President of Refugees International. Glickman, himself, stated in an interview that he was itching to return to public service. But reports suggest he was an awkward fit for the MPAA, had taken positions with which studio heads disagreed, and may not have been aggressive enough when it came to anti-piracy efforts. Can we add box office futures to the list? Did Cantor Exchange and Trend Exchange have anything to do with his departure? Did the studios (who control the MPAA) want to oppose box office futures and decide, at least in part, they needed to remove Glickman because of his connection to the CFTC, or because he was advising them that box office futures would not be a bane to the industry?
Until an insider writes a juicy tell-all we may never know. But for whatever reason, though Glickman’s departure was announced on January 22, his actual exit date, as noted above, was April 1, more than two months later. Deadline | Hollywood called it The Longest Goodbye in MPAA History. What was happening during those weeks when Glickman was a lame duck? In retrospect it seems likely that Pisano and the studios were already plotting strategy to torpedo Cantor Exchange and MDEX.
Then, on March 16, 2010, the first crack appeared when The Wrap reported Hollywood Nervous About Cantor Exchange. The story now reads like a plant by the movie studios in advance of the MPAA’s letter to the CFTC a week later (March 23, 2010) publicly opposing box office futures for the first time.
And that’s when all heck broke loose, leading to the current mess.
It’s interesting to note that Glickman’s departure from the MPAA occurred nine days after the MPAA’s March 23 opposition letter to the CFTC. Which raises the question, was even this orchestrated to permit the MPAA, the studios and Pisano the ability to note that Glickman was still Chairman when opposition to box office futures was announced, blunting any notion that Glickman’s departure was related to such?
Palace intrigue and letter writing aside, the bigger question in the drama before us remains: How will it end? I, for one, remain long on box office futures becoming a reality. But I know that even in Hollywood, the bad guy sometimes wins. I guess that’s why they call it a tragedy.
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