The Hollywood Stock Exchange, and bands with shareholders

Paul Raven @ 26-02-2010

If investment bankers can gamble on the success of big-money projects, why can’t the rest of us? Well, of course, we can – but those sort of big-money projects aren’t the sort of thing that get us normal folk excited, nor the sort of thing we understand (or think we understand) sufficiently to throw our money after.

But if you scratch a film buff, underneath you’ll find someone who thinks they can predict how well a movie will do once it gets released… and Hollywood reckons that’s an as-yet untapped source of funding for big-budget blockbusters. Hence HSX, the Hollywood Stock Exchange, is set to re-launch in April of this year as a real-money commodity exchange [via SlashDot]:

Since 1998, HSX has allowed just-for-fun traders to buy and sell valueless shares in Hollywood films based on forecasts of what the pics will ring up. Once launched, a new HSX site will list current and imminent movie releases with their projected four-week domestic grosses and allow exchange users to take long or short positions on the films.

A formal announcement about rules and guidelines for HSX users is expected closer to the launch. The exchange hopes to lure hobbyist investors as well as industry professionals, though the latter will be prohibited from improper insider activity.

For instance, distribution execs with access to early boxoffice data will be barred from making trades on the exchange after a film has opened. But film financiers will be allowed to invest in HSX an amount equal to a minority percentage of their total investment in a movie.

(Oh, man, you just know there’s gonna be some spectacular gaming of this system at some point, assuming it lasts long enough for gaming it to be worthwhile. It’s just too tempting, especially for such a historically desperate and greedy industry.)

Investors wishing to participate in the exchange will buy “contracts” priced at one one-millionth of a film’s projected boxoffice, with films to be listed on the exchange from the time productions are announced in the industry trade papers. Trading will begin six months before a movie’s anticipated wide release.

I make no claims to financial expertise of any kind, but I think I’d still assume that the safest way to gamble on the future of Hollywood properties would be to invest in something else entirely…

But a thought occurred to me while reading about HSX, namely that something like a stock purchasing model might act as a sort of bolt-on or extension to the crowdfunding models for creatives that we were discussing the other week. Say you’re in a band, you’ve done a few national tours, self-released an album, got some buzz going. How do you take things to the next step?

Systems like the newly-in-administration SellaBand are all well and good, but there’s still an intermediary middle-man involved, and the investment is conditional as well as project-specific; so why not just float your band (or your two-person animation studio, or yourself as a writer, or your guerrilla puppetry theatre mob or whatever) like a public company, offering shares to potential investors in exchange for their influence and input on what the band does? Product replaces dividends, tours and appearances are booked according to geographical distribution of fans, etc etc… it’s a bit like Kevin Kelly’s 1,000 True Fans idea, I guess, but much more formalised, with legally-binding obligations in both directions.

I’m pretty sure someone could knock up a software suite for managing all the paperwork necessary in order to make this happen, though I’ll confess that my knowledge of buisness law is sufficiently lacking that I have no idea whether or not it is legal (let alone practical, given the lack of a trusted and reliable micropayments platform and the morass if international business law). Can anyone in the audience shed a light on some of the details?

And more to the point, would anyone like to buy shares in Futurismic? We may not be profitable, but we’ve got a warehouse full of kudos… 😉

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4 Responses to “The Hollywood Stock Exchange, and bands with shareholders”

  1. brian t says:

    As for floating a band: as with so many other things, David Bowie was way ahead of the rest, successfully offering a 10-yr bond issue from 1997-2007. See http://www.businessdictionary.com/definition/Bowie-Bond.html and Wikipedia on “Bowie Bonds”.

  2. gmoke says:

    There’s also http://www.kickstarter.com/ which uses a Kiva-style model to fund individual arts projects including sending Ted Rall back to Afghanistan to do more cartoon journalism or to help James Kochalka make a video game or someone else finish a TV pilot. Looks interesting.

  3. khannea says:

    ‘iwantitnow.com’ a site where people can define an idea, and demand it be made as soon as posisble – and put money on the idea. Say, I want a 500$ HD3DVR HUD and a glove driven interface system, I put the idea on the site and people digg the idea, or state they’d buy one – or offer money if it enters serious development.

  4. Sarah Ennals says:

    I for one must never be allowed to predict the success of movies -I think it would be brilliant to do a remake of Harvey with Steve Buscemi as Elwood P. Dowd. Pretty sure that would not be a commercial success.