The MPAA Doesn't Want Anyone Shorting Movies

from the show-me-the-money dept

Last December, we noticed the revival of an interesting idea: a futures market on movies. There are actually a few companies trying to realize this concept: the Hollywood Stock Exchange (HSX), Veriana Networks' TrendEx, and simExchange (for video games). Instead of only allowing investors to trade with fake money, HSX and Veriana are looking to let investors use real money to trade shares in the prospects of movies, and have asked the Commodities Futures Trading Commission (CFTC) to approve these exchanges for trading with actual money.

However, the MPAA isn't too keen on the idea of having outsiders gamble on their movies. Understandably, the MPAA doesn't want to deal with complex liability for various kinds of insider trading or "market manipulation" that might result if studios/producers/directors could profit from simply making marketing decisions. Additionally, the MPAA likely also worries that movie futures would further encourage movie piracy -- given that investors who are shorting movies may have a significant financial incentive to distribute copies of movie files before a theatrical release.

These futures exchanges actually bring up several interesting questions regarding the metrics of movies -- and how betting big on theatrical releases could be open to alternative marketing techniques. And if these market exchanges are allowed, will Hollywood be forced to adapt to additional business models? Could investors push studios towards taking advantage of their infinite goods or towards even more stringent copyright enforcement? These exchanges could also determine how much movie popularity can really be manipulated by investors and marketing efforts. But we may never know without real money behind movie trading. So, with this fairly important change to the movie industry at hand, the Commodity Futures Trading Commission is taking a bit longer to decide what the fate of these exchanges will be.

Filed Under: markets, mpaa
Companies: hsx

Twitter Could Be A Good Predictor Of Box Office Sales

from the crystal-ball dept

Twitter is very useful for figuring out "what is happening right now." For example, Twitter has been used to figure out where an earthquake is happening. But instead of what's happening now, can it also be useful for telling what will happen in the future? Two researchers at HP Labs, Sitaram Asur and Bernardo A. Huberman, postulate that Twitter can actually be used to predict future box office results for movies. By building a computer model around the tweets for 24 movies, they claimed were able to predict the opening weekend box office results with 97.3% accuracy. An accuracy of around 97% seems unnaturally high, so I dug a little further into the actual report and found that both of these numbers were a result of combining each approach with the number of theaters associated with each release. Without taking into account the number of theaters in the release, tweets alone were able to predict at 93%. According to Asur, the correlation between theater counts alone and box office results is a paltry 39%. Considering that theater counts are probably a good indication of how well a studio thinks a film is going to perform, it seems that Hollywood should take notice of these forecasts.

The supposed gold-standard of box office predictions is Hollywood Stock Exchange, a prediction market. The researchers found that HSX had a 96.5% accuracy (when also combined with number of theaters). It's impressive that HSX gets a fair amount of accuracy despite it using "fake" currency. HSX is currently awaiting a ruling from the U.S. Commodity Futures Trading Commission that will allow it to trade using real money. When that happens, the accuracy of its prediction market should increase. At that point it may be interesting to see how much more closely the two prediction systems compare, since the apparent edge that the Twitter algorithm has right now seems too small to be significant.

In any case, with Twitter, since it's also a communications medium, tweets about a movie not only indicate interest, but also can ultimately influence a movie's sales at the box office. However, this effect seems distinctly different than the traditional notion of "observer effect," since the act of measuring the interest in a movie can actually occur without directly participating in the Twitter conversation. That said, if it becomes common practice to predict box office success by analyzing Twitter, the incentive to exploit this by spamming Twitter with tweets about an upcoming movie increases greatly. After all, the many predictions that foretold that Avatar would break box office records certainly played a self-fulfilling part in its breaking of those box office records. Furthermore, Tweets were taken for the 7 days before the weekend -- which means there would not be enough time to make any adjustment to any marketing (in the event of a dire prediction), and certainly not to production budgets, which have already been spent.

So, while, in their report, Asur and Huberman conclude:

While in this study we focused on the problem of predicting box office revenues of movies for the sake of having a clear metric of comparison with other methods, this method can be extended to a large panoply of topics, ranging from the future rating of products to agenda setting and election outcomes. At a deeper level, this work shows how social media expresses a collective wisdom which, when properly tapped, can yield an extremely powerful and accurate indicator of future outcomes.

The simple fact is that there is still quite a chasm to cross before Twitter can be used practically for any type of prediction or forecasting activity.

Filed Under: forecasting, movies, predictions, twitter
Companies: hp, hsx, twitter