This afternoon, I responded to Tammy, and I actually was pleased with my answer. So, I decided to repost it here.
I would love to know what anyone else thinks on this topic. Please comment or tweet with your thoughts. I'm curious to know how other film professionals view this.
My response to Tammy:
That's a really tough question. On the one hand, it sounds kind of fun to be able to bet on box office outcomes, and make some money if you're good at it. But the stated rationale behind these models is to allow studios a vehicle to protect their risk. In other words, they can bet on a certain level of performance that will give them some of their money back if the movie doesn't perform well. That means they are betting against their success.
So, you have people who have some control over the product's performance betting that it will perform badly. That's like letting a basketball player or referee bet on the game, right? Obviously a bad idea. Or maybe not.
The counter argument is that while the studio might make money from underperformance (as a result of its futures contract), it makes more money if the film performs well. The futures bet is only a hedge that theoretically allows the company to take a larger risk on the success of the picture, which actually means it's good for the business. If the studios can give the films a bigger push because they will get some of their money back if it doesn't work, that is actually good for the film industry.
The larger risk is if individual executives play the futures market. They could theoreticlaly sabotage a film, causing the studio to lose money while they cash in individually. But that can be (and should be) monitored and punished severely. I don't think many film executives would be stupid enough to try that, but it could certainly happen.
Going through that analysis, I believe it should be a net positive for the business. There could be some abuse, but in reality it doesn’t severly undermine the motivation to succeed and it could be a very useful tool for the film industry. And beyond that, I think a lot of smaller, unaffiliated investors will have a good time trying to guess which films will perform well.