Yes

by Anthony Megna

Created on: April 25, 2010

Here's an interesting way to profit from the potential success of a movie.  Buy a futures contract!  This idea has recently been proposed by a company out of New York, and it looks like it is going to be approved, if it hasn't already.  From what limited details exist, a futures contract can be purchased in the neighborhood of around fifty dollars.  This is a relatively cheap way to profit on the success of a new movie that is about to hit the market.

If you think that a particular film has all the right ingredients to be a blockbuster, or even to make a decent profit, you can jump aboard that train yourself and cash in.  But one must remember that very few films reach blockbuster status, and many films lose money.  The analogy is like a horse race.  Assume their are ten horses in the race, only one horse is going to win, one is coming second, and one is coming third.  Those horses that finish in the top three are what is called in gambling parlance, "in the money".  The rest are also-rans, and don't make any money at all.

As we all know, making a movie is a tremendous investment.  Big studios leverage their risk by making many films, as they know most will lose money.  They are looking for that blockbuster to carry the cost of all the movies they make.  For instance, Avatar is the top-grossing movie of all time, so the other films the studio made have been "covered" by the profit this film took in.  With the costs of marketing and distribution, let alone the three or four hundred million it took for the production cost of the film, a studio could be in the hole for close to a billion dollar investment, on one film!  That's some serious bread, and all who participate for taking that type of risk should profit handsomely when the movie turns into a blockbuster.  Now with the advent of the general public able to cash in as well by buying a futures contract on any film they deem worthy, another option to cash in is available.

Sure, one can buy stock in a company that owns a studio, but the dilution of that stock doesn't give a pure play on the success of a film.  That company may be a holding company that not only owns the studio, but is involved in other business as well.  So there really is no way to get the pure profit potential, short of becoming a movie investor, of a particular film.  With the ability to buy a futures contract on a single film, or multiple films for that matter, the path to movie riches is now open to the futures investor. 

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