Considering the looming arrival of Hollywood box office futures markets, the plot of The Producers might be coming to life, bringing with it a whole new way to profit off of failure.
In the first scene of Mel Brooks' The Producers, accounting whiz Leo Bloom tells producer Max Bialystock that under the right circumstances "a producer can actually make more money with a flop than he can with a hit." I've only ever seen the bits featured on Curb Your Enthusiasm, but the musical tells the story of these two taking this idea to the house, getting mad investors to dump money into their new production, which they have specifically engineered to fail (bad actors, worse script, etc). The plan is to get a large initial investment, put the show on for cheap, and then walk away with the difference after the show inevitably flops. (As a side note: this plot sounds like it could have been the inspiration for Goldman Sachs' trading policies: get people to invest money in securities that you know to be bad, bet against them, and then reap). Today though, as box office futures markets gather in strength, we’re ready for Max Bialystock's dream to go all Nightmare on Elm Street and start blending with reality.
Briefly, as an investor in these markets you buy and sell contracts $1 dollar for every $1 million that a movie is expected to earn. So, if a movie is expected to bring in $100 million in its first couple weekends, the contract for the options on that movie will be going for $100, and you can buy that contract if you think the movie will earn over $100 million. If it does, lets say it beats Aquaman and gets 120, you pocket the 20 in surplus, and go spend it on Magic cards, you loser. “Mana” won’t get you laid by the way.
Here is where Max Bialystock starts listening, because by bringing financial bets into the mix with box office earnings, we’ve potentially readjusted the incentives of the Hollywood execs. Now that Hollywood can bet and profit off of the outcomes of their movies, they can get a little tricky with it. Take the example of “Robin Hood”. Big headed Russell Crowe is in it, and the trailer looks similar enough to Gladiator to ensure that it will be a box office success. But what if this all is just a big ruse towards a sinister Hollywood profit, wherein the production company went to mad trouble to make the preview look totally bad ass, while simultaneously dumping on the rest of the movie. What if Russell Crowe actually has less total screen time than the dinosaurs did in Jurassic Park (- 7 mins)? What if Richard Lewis plays King Richard (the mole!)? And what if at the end of the movie we learn that the treasure is actually knowledge that was given to us humans by aliens? That would be a terrible twist... wait. (indy 4).
Then, while the masses bid way up the prices of the Robin Hood contracts, knowing that Crowe in a period piece is an infallible box office combination, the production company, which knows that it's actually going to suck, is shorting the shit out of the movie like it’s the fucking frozen orange juice market, making way more money with the “flop than [they could have] with a hit”.
The futures markets think they’ve got this under control though. NYTimes says; “Conflict-of-interest issues are handled by limiting the amount a company can hedge through the exchange, so that a distributor could never make more money by betting against a film through futures than by having that film succeed in theaters.”
But they seem to be forgetting one thing, Max Bialystock is not a morally straight-standing man. The distributor will still be able to make money flopping, they will just have to get a little “Lehman” about it. They can circumvent the rules by using a parrot-firm – tied to the production company by heavy layers of paperwork – to vicariously do their dirty work (Lehman Bros used an extremity company to shelter its risky investments). What I’m calling The Producers Model of Hollywood Success is just the next way that big biz can make money on failure --- it’s the next sleezy way to make a G today.
If only we could now figure out a way to profit on the failure of the USA.