Thursday, 22 April 2010

Hollywood Babble On & On #495: Analyzing the Analysts

Welcome to the show folks...

Lionsgate has broke from the other movie companies and tossed their support behind Cantor Fitzgerald's proposed Box Office Futures Exchange. Some say they're doing it as a way to offset risk, others say it's because of top Lionsgate honchos being connected to the play-money Hollywood Stock Exchange, and Cantor Fitzgerald. I don't really care why.

What I do care about is that it's a really dumb idea.

I've explained why I think the exchange has all the makings of a royal boondoggle.

What I would like to do today, is to further explicate one of the reasons I discussed in that article, the tyranny of analysts.

Box office analysis is given way more weight than it really deserves. In a perfect world it's a scientific discipline where coldly methodical brain-boxes study past ticket selling performances of actors, directors, genres, MPAA ratings, and coordinate them with outside factors like the time of year, number of screens, the state of the economy, target demographics and even the weather. They then take all these factors and use them to construct a rational, logical, and objective opinion of how they think the film in question will perform.

The problem is that we don't live in a perfect world. Instead we live in an extremely imperfect world, that's populated by extremely imperfect people.

Extremely imperfect people have agendas.

These agendas taint these analysis by tempting them to skew them one way or another, and not just for their own movies, but for the films of other studios as well.

That's because their estimates are taken as The Gospel From On High, and if a movie beats their estimate, it's hyped as the second coming of Avatar, if it doesn't, it's touted as the biggest bomb since the last time Nicole Kidman made a movie. So the estimators skew away, either to put lipstick on the proverbial pig, so that a film will look more successful than it actually is, or to hide its light under a bushel to make it look like a failure when it comes time to pay off the back end deals.

This means that the analysts who make box office estimates, even the ones that work for media outlets and not directly for the studios, are under tremendous pressure. This pressure warps things in weird directions.

Now imagine thousands of gamblers investors all over the world with millions of dollars riding on these analysis. The pressure to skew will increase exponentially and completely destroy whatever integrity the current process may have left.

And even if it doesn't, it still doesn't matter, because no matter how you paint it, estimate is just a fancy word for a guess. An educated guess, but still a guess nonetheless.

But it looks like this betting pool exchange is going to go through, so it's only a matter of time before it makes Enron look like shares in a Canadian bank.

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