After ten years of planning and study, Modern Cinema Group is launching an international on-line “Futures” exchange for the trading of media assets (including shares of equity “backend”).
As industry experts have long pondered various ways to facilitate on-line media transactions (buying, selling and speculating), vs. trade shows, phone calls and face-to-face meetings, four issues immediately come to light as follows:
- Existing ways of doing business are difficult to overcome
- A media czar may unwittingly appear from such efforts (company, alliance of companies or even an individual)
- Such efforts must allow for virtually all conceivable transactions
- Any new model must save a tremendous amounts of money by way of significant efficiencies
A “Futures” exchange can be leveraged by global buyers and sellers and is perfectly suited to perform all of the necessary functions as a viable media exchange. And by its very nature, it’s completely neutral with no ability to favor one trading partner above another; or create a media czar.
A commodities-style exchange is, therefore established to take a percentage of the equity in a given media asset, break the (derivative) equity component of the media asset into numerous discrete contracts (such as commodities-style contracts), and then list these contracts to potential buyers, sellers and speculators by way of means, methods and tools found in the domain of “Futures” trading.
Within this process of listing “Futures-style” contracts, downstream distributors are allowed to buy contracts for discrete media titles or bundles. If buyers purchase a pre-determined number of contracts and hold these contracts until settlement, they will receive four benefits as follows:
- Distribution Rights within their discrete territories (Exclusive or Non-Exclusive depending on the number of contracts purchased)
- Optional “Backend” equity for these media titles as defined within the contracts (allowing proportional revenues to be distributed to these same distributors)
- Ad “Avails” as provided by distribution partners (cable, satellite, internet, IPTV, mobile etc.)
- Risk Management means, methods and tools
Although such an approach may sound reasonable, not everyone agrees. To date there have been four major complaints expressed as follows:
- Such a model cannot attract the best of media assets (or projects)
- Regulatory compliance issues will be difficult to navigate
- Other means and methods can be used to achieve the same ends
- Media assets are securities (and are therefore not standardized materials like commodities)
The responses to these complaints are generally framed as follows:
- Media projects need to be profitable. They do not need to be wide-release movies, network television shows or the most popular of games
- Regulatory compliance has already been granted to media “Futures” projects that were initiated in the 2010 timeframe. (International compliance is also easier than U.S. compliance.)
- Other means (such as more traditional bond offerings) are not as flexible and cannot be accessed through a single portal.
The response to complaint number 4 is as follows:
One of the hallmarks of “Futures” trading is standardization. Gold is gold. Euros are Euros. Crude oil is crude oil. Conversely, Wonder Woman is not Fast and Furious. The Big Band Theory is not Modern Family and Candy Crush is not Call of Duty. Media assets do not provide the standardization of materials that characterize “Futures” trading, and this fact is recognized by the Symbiotic Exchange team members. This issue is important and will certainly be raised by the media industry not to mention the larger “Futures” trading community.
Instead of arguing that “backend” media derivatives are “backend” media derivatives, it’s better to characterize the trading model as the trading of small-lot, fungible, on-exchange content licenses with standardized contract specifications.
Definition: Fungible – Able to replace or be replaced by another item; mutually interchangeable.
The important thing to note is the apparatus found in “Futures” exchanges can be used to facilitate fungible on-exchange transactions. This may be a better way to characterize the trading model.
Regarding liquidity, there are tens of thousands of platform operators around the world and thousands of media producers (of all kinds). In fact, there are most likely tens of thousands of platform operators and thousands of media producers in China alone. The actual number could be as large as one hundred thousand world-wide. It is expected that market liquidity and volatility will be at least adequate to achieve the necessary trading volumes required to sustain such a model, not to mention providing all-important “price discovery” functions needed to determine value benchmarks.
The use of a “Futures” exchange, therefore anticipates virtually all deal structures and allows platform operators to participate in any way they choose by way of an on-line portal offered at virtually no additional cost (to platform operators or content owners). The strengthening of the business models on both sides can then be set in motion with a single tool (the “Futures” exchange).
This model is being launched now and results will be available in the following months. It is anticipated that such a model will turn heads at a minimum, and has a legitimate chance of changing methods and processes within the greater media financing, distribution and promotional industries that are badly in need of an overhaul.
To learn more about the Modern Cinema Group model, please download the Modern Cinema Exchange Operational Plan here.