Thursday, December 20, 2007

A New Financial Product

"R&R Consulting [R&R] has begun work on a database model to predict aggregate first-run U.S. box office revenues for independent movies. This is the first step in the development of an advanced system of financial securitization for independent film production. The project, called Film Score [FS], is part of the [R&R] mission to bring the same high standards of precision and dependability of the engineering disciplines to the capital markets. ... The project seeks to create a predictive model for determining a film's financial risks. ... [FS] predicts revenues for independent films by quantifying value elements in the selection of screenwriters, directors, producers, actors, and the script itself. ... [T]he model and the database will be able to predict revenues from a targeted film's first U.S. release. ... However, the database will not require specific names of actors or directors because only the profile of the different participants will be used as variables. ... The ultimate objective of precision-tool finance in parsing risk and capital more finely is to 'discover' new sources of capital for arts and society",, 30 November 2007.

Quoted without comment.


Anonymous said...

GW --- No comment?
Can we find a way to short R&R?
When the only tool one has is a hammer, then every situation looks like a nail.
This is a classic case of congitive dissonance. When your model (philosopher's stone) does not work in one area (CDO's, SIV's, MBO's, etc.), then you fish around for floating bubbles in search of another situation to apply your model to. If you are a shark or a leech, you follow the dumb money to find your next victim/host. As a former resident of Hollywood, you of course recognized this very old ploy that R&R is now going to play out on the financially-naive star-stuck blindly-egocentic folk mesmerized by the movie industry. (Another variant/wrinkle to the issuing of units/trust units, etc., for the production costs of movies --- that seem to perpetually clean-out investors pockets --- who of course are ignorant of the creative accounting that is an integral part of the entertainment industry. The only question that may be relevant is did R&R come up with this idea themselves or were they setup by someone else who wishes to issue securities? If the latter, then perhaps there is an additional opportunity to short the latter party and/or the securities? --- HDF

Independent Accountant said...

See my 13 November post, Res Ipsa Loquitor. This thing speaks for itself. Yes, if you have a hammer in your hand, the whole world does look like a nail. Since R&R is privately-held, you can't short it. But you can short R&R's likely customers, users of financially engineered products. Identify them and short away!