May 19, 2010
On Wednesday, May 19th, Scott Harbinson, International Representative of IATSE, testified on behalf of the DGA and IATSE before the Commodity Futures Trading Commission in Washington, DC. The testimony was in opposition of proposals to establish exchanges trading "movie futures," which are opposed by a broad entertainment industry coalition including the DGA, IATSE, MPAA, NATO and IFTA.
Mr. Harbinson's testimony is below:
Thank you, Chairman Gensler and other Members of the Commission for this opportunity to appear before you. My name is Scott Harbinson and I am an International Representative for the International Alliance of Theatrical Stage Employees. I am here today representing both IATSE and the Directors Guild of America. I hope my presence will underscore the grave concern we have about the impact of the "movie futures contracts" which are pending before the CFTC.
IATSE is a labor union that represents 110,000 technicians, artisans, and craftspersons in the entertainment industry who work in motion picture and television production, live theater and trade shows.
The DGA represents over 14,000 directors and members of the directorial team who work in feature films, television, news, sports, commercials, and new media.
The realities of our business are not easily deciphered by those outside of it. So let me begin with just a few of the realities, which I hope will shed light on our concerns about the MDEX and Cantor Futures contracts applications.
The majority of people working on the creative side of our industry, earning middle class incomes, do not hold a regular full-time, Monday through Friday job. Ours is a freelance business - people move from employer to employer and from one production to another.
Our business model recognizes and accounts for that significant uncertainty by providing another type of security in the form of residuals. These residuals, which come from the exploitation of our work in secondary markets such as DVDs, free and pay television, and new media, help people in between jobs, either directly or through contributions to our multi-employer health and pension plans. Not surprisingly, there is a high correlation between box office success and downstream revenues, and hence the residuals, generated in these markets.
The ability to trade on a film's box office receipts through movie futures contracts -contracts where "shorting" a film can be extremely lucrative - puts the commercial success of the film at an even greater risk. This new risk would not be generated by the people who spent years and invested millions making the film, rather it would be generated by those who are likely to have no real stake in seeing the film succeed; their goal is simply to make money for themselves.
What will follow is diminished downstream revenues. When that happens, our members and their health and pension contributions will suffer. Additionally, lower film revenues dampen reinvestment, which leads to decreased production and fewer jobs in the future.
Initially, it is hard for us to conceive of how the CFTC can allow a motion picture - which is in fact an experience, not a commodity - to be monetized and treated like Grade A wheat. At a fundamental level, we believe that you need to consider whether the motion picture industry will actually benefit. Will a broad and greater economic good result? What is the likelihood of market manipulation?
We believe that as regulators, your first duty is to the welfare of the general public and industry stakeholders, not speculators on the margins of the industry looking to make quick profits.
Relative to a crop of corn or a barrel of oil, there is no question that a contract tied to a single motion picture's box office performance would be far easier to manipulate. It has been suggested by Cantor and MDEX that smaller films would be the type that would benefit the most. Actually, the smaller the film, the more vulnerable it would be to manipulation.
The success of a film in its first few weeks of theatrical release is all about the buzz created. Why would you want to create new economic incentives for financial speculators to intentionally produce negative impressions of our films?
The MPAA and IFTA represent the companies whose releases comprise more than 95% of the motion pictures that would be the subject of these exchanges. IATSE- and DGA-represented crews work on all most all of these films. So you have almost the entire motion picture industry - the purported beneficiaries of these contracts - that are absolutely opposed to them. The proponents of these contracts are the ones who will be the largest, if not the sole, beneficiaries. And once again, the Wall Street guys stand to make millions at the peril of middle class working people.
We have just seen the result of the financial industry "helping" other economic sectors with new and exotic financial instruments. This "help" has resulted in dire consequences for the economy and tragic outcomes for the middle class who got fleeced through no wrongdoing of their own. The motion picture industry has reliably provided an international trade surplus every year since its founding. It provides hundreds of thousands of good, middle class jobs that provide health insurance and retirement benefits.
Our industry doesn't ask for bail-outs and doesn't need any "help" from Cantor or MDEX. We seek only to continue to grow and prosper without being imperiled by speculators and gamblers who have no stake in the continued success of the industry.
Just because these contracts may benefit Cantor and MDEX and indulge the star-struck gamblers and speculators for whom these things are created does not mean they are a good idea, nor does it mean they are good for the industry they purport to serve. Cantor and MDEX seem to be adopting the line from Field of Dreams - build it and they will come. But more aptly, that line translates to "trust me."
Well, I don't trust them, the working men and women I represent don't trust them, the film directors who can spend years of their lives putting a film together don't trust them, the motion picture companies that invest hundreds of millions of dollars don't trust them, and you shouldn't trust them either.
On behalf of the thousands of middle class families who help make movies, I ask that you not introduce a new form of financial threat into our industry.
About these organizations:
The Directors Guild of America was founded in 1936 to protect the economic and creative rights of directors. Over the years its membership has expanded to include the directorial team - Unit Production Managers, Assistant Directors, Associate Directors, Stage Managers and Production Associates. Today, through the collective voice of more than 14,000 members, the Guild seeks to protect the rights of directorial teams, to contend for their creative freedom and strengthen their ability to develop meaningful and lifelong careers in film, tape and digital media.
The International Alliance of Theatrical Stage Employes, Moving Picture Technicians, Artists and Allied Crafts of the United States, Its Territories and Canada, AFL-CIO, CLC (IATSE) is one of the largest entertainment labor unions in the world and represents over 110,000 technicians, artisans and craftspeople employed in stagecraft, motion picture and television production, the trade show industry, and affiliated crafts throughout the United States, Its Territories and Canada. For background information on the International Alliance of Theatrical Stage Employees: www.iatse-intl.org.