CONTACT: GEORGE McCRORY
100 Old Public Library
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
MBA 'movie moguls' trade in electronic movie market
IOWA CITY, Iowa -- Budding movie moguls in a University of Iowa marketing
class are speculating on the box-office success of two pre-holiday movies,
"I Still Know What You Did Last Summer," and "Enemy of the
Tom Gruca, associate professor of marketing at UI, is using the real-time
online technology of the UI business school's Iowa Electronic Markets (IEM)
to help his MBA marketing management class gain practical experience in
new product forecasting and financial trading.
Gruca's students invest in a real-time, real money, web-based market,
trading in futures contracts where eventual payoff depends on the movies'
four-week box office receipts as measured by AC Nielsen EDI. To make their
predictions about the movies' success, students gain experience in marketing
analysis and forecasting by gleaning data from movie industry web sites.
"The students get very competitive. This assignment is not just
for a grade--it's for real money. The movie market rewards students directly
for the quality of their work," Gruca said. "The feedback is
direct to the student and not filtered through the opinion of the instructor."
"I Still Know What You Did Last Summer" a horror movie sequel,
took in $16.5 million after it opened Nov. 13, putting it in second place
in this past weekend's box office receipts. "Enemy of the State,"
an action movie starring Will Smith and Gene Hackman, opens Nov. 20.
Trading began Nov. 9 and is based on box office receipts in the first
four weeks of release. For example, futures contracts for "I Still
Know" are for box office receipts of $0-$20 million, $20-$35 million,
$35-$50 million, or more than $50 million. If the trader's projection is
right when the market ends on Dec. 10, the payoff is $1 per contract; otherwise
there's no payout in the all-or-nothing market. The MBA students can use
their own money or use funds supplied by the School of Management for the
contracts. Most invest about $10 in the markets, Gruca said.
So far, IEM traders think "I Still Know" will make between
$35 million and $50 million, while "Enemy of the State" will
make more than $70 million.
"Given the high development cost and short life cycle of most movies,
forecasting their success is a very challenging application of the students'
marketing analysis skills," Gruca added. "Their decisions have
actual profit/loss payoffs."
Started in 1988 at the UI College of Business Administration, the IEM
is an application of the real-time trading technology futures markets developed
at the UI. The IEM's 1996 presidential election market received international
media attention as an accurate alternative to traditional polls. Since
then, the UI School of Business has conducted several other political and
Last spring Gruca's classes traded in IEM movie futures markets for
two science fiction thrillers, "Mercury Rising" and "Lost
in Space." Gruca added that his movie choices are based on their probable
appeal to college students who trade in the IEM.
For more information, contact Gruca at (319) 335-0946 or visit the IEM
web site at http://www.biz.uiowa.edu/iem/