CONTACT: GEORGE MCCRORY
300 Plaza Centre One
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: Nov. 20, 2002
Marketing class uses futures market to predict Bond film box office
the latest James Bond adventure "Die Another Day" sink or swim in
the box office? So far, a University of Iowa marketing class thinks it will
likely make more than $120 million, and students are buying futures contracts
in the Iowa Electronic Markets (IEM) to back up their predictions.
Tom Gruca, associate professor of marketing at the UI, is using the IEM
to help his MBA marketing management class gain practical experience in marketing
analysis and financial trading. The IEM is a real-money, web-based market,
trading in futures contracts whose eventual payoff depends on the movies'
four-week box office receipts as measured by AC Nielsen EDI. Trading in "Die
Another Day" contracts began Nov. 8 at http://www.biz.uiowa.edu/iem/markets/movie_Die.html.
To make their forecasts about the movies' success, students conduct research
using many sources including information from movie industry web sites, looking
at past performance of similar movies, critics' reviews and expected performance
of competing movies released in the same time period in previous years.
After completing their research, the MBA students use $5 accounts supplied
by the Henry B. Tippie School of Management to buy futures contacts based
on their projections of the movie's box office receipts in the first four
weeks of release, Nov. 22 to Dec. 19. Futures contracts are for box office
receipts of $0-$90 million, $90-$100 million, $100-$110 million, $110-120
million, and $120 million or more. If the trader correctly predicts the box
office totals and purchases a contract that reflects their opinion as of Dec.
19, the payoff is $1 per contract; other contracts expire worthless in this
"Students get a lot of assignments doing analysis or defending their
recommendations from a case study. But with the IEM, they are making decisions
and taking action in a market with a real dollar payoff. It completes the
cycle of business decision-making," he said. Students like the IEM because
it prepares them for their careers in marketing and finance, Gruca said.
The IEM movie market isn't open to the general public; it's for classroom
use and open to traders with an academic affiliation.
Since 1995, Gruca has conducted markets on 16 movies with students from
the UI MBA program and other schools throughout the country. His movie choices
are based on their probable appeal to college students who trade in the IEM.
Started in 1988, the IEM is a teaching and research laboratory at the UI
Tippie College of Business. Six faculty at the Tippie College have conducted
several other political and business markets, including markets for the 2000
presidential elections, Senate races, and Republican or Democratic control
of the two houses of Congress.
For more information, see the Iowa Electronic Market website at http://www.biz.uiowa.edu/iem
or contact Gruca at (319) 335-0946.