Will this limited release report box office?

One of the frustrations that starbond traders have is when they are expecting a starbond to have a profitable adjust, only to have it not report box office to ERC.  (If you're not familiar with this issue, it is explained in this column).  Obviously it would be useful to know whether a movie is likely to report box office before you invest in the starbond. However, doing this research for every limited release is time consuming, tedious and easily forgotten.  After many years of doing nothing about it, I finally got fed up with being on the wrong side of starbond movements and decided to look systematically at the studios that do and do not report box office, and develop a reference to hold that information.

The new spreadsheet is called Will It Report?.  It has data on films that had a limited release starting in January 2015, the studio behind the release and whether box office was reported to ERC.  The studio behind the release is the same as that listed on the relevant moviestock page, except in cases where the moviestock page does not list a studio, and this information has been gained from another source. These studios are marked with an asterisk.

Will It Report? also analyses the data through a simple formula and suggests how reliable a particular studio is at reporting box office.  Because these predictions have not been tested and are probably not going to be 100% accurate, I've stolen pithy results from the Magic 8-Ball as the answers.

Like other HSXsanity tools such as the predictions database and the midnight box office database, I plan to continue updating Will It Report? for future releases.  Also like other HSXsanity spreadsheets I'll do my best to make it as accurate as I can, but errors happen, real life gets in the way and so on.

Not having looked at this issue in detail before, there were a couple of results that challenged my assumptions on which studios reported and which did not:

• Lionsgate - or rather, its subsidiaries and partners - are inconsistent about whether they report box office.  Movies released under the Pantelion label, which is aimed at Latino audiences and backed by Lionsgate - such as ALMAL, LVRBT and VATAP, which all had releases in 300 or more theatres - consistently report box office.  Other Lionsgate-related brands, such as  Grindstone Entertainment (a subsidiary) and Saban Films (a partner) have not reported box office.
• Weinstein reported box office for nine of its eleven limited releases. The two movies that did not report - EVRLY and MNST2 - were both released under the Radius-TWC brand, which specialises in VOD.
• Independent wings of major studios such as Focus Features, Fox Searchlight and Sony Pictures Classics reliably report box office, but major studios that want to bury movies (for example, Paramount and ARE51), or that decide to release a movie through their VOD brand (Sony/Stage 6 and PDSTN) are not.
• IFC Films is surprisingly spotty about reporting box office. My vague impression was that they reliably reported box office, but they reported on only 8 out of 17 films - generally the most successful ones.  MTCH was the only film to report with a theatre count in the single digits, and SALVT (box office of $42K) was the only film not to report with a total box office of over $20K.

There's clearly more work to be done in parsing out which movies are likely to report and which are not - though I'm not planning to get down in the weeds in this column.  But hopefully Will It Report? is a useful reference that you can use to flag possible starbond adjust issues when you're looking at other starbond tools such as kaigee.com,  the HSXDude's Post-Adjust Bond Show or even doing your own math.

Why are so many dumb traders holding this security the wrong way?

On HSX, there are usually a few very obviously profitable short-term investments, like movies that open much higher (or lower) than expected, arb moviestocks, and starbond adjusts. And lots of moviestocks and starbonds make profitable investments over the long-term, because you can reasonably expect their price to steadily increase or decline.

But when you look at the number of shares held on the moviestock trade, sometimes you will see that the overwhelming majority of traders are holding the investment the "wrong" way - either against the short-term adjust, or against the prevailing long-term trend.  What's going on here? Have you got it wrong, or are all these traders complete idiots?

Neither. It is actually because many HSX portfolios are not actively traded.

HSX has been around for over fifteen years now, and over that time there have been a lot of traders who have stopped playing the game and allowed their portfolios to go dormant.  Even though their portfolios are no longer traded, their positions still show up on the "shares held long/short" section, giving the illusion of popularity.  This is especially notable for moviestocks that have been active on HSX for a long time, and were once hot stocks to own, but now are stalled projects. AUST4, FLASH and HALO.

And then there are casual traders who are not so dedicated to HSX that they check their portfolio every day, every week or even every month.  There's a big uptick in HSX activity over the summer and the holiday season, when the combination of movies that people want to see and the allure of buckets of easy H$ entices more casual players back to the game. There's also a down-tick in spring and fall, when the movies are generally less interesting and making H$ is harder, giving people less reason to play. When these traders are taking a break for the game, they either take the long-term perspective and invest in moviestocks they believe will go up in value over the coming months (or years), or leave their portfolio as it is without worrying about it.

So obviously these portfolios are missing out on H$ opportunities by not holding their investments the right way. But the people running them aren't morons. They just have other priorities outside of HSX.

Why is tracking so awful? And why do traders still pay attention to it?

It's a constant lament on the HSX boards that tracking by organisations like RS and MTC affects moviestock prices. Why should this happen when tracking numbers are often wildly inaccurate?

Let's go back a step first. RS and MTC are two predictors of movie box office.  RS is ReelSource, which is a company that sells box office tracking data to whoever wants to buy it.  MTC stands for “Major Theatre Chain”, a certain theater chain that we won't name here.

Both RS and MTC develop their predictions through surveying moviegoers about which movies coming out soon they have heard of, and which ones they want to see. The data that comes out of these surveys is known as 'tracking', and they use the tracking data to make predictions about a movie's opening weekend.

RS and MTC's predictions for the next weekend are frequently posted on the HSX boards on the Sunday and Monday before opening.  Both (and particularly RS) often come under fire for being inaccurate.  As of writing, for 2013 releases RS' accuracy is at about 62% and MTC's is about 72%.  There's no clear pattern to their inaccuracy either.  Some weeks, one or both will massively under-estimate a movie's opening weekend. Other weekends, one or both will over-estimate it. So, the argument goes, why bother with tracking?

Let's look at some of the reasons why tracking often doesn't come up with the goods:

Tracking comes out at the beginning of the week.

We normally see tracking for movies opening on Friday come out on Sunday or Monday.  So tracking misses the whole big week-before-release marketing push.  This is when marketing and publicity is at its heaviest, particularly for advertising aimed at general audiences, like television commercials. So the data from tracking doesn't even include the final marketing push. Strange as it may seem, many casual movie-goers don't plan to see a movie weeks in advance, they decide based on what looks good that week.  So tracking data doesn't factor in a chunk of the audience that hasn't decided whether to see the movie yet.

Tracking focusses on frequent movie-goers

The people most likely to be surveyed are frequent movie-goers - people who go see more than one movie a month. According to the MPAA's Theatrical Marketing Statistics, frequent movie-goers make up only 13% of the population in North America, but they buy 57% of all the movie tickets.  They are also more likely to be aged between 12 and 40, with people aged 12-24 being especially over-represented.

Demographics aside, frequent movie-goers are far more likely than the general audience to know what movies are coming out and whether or not they want to see them.  But interest among frequent movie-goers (or lack of it) doesn't always translate to whether the general audience - or specific demographic segments - will turn up to see a movie.

There's a long list of movies where tracking has not factored in demand from one or more specific demographic segments.  Probably the best known examples are the Passion of the Christ, Tyler Perry movies, and the Alvin and the Chipmunks movies. But these aren't the only ones - examples from 2012 and 2013 include Fast and Furious 6, Ted, Magic Mike, The Devil Inside, The Lorax, The Purge and The Great Gatsby.

And there are more than a few cases where high interest and hype among frequent movie-goers has not lured in the general audience to see the movie.  Snakes on a Plane is probably the classic example of hype being way ahead of audience interest, but the movies that are most consistently over-estimated by tracking are sequels.  Compared with MTC tracking, seven of the ten biggest under-performers since 2012 were sequels (and an eighth was a re-release).  So far in 2013, the three greatest under-performers are Hangover 3, Star Trek 2 and Die Hard 5. This may be because sequels have high audience awareness, and this can get confused with actual interest. For example, people may tell the survey that they want to see a new Die Hard movie (because who wouldn't, Die Hard movies are awesome) but they later decide against it after they see how bad the movie looks.

Coming up with an opening weekend prediction isn't the point of tracking

Tracking is really about measuring whether the marketing and publicity for a movie is succeeding.  It asks respondents if they are aware of the movie, if they are aware of the movie if they are given a hint (such as the movie's name), whether they want to see the movie and whether it would be their first choice.  This is the information the movie studios and distributors are paying for, to help with business decisions such as "should I spend more on marketing this film?", "should I put this film in the big theatre or the small one?" and "should I clean out my office before the weekend?".

Of course, a lot of people don't like loads of data, and prefer simple one-word answers they understand, so predictors take the data from tracking and try to translate it into a simple number for the weekend.  But this is probably more art than science, and maybe they don't put a lot of work into it. But that's the number we see.

Unfortunately, we don't get to see the data, or interpret it for ourselves.  There have been a few sites, such as the now-defunct It's On The Grid column, that used to make some information on tracking, broken down by age groups and gender, publicly available.  But sadly there aren't any good data sources like that any more, unless you pay for them.

Those are the basic reasons why tracking numbers are not always accurate.  So, if tracking is at best frequently inaccurate and not great at telling the whole story, who are traders on HSX so interested in it?

There are a bunch of reasons for this.  While it's not the optimal tool to work with, it's the best one we have.  RS and MTC are the earliest indicator we have of whether a movie is going to perform on opening weekend.  MTC is about as accurate as other prediction sites, whether they use tracking or some other data source. The real value of tracking is not in its numerical accuracy, but rather in whether it points us in the right direction of the eventual adjust - tracking can be wrong, but it doesn't lie. It doesn't need to be 100% accurate to tell you that a movie is going to over- or under-perform. And aside from all of these factors, tracking numbers are still going to affect the market, so it's better to know what the number is and play accordingly than not know and lose your shirt.

It's also important to remember that when it comes to movies and opening weekend, nobody knows anything.  There is always the potential for movies to surprise and to disappoint, and you never really know what is going to happen before it actually happens.  Pointing out that tracking is often inaccurate is an easy answer that provides no real solution to better predicting the box office.

Why is this security moving the wrong way when it's guaranteed to make a lot of money in a couple of days?

It can be frustrating when you are holding an investment that is a sure thing - like a moviestock approaching delist, or a starbond approaching adjust - but the market is moving the price in the opposite direction.  It seems not just counter-intuitive, but idiotic.  Why can't people be patient and cash out at the accepted time designated by the calendar?

The main reason this happens is that small, active traders are cashing in their gains and moving onto a more profitable investment.  As the price falls, this impacts other traders.  More small active traders will move their money into something more profitable in the short term, calculating that they can buy back into this opportunity later.  Other active traders will follow the movement and play the players.

There are two ways of coping with this.

The first is to follow the movement.  This offers higher gains, because hopefully you'll make money as the investment moves in the contrary direction, and then more money still.  There are two chief risks here - that the gains from flipping will not cover your costs in commission, and maybe the price will turn back in the "correct" direction when you're not expecting it and you'll miss the movement.

To mitigate the risks, you'll want to study how price swings work in practice.  Most price swings follow predictable patterns - or so the dark masters of the day-trading arts claim.  So study price swings, and observe how far prices move in the "opposite" direction, and figure out when the price movement switches back to the correct direction.  Once you're comfortable with how price swings work, you can also use limit orders to pre-position your trades according to your expectations.

The second is to accept that your investments aren't going to move in a straight line the way you want them to, and patiently wait for your guaranteed profits to roll in.  It's less rewarding, but you don't have to put any effort into it.

What do I do when trading is down?

The first thing to do is not to panic.

The next step is to check on the Feedback and Support board to see whether there has been any discussion by other traders, and to post about your problem if you want to.

If for some reason the HSX community boards are not available, you can can check HSX's Twitter account to see if there are any updates.  You can also check third-party sources like the HSX Dude's Facebook page and Twitter feed.

It's a good idea to protect yourself from HSX outages.  If you're planning to make a large number of trades, make a couple and then check your trade history to make sure they are going through.  It can save you from a lot of frustration.

Similarly, you can use Chimp, a downloadable trading widget, that allows you to trade by mousing-over then clicking, rather than keying in trades individually.  It makes trading (and therefore re-trading) a lot less work.

What is reset trading?

Reset trading is a particular style of day-trading.

At midnight Pacific time, the daily price changes for moviestocks and other securities on HSX are reset to zero.

Years ago, some traders noticed that the first moviestocks to move in price after reset are often still among the big movers at the end of the day.  They also found that they could make money by buying the moviestocks that were the first to go up in price after reset, and by shorting the moviestocks that were the first to go down.  They could do this confident that other traders – ones who are in other time zones, or who don’t have insomnia ‑ would take the cue and follow, driving the price up (or down) even further.

Reset trading is not risk free.  It is like a Ponzi scheme that you buy into, betting that other people will be following you.  It’s great when you are one of the first people to buy in.  The trick is not to be one of the last people to buy in.

This is because eventually, enough traders decide they have made enough profit.  They sell their shares and then maybe short, putting downward pressure on the price.  The Ponzi scheme collapses, and a new one begins – except this time it’s great when you are one of the first people to sell and short, and the trick is not to be the last person to sell out.

For active traders, playing the reset can be very profitable.  But if you do play the reset, make sure that you are active.