Betting on Oscar

You heard it here first: Next year, the film studios jostling for recognition at the Academy Awards are going to move a small part of their publicity budgets online. Not to advertising, mind, but to bet on themselves.

For the past three years, I've had a bit of fun betting on the Oscars at Tradesports, an online prediction market. I've lost some money betting on early favourites (Martin Scorsese to win Best Director for Aviator) but won more betting on outsiders (Adrien Brody to win Best Actor for The Pianist) who won. This year, I was lucky enough to be watching the Oscars in a wifi-enabled house when I realised shortly before the announcement was made that Crash was going to win. Which was a pretty lucrative bet.

The Oscars are an interesting event to bet on, since there's infinite amounts of speculation as to who will win, but in reality nobody knows anything. All the same, films do build up momentum, and the Academy does seem to have a tendency to vote for perceived favourites. Which is one way of explaining why Lord of the Rings III swept the awards, winning 11 Oscars including Best Director, Best Editing and Best Adapted Screenplay as well as Best Picture, while Lord of the Rings I and II, which were of pretty much the same quality, had to make do with only technical awards.

Increasingly, the best way of working out which films are the perceived favourites is to go to somewhere like Tradesports. Indeed, Allen Wastler today has the temerity to complain that this year, the markets were wrong:

The contracts also indicated that Paul Giamatti would edge out George Clooney as Best Supporting Actor. Instead, Clooney walked off with the statuette and "Crash" shattered Best Picture expectations.
That was unfortunate for me since I made my office-pool picks using the futures contracts. I trusted, as we are so often told to do, in the wisdom of markets.

The FT is allowing free access to its articles this week, so if you go over the next couple of days, you'll be able to read Matthew Engel's article on the leadership election in the Liberal Democratic Party. Which isn't really about the leadership of the Lib Dems at all: it's about the storied history of bookies and politics in England.

Political punting has long been a particularly British phenomenon, helped along by the first-past-the-post electoral system and the liberal betting laws.
The phenomenon is believed to date back to the 1973 Isle of Ely by-election when the Liberal candidate Clement Freud famously placed a bet on himself at 33-1, helping to create a buzz that brought him victory.
There was also reputedly an Irish local council candidate who started at similarly long odds with the local betting shop and then issued a leaflet telling people to both back him and vote for him. "Vote yourself some money," was the slogan.
It worked there, too. But this can only happen in a contest where the electorate is too small to make opinion polls viable: buzz is meaningless if the pollsters keep saying a candidate is 20 points behind. The 73,000 paid-up Liberal Democrats eligible to vote in the leadership election were, in effect, unpollable. It might have taken 500 calls to find one voter.

The Academy, of course, is even more unpollable than the UK's Lib Dems. So as increasing numbers of people, including Academy members, turn to the prediction markets to tell them who the favourites are, it makes all the sense in the world for film studios to start betting on their own pictures. A few thousand dollars – a pittance in the promotional budget of any studio – would be enough to make any film or actor an overwhelming favourite on Tradesports, with a price in the mid-80s somewhere. That kind of intelligence could easily trickle out to Hollywood, become conventional wisdom, and even help drive voting in the real world.

Next year, then, I'll be keeping my eye out for contracts trading at improbably high levels. Maybe I can make as much money on the short side in 2007 as I made on the long side in 2006.

Posted by Felix at 0:08 EST