Prospects for the Freakonomics Documentary

Koleman Strumpf, an economist at the University of Kansas School of Business whose research you’ve encountered previously on this blog, wrote in to say he’d noticed some interesting trading activity over at the Hollywood Stock Exchange. I will give my take after Koleman’s post.

Prospects for the Freakonomics Documentary

A Guest Post

by Koleman Strumpf

Blog readers may recall the announcement late last year that there were plans to make a documentary based on Freakonomics. While not much has been written about the movie since the initial announcement, traders over at the Hollywood Stock Exchange (HSX) have been making bets on its future prospects (the HSX is a play money prediction market in which traders try to forecast movie box office returns; it has an impressive track record as noted in these papers: #1, #2).

The HSX traders have been dumping Freakonomics stock like it was Freddie Mac. The graph below shows the time series of HSX prices, which are the predicted box office revenue during the first four weeks of the movie’s release (here is the complete HSX Freakonomics page).

Traders have cut their forecast of Freakonomics’s earnings by 85 percent since the beginning of the year. What accounts for this skid? I can think of four possibilities:

1. Changes in the likelihood of the movie being made. HSX stocks only pay off after the movie completes its theatrical run, so traders do not like to keep their money tied up in movies they believe are mired down in production. In fact the movie was supposed to begin shooting in March but did not (shooting has since been rescheduled for August).

2. Changes in the perceived quality of the movie. Perhaps traders viewed the delay as a signal of other problems, such as funding shortfalls or conflicts among the five sets of directors (!) involved with the project.

3. Out of sight, out of mind. HSX traders tend to shift their money to movie stocks receiving greater media coverage, such as casting announcements or Variety stories about filming. Alex Costakis, managing director of the HSX, told me “There has been no recent news about the Freakonomics project. Without news, the price tends to drift downward.”

4. Get the movie mothballed. A more sinister possibility is that some traders are trying to sink the movie before it is ever made. The idea is to create a negative buzz which in turn could discourage financiers and others involved with the project.

Perhaps readers have additional theories which they can post in the comments.

While participation rates are rather low for an HSX market (fewer than a thousand traders), the number of shares traded is still relatively large (almost a tenth of that for The Dark Knight).

I of course am betting on No. 3.

The delay cited in No. 1 is pretty typical.

No. 2 presents a few issues. The first is perceived quality — which I would think has increased after, e.g., one of the directors, Alex Gibney, won an Oscar and just released another high-profile doc. As for the other points of No. 2: funding shortfalls (none that I know of) and other worries/conflicts — like, maybe, the fact that one of the directors just won an Oscar (and maybe has bigger fish to fry suddenly than Freakonomics …).

As for No. 4: I would love to know who the project’s enemies are, but as of now I have no indication that there are any serious ones. On the other hand, the stakes at HSX are low enough that it might be worthwhile to try to sink a random stock just for kicks.


Like Greg I a long term player of HSX and currently have a portfolio worth H$1.14 billion HSX dollars and am ranked in the top 700 players.

I second a lot of points made by Greg. I'd like to add the following if I may.

Basically H$1.00 = $1,000,000 in box office take by the delist date. For example WNTED (Wanted) which delisted this week delisted at H$123.32, it's box office take was $123,322,635.

Looking at it's full chart on HSX, FRKON had an IPO price of H$5.00. For this to be a profitable investment being held from IPO to delist FRKON would have to take more than $5,050,000 (this also factors in the commission on the initial trade - there is no commission on delist).

Another factor that needs to be accounted for is that not all films released will delist after 4 weeks after their initial release. Films that are released on less than 650 screens are considered a limited release and will delist 12 weeks after their initial release.

Purely from HSX Trader's point of view I would view FRKON as a limited release.

While writing this reply I checked the price of FRKON and it was trading at H$1.49 (which means a box office take of at least $1,504,900 for it to be profitable). I don't have FRKON in my portfolio and will only really be interested once it's been completed and it has a distributor. Once I have this information, a release date, and a screen count, I would make a decision based on it's HSX price at that time.

#3 is probably the reason it's price has decreased since it's IPO.



Chad Troutwine

Thanks, Greg -- your insight perfectly addresses Prof. Strumpf's questions.

Greg Wathen

As a long-time player at HSX with a portfolio measured in billions, I believe I can answer some of your questions. Primarily, I would suggest that you not read too much into the price movements in the movie stock since January.

When the IPO of the FRKON movie stock was first announced, we had limited information. The subject was well known as were some of the directors involved. The 20,000+ active players have a large and diverse knowledge base.

The main bits of information relevant to the traders; however, were these: 1) it was a documentary, which is usually not a huge money-maker in Hollywood; 2) it was not yet in production; and 3) there was no release date or distributor.

For most knowledgeable traders on the exchange, those three points make it a sure-fire short. I do not have the figures to calculate a real average, but the vast majority of movie stocks with those attributes earn a few hundred thousand dollars at the box office, if that.

There may be some price movement when it appears at the festivals, but that will depend on reviews and on whether it finds a distributor.

The exchange will begin to give a better indication of the expected box office potential once a release date is announced and a distribution plan is known.

It will become much more focused when we see how it is promoted and the amount of interest that generates.



As the HSX means little to anyone in Hollywood and whose users have an unknown experience in markets (I would guess most are amateur), I don't think the HSX is worth too much discussion considering the large number of film projects and small number of users

I came to this post hoping to find a proposal for a Freakonomics Documentary. With a site like this, there's a built in workforce of individuals who have an interest in contributing to group efforts and projects. Additionally, with the advent of digital video, the ability to make a film has gotten easier and easier for individuals to do. Combining this community and DIY spirit, I assert a Freakonomics Documentary can be done independently of Hollywood.

I propose a group effort to create a documentary. Individuals can find a freakonomic angle with which to create a two to five minute segment. After posting these segments online, the forums can vote on the top twenty entries, which can then be cut together (each entry being a chapter like in the book) and then a Freakonomics documentary will have been created and can be distributed by over the internet, by DVD, and even through festivals.

Why worry about the market when one can be an entrepreneur?



It's #3, I just got 50000 shares of FRKON. =)


Rival docu-drama is in the works. However Clooney & Crowe rumored to be feuding over who will play Dubner and who will play Levitt....

Chad Troutwine

I am producing the Freakonomics documentary, so I am particularly interested to read the comments to Prof. Strumpf’s guest post.

Koleman properly identified the likely reasons for FRKON’s summer swoon on the Hollywood Stock Exchange. While I cannot provide a definitive explanation for precisely which of those reasons was most influential, I can offer insight into what is actually transpiring (as distinguished from its virtual performance on HSX).

1. Theory: Changes in the likelihood of the movie being made. Reality: The film will be made; it is already “green lit”. I am an independent producer, subject to no studio. The likelihood of the film getting made has not wavered since I originally optioned the cinematic rights to Freakonomics. The only variables have been the scheduling vagaries and other challenges related to using multiple directors.

2. Theory: Changes in the perceived quality of the movie. Koleman posits a couple of possibilities: “funding shortfalls” and “conflicts among the five sets of directors”. Reality: There are no funding shortfalls (I am financing the film myself). None would have emerged yet, anyway. We haven’t even begun shooting the film. The directors will not be working together, so conflicts seem extraordinarily unlikely. To date, they have universally praised each other.

3. Theory: Out of sight, out of mind. Reality: This theory is true. We announced the project in December 2007 and earned a lot of press. Things have quieted significantly since then. We will get another wave of publicity this fall when we have presentable footage. We have another announcement that should generate attention, too (I address that below). Finally, there will be the inevitable surge of publicity when we announce our festival screenings in spring of 2009.

4. Theory: Get the movie mothballed. Reality: Although I am fascinated by conspiracy theories, they don’t apply here. There are no other investors. The Freakonomics documentary is as unconventional as the book. We hope it will be as iconic, too.

My theory: When we moved the shooting schedule from March to September, in order to better accommodate everyone’s schedules, I suspect the HSX investor community got restless. Moreover, FRKON is traded on an extraordinarily small base. Just a few purchases have a profound impact. It only took a few sellers to send the price hurtling downward. Put simply, now seems like a very opportune time to buy FRKON. The graph used shows its low mark on July 13th – it is up approximately 27% since last week and should continue to climb, just based on this blog post.

As a historical reference, I was an investor and Executive Producer for the critical darling, Paris je T’aime, another film that utilized the talents of several directors. It took several years to get made. Historically, omnibus projects just tend to take a little longer to make.

Sam, I appreciate the spirit of your post. I am a devoted fan of Freakonomics first and a producer second. Like you, I would like to involve as many people as possible in this project. Fortunately, we are poised to announce an innovative way to involve the entire Freakonomics community and attract rogue filmmakers. I’ll speak with Stephen and Steven about it, and we’ll announce it here first!

I am pleased to personally answer any questions the readers have about the Freakonomics documentary.



Let's see if this post influences the price of FRKON... That could confirm #3.

A E Pfeiffer

It's #4 of course. Hollywood's not going to make a film about a Chicago economist in the current climate with the Fed endorsing a policy of fiscal stimulus - "We're all Keynesians now".