Actually, I have no idea what Roger Ebert, the film critic of the Chicago Sun-Times, thinks about these arcane money manipulations, but he’s a good place to hang a metaphor:
Suppose Congress codified it into law that movie theaters could charge twice as much for any movie that Roger Ebert gave “three stars” or higher. In other words, Roger Ebert — the movie critic — is specifically mentioned in the bill, and given a sort of official, government-approved fiscal power to help determine movie-ticket prices by the sheer force of his proclamations.
First off: wouldn’t that be freaking ridiculous? Yet that’s what we have done with The Rating Agencies. Their proclamation that a security is “AAA”, for example, affects the legal capital requirements needed to be held against it. This fact alone is pretty much the only reason that “CDOs” even exist.
How would this work in real life? Here’s the release schedule from Metro-Goldman-Sachs:
Okay, so if the movie gets 2.5 stars or lower, you can charge $10; 3 stars or above, you can charge $20. Now along comes some enterprising theater owner who takes Transporter 2 (2.5 stars), splices a half hour of Schindler’s List (4 stars) onto the end of it, and calls the resulting 2-hour film a 3-star “movie” (on average). Now he can charge $20 per 2-hour bloc instead of only $10 for every 1.5-hour bloc, which is a nice improvement from his point of view.
This begins to happen more and more. Movies are spliced and diced just to get above the Ebert Threshold. Four-star movies are cut off by 25% and called three-star movies for the same price (to watch the last 25% you have to buy another ticket). Finally, movie studios start getting in bed with Ebert and sending him kickbacks, leading to Star inflation. People complain about all this. “This is absurd!” they say. And it is.
I don’t think Ebert is at all bribable in this way, but then his reputation is so colossal, comparatively speaking, that he isn’t likely to risk it for some short-term gain. Your Rating Services? Not so much.
Now, the interesting question is why it’s absurd. I’m not sure there’s a right answer and there seem to be two general schools of thought:
1. It’s absurd because Roger Ebert shouldn’t be allowed to just give four stars to any movie. Or to get kickbacks from movie studios. Generally, there needs to be better and stricter oversight of Roger Ebert. He should be called before a Congressional subcommittee. Meanwhile, there should be tighter controls, and more complicated mathematical formulas, regarding how a “three-star-on-average movie” can be created. Not just any movie can be sliced and diced like that. Some independent body should do some stress-testing of their own, perhaps, hiring the best PhD statisticians to build models of Movie Quality. Maybe the theater owner should be required to fill out more forms, pay some fees, take some licensing exams, etc. An independent regulatory body, with Presidential appointees ratified by Cognress, could be set up to oversee all this.
2. It was just absurd to give Roger Ebert’s movie reviews the force of law in the first place.
My sentiments are definitely with #2: the whole process by which these particular derivatives were, um, derived deserves Thumbs Down.