(Movie) Insider Trading: Visiting the Hollywood Stock Exchange
Published on April 8th, 2011 | by Cassady Dixon0
The Hollywood Stock Exchange (HSX) advertises itself as “just like the real stock market, only way more fun.” There is truth to that, but only if you already happen to enjoy the real stock market. It’s a simple process: one may sign up for free, buy and sell virtual shares of films and celebrities using the site’s “Hollywood Dollars,” and then play the market depending on how things make out at the box office. Interests piqued, I had to investigate further.
Feeling lucky, I enrolled on a lark and bought a few shares each of the recently released “Paul” and “The Lincoln Lawyer.” These two particular movies performed about the same on their opening weekend, but then purchases of “Paul” went down, and “Lawyer” shot up. Why? I have no clear idea. Maybe the old hats on the Exchange deemed Matthew McConaughey to have more legs than two Brits and an alien/Seth Rogen. Seems plausible, but then again Hollywood is obviously fickle. The whole situation is left up to each individual trader to figure out and maneuver, but there is never any real payout beyond the site’s fake money. Essentially it’s World of Warcraft for the financial transaction set.
HSX has some reach, though. It was created during the late ‘90s tech boom by financial players Max Keiser (current broadcaster and business pundit) and Michael Burns (now vice chairman at Lions Gate Entertainment). The company eventually raised around $30 million in private investment. The company had legs to withstand the dot-com bubble and was eventually purchased by the global financial services firm Cantor Fitzgerald in 2001. Steady growth has led to over two million traders worldwide. HSX makes most of its money now on advertising, but the future may hold more diversity.
I spoke briefly with Richard Jaycobs, president of Cantor Exchange, a futures trading house and subsidiary of Cantor Fitzgerald. Jaycobs is very optimistic about HSX‘s growth into the world of apps, Facebook games and other partnerships with content providers. Ideas also on the table are the selling of data garnered from the site’s box office predictions, as well as allowing users to pay for more virtual trading money. HSX already figures into general financial predictions one reads about all over the internet (on top of awards season estimations and the like) so such maneuvers seem like a natural progression, though any kind of leap into gambling arenas remains off the table for now, according to Jaycobs.
Also stymied were attempts at parlaying actual money into the trading circle when Congress last year passed legislation, after much lobbying from the MPAA, which banned the usage of box office receipts as the basis for any actual “real world” futures markets. Still, account portfolios put up for sale on eBay actually do, like World of Warcraft, attract considerable private purchases. Even a cursory look at HSX’s website distinctly gives off the impression that it’s not for the uninitiated, or rather an addictive meta-world with a language that is all its own. It’s relatively enjoyable simply trying to work out the nuts and bolts.
The lion’s share of the numerous items one may trade include the following:
MovieStocks – MovieStocks represent films in all stages of production. A film’s stock price directly correlates to how much the engineers at HSX think it will make at the box office, with each dollar standing in for one million in real figures. Thus, if “Paul” is valued at $30, it is projected to make $30 million in its first four weeks in wide release, or twelve week run in limited release. After said time period, one makes or loses out depending on how well the film hit its mark. Similarly, one may purchase StarBonds based upon the box office clout of an actor. However, these can be deceiving, as an otherwise “blue chip” celebrity may suddenly shift in worth if he or she, gasp, decides to pursue a small, independent film.
Mutual Funds – Mutual fund action is in play, too, via privately managed groups (Funds) that collectively bet upon the fruits of everything from Disney or 20th Century Fox films to package set up under more specific aims such as the output of Michael Caine or even stars whose fame comes more from their off-screen antics as opposed to their actual work (Lohan, Hilton, et al.). Ironically, names of those last two funds are “The Hard Working” and “The Overexposed,” respectively and fittingly. Other tradeable securities include TVStocks for the smaller screen and Warrants, which are more like orphan stocks that don’t fit into any other mold. For instance, a recent Warrant concerns the placement of a the final slew of “American Idol” hopefuls.
Options (i.e. Derivatives) – Options are a fun, well, option on the site and also show more immediate results. These concern upcoming releases and betting upon a movie’s opening weekend success or lack thereof. Each film has a “strike price” which is set by the HSX people and is the given amount a release is predicted to make. If one thinks this is wishful thinking and that a film will bomb, one may buy a Put Option on that movie. Conversely, Call Options may be purchased if one thinks a film will do better than expected.
HSX’s website also comes with handily linked news stories concerning the business that could either aid in one’s trading or just act as information for information’s sake à la Variety and other news sources. Active group forums allow members to communicate and trade information; moreover there’s a feature where traders can go head-to-head and track each other’s performances in a competitive manner. Plus, if you get tired of earning your virtual cash the old fashioned way, you can also make a few easy bucks by answering trivia questions.
Rummaging through various stock prices, one can see that the HSX is fairly on the mark in terms of the value of any given property. For instance, it stands to reason that “Sucker Punch” will rake in about $78 million in its first four week stretch given Zack Snyder’s results with “Watchmen.” 2014’s “Avatar 2” is already set at around $300 million. (Hmm…could go either way, but $130 million for the “Wolverine” sequel seems a little high. Better get back to trading.) Unfortunately, there is no clear way to go back through the archives to see how past predictions and trades have paid off and matched up to actual figures. That would be an amusing element to add to the site and would also be a valuable tool for traders one would imagine. At any rate, the Hollywood Stock Exchange is a gripping little mind game to distract you at work but, luck be a lady, enhance your business acumen as well.