|
January 11, 1998
The Hollywood Stock Market: You Can't Lose
By LAURA PEDERSEN-PIETERSEN
as the swooning Dow led you to wonder whether the only difference between Wall Street and the Titanic is that one of them had a band? If so, then maybe you are ready to open an account at the Hollywood Stock Exchange, where shares of the movie "Titanic" (ticker symbol: TITAN) are rising faster than those of Berkshire Hathaway.
The Hollywood what? Yes, it is finally here — a stock exchange for film fanatics that deals in "Moviestocks" (films in production or recently released) and "Starbonds" (actors), and uses play money called "Hollywood Dollars."
Including the sons of the president of Botswana, 63,000 participants are registered and about 5,000 of them trade each day. The daily volume is about 67 million shares — about double that of the American Stock Exchange.
The exchange, run by HSX Holdings, is simulated and can be found on the World Wide Web at www.hsx.com. The Web site, supported by advertising, was created a year ago by Michael Burns and Max Keiser, two former stockbrokers in their 30s. They hope that the film industry will eventually use the exchange for market research and for financing films — on the theory that people who are so happy to play a Hollywood-based game might invest in movies for real.But for now it is still a game, and here is how it works:
After a free sign-up, a player receives an HSX account with $2 million in electronic scrip and is urged to start trading. As in real life, the goal is to buy low (before the films are released) and to sell high (once they are boffo at the b.o., as Variety would put it).
Commissions, deducted from the account, reflect the industry standard of 1 percent. There is even a Hollywood Reserve Bank, with the power to adjust interest rates, print more Hollywood Dollars and so on.
The prices of the securities are driven largely by actual ticket sales. But just as Wall Street reacts to breaking news, Moviestocks and Starbonds are affected by Hollywood events. A share of "Armageddon," now shooting, jumped 5 percent, for example, on the announcement that Bruce Willis had been signed to star.
And after Gwyneth Paltrow and Brad Pitt split last spring, her Starbond soared while his plunged. "Public perception was that she was better off without him," said David Herman, president and chief operating officer of HSX Holdings.
When Will Smith, a star of "Men in Black," wed the actress Jada Pinkett, his bond price rose sharply. "Fans decided that settling down was good for Smith's career," Herman said.
But on this exchange, players trade strictly for fun, not profit — though contests during the year offer prizes like tickets to a film premiere or a trip to the Caribbean.
Such goodies are common in the handful of other online virtual stock exchanges, too. For instance, CNBC and MCI sponsor a stock-picking contest — real stocks, play money at www.cnbcsst.mci.com -- for student investment clubs. Winners get T-shirts, and the grand prize is an appearance with the CNBC anchor Bill Griffeth.
So who is playing the Hollywood game? Including the sons of the president of Botswana, 63,000 participants are registered and about 5,000 of them trade each day. The daily volume is about 67 million shares — about double that of the American Stock Exchange. Thirty percent of the players are students, and 20 percent are involved in the media or entertainment industries.
Related Article
Bullish and Bearish on the Famous: Online Market Bets on Celebrities
(May 18, 1997)And it is not just movie fans who take their chances on the Hollywood exchange. So do Tinseltown insiders like the actor Albert Brooks, who in 1996 directed and starred in "Mother"; Gordon Paddison, manager of interactive marketing at New Line Cinema, and May Wuthrich, a film scout at the Writers House in New York.
Studio executives seem professionally interested, too. Paddison said HSX had great potential as a research engine. "Sure, it's only a game," he said, "but everything in Hollywood is perception."
One satisfied customer is Dale J. Borgen, a pastor of an evangelical church in San Dimas, Calif. A popcorn-carrying film buff, he trades on the exchange several times a day and calls the site addictive.
here's a real intensity about trading against other players," said Borgen, 28, who has set up an investment site for the game — http://members.xoom.com/HSJ — that carries reviews of future initial public offerings (new releases) and fiscal results (box office returns).
Some fans insist that the exchange is educational, though so is driving 90 miles an hour through a Buffalo blizzard to study the laws of traction and aerodynamics. Still, the HSX game can go a long way toward familiarizing people with real investing.
The game has real-time trading and a ticker tape. Starbonds are rated AAA through C. The central bank has a chairman, "Dr. Zeros," who is an HSX employee. There is even program trading. When a sheep was cloned last summer, "sell" programs hit the trading floor as anxious players contemplated the consequences of having not one but six Harrison Fords.
I found out how real the game was when I played it myself. I set out to corner the market on "Deconstructing Harry," (ticker symbol: DECON), the new movie by Woody Allen.
My decision was based on positive response from a friend who had worked as an extra for Allen. But I should have read the small print on my PC screen: HSX, like the Securities and Exchange Commission, requires investors who want to own more than 5 percent of a security to file with the exchange and explain their interests. In other words, Jim Carrey cannot simply buy up all of his Starbonds. To avoid the hassle, I bought less than 5 percent.
The HSX departs from real investing in a way that some people may love: Insider trading is completely legal. "The Internet is very open, so we don't crack down on it," said Keiser, one of the HSX creators. "You get lighting people, soundmen and gaffers who are all working on projects and gossiping like mad. Traders have to decide for themselves what's fact and what's fiction."
HSX sure seemed educational for Austin Chen, 23, a student at Ohio State University. Chen won the HSX trip for two to Antigua last year, and he sounds like a winning portfolio manager.
"I tried to find undervalued stocks — shares in projects that people either didn't know too much about or didn't think would do very well," said Chen, who may check his portfolio four or five times a day. One of his bigger bets was on "Soul Food," starring Vanessa L. Williams and others. Its stock opened at $10 a share and had reached $35.25 after a month in the theaters.
Meanwhile, Burns and Keiser, the founders of the exchange, are working on their plans to take the site beyond simulated investing. Given the rising expenses of making movies, HSX is designing a system in which its traders can invest real money in film projects. Keiser said the idea, which is geared to cash-hungry independent film producers rather than the big studios, will soon be before the SEC for approval.
The HSX managers also say the game can become an audience laboratory for the industry. How movie buffs vote with their play money could supplement the test screenings in Los Angeles suburbs upon which studios often rely. Herman hopes that studio executives will soon float trial balloons of project concepts on the exchange.
At times, the sentiments of HSX traders have been impressively on target. Warner Brothers pulled out all the stops for "Batman and Robin" last spring, for example, but the exchange correctly signaled that the Caped Crusaders were headed for the Bat Grave. And while the media had a field day reporting problems on the set of Sony's "Men in Black," its HSX shares generated huge momentum six months before it became a hit last summer.
Well, I have been away from my HSX portfolio for about 10 minutes now and it is time to get back to trading. I own the limit on Kathy Bates. I had wanted to buy stock in her ever since her 1991 movie, "Fried Green Tomatoes," in which she tells those two obnoxious young women whose car she deliberately smashes, "Face it, girls: I'm older and I have more insurance."
Related Sites
Following are links to the external Web sites mentioned in this article. These sites are not part of The New York Times on the Web, and The Times has no control over their content or availability. When you have finished visiting any of these sites, you will be able to return to this page by clicking on your Web browser's "Back" button or icon until this page reappears.