Hollywood-Börse

What Is the Hollywood Stock Exchange (HSX)?

The Hollywood Stock Exchange (HSX) is an online prediction market in which "investors" bet on the performance of various components of the entertainment industry. The bets are made using credits called Moviestocks, Starbonds, Celebstocks, TVStocks, Movie Funds, and various derivatives.

Trades are made in "Hollywood dollars," which players receive when they open an account, make successful trades, and participate in the website's quizzes. Each "investment" has a ticker-like symbol: For example, the symbol for the movie Iron Man 3 is IRNM3.

Key Takeaways

• The Hollywood Stock Exchange (HSX) is an entertainment "stock market" where people can buy and sell virtual shares of celebrities and movies with a currency called the Hollywood Dollar®.
• Share values rise or fall based on the success of the underlying film or celebrity in the entertainment market. Prices can soar with a blockbuster opening at the box office and plummet with a bomb no one went to see.
• Founded in 1996, the New York City-based brokerage firm Cantor Fitzgerald purchased the HSX in 2010.
• It is now headquartered in Los Angeles, California.

Understanding the Hollywood Stock Exchange (HSX)

The Hollywood Stock Exchange game uses virtual specialist technology invented by Hollywood Stock Exchange co-founders and creators Max Keiser and Michael R. Burns. The exchange has been in operation since 1996 and is owned by brokerage firm Cantor Fitzgerald, which launched a real-world exchange similar to HSX, called the Cantor Exchange, in 2010.

Previous incarnations of the game included a music market (for purchasing musical artists), prizes for top gainers, and briefly, a "buyout" program in which the Hollywood Stock Exchange would reward top players by purchasing their portfolios at a price of $1 per $1 million of exchange currency if the player listed the portfolio for sale on eBay. These features have been discontinued. The now-discontinued practice of selling portfolios on eBay was inaugurated by Curtis Edmonds, a former Texas lawyer.

The Hollywood Stock Exchange attracted some private investment during the dotcom boom and ran TV ads on cable channels in an effort to attract players. After the dotcom crash, the exchange was acquired by units of Cantor Fitzgerald. Cantor Fitzgerald has used the exchange’s Moviestock prices to assist its gambling operations in the United Kingdom, in which bettors can place wagers on how much money U.S. films will gross.

Tip

New users who sign up receive H$2,000,000 of virtual Hollywood Dollars to get started playing the Hollywood Stock Exchange game.

The Hollywood Stock Exchange and Prediction Markets

The Hollywood Stock Exchange is a prediction market in the form of a game. Prediction markets are those created to trade on the outcome of events. The market prices generally indicate what the majority of players or "crowd" thinks is the probability of a particular event occurring. A prediction market contract will trade between 0% and 100%. It is a binary option that will expire at the price of 0% or 100%. Prediction markets can be thought of as belonging to the more general concept of crowdsourcing, which is specifically designed to aggregate information on particular topics of interest.

Prediction markets, which tend to be quite accurate, exist for a wide range of subjects. Some, like the Iowa Electronic Markets, trade in real money. Lately, prediction markets have become quite popular for elections. The website fivethirtyeight.com, which analyzes the likely outcome of elections, among other events, factors in prediction markets.

Advantages and Disadvantages of the HSX

The trading in Moviestocks and Starbonds serves to predict the box office in the first four weeks of a film's wide release. Depending on the number of investors at any given time, the HSX should be relatively easy to manipulate. In contrast to the regular shares, however, there are special "warrants" issued around holidays and the summer blockbuster season that have specific prices at issue. These make money if the box office exceeds the face amount and expire worthless if they do not.

Few barriers to entry

Few barriers to entry

Provides valuable market information to predict movie successes and failures far in advance of opening

Provides valuable market information to predict movie successes and failures far in advance of opening

Small markets are relatively easy to manipulate.

Small markets are relatively easy to manipulate.

Prices highly vulnerable to events like casting announcements

Prices highly vulnerable to events like casting announcements

Example of the HSX

Let's say that you think Al Pacino, getting renewed interest because of the re-release of the Godfather films, still has a great film left in him and you want the opportunity to make money from that. You can place a trade with Hollywood Dollars to buy (go long) an Al Pacino StarBond at a particular price. Or, if you think for example, that the world has seen enough of Pacino, you could sell his StarBond short, which allows you to profit from the downward movements in the overall price of Mr. Pacino's StarBonds.

With both the long and short positions, when the market moves enough in your direction for you to make enough money to make you happy with your purchase, you sell your long position or buy back your short position, and the extra Hollywood Dollars you receive are your profit.