Strangers on a Train: Film According to the Hollywood Stock Exchange
25 July 2005
Fella said, We must never forget that we are Human. And, as humans, we must dream. And when we dream . . . we dream of money . . .
David Mamet
"The Spanish Prisoner"
-~-
I would like to call my participation in the Hollywood Stock Exchange a hobby or a past time. Rather, I would like to call it a talent, but I fear that claiming my minutes looking at HSX a talent is on a par with my talent at standing on "The El" in Chicago’s Loop. Both give me the sense that I have progressed. Depending on how far I look into the distance, both give me the illusion that I am moving faster or slower. But eventually, on both, I end up where I started.
The Hollywood Stock Exchange (www.hsx.com) is easiest described as a stock market simulation. Instead of stocks, HSXs’ patrons use fictitious money to buy, sell, and trade movies and box office stars.
In fact, HSX, established in April 1996, is "the longest continuously operating prediction market," according to its website.
"Fake stock," I call it, "go see X movie, I have ‘fake stock’ in it."
A big name film like "Harry Potter" or "Star Wars" garners a high IPO and more or less increases to Intel-like stature over time. Other films, like Mamet’s forthcoming "Diary of a Young London Physician" – released on the stock market in October 2000, supposedly starring Jude Law and based on "Dr. Jekyll and Mr. Hyde," and still, according to HSX, in "concept" mode – fall to rock bottom and do not move much at all.
All told, it is a familiar, if not brilliant, recreation of the economic steam engines that power the country.
For a "movie buff," it is a lot of fun, too. The stock prices rise and fall as the curiosity in films and, eventually, their box office takes fluctuate. A surprise film heavily invested in can bring riches beyond one’s wildest fancies. A film that fails can knock you down to or below the $2 million you start the game with.
As far as stars go, they act as bonds on the stock exchange of Katzenberg’s dreaming. Buying Johnny Depp three years ago returns a nice net gain today, but be wary of symbol JDEPP if the man himself does not have any major roles looming on the horizon. Directors, I have noticed, come at a considerably lower price.
HSX has other advantages than indirect industry tracking. An active HSX trader can follow movies from concept to contempt with remarkable ease. Many HSX stocks are for films that are still only a glint in a given director’s eye – again, Mamet’s "Diary" – if they have not already been scrapped. All HSX needs is an official announcement. Also, it has a venue for investing in "funds," large accounts you pay into handled by more expert HSXers than yourself, and "options," quick accounts based on the films being released the next weekend or other industry happenings like predicting Academy Award winners.
All this has reeled in a weekly trader volume of about 21,000, the website says, with over a quarter million trades per week. The website comes with a fully-integrated research companion to help subscribers chart the rise and fall of specific films – I mean, stocks. One can ask advice, read recent reviews and articles, enter a discussion group and add his or her voice to whatever matter is at hand. And while I am pleased so many people take such a unified interest in the film market – and I stress the word, "market" – I cannot help but lean back from time to time to breathe a protracted sigh and say, "Wow."
For underneath its glittery surface, HSX is exhibiting the precise and unstoppable problem with the film industry, rather than its solution. Namely, big money.
Granted, I assume many of the people trading on HSX are movie fans; how else did they find the site? I would go a step further and assume movie fans might be more interested in film quality than film business, but maybe that is a step too far. On HSX, films have become tradeable commodities, "fake stock." Perhaps, to the Selznicks and Mayers and Weinsteins of the world, they have always been, but to humble movie attendees, even to myself, an active HSX trader, I wonder if this interest in the ups and downs of an art industry become financial market is the best perspective to take. Could this just be making films less user-friendly?
Moreover, HSX itself is flawed. It short steps one of the foundations of the stock exchange model: uncertainty. Since its main source of market fluctuation is box office numbers, HSX can be easily "mastered" by buying into big name films shortly before they are released, if the buyer expects the film to financially succeed. When the film does succeed, the price skyrockets, as does the buyer’s revenues.
Consider "Star Wars, Episode III: Revenge of the Sith," stock symbol STAR3. Certainly, no one doubted that George Lucas’ much-anticipated film would be a financial success. According to the HSX Market Lab, STAR3's daily closes fluctuated around $290 in the days before the film’s May 19, 2005, release. After the 19th but before the 23rd, the price rocket launched to nearly $357. Meanwhile, the shares held in STAR3 peaked at approximately 413 million the weekend of the release while the shares daily traded went from about 20 million to 70 million.
How about a film that did well financially but poor critically? "Fantastic Four" – FFOUR – released July 8, 2005, sank from nearly $140 a share late June to $113 the weekend of its release, I assume in the wake of its bad press. After the weekend and its surprisingly high monetary yield: $154 per share. It is all about the money, after all – shall we celebrate this disappointment?
HSX devotees will argue that the game is not so easy, and indeed it is not, since, as I have mentioned, I often find my HSX account creeping downward. That is because I cannot help but invest a lot of my $2 million in the smaller films, the "Andrew Henry’s Meadows" of the film world, on the hope that Zach Braff’s next film – still in development – will become the next "Garden State," a huge earner for the few HSXers who bought into it from the start. Few "Garden State"s are out there, but I feel that, since its so hard to convince people to see the smaller flicks, I owe them enough to pay for them – kinda.
Still unsatisfied, the devotees will also mention that this Star Wars liftoff phenomenon is balanced by the marquee films that surprisingly fail. But aren’t those stink bombs pretty easy to spot as well, or at least, as an investor, easy to refrain from? Maybe not, but it hardly matters when a "Harry Potter" or "Spiderman" or movie version of "The Simpsons" remains on the slate. Sometimes you lose. Most times you win.
This is getting off my point somewhat, but it is related to the kind of simplification HSX has created for the film business. Its model seems too easy: quantity, rather than that other thing we scarce dare mention. HSX moves you forward: your $2 million becomes $2.5, $4, $7 million. Yet, since that money, like the movies it promotes, is not real, has it really gotten us anywhere? Are we, instead, listless riders, staring off into the distance for illusion's sake? Are we, as that certain fella said, strangers on a train?