The Hollywood Stock Exchange, or HSX, is a web-based, multiplayer game in which players use simulated money to buy and sell "shares" of actors, directors, upcoming films, and film-related options.[1]
The technology that drives the Hollywood Stock Exchange is the Virtual Specialist technology invented by HSX co-founders and the exchange's creators Max Keiser and Michael Burns, who were awarded a U.S. patent no. 5950176 in 1999 for the invention. Claims of this patent cover trading applications for trading virtual securities using virtual currencies over a network.
Because trading directly affects the prices of the securities — purchasing enough shares of a stock causes its price to rise, and selling causes its price to fall — and because the ultimate value of a moviestock is based on the film's box office, stock prices act as box office predictions. For example, if a particular moviestock trades at "H$40.00", the market is predicting that the movie will gross US$40 million at the box office in the first four weekends of wide release. In 2007, players in the Hollywood Stock Exchange correctly predicted 32 of the 39 major-category Oscar nominees and 7 out of 8 top-category winners. The Hollywood Stock Exchange is considered a good example of a prediction market.
Previous incarnations of the game included a music market (for purchasing musical artists), prizes for top gainers, and, briefly, a "buyout" program in which HSX would reward top players by purchasing their portfolios at a price of US$1.00 per HS1 million if the player would list the portfolio for sale on eBay. These features have been discontinued. The practice of selling portfolios on eBay was inaugurated by Curtis Edmonds, a former Texan lawyer who was the first to sell his HSX portfolio on eBay.[2]
HSX attracted some private investment during the dot-com boom and ran TV ads on cable channels in an effort to attract players. After the dot-com crash, HSX was eventually acquired by units of Cantor Fitzgerald. Cantor has used HSX's moviestock prices to assist Cantor's gambling operations in the United Kingdom, in which bettors can place bets on how much money US films will gross. HSX is headquartered in Century City, California.
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StarBonds represent the "trailing average gross" of an actor or director's last five movies. As with the MovieStocks, trading directly affects the value of these bonds, until they adjust after a new release. StarBonds can be volatile, as an actor or director may star in 5 blockbuster movies, only to then star in a small independent film, causing their StarBond to fall rapidly.
A movie option may be either a "Call" or a "Put." A call is claiming that the movie will make more than a certain amount for its opening week, and a put is claiming that it will make less than that amount. For example, suppose there is a $10M call and put for the opening weekend total of a movie called Rosebud. If Rosebud makes $20 million in its opening weekend, those who called Rosebud at $10 million will receive $10 for each share of the Rosebud call that they purchased, and those with a put would lose the money they invested. If it made $5 million, those with the Put would receive $5 a share and those with a call would earn nothing. As of June 2006, Options have been renamed as Derivatives.
Some veteran HSX players run special securities called funds. A fund is similar to a personal portfolio; however, all the holdings of this particular fund are visible to the public. Funds also have themes, so instead of being able to invest in any security, the fund manager may only be able to invest in horror movies, or sequels, or movies based on video games, for example. The price of a fund is only influenced by the stocks held by that fund, not by players who buy or sell the fund. Most funds cash out once they reach H$100 per share, or the equivalent of H$100 million for a personal portfolio. This type of security can help to educate newer players about how to effectively manage a portfolio, and is also an opportunity for slow and steady growth.
During the holidays, there are "holiday warrants" that allow one to predict the final gross of a movie by President's Day Weekend of the following year. For example, there was a Narnia warrant of $180 million. Since Narnia could make $300 million by 2/20/06, anyone who purchased the warrant would be looking at $120 per share. On the other hand, Zathura had a holiday warrant for $70 million. Since it closed a month after its release making less than $30 million during its run, anyone who predicted it as making more than $70 million would lose their investment. During the summer, there are similar "blockbuster warrants" that allow one to predict the final gross of a movie by Labor Day Weekend of that year.
HSX also releases various special derivatives throughout the year. During the summer of 2006, there were derivatives for the World Cup Tournament.
On Tuesday October 21, 2008, HSX released a total redesign of their website. The redesign was met by harsh criticism from the site's users on the site's message forums.[3] One week later, on October 28, HSX announced that it was rolling back to the previous design due to user complaints, and would keep the new design up as a beta site run concurrently with the old design until bugs were worked out.[4] On November 14, HSX announced it was closing the beta site in order to improve performance and functionality. A completely new redesign came online in June 2009.