Monday, May 08, 2006

Fun with Hollywood!

For those of you interested in the goings on of Hollywood (and independent film distributors as well) from a financial angle rather than a consumption angle, have I got the place for you! The Hollywood Stock Exchange is a very impressive "game" site in which an entire stock exchange has been built up around movies, actors, directors, and related things. Movie "stock" prices are set based both on demand and on expected earnings -- and after a film's release, the price is readjusted to reflect its actual earnings. Think you can predict when a movie is going to flop? Short that mother! Think something's gonna be a sleeper? Go long on it. Best of all, it's completely free! (I think I read somewhere that, apart from ad revenue, studios pay the owners for alot of their stock data -- after all, if EVERYBODY is betting a movie will flop -- and there are thousands upon thousands of players -- it's probably gonna be a flop).

I've been playing for a few months, and have managed to turn my $2,000,000 initial sum
into about $8 million. It has its ups and downs -- I really thought The Sentinel would do much better, and lost about $750k on that one after my initial gains. However, I shorted MI3 this weekend, and earned a cool $1.7 million in 3 days! That pretty much made up for a string of recent losses. I was in the top 20 this weekend for gains! Hooray! If only I had had enough to fully invest in that short -- I could only afford around 38k shares, out of a max of 50k for movies (20k for actors, 10k for funds and options).

A word of advice -- shorting seems to be much more reliable than going long over opening weekends, especially as of late. There are a few exceptions -- harry potter, narnia, and a few others have all exceeded their expectations -- but generally hollywood is a big vortex of suck right now -- hence the fact that MI3 can lose $50 a share over its own opener. Also, most funds seem very reliable, steady, long-term gainers -- I think there's a minimum portfolio value requirement to start a fund. Actors and actresses are VERY long-term games. Whereas a movie's value can fluctuate +/- 5-10 points in a day and move like a roller coaster over weeks, an actor will generally never move more than $1 a share, and generally fluctuate about some stable mean -- and I think that has a lot to do with their system of evaluating an actor's net worth to set a price -- they only see major changes after a movie of theirs is a major hit or a flop, since their value is set as a moving average of their last few movies (with some other factors involved too). I almost never invest in actors, and I suspect few other serious players do either.

Meanwhile, I sunk $200k into the Summer Blockbuster fund and have made nearly $600k profit off that. Read the prospectus, and if their strategy sounds good, invest! If you catch it at the IPO, it'll generally be a modest outlay of cash for some steady growth. Unless the fund's "theme" -- they're all themed -- is arbitrary or trying to make a statement -- like the "black actors fund", dedicated to films featuring black actors or directors -- Denzel and Halle can only make so many movies, people! Bernie Mac and Queen Latifah are just not in the business of turning a huge profit!

You can also have fun with "penny stocks" -- I classify them as movies in development or wrap phase (you can search by phase!) that are less than $1 a share. I spent a whopping $20k on 50k shares in a sequel to the classic Ferris Bueller's Day Off, and it's up to around $5 a share now!

Anywho, it's good fun without having to actually WATCH the dreck that comes out of hollywood these days.



Anonymous Marty said...

Interesting post, Ben. Glad to see you're back! I wonder how the dynamics would change if the 'players' were using real money. Their own. Like the political futures markets do.

12:50 PM  
Blogger Benjamin said...

I actually think there's more room for honesty when it's not your own money. No matter how resolutely you believe in something, risk mitigation always plays a part in investments you make with your own money. If it's an imaginary portfolio, I think you're more willing to play your own expectations rather than hedge your bets. Then again, with a large competitive streak, you could be just as ruthless and cunning here as you would be with your own cash -- some people get a bigger thrill seeing their names on leader boards than they would getting a nice ROI.

12:55 PM  
Anonymous Marty said...

Oh, I'm not saying it's not fun. But I just don't know if honesty equals congruence to reality, or predictive value. I'm sure if DailyKos had a fake futures market, it would show a lot more about their prejudices than anything useful about a politician's prospects. I think the Hollywood futures market is probably less prejudiced and a better predictor than a partisan political one would be, but it would still have a bigger variance than one where people bet their own real money.

1:25 PM  
Blogger Benjamin said...

What I meant by that last comment was that the "thrill of seeing their names on leader boards" was just as big a motivator as earning a profit would be -- and thus they'd take it as seriously as they would if it were their own money. That's me speaking as a gamer of many years, having known a whole lot of gamers as well. For many gamers, "fun" has got nothing to do with it.

1:55 PM  
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