The Hollywood Stock Exchange (HSX) is a virtual trading platform for users interested in the entertainment industry. It allows traders to engage in speculative trading by betting on the performance of movies and actors.
The platform is also a prediction market tracking the user sentiment and financial predictions around upcoming movies.
This article will explore the concept of the Hollywood Stock Exchange, how it works and what makes it unique.
Origin of the Hollywood Stock Exchange and the Entertainment Trading Industry
HSX is a web-based multiplayer game that enables users to buy and sell “shares” in movies and actors.
Founded in 1996 by Max Keiser and Michael R. Burns, the platform allows users to invest in movies, actors, directors, and other assets with virtual currency.
Factors such as box office performance, critical reception, and perception by the Hollywood industry affect the value of these assets.
Evolution of the Hollywood Stock Exchange
Cantor Fitzgerald, a financial service company, bought the HSX in 2001. They had ambitious plans, including turning it into a real trading exchange. However, following the 9/11 attacks, these plans were put on hold.
In 2007, Robert Swagger created the Media Derivatives Inc. (MDEX) – an effort to launch an electronic futures exchange for contracts based on box office results.
He believed that his experience in risk management could help investors and Hollywood studios reduce the losses associated with the unpredictable nature of the industry.
Cantor Fitzgerald also resurrected the plan for real-life trading of HSX and decided to start the process of getting regulatory approval.
The U.S. Commodity Futures Trading Commission (CFTC) began the process of ratifying these futures contract concepts in 2009. In June 2010, they approved Media Derivatives’ application, stating the following:
“The contracts are intended to allow participants in the motion picture industry to manage the financial risks associated with the production and distribution of motion pictures.”
The Motion Picture Association of America, representing the six major movie studios, ended up opposing these contracts with the motive that they would open up the possibility of market manipulation.
Other concerns included hurting ticket sales and putting additional pressure on studios. Finally, they added that they had no intent to use this system as a hedging mechanism.
Despite the approval from the CFTC, the movie futures contracts didn’t pass Congress.
Pros of the Hollywood Stock Exchange
Some of the benefits that the HSX was dubbed to bring included:
Low Barrier to Entry
With an internet connection, anybody can sign up for an HSX account to start trading virtual shares in movies and actors. The easy access provides an opportunity for diverse participants to partake in the entertainment industry.
Low-Risk Trading Experience
The risk-free nature of the platform allows investors to test their strategies without putting their capital on the line. You can learn, experiment, and modify your strategies without worrying about losses.
Cons of the Hollywood Stock Exchange
Here are some of the limitations of the HSX:
No Direct Impact in Real-World Markets
Trading on the HSX is a simulated experience that isn’t applicable on real-world trading markets. The techniques used on the platform do not equate to success when trading futures contracts with real money.
Prone to Manipulation
The exchange is dependent on the assessment of market participants and public perception of movie performances. The subjective nature of these predictions and reviews makes it easy to be manipulated by misinformation and biases.
Rumors and subjective reviews can affect the prices of instruments on the exchange, leading to losses.
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Conclusion
The Hollywood Stock Exchange journey was an ambitious plan to introduce real-life trading and hedging strategies to the entertainment industry.
However, industry concerns and backlashes led to the suspension of those plans. Yet, the HSX still exists and you can try the virtual trading game for free.
