Comic Fodder

Psst! Wanna Make Money Off Super-Hero Movies?

Spider-Man 4 will be a big movie, right? What if you could buy shares proportional to its box office results? Soon, you'll be able to do just that. The Hollywood Stock Exchange (HSX) is a free online movie investment game. It was founded in 1996; I've been playing it for years, but not quite that long. With more than $874 million in digital dollars, I'm ranked in the upper 2% of all players for portfolio worth, but I've been coasting ever since they redesigned the site; it's just not as much fun anymore. However, they might perk up my interest with their new Cantor Exchange, which will be a commodity exchange where you can invest real money into movies.

This isn't buying a share of a movie project before production or putting up funds to make sure it gets made. The new site will work along the same lines as the play site: you can buy or short shares in a particular movie, based on whether you think it will make the box office projection for the four-week domestic gross of a wide-release movie. You think the Clash of the Titans movie this weekend will make $70 million over the next month instead of $60 million? Time to buy. Think it will bomb? Short the max out of it. The company has filed for approval with the U.S. Commodity Futures Trading Commission, and looks to clear the final hurdles soon, aiming for an April 20 launch date. Shares are priced at one-millionth of the projections, so for a movie expected to pull in $50 million, one share will cost you $50 in real money. I'm not sure what the commission charge will be, as it's 10% for HSX, and that seems a little high for a real life fee.

The opportunities involving comic books are greater than ever before: since past successes have made comic-derived features a mainstay of modern movie projects, there are now more than 100 different movies in various stages of development that are all based on comic books. HSX has even had a mutual fund devoted only to investing in comics-related projects, the fund being managed by one of the players. A recent iteration reached its $100 million goal a while back, and a new version has not been started as of yet.

Some details will shake out over the next couple months, but don't count on putting real dollars into a Wonder Woman movie just yet. On HSX, you can trade on movies that are still in the concept stage, and may never even make it to the big screen. Projects that are in development hell or still have significant hurdles will not be traded on the Cantor Exchange. Only films that will debut within six months are eligible to be traded. Major releases will de-list after four weeks, and limited release movies will de-list after twelve weeks.

If the Cantor site were up and running today, Jonah Hex would be a timely investment. HSX has been issuing Cantor Exchange (CX) derivatives, allowing the HSX players to practice and get used to the differences between the HSX game, and how the real derivatives will behave. The HSX stock was recently trading just above $100, meaning traders think it will pull in around $37 million for its opening weekend, and possibly make $100 million in its four weeks. The CX derivative debuted Tuesday, February 22, at $130, and immediately shot up more than ten dollars per share. The key difference between the HSX game and the real thing is that "a CX Derivative will NOT halt trading on its opening date in wide release or adjust in price based on estimated weekend box office." Seems like the HSX players think Jonah Hex is going to do pretty well.

The differences reflect the real-world stakes of finance. In HSX, if someone gets their hands on early box office projections, they might pull their money out before the rest of the world gets the results. Let's say Jonah Hex will be a bomb. For HSX, the stock is frozen on Friday before its release, and remains frozen so your "bet" will have consequences. On Sunday, after the opening weekend results are calculated, the stock will adjust according to a pre-defined equation that projects the opening weekend results onto its four-week projection. If the final Hex projection bombed by, let's say $10, and you had bought the maximum-allowed 50,000 shares, you would lose $500,000 Sunday afternoon (FYI, you can only buy 10,000 shares of the CX derivatives in the game).

For the real-world shares, there is no adjustment to project the four-week results for you: all the traders have already made their decision on how well or poorly the movie will do. Just as in the regular world of stocks, there is no artificial freezing of prices or trading at any time to prevent "cheating." Instead, the box office weekend results will be announced, and traders can buy, sell, or cover their shares at any time. The result so far has roughly mimicked the game adjustments that HSX has made. In other words, everyone ditches their stinkers as quickly as they can, so the CX derivatives tend to adjust about as far and as fast as the artificial adjustments that the HSX game forces on their fake stocks.

How good are the odds you can translate your love of comics and knowledge of movie box office statistics into riches? Well, it depends. IN HSX, you start with $2 million in play money. For the Cantor Exchange, you'll need to provide your own funding. Want to invest in Iron Man 2? A single share might cost $350. How many shares can you buy? Will your profit pay for the commission fees, which you have to pay when you buy it, and later when you sell it? How about something cheaper like the Green Hornet? It's going for a measly $100 a share on HSX. Thor is at $175 and climbing, and Green Lantern is at $141. The project for Power and Glory, Howard Chaykin's title, is in the penny stocks right now, going for only 27 cents a share, but it wouldn't be available for trade on the CX, because it's still in development. The initial offering for the actual shares would probably be much higher in the event the movie actually gets made. Same for Deathlock, which is currently trading at 86 cents a share.

So unless you already have a couple million to play with, it will take you a considerable amount of time to start with a small nest fund and build up, successfully buying a small handful of shares for a movie, and re-investing the profits in another successful movie later. If you want to restrict your expertise to comics only, keep in mind that you only get to trade on movies opening in six months or less, and there are only a small handful of those at any one time. For example, Green Hornet won't open until December 22. However, if you also want to look at investing in the next Twilight or Harry Potter movie, those and many other choices will be available to you as well.

Still, wouldn't it be great to turn into a multi-millionaire, and when people ask you what you do, you reply: "I invest in superhero movies!"

Tpull is Travis Pullen. He started reading comics at 5 years old, and he can't seem to stop.