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Site Hopes to Put Profitable Spin on Hollywood Fame Game

May 19, 2000|JAMES BATES

For the Hollywood Stock Exchange, it's no longer just fun and games.

The Internet site known for operating a movie and celebrity stock-trading game analogous to the fantasy game of rotisserie baseball now wants to leverage the information it gets from its 570,000 registered users to become a serious player in movie, music and television research.

By fall, HSX, as it's known, plans to reposition itself as a research outfit that can tell a movie company instantly whether young males are responding to an ad campaign for an upcoming Keanu Reeves film, or alert a burger chain that a film still two years from release is a good bet for a promotional tie-in.

How? By tracking how their affluent young players trade movies and stars on the site, in much the same way stock and bond trading is tracked in the financial markets. Who's hot and who's not, right now.

In short, the game site would sell the information gleaned from HSX games, as well as the information it has collected on the folks who frequent the site.

"It's the home run, the crown jewel," says Andy Kaplan, a former top Sony TV executive newly hired as the fledging company's first chief executive.

The game works this way: HSX assigns movies a value in fake dollars (or in the case of a movie star, a bond value). Those values are based largely on past box-office performance. (Russell Crowe, star of the hit film "Gladiator," had a value of $1,413 on Thursday; Kevin Costner, who hasn't had a hit in ages, was trading at $1,028.) Music groups are assigned values defined by record sales success, while television is still being worked out.

Values Rise, Fall, Just Like Stocks

Like any stock, the values of movies and stars rise or fall, based on how well traders expect them to perform in the future. (As an example, I bought 1,000 shares in the Foo Fighters on Tuesday, when the band was trading at $55.47. By Thursday, the band was trading at $56.77. My "investment" had gained 2%.)

So far, HSX has proved to be an accurate barometer of the opening box office for films, and has successfully flagged some sleeper hits early, notably last year's phenomenon, "The Blair Witch Project."

Repackaging and selling this data has been in the game plan since the company was founded four years ago. But HSX has said little about it until now. Whether the online venture ever turns a profit (company projections are for that to happen in late 2002) hinges on the concept's success.

HSX would be the first serious challenge to the movie industry's leading data-collection company, National Research Group. While HSX exists in super-efficient cyberspace, NRG folks toil away in real time, roaming high-traffic spots like Old Town Pasadena and the Glendale Galleria with clipboards inviting people to attend screenings and querying people at home by phone.

To fuel HSX's ambitions, investment bank Bear, Stearns & Co. has been hired to raise $30 million in private money, Kaplan said.

But will studios, hamburger chains, toy makers, Bank of America or Procter & Gamble pay to find out the detailed thoughts and spending habits of people who obsess over whether "M:I2" can open to more than $40 million at the box office?

"The idea of creating refined databases and demographics using some kind of Internet activity is real, but whether the Hollywood Stock Exchange's methods are the best ones remains to be seen," said Richard Cohen, MGM's president of home entertainment and consumer products.

Tom Sherak, chairman of 20th Century Fox's domestic film group, also is skeptical. "I don't know enough about who is playing the game to make a smart decision about it," he says. "Research is nothing more than a tool. It isn't right all the time."

Projections Hit Close to the Mark

Founded by investment banker Michael Burns and former stockbroker Max Keiser, HSX was conceived as a game to take advantage of the public's obsession with box-office numbers.

As a rule of thumb, HSX divides the Thursday trading value of a film by 2.9 to predict the opening weekend. It was very close to the mark this month for both "Gladiator" and "Battlefield Earth," although it missed on last year's "The Matrix." The formula suggests a $37.6-million opening for Walt Disney's "Dinosaur" this weekend.

Studios, who relish any opportunity to manipulate real box-office numbers, might be tempted to try to influence "play" ones. So HSX has installed software to limit manipulative trading. HSX also believes that the size of its membership naturally would thwart those efforts.

Already, studios use HSX to plug their movies. Whether they also buy HSX's unorthodox methods to research audience behavior is beside the point, says Kaplan. Consumer product companies that can use the data to monitor pop culture trends are the big fish Kaplan is hoping to catch.

"If I had felt that having five studios was our client base, I would not have come here," Kaplan says.

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