HSX to Live On, Cantor Insider Says

Parent company looking for partner to continue virtual box office futures market

Big capital, companies and plans have risen and fallen around it, but the Hollywood Stock Exchange will apparently go on.

According to an official close to parent company Cantor Fitzgerald, the Wall Street firm is currently in talks with about a dozen companies, most of which specialize in online gaming, to enter into partnership on HSX and develop it into a more robust, viable (i.e. moneymaking) operation.

Last month, Cantor Fitzgerald, which has owned the online play movie-futures market since 2001, confirmed to TheWrap that it had conducted a major down-sizing of the not-so-outsized-to-begin-with staff, reducing its employee roster from five to one.

The reasoning was understandable: operating the game does not make money for Cantor, which had been using HSX to model and develop a real-life movie-futures market.

Since Congress banned that aspiration within its recently passed financial reform bill, Cantor wants to reduce its overhead on the HSX, as well as find another company to develop a new plan for it going forward.

So begins the latest chapter for a 14-year-old online gaming site.

According to Max Keiser, who developed and launched the site for $300,000 along with fellow former trader Michael Burns, now vice chairman of Lionsgate, the HSX was created with the intention of being the first real-money exchange centered on box office performance.

However, after familiarizing themselves with the time, money and trouble needed to gain trading approval from the Commodity Futures Trading Commission, Keiser and Burns opted to keep it as a "virtual market."

Along with the proliferation in box-office interest among the general public, the site's popularity took off, souring to millions of registered users and hundreds of thousands of regular players.

And with venture capital flooding into the Internet, Burns and Keiser were able to secure ample backing, procuring $40 million in private investment from 1996-98, according to Keiser.

At one point, the HSX staff totaled around 40, mostly working out of a Santa Monica office, but with a few scattered in a New York bureau, as well, according to Oakley Boren, who started at the company in 1999 as a receptionist.

Keiser, who was connected to Alec Baldwin through his NYC home base, initially tried to bring the actor in as a partner.

"We wanted to take the Hollywood Stock Exchange and call it 'Alec Baldwin's Hollywood Stock Exchange.'"

Cantor bought the business in 2001 — a purchase Keiser strongly opposed, claiming the financial company badly mistreated HSX shareholders.

In any event, Cantor ran HSX as a much leaner business, scaling the staff way back in recent years.

Over time, however, the HSX established itself as a leading prognosticator of box-office performance.

"Out of the non-research-based prognosticators, they are the most accurate," said one tracking-firm research head. "That's because it isn't an individual guessing. It's the invisible hand of the market adjusting the number to a mass, agreed-upon number. And the people playing it all know movies, so it isn't just one person looking at secondary data."