Huy Nguyen likes the stock market. He also likes movies. Now, due to the strange marriage of the entertainment dot-com Hollywood Stock Exchange and financial powerhouse Cantor Fitzgerald, the British securities lawyer can combine his two passions: betting real money over the Internet on how films such as Jurassic Park III and Rush Hour II perform.
"This is a chance for me to put my money where my mouth is," he said.
Cantor is wagering that people like Nguyen will make its online movie-betting service, launched last month in Britain, a success. Not only that, but help it launch similar services for music and other forms of entertainment, expand its betting service to other countries -– and set up a futures market in the United States to trade risk in movie productions.
That, in turn, would validate its purchase of HSX, which provides the data Cantor uses for its service.
For HSX, Cantor's entertainment betting service is a unique way for the once-bleeding Internet startup to stay alive when most other Web content plays have died. The Los Angeles company has run its own virtual "stock market" for Hollywood movies and music since 1996. Players "buy" or "sell short" the fortunes of newly released movies, stars and albums using "Hollywood dollars" that don't cost them a penny.
But HSX's revenue from advertising, sponsorship and market research sold to studios wasn't enough to keep it afloat. So Cantor's purchase for an undisclosed price in May was a relief.
"It was the best possible outcome for our investors, our shareholders and our employees," said CEO Brian Dearth. "When we first went down the path, it was difficult to see what the fit would be. Now two months down the road, its difficult to imagine how it could be better."
HSX still runs its free service for hundreds of thousands of active users, and much of its revenue model remains intact. But its biggest client now is Cantor Index, which uses HSX data to create "spread bets" on movie performance.
Illegal in the United States, spread betting on financial markets and sports is the rage in the U.K. A bookmaker creates a bet by quoting a "spread" for the object of the bet -– two prices, one a little higher than the other that fluctuates on a daily basis. Customers either bet "down" from the lower number or "up" from the higher one. They win or lose depending on how the security ultimately fares in the market.
Here's how it works for Nguyen's bet on Jurassic Park III: Cantor Index estimates currently that the movie, released last month, will gross between $155 million and $160 million at the box office in its first month. Nguyen bought the movie a few weeks ago when Cantor estimated that its box office would total $145 million.
He could close out his bet now by selling at Cantor's current sell price of $155 million for a 10-tick profit -- or £10 for every £1 pound he originally invested. Conversely, if Cantor's spread today were $135 million to $140 million, he would have a paper loss of £5 for every £1 he bet.
So far, only a few hundred people in the U.K. have used the U.K. movie betting system. But Lee Amaitis, president and CEO of Cantor Fitzgerald International, thinks that number could jump dramatically when the company starts an in-theater promotions.
In the United States, Amaitis wants to start a futures market for movie production, helping studios buffer the risk for their massive investments, and giving investors a chance to profit from the movie-making game.
HSX is critical to Amaitis' plans. "I view them as a value research company for the entertainment world," he said. "We create the product that trades out of what they supply us. One hand feeds the other."
Armed with his computer and an Internet connection, Huy Nguyen thinks he can cash in too. "I'm arrogant enough to think I can beat most people," the British attorney said. "But I'm doing it primarily because it's fun."
