An online game turning into reality is the stuff of film fantasies. But for Huy Nguyen, an online game about films in which he gambled and won a billion fantasy dollars became a real game in which he gambled and won thousands of pounds.
Nguyen, a City lawyer, started playing Hollywood Stock Exchange in August 1998. This free, web-based game allows players to bet on the performance of films.
New players get H$2,000,000 (in Hollywood dollars, the game's currency) to invest on films being developed, all of which have stock prices based on what players will pay. As with real stock exchanges, these prices must eventually be backed up with real results.
For HSX, these are provided by the film's "gross": how much money it takes in the United States and Canada over its opening weekend, then over its first four weeks. The HSX "share price" is revalued when these figures are released. If a film never reaches North American cinemas, the film "delists" and its shares are worthless.
By August 2001, when he retired, Nguyen was the second highest-rated player in the world: his virtual portfolio was worth over H$1.3bn.
But a new possibility had arisen when London-based, spread-betting bookmaker Cantor Index bought HSX in May 2001. Spread-betting is a risky way to gamble. The bookmaker offers a "spread" on an event with quantifiable results. For example, it might set a spread of $13m to $15m on a film's opening weekend.
In this case, the gambler can buy, or "go long on" the spread: this means he bets that the film will take more than $15m. Or he can sell, or "go short", betting it will make less than $13m.
If a gambler buys a £10 stake on this spread, he would win £10 for each $1m the gross exceeded $15m. But if he sells a £10 stake, he must pay the bookmaker £120, his stake times 12, for each million dollars between $13m and $25m.
Winnings and losses are limited to 50 times your stake, so a stake of £10 can win or lose you £500. As a result, Cantor requires gamblers to provide copies of passports and proof of funds.
This requirement stopped Americans, who dominate HSX, from playing the real-life version. Internet gambling is illegal in the US. In reality, gamblers there use offshore online casinos. But Cantor's need for identity checks means Americans cannot play.
This left Nguyen, as one of the very few experienced non-American HSX players, in a strong position. He took it, making money on Cantor's first two film spread-bets, Jurassic Park III and Planet of the Apes.
Then, in August 2001, came Jay and Silent Bob Strike Back, directed by Kevin Smith. Market research predicted an opening weekend worth $20m to $25m. Cantor was more conservative, setting a spread of $16 to $18m.
Nguyen thought this was still too high. "Kevin Smith has a large and dedicated fan base, but no one outside that fan base cares," he says. Smith's previous film, Dogma, took $8.7m on its opening weekend.
Nguyen felt Jay and Silent Bob might do better than Dogma, but not twice as well. So he went short, and won handsomely when the film took just $11m in its first weekend.
Nguyen used his experience in particularly devious fashion when betting on the multiple of opening weekend and four-week grosses. This multiple is usually about three: a film making $10m in its first weekend will normally make roughly $30m over the four weeks.
Takings are difficult to predict, but the multiple is easier. American Pie II, also released in August 2001, was a classic example of a "front-loaded" film. In other words, takings will peak and then quickly die away, producing a lower-than-average weekend-to-four-week multiple.
Nguyen went long on the weekend and short on the four weeks. "Sequels are hugely front-loaded, as you have a built-in audience," he says. "It was for teenagers, who are far more likely to see a new movie on the opening weekend, and it was heavily promoted, leading to high initial awareness."
Finally, a high-quality film will generate "good word-of-mouth". Viewers will recommend a decent release to their friends, but this boosts the four-week takings rather than the first weekend.
American Pie II - awarded one star out of five by the Guardian - was unlikely to do this. The end multiple of a little under 2.8 was higher than Nguyen expected, but he still made modest profits on his double bet.
In 2001, Nguyen did what few get the chance to do: turn an online game with no real-world rewards into a way of making cash.
Last year, though, he lost money. "With Spider-Man, I got it wrong at every single turn. I thought there was a limit to what it could do on its opening weekend." So he went short on that. "I was wrong. Then I thought, it wouldn't have great legs."
Nguyen thought takings would fall away, so he went short on the four-week figure. "I was wrong there, too. The reviews were very good, and there wasn't much else on. Then I cut my losses."
However, soon after Nguyen "bought out his position", cancelling the bet for a fee rather than risking a big loss when the four-week numbers were announced, interim data showed that the film's takings were at last falling away. "I thought, I don't understand this movie."
Nguyen wonders if his recent mistakes are due to giving up HSX. "I suspect I've lost my edge," he says.
