Online market turns athletes into stocks - East Valley Tribune: Business

Online market turns athletes into stocks

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Posted: Monday, September 19, 2005 4:06 pm | Updated: 10:01 am, Fri Oct 7, 2011.

SAN FRANCISCO - Sports fans already invest considerable emotion and angst in professional athletes. Now they can take that obsession a step further, trading on the pros' performance in an online electronic market.

If the new Internet venture succeeds, it'll be a whole new ballgame for the gambling-driven pastime of fantasy sports, which already has up to 20 million players.

Launching Monday, ProTrade will treat professional athletes like stocks to be bought and sold, initially in a theoretical currency. Cash prizes will be awarded to the most successful investors.

The value of a blue-chip quarterback such as Peyton Manning of the Indianapolis Colts will be determined by a community of traders competing to identify players most likely to contribute to the success of their real-life teams.

In this bottom-line approach to sports, teams are known as investment portfolios and the real-life athletes get their own ticker symbols. Manning's symbol is PMANN.

"It's going to take fans to a whole new level of fantasy," predicts Bill Walsh, the former San Francisco 49ers coach and a member of ProTrade's advisory board.

ProTrade initially will be confined to trading NFL players, but the San Mateo-based company expects to add the NBA and major league baseball after working out licensing agreements.

"Our mission is to change the way people think about sports," said Mike Kerns, a ProTrade co-founder and former understudy to venture capitalists and sports agents.

The endeavor drew its inspiration from the 2003 Michael Lewis best seller "Moneyball," which dissects the statistical analysis Oakland Athletics general manager Billy Beane used to obtain players he considered undervalued by the rest of the baseball market.

At the outset, basically for the first half of the NFL season, no actual money will be exchanged in Protrade's market; each participant will get a virtual stake of 25,000 coins to invest.

But capitalism will fuel the market's activity, with weekly prizes awarded to the portfolios with the best investment returns. Later this year, traders will be allowed to create their own competitive leagues and set their own entry fees, with a $5 minimum per entrant.

ProTrade will hold all the entry fees in escrow and then distribute jackpots, minus a 2 percent to 3 percent commission, to league participants who generate the best investment return. ProTrade hopes to make money from those commissions and advertising on the site.

The potential target audience is huge. About 15 million to 20 million people already compete in traditional fantasy sports leagues, including myriad competitions waged through such Web sites as Yahoo.com.

These fantasy leagues, which steadily have grown during the past 20 years, usually consist of several friends or co-workers who ante up an entry fee before drafting the premier players in a sport. Points then are accumulated based on the statistical performance of the athletes on one's roster.

In an NFL fantasy competition, points typically are based on yards gained, with bonuses for touchdowns and field goals. At season's end, the jackpot goes to the fantasy team owner with the most points.

Statistics are important in ProTrade, too, but the system tries to provide more context by analyzing the situation in which a play occurs. As an example, a 3-yard run on fourth-and-2 would be worth more than a 3-yard run in a third-and-20 situation.

The system is probably too complicated for at least half the nation's fantasy sports players, but ProTrade "will feed into the fanatical, obsessive types who are constantly looking to suck more entertainment value out of football," said Fantasyguru.com publisher John Hansen, who has been following the fantasy sports craze for 11 years.

Kerns, 28, created ProTrade with 32-year-old Jeffrey Ma, an MIT graduate with a penchant for numbers and gambling. While still in college, Ma and his buddies became so proficient at counting cards in blackjack that they carted away millions of dollars from Las Vegas casinos, inspiring the best-selling book "Bringing Down The House." (Ma is Kevin Lewis in the book).

The blackjack experience convinced Ma there are "analytical and quantitative ways to approach something that you normally associate with something emotional like sports," he said.

Reflecting that philosophy, ProTrade is driven by an array of complex algorithms that crunch an athlete's statistics to project future performance. The system, which draws on information provided by Stats Inc., also will offer real-time insights into the chances for a score before a play occurs in an actual game.

"It's a pragmatic approach that more and more real-life teams are taking," said Jeff Moorad, a former sports agent now general partner of baseball's Arizona Diamondbacks.

Moorad is a primary investor in ProTrade, along with Kevin Compton, a Silicon Valley venture capitalist who is the principal owner of the NHL's San Jose Sharks.

Although ProTrade hopes its traders make rational decisions, Kerns acknowledges that emotions are bound to enter the equation, just like the stock market.

For instance, if ProTrade's market had been open during the NFL's opening weekend of play, traders watching the New York Jets game might have been tempted to sell quarterback Chad Pennington as he fumbled six times - losing the ball twice. Meanwhile, traders watching the Pittsburgh Steelers might have been tempted to buy little-known running back Willie Parker as he rushed for 161 yards and a touchdown.

As it turned out, Pennington (ticker symbol: CPENN) lost $7.04 in dividends. ProTrade rated Pennington's showing as the least productive of the opening weekend and hailed Parker's as the most productive, awarding a dividend of $10.26.

Parker (ticker symbol: WPARK) earned another $4.99 Sunday after rushing for 111 yards with a touchdown, lifting his ProTrade value by 38 percent during the past five days to $21.17 per share among the few hundred traders testing ProTrade's system before its official opening.

Despite last week's letdown, Pennington's stock fared well, rising from an opening price of $87.46 to $88.43 after throwing two touchdowns to earn a $2.43 dividend in Sunday's Jets game - an indication that the ProTrade market expects the quarterback to turn things around.

Or perhaps the traders viewed Pennington as a bargain compared to Manning, whose $202.16 price after Sunday's game ranked as the most expensive stock on ProTrade, even though he earned just 40 cents in the Colts' 10-3 victory.

There's nothing to prevent real-life athletes from participating in ProTrade's market, although the NFL discourages its players from joining fantasy football leagues.

Former San Francisco 49ers tight end Brent Jones, a member of ProTrade's advisory board, believes most players will stay away from the site.

"There are a lot of guys out there who aren't going to want to see what they're really worth," he said.

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