Imagine a day when athletes can go public by offering stock in themselves, and fans can buy and sell these securities based on the athletes’ performances on the field.
That’s the basic idea conceived by a guy named Mike Kerns and eloquently described in a recent Michael Lewis essay written for Portfolio. Read an excerpt below:
“The fans have always had an emotional investment without a [legal] financial one,” says a leading sports agent, one of the principals of the A.S.A. Sports Exchange, who prefers to remain nameless. “This is taking emotion and putting it to financial use. Screw this putting 300 bucks into a pot at work. This is ‘everyone get online and open your account at Ameritrade.’ The fans will be in the same position as the owners of sports teams—they’ll be making money off [the players] or losing money on them. They’ll just have more flexibility than the owners.”
As a number of smart people seem to have noticed at once, professional athletes have all the traits of successful publicly traded stocks, beginning with enormous speculative interest in them. Americans wager somewhere between $200 billion and $400 billion a year on sports, and between 15 million and 25 million of them play in fantasy leagues—which is to say that a shadow stock market in athletes already exists. That market may not know everything there is to know about the athletes it values, but it probably knows more than New York Stock Exchange investors know about the N.Y.S.E.’s public corporations. “People worry about lack of transparency in sports,” says the leading sports agent. “My newspaper this morning has two and a half pages of business news and 17 pages of sports. The day after the game, you know Peyton Manning’s thumb is hurt. What do you know about the C.E.O. of I.B.M.?”
Read the story from Yahoo Finance
I was a little confused when I read the story about exactly who is behind this idea. Apparently Kerns and colleagues from Protrade, seek to graduate from running a fantasy sports site to running a stock exchange that gathers stats and lets customers make bets on the future success or failure of athletes and teams.
At this point, ASA Sports Exchange, which is what the new entity will be called, doesn’t actually exist, but as Lewis writes, “…in the bowels of the U.S. Patent and Trademark Office, an application from a cryptic entity called A.S.A. Sports Exchange containing a description of a design for just such a market: The athlete would sell 20 percent of all future on-field or on-court earnings to a trust, which would, in turn, sell securities to the public. ”
The Portfolio piece explores the pros and cons of this idea, and concludes that a stock market for pro athletes is inevitable:
“At this point, the soul of professional sports is beyond worrying about: Athletes are frantically self-interested; marvelously self-absorbed; always looking for any edge, however unfair; and forever leaping from team to team in search of a few more dollars. In other words, the jock market already has the morals of the stock market.”
Michael Lewis is most famous for his book Money Ball, which is one of my favorite books of all time. Why? Because it combines sports with database marketing. These are two subjects dear to my heart 
This isn’t a new idea. Wall Street Sports, which began in 1994 and evolved/merged into Trade Sports (http://www.tradesports.com), was an idea that allowed you to buy prospects cheaply and have their value rise with their careers. You would be rewarded for good scouting and your ability to sell high.
These kinds of games have a predictive value as well. Many people making individual choices about future outcomes turn out to leverage some collective wisdom and are fairly accurate in predicting what will really happen. The Iowa election market has been doing this with political races since the late 1980s.
From a fan perspective, it is a neat way to test your own “fake GM” instincts. But what is missing is the sense of community that is much stronger in organized leagues of 12-24 fantasy owners competing against each other with a set of players.
But this isn’t a “game” or a community. Here’s the difference: The athlete would sell 20 percent of all future on-field or on-court earnings to a trust, which would, in turn, sell securities to the public.
Protrade has largely failed at “fantasy sports”. There was a time a couple years ago where their pr was churning out stories about revolutionizing the industry. Troy Aikman, an invester in the company was on every radio program talking about how great it was going to be.
The problem was that the values go up and down based on a complex formula. A HR in the 9th inning of a close game was worth more than a home run in the second inning. As a fantasy player you didn’t know what it really meant. Whereas if I guy scores a TD you know that is 6 points in your traditional fantasy game.
This extension to “real-world” stock market is interesting. But why do athletes need capital? Maybe while they are young, just our of school, etc. Though agents and sneaker companies seem to already fill that void.
Why would tiger release 20% of his future earnings and deal with crap from disenfranchised stock holders?
Maybe their is a demand on the fan side of the fence - (hell I bought a few shares of the Boston Celtics when they were a public company just to say I owned them). I just don’t see many athletes doing this.
What percentage of athletes entering pro ranks ever become set for life, mega-rich? Think about minor league baseball, late round draft picks, undrafted free agents, etc. I suppose these are the ones who might risk 20% of their action.
Glad to see you got the email and read the article Pat…
As far as the percentage of athletes entering pro ranks ever becoming set for life I think it depends on the sport. In golf for instance, you’re still guaranteed some pretty decent money for finishing at the bottom and in football you can still make much more than the average white collared working man… baseball is a good example for the opposite side of the fence though.
I got to pick up that book Moneyball btw… sounds like exactly what I need to get a read up on before I graduate.
Sports Derivatives have been trading since 2004 and are on the verge of full US regulation. There is a video produced at U.C.L.A which overviews a Sports Derivative that uses on-filed sports performance as the exotic underlying value. You can watch the video here: http://www.gsfeblog.com The name of the exchange is AllSportsMarket, the web site is AllSportsMarket.com.
Adam - Thanks for sending the article. Sorry I didn’t mentinon you in the article…I knew I got if from somewhere, but couldn’t remember who sent it