Trading baseball players like stocks
ProTrade has already built virtual exchanges where fans can trade football and basketball players. Now it's the MLB's turn at bat.
Michael V. Copeland, Business 2.0 magazine senior writer

SAN FRANCISCO (Business 2.0 Magazine) - Who's the best player in baseball - Texas Rangers first baseman Mark Teixeira, or Chicago Cubs first baseman Derrek Lee?

There's no need to start a bar fight over it. According to a statistical analysis, it's Lee with a "net expected run value" of $61.64 trumping Texieria's "NERV" of $58.05. Those figures come from ProTrade, a San Mateo, Calif.-based startup which is making a market out of sports performance statistics. The company, co-founded by former sports agent Mike Kerns and blackjack whiz Jeff Ma, analyzes a player's moves to come up with a stock price-like valuation, which ProTrade users can then buy or sell using a virtual currency.

The company, which already trades NFL and NBA stars, is launching trading on April 1 for Major League Baseball players like Teixeira and Lee, just in time for the start of the baseball season. ProTrade already boasts 10,000 users.

More than 15 million people today participate in fantasy sports leagues, often competing for prizes. For now, ProTrade is hoping to tap into that business, charging $5 entry fees to enter "challenges," or competitions, that award prizes to the ProTrade user with the best portfolio of athletes. Users can also set up their own challenges, a service for which ProTrade charges a management fee.

As users buy and sell, their trades change the athlete's price on ProTrade, just as trading on the stock market affects share prices.

"It's a true predictive market, based on buy and sell pressure," Ma says. Or rather, it will be a predictive market, if Kern's and Ma's dreams of attracting enough traders pan out.

They've already gotten some investors betting on them to win, at least. ProTrade landed a $10 million round of funding late last year, largely from blue-chip venture-capital firm Kleiner Perkins Caufield & Byers. Former Dallas Cowboys quarterback and three-time Super Bowl champ Troy Aikman and NFL Hall of Fame coach Bill Walsh also invested in the round. With the money, Kerns and Ma hired a team of statistical whizzes who have developed ProTrade's proprietary scoring mechanisms.

As the baseball season begins, those statistical formulas will set players' initial prices. As ProTrade's market opens, those NERVs are like initial public offering prices. And like any good IPO deal, you want to look for players that have some room to rise. Barry Bonds' NERV of $104 seems a little too, well, juiced. But Rangers' center fielder Brad Wilkerson at a NERV of $49.09 could be a bargain.

A crucial question for ProTrade is whether it can attract enough sports fans to build critical mass. The more traders it has, the better-informed its prices will be and selling that information may be where ProTrade's most lucrative business may lie. Kerns and Ma hope to sell ProTrade's real-time trading prices to sports broadcasters, giving them a ticker to scroll like you now see on business channels.

But landing those deals depends on how predictive its NERV prices turn out to be in actual performance -- a test it will face between now and the World Series.

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