- The Washington Times - Monday, September 19, 2005

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 pro’s performance in an online electronic market.

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

ProTrade, which opened for business yesterday, 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,” predicted 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, Calif., 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 idea 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 on Web sites such as Yahoo.com.

These fantasy leagues, which have grown steadily 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 three-yard run on fourth-and-2 would be worth more than a three-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.

Mr. Kerns, 28, created ProTrade with 32-year-old Jeffrey Ma, an MIT graduate with a penchant for numbers and gambling. While still in college, Mr. 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.” (Mr. Ma is Kevin Lewis in the book).

The blackjack experience convinced Mr. 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 and now general partner of baseball’s Arizona Diamondbacks.

Mr. 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.

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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