The advancement of NFT (Non Fungible Token) technology into collecting has taken the world by storm. If you are unfamiliar with NBA Top Shot, or any of the major NFT platforms, its in your best interest to take a look at what the whole craze entails. Or, if you want a pretty hilarious shortcut, go check out this SNL skit.
Topps recently announced that on April 20th, Series 1 Baseball will be released in digital NFT collectibles for the first time ever. This comes on the heels of the announcement of their going public through SPAC, based on the success of their business and digital capabilities. Because NFTs have already become a top digital collectible format across multiple markets, it should be no surprise that cards are a logical next step. This is ESPECIALLY true after the insane success of Top Shot.
To give a bit of background, Topps has been doing digital collectibles for almost a decade now. Topps Bunt started the digital division over at the company, and that division has gained mainstream attention for the success they have had over the last 5 years, especially with Star Wars. Per the investor presentation, they did about 30 million in business in 2019, and are projecting 51 million by the end of 2022.
Just to make sure that everyone is aware, the way Topps Digital HAS done digital collectibles is not the way they WILL do NFTs, as the digital collectibles are entertainment and do not have ownership. NFTs by nature are owned by the consumer through the blockchain.
This whole concept is likely unfamiliar and unattractive to many long time physical card collectors, but I assure you that it has a gigantic market and a larger following. Sports Cards in general have exploded over the course of the pandemic, and NFTs seem to be on the same path. Like the card market, the bubble talk seems to have crept into the conversation, especially with the NBA top shot market cap drooping a bit as the market becomes more diluted.
I get it, honestly I do. People who have collected cards for 30+ years are hard to separate the physical nature of the ownership of their collections to a digital marketplace. From a manufacturer perspective, both Topps and Panini have embraced the digital side for multiple years and much success, likely as a pre-cursor to the blockchain technology that is needed to do this right.
People are like, why would I pay for a picture of a card on my phone, when I can just buy the actual card and own it physically? The reason is simple – both have intrinsic value in the secondary market. They may be different in nature, but both have value. I would say, if anyone is lucky enough to get a pack of the Topps NFTs announced today, they will see that the value of the digital collectible will FAAAAAAR exceed that of the physical one. Hard to wrap your head around how that is possible, but the easy explanation is the supply is far smaller and the demand is huge.
As Topps outlined, there will be two flavors of packs, a 5 dollar version available in 50,000 buys, and a 100 dollar version available in around 25,000 buys. Of course, like Baseball cards there are odds to pull rare chase NFT backed digital trading cards, which I would expect will go for an absolutely insane amount of money.
Here is the thing, Topps Digital built a large audience for their apps, largely composed of non-card collectors. A lot of the traffic, especially on the Star Wars and other entertainment apps, are not from the same target market as the physical card collecting public. One of the main reasons stems from the situation many of you find yourselves in right now – there just isnt a good understanding of why something like this is and should be valuable.
As recently as last year, the argument would have had some traction. None of the cards on Panini’s or Topps’ apps are owned by the people who buy them. The apps are meant for entertainment, NOT long term collecting. The NFTs are not only entirely different in that fashion, but can be traded across many platforms, sold easily, and can be produced without the same effort as a physical card. Additionally, with the finite resources for producing trading cards at full capacity, its clear NFTs have an advantage.
Because Topps Digital already has a huge infrastructure and support mechanisms for creating digital collectibles, this whole situation just sounds like a perfect fit. Even if there is a bubble that will drown the value of these cards eventually, right now the market is immeasurably strong. These cards will sell out lightning fast, and be worth a considerable amount of money. If physical collectors are willing to have an open mind here, they would see there is a lot of fun to be had, especially when you dont have to grade a card, wait for a big buy you make to come in the mail, or just want to see something explode. All of those things are native to this platform.
There is no doubt that the last 12 months have been unlike anything we have ever seen in the history of cards. If someone had come to me and explained the contributing factors that led to this new world order, I would have laughed so hard, I would have likely hurt myself. Because of the way the discourse of the hobby has shifted, its easy to see where people usually stand on the issue. Believe it or not, there sure is a lot of complaining given the utopian circumstances right now.
Collectors are usually very apt to comment on how insane it is that new wax is selling for what it is, especially for desirable legacy products. Pre-sale for once cheap and fun products are suddenly the cost of mid range products of previous years. Sets like Topps Opening Day baseball, the entry level door on the entry level of baseball products sold out in record time for its initial go as an online release.
On the flip side of that, are the investor chats, that are led by a group of accounts directly aimed at cards becoming the new darling of the high dollar world. Because there are so many new people buying, it presents a few different situations that can be an enormous challenge to overcome. First, knowing what cards to buy is inherently complicated. Hundreds of sets, thousands of autographs, and a community that has years to decades worth of experience ahead of any new entry into the hobby. With most of these people joining for the “money making potential” instead of the usual reasons to dive in, the ease by which these people can be influenced is unheard of.
As a result, there are a number of accusations of this new boom being funded much like a pump and dump grift, led by some of the social media influencers that have a huge following. Because their instagram posts, youtube videos and facebook engagements are seen by tens of thousands of hungry investors, a single mention can send cards soaring. Without any regulation in place, it can be a breeding ground for giant conflicts of interest that would be heavily scrutinized in other industries.
Here is how it could work in theory. Lets say a primary influencer or colleague of an influencer acquires a nice card, or a series of nice cards. Things that would normally be within reason to pick up, and not some super premium example that would be desirable no matter what. The primary influencer either posts about this card on their social media, lauding how much of a hidden gem it is, or that they have made a huge investment to pick up a bunch of that item. Naturally, being a big influencer, these posts are shared all around and the lemmings head to eBay to pick them up. Within days, the cards have shot up in value, and the original individual can now sell their investment at a multiple of what they paid.
This is an oversimplified example, but there are some major red flags that are popping up all over the place. Giant deals between friends publicized to inflate value of other copies, or similarly important cards. If it happens frequently enough, and enough of the new eyes get wind of it, the original artificial pump and dump becomes lost in a sea of sharks looking to capitalize.
If we go back in time, this isnt the first time pump and dump has been widely accused a number of times, most notably on message boards in regards to Michael Jordan cards. Many users of these sites devised that a small group of collectors were working together to increase the value of desirable and or rare Michael Jordan cards from the late 90s and early 2000s. Although nothing ever came of it, whenever a big sale would go down, post after post would pop up detailing the intent.
In terms of the current threads, I have seen accusations thrown around that range from small inflations to enormous conspiring groups, and all of them seem plausible, if not only because the public is behaving in such a ridiculously inconsistent manner. Not only does this spur more speculation of a bubble, but it points to other examples in financial history where similar schemes have been enacted with varying levels of success.
This situation is only further exacerbated by the burgeoning creation of investment services, run by well informed collectors who seem to have a following of people paying them for advice on which cards are the next to explode. The most recent example is the series of Jay-Z cards that were released in Topps products earlier in the 2010s. These cards went from generally inexpensive to highly coveted in a matter of weeks, spurred by influencers on Social Media talking about them non-stop.
Funny thing is, I would expect that because hobby discourse has become spread through so many platforms, there is as much hype generated by collectors just openly communicating about fun things they find as much as it is planned pump and dump schemes.
Being that I am generally disconnected, most of what I am picking up is second hand information, all considering that my main focus in this hobby is still generally unaffected by the boom. I have a feeling we will be discussing these types of situations for years to come, and I would guess the muddied waters will make things very complicated to trace. Other times, it could be easy to trace a wave back to the pebble thrown in an ocean. As I have said for 10 plus years on this blog, if there is money to be made, there will be many people who look to exploit the uninformed to make more of it.
There arent many products that have the brand loyalty that has been built by Topps Chrome and it’s sister sets, or Panini Prizm and it’s sister sets. I think there are sets that end up being more valuable, but overall, from a popularity and importance standpoint, the chrome stock family of products are the most important aspect in the history of the hobby.
Yep, I’m leading with some MEGA hyperbole, because as we have seen with recent 7 figure sales of some Chrome cards, there is nothing that people want to have more for their collections than the iconic examples from over the years. More importantly than that, the cards achieve these insane values with a much lower product cost and much higher availability than just about any other product has ever had on the market.
Think about it, Exquisite and National Treasures bring the most valuable cards around, but the availability of those products pale in comparison to the products like Prizm, Bowman and Topps Chrome. Its actually shocking to me that Topps gambled so large with the first release of Finest and hit it so far out of the park that 30 years later, we are still living that premium approach in a giant portion of the hobby releases.
When reviewing the legacy here, it should go without saying that the way both Topps and Panini were able to create value in cards that have no autograph and no relic, is pretty admirable. The era in which these cards made the most of their mark was characterized by cards who’s value stemmed from autograph and relic content. Its impressive that both companies so successfully worked around that for so many sets.
Both Topps and Panini each release 20 or so versions of a Chrome stock product each year, which is saying something about its overall importance. The hobby has responded in kind, with Chrome stock products being the most heavily graded cards in the history of the hobby. Even during the most down periods of the hobby, people still loved the cheap fun that these products delivered, and in Topps’ case, they rarely made a mistake in the way things were built. Its a legacy of excellence that might not ever be overtaken by anything.
Panini Prizm, or as I have affectionately called it the past, “Diet Chrome”, has taken on a life of its own. Panini effectively owns like 80% of all the trading cards sold in the US, or some ridiculous number like that, and Prizm has become their go to set for driving a new license and creating margin in their product lines. Because Prizm has almost exclusively become the card of record for some of the most important NFL and NBA players, the exclusive license has made it the most important vehicle Panini has.
Funny enough, Prizm doesnt have the same excellent track record that it should have, if not only because the 2012 sets through the 2014 sets were some of the ugliest products ever made. Similarly, since it’s inception, it has always been the imitator rather than the originator. Go look at 2014 Prizm Football. That shit will haunt your fucking nightmares for years.
In 2015, when Topps was on the verge of losing their NFL license, something changed with Panini, something I think was THE best choice they ever made in the course of their trading card dominance. They decided to make Prizm much more like what Topps releases every year with Chrome, opting for simple bordered designs coupled with simple game photos to really re-create the iconic formula that Topps perfected.
This choice transferred over to Basketball, and in turn, created sets like Mosaic and Optic, which have never really reached the level of importance that Prizm has had.
On the Topps side, the creation of Finest in the early 1990s changed the face of Baseball cards forever. When it eventually came to the NBA and NFL, Topps Chrome was along for the ride, giving kids like me a window into the high end world of premium card collecting. To this day, Chrome remains my favorite set ever, and I will always buy a box every year for as long as I can afford it. I have sold my sports collection twice over, and each time, I have kept the chrome examples of my favorite players out of sheer reverence.
The main issue for Topps, is that they have lost all but a few licenses in their arsenal, something that could eventually change with the exploding landscape of the industry. Even with a dwindling presence over the last 8 years, they have managed to keep afloat because the Bowman Chrome and Topps Chrome lines remain as popular as they have ever been.
Prospecting in Baseball has become Baseball cards, only made more furious by the recent focus on rookie cards now claiming five figure sales so frequently. The sale of the Mike Trout Bowman Chrome Superfractor and the Kobe Bryant RC at more than a million have also brought a spotlight to the ongoing legacy that these cards have.
Similarly the rare late 90s inserts from top NBA players in the hobby have always driven ridiculous prices, but now make those prices look like ants seen from an airplane. Panini wasnt around when card companies could make Michael Jordan cards regularly, and they werent around when LeBron James, Tom Brady or Kobe Bryant were rookies. Topps and Topps Chrome were prominently featured, and that presents a giant advantage in the way collectors see Chrome’s importance in the long run.
That’s not saying Prizm hasnt driven its own fair share of eye popping sales, just look at what has happened with exclusive era Prizm rookies of Giannis, Patrick Mahomes and others. They are always among the top sales on eBay, and will continue to be long after the hobby potentially goes back on the decline.
When the dust settles and we can look back on this period in the history of the hobby, I dont think there will be a single person that can point to either brand and really complain. Its been such an important piece of hobby life over the last 30 years that its never going to be on the sidelines. I think its crazy that the current boom is defined so heavily by products relying on Chrome stock, but I guess that given the consistent performance and undying collector loyalty, its a no brainer.
Ill start off by saying that I hate exclusive licenses. Every collector hates exclusive licenses. Every sport has an exclusive license partner, which makes things worse. If you collect Baseball, you are buying Topps cards. If you collect Basketball and Football, its Panini. If you collect Hockey its Upper Deck. Because most collectors collect more than one sport, having one choice in each area becomes the most frustrating part of their hobby life.
On the other hand, manufacturers love exclusive licenses. It makes everything easier. From obtaining material to embed in the cards, to licensing autograph content, it becomes the best tool in their tool bag. It also builds lasting relationships, which in most cases, is just as valuable.
Why Are There So Many Exclusives?
This is going to take a bit to explain, so bare with me. League licensing is one of the most complicated and fought over parts of the industry side of the collecting hobby, and even with exclusives, it doesnt seem to get easier for the people involved.. Most of what I am going to say is second hand, but received from 10 plus years of direct communication from people who work at the manufacturers.
Back in 2006 and 2007, the seeds were planted for the situation we find ourselves in currently. Most of the sports had at least 2 licenses that granted the manufacturers the ability to produce cards with professional logos and professional players. One side is the “Properties” arm, which is all about the likenesses and names of the teams, stadiums, games, etc. The other side is the Players’ Association side, which gives access to use the likenesses of the active players themselves. There are other licenses that go along with these, including some for groups of retired players, the hall of fame, stuff like that.
Additionally, for almost every sport, there were at least two companies that owned both sets of licenses. Most of these licensing arms have been in place for many decades, and most of the time prior to the mid-2000s, leagues were much more likely to give them out to people who were interested in trying their hand at trading card production. This is the main reason why Upper Deck was able to storm the hobby in 1989, and release a Major League set – licenses were SEEMINGLY easier to come by and likely cheaper for card companies.
Things changed for a few reasons, need for access, need for content, and one other giant thing – money. When Upper Deck wanted to use the license to produce MLB trading cards in 1989, they only needed one thing from the league itself – access to take photos to use in the cards, and as the internet became more prevalent, even that became less of a need. If Upper Deck needed to make MLB trading cards in 2009, everything would have been infinitely more dependent on the league.
First, each league approval process had likely become much more stringent with protection of the brand as important as anything. There were also more products included in a license, sometimes more than 50, which required more headcount for approvals and processing at the league office, and thus more resources.
Secondly, with the addition of autograph content that drove 100% of the products released, access to the players became essential and necessary. The players’ associations would need to ensure that the players cooperated, or their license wouldnt be as valuable either.
Lastly, the content is also driven with pieces of game used material, which means that access to authentic jerseys for as many products as possible would inevitably fall on the league as well. If people wonder why Panini and Topps have switched almost entirely away from game worn, this is the reason. Game worn jerseys are sold by the league, valuable to collectors, and are hard to authenticate if the league doesnt provide them. Ill get to this more in a bit.
This is only a minor complication of the plethora of complications, some of which just stem from volume above everything. In 1982, there were like 2 products a year. In 2002 there were 20-40, in 2012, it was double that. You can see from a league perspective, that’s a lot of work for a part of your licensing arm that pales in comparison to something like sweatshirts and hats.
Remember, in the mid 2000s and well beyond, every week there was an article in the paper about how things have dwindled down, shops closing, shows empty. You can see why the leauges wanted to simplify their card existence. They just wanted things to be easier with cards.
Then something else happened – Upper Deck found themselves in a bunch of problems stemming from money, and even more problems from lawsuits with other licensors. For years, Upper Deck and Topps were the most important licensor in the hobby. Similarly DLP (Donruss, Leaf and Playoff Brands) was struggling, and Fleer had gone out of business.
Within a few short years, Upper Deck’s trouble had led to a loss of all of their major licenses, and a group from Italy known for sticker albums had purchased DLP to distribute a new brand of trading cards. Not only did this bring new consolidations of power, but also a new influx of influence and money that was absent prior. When I was writing this site back then, I commented how Panini’s new power was in their available cash. Topps was being bought and sold, and Upper Deck was reported on the verge of bankruptcy at least once a month.
Panini’s stability also gave the leagues something that they desired as well, money and resources. They knew that by giving Panini the exclusive license to their sport, they would solidify a stable avenue for the production of trading cards, and keep money coming in. By all accounts, Panini also overpaid by a drastic amount for each negotiation they were looking to become engaged with. You know what happened? They won, a lot.
The NBA was the first domino to fall their way, NFL being a huge win in 2015. NHL was theirs at one point too, leaving the Topps exclusive with MLB the only outstanding license they could never acquire during this run. They did manage to pry an exclusive away from Topps with the MLBPA, allowing them to use logo free designs with current players.
You should start to see a clearer picture of why this was happening – cards just werent that important, stability and money are important, and hence, the exclusive life began and continues today. The question is, how will licensing change now that cards are a top story, million dollar sales are national news, and investment in collectibles are the most surprising thing to come out of the pandemic?
League Licensing Battles In the Future
When a commodity is hot, the barrier to entry becomes that much more thin. Although there are still huge barriers in place, the desire to partake in the hottest thing out there can do some crazy things. Especially if you are a company with the means or methods to enter a market, and brand recognition isnt an issue.
Most of the league licenses are in place with exclusivity for a few more years. Topps has MLB through 2025, and Panini and the NBA/NFL are likely in a similar situation. In terms of hobby life, that is a long time. From a company perspective, it really isnt that long, as negotiations on a hotly contested commodity can go on for a long time. This means lots of prep, lots of posturing, and as we saw the last time the NBA license came up, some gamesmanship.
The world of the licenses has changed so dramatically over the last few years, one has to wonder what could happen if the bubble I referenced in the previous post comes down, or if things only get hotter.
Undoubtedly, the cost of the licenses is going to get quite a bit more competitive, especially now that there is leverage on both sides of the equation. The leagues have a lot of power, because there will be desire from every previous card manufacturer to get into a licensing position, and more desire for the leagues to likely want the piles of cash from multiple sources instead of just one. Right now, there is barely enough supply to cull demand, and that is creating huge secondary market volatility. The secondary market’s performance showcases there is enough to support multiple companies, and that is a HUGE piece of hand in the relationship.
Secondly, because each license has all of a sudden become insanely profitable, all manufacturers currently in business have plenty of money to throw at their business and the league. That includes the companies in power for each exclusive. Panini and Topps have more money to fight for the right to remain exclusive, as well as other companies like UD and Leaf have to show that they deserve a shot at a shared license. Because UD has a legacy of cards unlike any company (both good and bad), they have a lot of power to move their station higher in the consideration. Their history may be a red flag in a down industry, but that might be overshadowed now.
Topps has a huge runway as well, because their brand recognition is the top in the game. Even though Panini makes more cards than anyone these days, the choice to use an unfamiliar name that is shared with a grilled pressed sandwich means that they have less in their name than any other company. I would venture a guess that most casual Americans would know that Topps, Upper Deck and Leaf all make trading cards. Panini, very few would be able to identify outside the food connotation.
Player Licensing is Going to Change the Game
Right now, there are exclusives in place for players as well as for leagues. That’s why Michael Jordan hasnt had a card since Upper Deck lost their last licensing method to produce basketball cards. He has an exclusive partnership with Upper Deck, much like LeBron James, Tiger Woods, and a few others. Panini has them too, Topps as well. It used to mean a lot more, when shared licenses meant having to keep the biggest names for yourself.
Now, it means little to nothing, because few players would be able to appear in other products outside the ones officially licensed by the league. A few things have changed, however.
The craziest part of this entire thing is that athletes have become some of the most important drivers of the boom. Prior to 2020, most athletes saw cards as another thing they were required to participate in. Some even hated signing so much, that they dropped out of the game completely.
Obviously there were exceptions to the rule, but for the most part, athletes never really saw any potential in cards, unless they had nostalgia of collecting from when they were younger. With most of the rookies now being born past the original collecting boom back in the mid 1990s, the fun factor was greatly diminished before this year brought everything to the forefront.
You can imagine that if players like Deshaun Watson and Kevin Durant are taking cards seriously, their buddies and their agents are as well. Some players have historically been very involved with every aspect of their brand. Ask Russell Wilson. Now that cards have become such a gigantic source of potential funds, there could be humongous impact for those players with leverage.
Here is the caveat – every player covered by the PA license will continue to have trading cards if needed. The cost of adding autographs to those cards is a different story. Players have control over how much they charge per signature, and that’s where the volatility could impact their inclusion. More importantly, in some sports, the autograph has become a less important part of a set, with more and more focus on rare cards created through serially numbered parallels. This situation is a complete departure from previous years, and as with every negotiation, each side has their perks.
The same could be said for legends and retired players, as their licenses are rarely done with the same stroke of the pen as the league licenses are done. Many retired players join licensing groups or offer their own permissions, and with card prices soaring, all of that is going to change. This also means that their usage could be deemed unworthy and removed due to the cost of inclusion versus the value of inclusion. Once a player is no longer covered by the players’ association, it falls on a number of different levers to deteremine their worth to the overall trading card industry. For important guys, that could be one source of negotiating power, for others – it could be the end of their time on card fronts.
Overall, this is going to come down to sustainability. Can the bubble be sustained? Is it a bubble? Will the leagues consider this time as a benchmark for potential popularity? All of these things are going to have a ton of impact on the licensing future of trading cards. The more that card values and sales figures dip and rise, the more question marks are created. If anyone believes that this is the final form of the industry, money always has an effect. Right now, there is more money floating around than any other point in trading card history. Its time to see what that means.
When sports cards started creeping up, I saw a lot of excitement. The pandemic was supposed to wipe out everything we loved about sports cards, especially with millions of Americans out of work, and millions more left with a half job that wasnt going to cover much of anything. Instead of tanking the market, sports cards exploded, with so many people longing for the fix of happiness that ripping a pack can provide.
As the card market slowly approached unprecedented levels, a second narrative follwed suit almost at the exact same time. There is no way this tidal wave of value and investing could be a long term thing – this was a bubble, and as sure as the sun rises in the East, it would eventually burst.
I have to believe that many of the louder voices of this counter narrative were made up of a few different groups of people. The ones that had been priced out of their hobby that had brought them so much happiness over the years, combined with frustrated FOMOers, and finally those that had lived through the early to mid 90s. The frames of reference were true, its rare that a giant boom of interest was at all sustainable, especially at prices that only a fraction of a percent of people could afford to participate.
If the prevailing opinion that cards will eventually come back down, especially with Americans eventually having access to all those things that brought them joy and places to spend money prior to the pandemic, how will it look?
Is It a Bubble?
As it turns out, the pandemic did not start the upward trajectory in card investing and money, but rather augmented and accelerated an existing trend – at least in specific parts of the hobby.
Vintage and important cards from important players were already increasing in value, just not at the pace they did after the shutdowns started. Iconic and important cards from the most essential players in the hobby were also increasing.
Given that already existing trend, sports cards seemed primed for a nice few years of growth, mirroring the existing growth that had already taken place. What none of could plan, was that the pandemic would drive a spark in interest, driven higher by celebrity involvement and investor attention.
Bubbles exist because of artificially inflated prices that reflect a short term supply famine and a giant demand increase. If either of those aspects of the economics change, the bubble bursts. As we saw many times before, when demand greatly outweighs supply, the people in charge of the supply do what they can to increase their stock. If they can capitalize on the demand in time, the prices normalize.
With trading cards, there is a never ending supply of new modern cards. Its literally licensed at a level that Panini, Topps and UD can print as needed, as long as they have the means to do so. We have already seen Panini introduce multiple new formats across the calendar for every sport they own, and Topps doing similar with what they own. The supply of cards is going to change in 2021, and likely in a drastic way for 2022.
The last time this type of demand increase happened, 1987 Donruss and the junk wax era gripped the industry and almost drove it out of existence. The demand of the current era is supplemented by a similar starving collector base, but augmented by contrived scarcity. Unlike the era of junk wax, serially numbered cards and finite autograph resources make unlimited production relatively difficult. As we have seen, it hasnt stopped things from getting out of control, but its far from impossible to see resources drying up to continue down the path of the junk wax era in the same fashion.
Grading and the Long Term Success of the Bubble
Lets continue onto the part of the bubble that I feel is the one with the most vulnerability, and that is graded cards. Right now, the most important aspect of this explosion is the way hyper mint graded examples have driven exceptional market performance. Its two fold, demand for a limited number of high grade cards, and the limited number of those cards to begin with. Both of those aspects are vital to the success of trading cards as a long term investment play and how the grading business impacts the overall durability of this bubble.
To start, the grading impact on things isnt going away. If anything its going to get more important. As much as that makes me upset and disappointed, its a reality no one can run from. Certain high grade cards that populate the champagne room of this hobby may forever be unattainable for the majority of the hobby because of this state of affairs.
Although the million dollar sales may eventually slow down when things get back to normal in our regular life, the trajectory of value is not going to be stunted. There is too much toothpaste out of the tube to stuff it back in – especially with how many athletes and celebrities are catching on. News coverage of the top sales perpetuates one of the conflicts of interest I mentioned in the previous post, but it also spurs a blitz of new considerations. “If that card is worth 1.8 million, what is this more desirable card going to go for? Lets find out!”
These mega cards really share one specific trait that will forever make them the icons of the hobby – there arent many of them. True rarity, not contrived rarity drives a lot of that value, even if that rarity is in the subjective grade, rather than the rarity of the card. When we travel across the spectrum to the more every day examples, that’s where the true measure of this bubble really lies. Can the cards with no real rarity in a high grade continue to demand the kind of dollars that they do right now?
I think the answer lies in one very specific stat – the number of cards currently existing in the PSA backlog. We can guess that there are millions of cards currently waiting to be graded. Outside of the ridiculous price increases trying to dam the river, there are so many cards that are going to come onto the market in the next year, that the more common ones could see a flood.
That begs a question of whether or not the hobby can withstand the enormous supply injection and if the demand is truly as explosive as we all think. Its possible that it can, but we are foolish to expect that more supply will do anything but drive prices down.
What Breaks First?
People seem to be expecting a rapid downfall if/when this bubble does burst. I dont think I agree that it will happen the way people expect. I think it will be much more of a gradual process, and the new bottom will still be well above the old one.
The first indicator will be wax. If Panini and Topps continue to churn out cards that are indistinguishable from other cards released, the grading queue shortens, and people start seeing a clearer picture of how many cards exist in the hobby’s new universe, I think the first thing to start going back will be new wax from sets that were generally throwaways in the past. Right now boxes of product like Donruss and Score are 10x what they should be. I just cant see a future where those boxes remain desirable enough to sustain a price like that. At the end of the baseball season last year, wax prices seemed to settle hard. The desirable sets remained in an hyper inflated price state, but the rest really went back to something resembling normal. This could be the first indicator when things start to normalize.
The second indicator will be the value assigned to new cards of unimportant players and unimportant sets. Like wax falling off, the insane quantity of cards will eventually generate a supply that cannot sustain the type of demand that was initially there. The legacy sets like Topps Chrome and Panini Prizm will continue to drive the market, but paying $9000 for a second year card of an unimportant player in an unimportant set is going to be another hole in the wall.
The last indicator will be the lowered value of common cards in high grades with growing pop reports. We have already seen that enormously common cards, that were born during this new era have never existed outside of a sleeve from the moment they were pulled from a pack. This is different from cards that were released earlier and without much fanfare. The spectrum of grades that should span results of 7-10, will eventually be much more likely to span 9-10. It creates an artificial scarcity, which will change.
How Long is it Going to Take?
The saying is always buy low and sell high. The problem is knowing when a card or set will reach the peak of its value. Right now, people are holding because they feel that they still have room above.
There are other factors as well, stemming from environmental due to the eradication of Covid, and governmental stemming from the stimulus packages. As long as those things remain in play, the peak is still off in the distance. When those things change, that’s when we will start to see the decline come into focus – if it ever does.
I dont think there is a guarantee it will ever get back to where it was. In fact, I would say its likely not going to get there. But to think that this boom is infinite in its timeframe is short sighted. There are too many headwinds that should or will change.
We always used to wonder what the next big thing was going to be, thanks to years of stale products and lack of innovation. Right now, that stalemate could be a harbinger of trouble, especially with things like NBA Top Shot and other innovative collecting approaches taking hold.
If this boom lasts beyond the 2-3 years, there is going to be a number of questions that will need to be answered, most of which stem from basic things. We are talking product delivery, product configuration, grading, and community. The more things stay the same, the less of a peak the end will have.
Right now, group breakers and many shops are living their best life, with many of the products selling like they never have in the past. At the same time, rising cost and lack of access to affordable wax may limit the participation of many people who used to be the driving force behind many of the cards we chased on eBay.
This leads to more discussion of direct to consumer sales, changes in the way eBay manages their sports card related listings, and how products are configured to ensure group breakers never struggle to fill breaks.
In looking at this from how I would approach things, the key to long term success hinges on technology. Too many parts of the hobby function on outdated approaches, which is why Top Shot and digital collectibles have become the darling of many talk tracks in the hobby. The more Topps and Panini can innovate around creative uses of technology to connect, inspire, and track the progress of their consumers, the more likely this boom will continue to grow.
Like most people, I never expected this to happen the way it has. I never saw sports cards as the key to Pandemic era happiness until it was. Being a part of this hobby for so many years, Im excited we are finally getting our time in the spotlight. As they say, for most, there is only 15 minutes of fame – and we are all curious if we are on minute 3 or minute 14 here.
