The last two years of trading cards has been historic. First, a value boom of epic proportion has brought trading cards and sports collectibles to the forefront of the national conversation. Then, as if things couldnt get more crazy, Fanatics secured a deal with the three biggest leagues to have exclusive licensing rights for 20(!!) years. Now, we have come to find out that Topps has been acquired, putting them at the top of the card mountain for the foreseeable future. Funny thing is, I dont even think we are close to being done. I want to look at this acquisition from the different sides of the hobby and industry.
Impact to the Industry
Fanatics’ entry into trading cards is a new era, and that hasnt changed since the announcement a few months ago. The problem for Fanatics wasnt money or distribution, but the people needed to design and deliver the massive amounts of content needed for a trading card company. For people to expect Fanatics to just come up with a plethora of new brands that would continue with the hobby’s current trajectory is relatively laughable. They needed people, they needed intellectual property, they needed a crew. With Topps, they not only got all of that, but they got some of the best there is.
Flagship Topps baseball is a historic legacy that needed to continue. The hobby was in jeopardy of losing that history when Fanatics stepped in, and thankfully we arent going to lose the iconic aspect of that again. I doubt there were many industry professionals that wanted to see the end of Topps’ place in that part of the trading card world. Its rare that you have 70 years of history just wiped away, and this merger prevented that from happening.
In buying Topps, Fanatics also gains access to some of the top card designers around. Topps, for the most part, has brought together a collection of people that all have the chops to do what needs to be done. I believe when Upper Deck lost their licenses back around 2009-2010, Topps went and signed those people up. Since that time frame, the best looking cards in the industry have undoubtedly been on the Topps side of the equation. That’s why I have always gravitated towards their goods. Its not saying Panini and Upper Deck havent made improvements since that time, but Topps remains the benchmark.
Additionally, Topps has a digital division that might be unmatched across the entirety of the industry. With the recent inclusion of NFTs to their portfolio, it has only gotten stronger. We know that Fanatics sees digital cards as a huge frontier, and I think that of all the assets out there to buy, Topps is most mature.
This doesnt look like the last of Fanatics’ desire to consolidate, especially given what Michael Rubin has stated in different interviews since the announcement was made. I fully expect we start to hear more and more about this type of M&A pretty regularly as we get closer to 2023 and beyond. If consolidation is the plan, we could easily see them target more card companies that have staff and IP to give. I believe Panini is likely off the table now that Topps is under the Fanatics umbrella, but a company like Upper Deck still seems very attractive. Sets like Exquisite and SPA are still among the most valuable IP out there, because newer collectors have seen Jordan, LeBron and Kobe stuff shoot to the moon from those products. Similarly, the contracts with Jordan, Lebron and Tiger are all insanely valuable, especially because pro-uniform autographs are non-existent since the lost license to Panini took effect.
Impact to the Hobby
I have been a staunch critic of exclusive licenses since the first one was signed. However, now that the exclusives are here to stay for the next 20 plus years, there isnt much we can do. This feels different because of the length of time, and the potential to buy out companies that will bring their IP to an exclusive. Instead of locking people out, its possible we see Fanatics M&A plan work to the advantage of the collector. Owning these giant licenses for such a gargantuan length of time breeds new need to negotiate.
We all know that from their press release, the plan is to use the Topps name on products going forward. Good thing. We also should get collector favorites in NFL and NBA that have been gone for YEARS. Another good thing. The chance to continue collecting products around since we were kids? Yup, good thing. Is it possible that Fanatics buys the IP or ability to license it for their use given the timeframe of their relationship with the leagues? Who knows? All big question marks that we need to have sorted out over the next few years.
Similarly, we saw that the press release also mentioned Hobby Shops in their language, something that a number of pundits were wondering about. No one wants to see a neighborhood shop close their doors, most are family run, and some have been around since the last collecting boom in the 90s. If Fanatics buying Topps means they get to stick around? I love it.
There are aspects of the hobby I hope will change with this consolidation plan, as Ive mentioned in previous posts. I dont like that online retailers and distributors can collude to fix prices. They can artificially set a floor or raise a ceiling without much effort, and due to limited supply and overwhelming demand, right now there are no consequences. If Fanatics is going to remove that from their model, I think that’s a good idea. Similarly, Topps comes with baked in people that have decades of experience in this part of the industry. Im curious if this plan changes to accommodate the relationships Topps brings to the table. For collectors, this might be the most challenging part of the acquisition to understand, but its one that could hurt us the most. There are people in power right now that have exponential influence over a speculative bubble that seems to have formed. If Fanatics truly wants to move on from the way things are done today, this is the one thing I hope will change.
Where Do We Go From Here?
The next 4 years are going to be a whirlwind of change. Change in the way people look at cards, the values, and what Fanatics plans to do with their vision.
As mentioned, I think the M&A continues to a very high degree. I also believe that we arent done hearing about card company acquisitions into the Fanatics family of products. Upper Deck seems like the next logical choice, given their IP and ePack. If Michael Rubin’s philosophy of increasing access to product and going mainstream, they will need all the help they can get. Its a big vision to make work in practice.
Peripheral hobby businesses like COMC might be on the menu too. Fulfillment is a huge deal, especially for single card shipments, so this could be something that Fanatics wants to include in their plan. Same goes for things like group breaks or general crowd sourcing of product. All those things are on a white board somewhere, surely.
Lastly is the grading, and I think thats where this gets very complicated. Fanatics is climbing a mountain to get to a consolidated retail empire. Collector’s Universe (PSA) is climbing the same mountain on the grading and valuation side, acquiring businesses like Card Ladder and the like. I could see Fanatics take over Beckett to get BGS, and that might be as big a deal as getting Upper Deck under their watch.
Either way, this is going to be one of the most fun times we have seen in the hobby, ever. Hope you guys are ready!