How baseball card mania works with the NFT increase to revive Topps and alter the sport for sellers

Topps baseball cards

Ari Levy | CNBC

On a recent family ski trip in California, my kids and I visited an old baseball card shop in Sonora, a former gold mining town in the Sierra Nevada foothills.

As a former mad card collector, I lit up when I saw the sign for BJ’s cards and collectibles on the main street of town. Just before the start of baseball season, I bought each of my sons, ages 5 and 8, a pack of 2021 Topps cards.

Before calling me, the owner, Bill Wiley, apologized that each pack was $ 5.50. That is more than a 100% surcharge compared to the prepandemic. Sports cards became popular during the bans, and small retailers like BJ had to pay the retailers the highest dollar to get inventory. It didn’t matter if you were talking about single packs or the rarest collectibles.

“This is the busiest thing I can remember,” said Wiley, who opened the store with his son in 1992, in a phone interview this week. “I was closed for nine weeks and when I reopened there was an incredible demand for sports tickets.”

Those $ 5.50 packs I bought my kids in February would now cost $ 7, according to Wiley, who said he was paying $ 148 for a box of 24 packs to make a $ 20 profit. At the other end of the market, a 1952 Topps Mickey Mantle rookie card sold for a record $ 5.2 million in January. A month later came the most expensive basketball card transaction in history – a rookie trading card from Dallas Mavericks Star Guard Luka Doncic was bought for $ 4.6 million. And in April, a rookie Tom Brady card was bought at auction for $ 2.25 million, a record for football.

Wiley, 68, said shoppers today are much different than when the industry was at its heyday in the 1990s, when collectors came in and rummaged through boxes of random cards for hours.

“A lot of these people are new to the hobby and consider it a form of maybe a little bit of gambling,” he said.

The unforeseen resurgence in the sports card industry that sellers like Wiley are witnessing collides headfirst with two other booming trends that have caught investor attention: non-fungible tokens (NFTs) and special purpose acquisition companies (SPACs).

On Tuesday, Topps announced it was going public through a SPAC, which means it will be acquired by a publicly traded blank check company. In the announcement, the 83-year-old sports cards and chewing gum company pointed to both the popularity of physical collectibles and the expansion to NFTs or digital items based on blockchain technology.

Former Disney CEO Michael Eisner, who bought Topps 14 years ago, told CNBC’s Squawk Box that the digital business, mostly apps, is growing rapidly and that blockchain will be a big part of the future. However, he said physical cards still run a large part of current business.

“The cardboard cards are still very popular – we appeal to children,” said Eisner. “The digital cards are very popular – we appeal to teenagers and young adults. And with blockchain we think we will appeal to everyone.”

Topps’ sales increased 23% to $ 567 million in 2020. The company predicts sales growth of 22% this year, followed by an expansion of 12% in 2022. Through next year, physical goods and confectionery (bazooka gum and ring pops) will continue to be manufactured to nearly 90% of sales. In addition to its flagship baseball cards, the company sells cards for the European UEFA Champions League, National Hockey League, World Wrestling Entertainment and Star Wars.

Eisner said the company chose the SPAC transaction based on the history of its existing business and the blockchain “exploded after we made that decision”.

By explosion, he refers to products like NBA Top Shot, made by league partner Dapper Labs. Consumers pay up to hundreds of thousands of dollars for a video highlight of a LeBron James Dunk or a Zion Williamson Blocked Shot. The clips are purchased as NFTs that have unique codes on the blockchain that confirm their authenticity.

LeBron James of the Los Angeles Lakers during a game against the LA Clippers at the ESPN Wide World Of Sports Complex on July 30, 2020 in Lake Buena Vista, Florida.

Mike Ehrmann | Getty Images

“More time on your hand”

For card retailers like Ron Gustafson, owner of MVP Sports Cards & Collectibles in Sebastian, Florida, the timing of Topps’ plan to hit the public market is fascinating. From his 1,000-square-foot store in a coastal mall, Gustafson has seen firsthand the remarkable recovery of a business that has tended more towards traditional retail for the past few decades.

Gustafson, who has three daughters, opened his business in 2017 as a passion project and side run of the tax business, which he has owned since 2008 economy. The resurgence began around the time the NBA restarted their Orlando Bubble season in July, he said.

“That really helped get sports fans back,” said Gustafson. “The card market just shot up. Maybe people were home and more people had more time.”

Despite the store occupancy restrictions and the display of appointments, Gustafson said he recently made good on his initial $ 250,000 put into the store and is now seeing profits. While Topps controls most of the baseball card market, soccer cards are the most popular and basketball the most expensive right now, he said. Panini America owns the licenses for these leagues.

A surprise customer

Gustafson said his most interesting date of the year came on a Saturday in March after being called by someone asking if his store had boxes of Panini’s Prizm football tickets that he sells for $ 1,500. Gustafson said he did and the man told him he would be there in half an hour.

When he arrived, the man asked Gustafson if he happened to have rookie tickets for Alex Bregman, an infielder for the Houston Astros. Gustafson said he didn’t and asked why he was looking.

“He said, ‘Because I’m Alex Bregman,'” said Gustafson. “Sure enough, he took the last three Prizm boxes off the shelf and had us take a picture.”

Alex Bregman of the Houston Astros at MVP Sports Cards & Collectibles in Sebastian, Florida.

Source: Ron Gustafson

Bregman was in Florida for spring training. The Astros play about 90 miles south of Sebastian in West Palm Beach, but had a game against the New York Mets that day in the nearby town of Port St. Lucie. Gustafson said he originally planned to take part in the game that day and would let his store manager run the store.

“If I had gone to the game I would have missed Alex Bregman,” said Gustafson. Instead, he met Bregman and made a sale for $ 4,500.

Gustafson said he was still not sure where the digital market was going. Panini has a blockchain product with online card auctions, although it has very “niche popularity,” he said. The physical card with a handwritten autograph is still what collectors get excited about, he said, as is buying and owning boxes of packs, which increase in value as beginners turn out to be stars this year.

Still, there are many ways blockchain could make even the traditional card market more efficient and trustworthy, Gustafson said. For example, there is no good way to rate old and rare cards. Sellers still tend to look for the last transaction price on eBay. Others post cards and pay for them to be evaluated by special authenticators. These processes are lengthy and imperfect.

“People are warming up to the digital side of things because digital currency works from an investment standpoint,” said Gustafson, adding that he has invested a little in cryptocurrencies, bitcoin and Ethereum. “Collectors still want something physical in return.”

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