How baseball card mania collides with NFT boom to revive Topps and change the game for dealers

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

As a former collector of rabid cards, I lit up when I saw the sign for BJ’s Cards and Collectibles on the main road of the city. As baseball season nearly started, I bought a pack of 2021 Topps cards for each of my sons, ages 5 and 8.

Before calling me, the owner, Bill Wiley, apologized by telling me each package was $5.50. That’s more than a 100% boost from pre-pandemic levels. During the lockdowns, he said, the popularity of sports cards had skyrocketed and small dealers like BJ’s had to pay top dollars to distributors to get stock. It didn’t matter if you were talking about loose packaging or the rarest collectibles.

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

Those $5.50 packs I bought for my kids in February would now cost $7, according to Wiley, who said he pays $148 for a box of 24 packs to make $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, the most expensive basketball card transaction in history occurred – a rookie trading card from Dallas Mavericks observatory Luka Doncic became 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 buyers are very different today than they were during the industry’s heyday in the 1990s, when collectors would come in and spend hours looking through boxes of random cards.

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

The unforeseen revival of the sports card industry experienced by sellers like Wiley clashes primarily with two other booming trends that have caught the attention of investors: non-fungible tokens (NFTs) and special purpose acquisition companies (SPACs).

On Tuesday, Topps said it will go public through a SPAC, meaning it will be acquired by a publicly traded company with blank checks. In the Announcement, the 83-year-old sports card and gum company praised both the popularity of physical collectibles and its expansion into NFTs, or digital items that live on blockchain technology.

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

“The cardboard cards are still hugely popular — we appeal to kids,” Eisner said. “The digital maps are very popular – we’re targeting teens and young adults. And with blockchain, we think we’re going to appeal to everyone.”

Topps revenue grew 23% to $567 million in 2020, and the company expects revenue growth of 22% this year, followed by a 12% expansion in 2022. Until next year, physical goods and confectionery (Bazooka Gum and Ring Pops) still almost 90% of sales. In addition to its flagship baseball cards, the company sells cards for Europe’s UEFA Champions League, the National Hockey League, World Wrestling Entertainment and Star Wars.

Eisner said the company settled the SPAC transaction based on the trajectory of the existing company, and that the blockchain “exploded after we made this decision.”

With explosion he refers to products such as NBA Top Shot, made by competition partner Dapper Labs. Consumers pay up to hundreds of thousands of dollars for a video highlight of a LeBron James dunk or a blocked recording of Zion Williamson. The clips are purchased as NFTs, which have unique codes on blockchain that certify their authenticity.

Top Shot sales are just the beginning. Following his seventh Super Bowl win, Brady announced the… launching his own NFT company called signature. Mavericks billionaire owner Mark Cuban started an NFT art galleryand athletes, including Kansas City Chiefs quarterback Patrick Mahomes and PGA Tour golfer Bryson DeChambeau have created and sold NFTs.

‘More time on your hands’

For card dealers like Ron Gustafson, owner of MVP Sports Cards and Collectibles in Sebastian, Florida, the timing of Topps’ plan to enter the public market is fascinating. From his 1,000-square-foot store in a strip mall near the coast, Gustafson has seen firsthand the remarkable resurgence of a company that has evolved more toward traditional retail in recent decades.

Gustafson, who has three daughters, opened his shop in 2017 as a passion project and a sideline of the tax business he has had since 2008. He said when the pandemic hit, things were very slow at first due to the closures and concerns about the economy. The resurgence began around the time the NBA resumed its July season in the Orlando bubble, he said.

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

Even with limits on store occupancy and viewing appointments, Gustafson said he recently recouped his initial $250,000 he put into the business and is now making a profit. While Topps controls most of the baseball card market, the most popular products right now are football cards and the most expensive are basketball, he said. Panini America owns the licenses for those competitions.

A surprising customer

Gustafson said his most interesting appointment of the year came on a Saturday in March after he got a call from someone asking if his store had boxes of Panini’s Prizm football cards, which he sells for $1,500. Gustafson said yes, 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 any rookie cards for Alex Bregman, an infielder for the Houston Astros. Gustafson said no and asked why he was looking.

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

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

“Had I gone to the game, I would have missed Alex Bregman,” said Gustafson. Instead, he met Bregman and sold $4,500.

Gustafson said he’s still not sure where the digital market is headed. Panini has a blockchain product with online ticket auctions, although it has very “niche popularity,” he said. The physical card with a handwritten signature is still what excites collectors, he said, and so is buying and owning boxes of packages that rise in value as that year’s rookies turn into stars.

Still, there are plenty of ways blockchain could make even the traditional card market more efficient and reliable, Gustafson said. For example, there is no good way to price old and rare cards. Sellers still tend to look on eBay to see the latest transaction price. Others send cards in the mail and pay to have them reviewed by specialized authenticators. Those processes are tedious and imperfect.

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

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