How baseball cards’ clash with NFTs, SPACs changes the game

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

As a former rabid card collector, I lit up when I saw the sign for BJ’s Cards and Collectibles on the city highway. With the start of the baseball season, I bought each of my boys, 5 and 8 years old, a pack of 2021 Topps cards.

Before the owner, Bill Wiley, apologized to me, he informed me that each package was $ 5.50. This is more than a 100% surcharge of pre-pandemic levels. During the shutdown, he said the popularity of sports cards skyrocketed and that retailers like BJs had to pay the best dollars to distributors to get stock. It did not matter if you were talking about single packs or the rarest collectibles.

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

The $ 5.50 packs I bought for my kids in February would now cost $ 7, according to Wiley, who said he paid $ 148 for a box of 24 packs to make $ 20 in profit. Across the market, a 1952 Topps Mickey Mantle vegetable card was sold for a record $ 5.2 million in January. A month later, the most expensive basketball card transaction in history took place – 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 buyers today are very different from during the heyday of the industry in the 1990s, when collectors would come in and spend hours looking through subjects with random cards.

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

The unforeseen revival of the sports card industry that sellers like Wiley are experiencing is at the forefront of two other booming trends that have caught investors’ attention: non-fungible tokens (NFTs) and specialty procurement companies (SPACs).

Topps said on Tuesday that it will publish through a SPAC, which means it will be acquired by a publicly traded blank check company. In the announcement, the 83-year-old sports card and chewing gum business pointed out both the popularity of physical collectibles and their expansion into NFTs, or digital items that live by blockchain technology.

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

“The cardboard cards are still extremely popular – we appeal to children,” Eisner said. “Digital cards are very popular – we appeal to teenagers and young adults. And with blockchain, we think we’ll address everyone.”

Topps’ revenue increased by 23% to $ 567 million in 2020, and the company predicts sales growth of 22%, followed by a 12% expansion in 2022. Until next year, physical goods and decorations (Bazooka Gum and Ring Pops) will continue until almost 90% of revenue. In addition to its flagship baseball tickets, the company sells tickets for the European UEFA Champions League, the National Hockey League, World Wrestling Entertainment and Star Wars.

Eisner said the company settled on the SPAC deal based on the track of the existing business, and that the blockchain explosion came after we made this decision.

By explosion, he refers to products like NBA Top Shot, manufactured 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 shot. The tracks are purchased as NFTs, with unique codes on blockchain confirming their authenticity.

For card dealers like Ron Gustafson, owner of MVP Sports Cards & Collectibles in Sebastian, Florida, the timing of Topps’ plan to reach the public market is fascinating. From his 1,000-square-foot store in a strip shop near the coast, Gustafson saw first-hand the remarkable revival of a business that has been moving more toward traditional retail in recent decades.

Gustafson, who has three daughters, opened his store in 2017 as a passion project and a cast for the tax business he has owned since 2008. economy. The revival began by the time the NBA started the season in the Orlando bubble again in July, he said.

“It really helped get sports fans back,” Gustafson said. “The card market just skyrocketed. People may have been home and more people had more time.”

Even with limited occupancy limits and appointment visits, Gustafson said he recently recovered his initial $ 250,000 he poured into the business and is now making a profit. While Topps controls most of the baseball card market, the most popular products at the moment are football cards and the most expensive is basketball, he said. Panini America owns the licenses for those leagues.

Gustafson said his most interesting appointment for the year took place on a Saturday in March after he received a call from someone asking if there were any boxes of Panini Prizm soccer tickets in his shop, which he bought for $ 1,500. sell. Gustafson said he did, and the man told him he would be there in half an hour.

When he got there, the man asked Gustafson if he happened to have a rookie ticket for Alex Bregman, an attacker for the Houston Astros. Gustafson said he did not do so and asked why he was looking.

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

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

“If I had gone to the game, I would have missed Alex Bregman,” Gustafson said. Instead, he met Bregman and made a $ 4500 sale.

Gustafson said he was still unsure about where the digital market was headed. Panini has a blockchain product with online card auctions, though it has a lot of ‘niche popularity’, he said. The physical card with a handwritten signature is still what excites collectors, he said, and so is the purchase and possession of parcels that increase in value as rookies from that year turn into stars.

Yet there are many ways blockchain can 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 tickets by post and pay to have them rated by specialty verifiers. These processes are tedious and imperfect.

“People are heating up the digital side of things because of what digital currency does from an investment standpoint,” Gustafson said, adding that he has invested a bit in bitcoin and ethereum. “Collectors want something more physical in return.”

LOOK: The rise of NFTs and why people collect moments and assets differently