Sports Cards: A Little Slice of Vegas

Josh, a typical 13-year-old kid, rushes into his local 7-Eleven with a fist full of money he earned from mowing lawns that day. He quickly walks up to the counter and purchases $30 worth of scratch-off lottery tickets from the store clerk. Josh promptly scratches the tickets, one after another, discarding the losing tickets to the side. Consequentially, one of the tickets produces $50 in winnings. The $50 ticket is immediately turned in for another $50 in tickets and the process is repeated.

Does a 13-year-old boy scratching lottery tickets sound legitimate to you? Well, a similar process occurs daily in the sports card industry. In my opinion, it's hard to see the difference between buying a lottery ticket at a convenience store and a premium pack of collector cards. Sound silly? Not so fast.

Buy a pack of cards or pay your mortgage

Today, it is not odd to see collectors as young as twelve spend $100-$300 on a pack of four or five cards in hope of pulling a card worth thousands of dollars. Anyway you slice it, this is gambling pure and simple. Good luck finding a pack of cards for less than $5 in your local card shop. Just 15 years ago, I remember spending fifty cents for a pack of 20 cards and the packs came with a piece of powdered bubble gum! I looked for my favorite player or the up-and-coming rookies, not a $20,000 card. This forces me to ask the question: Is there really any difference between scratching a lottery ticket from your local 7-Eleven or buying a high-end pack of cards from a hobby shop? Not really.

Still need convincing?

One of the best examples of this "lottery" mentality sweeping the card-collecting market is the LeBron James/Michael Jordan "All-NBA Access Pass" card found in Upper Deck's 2003-04 Exquisite Collection Basketball product line. This card is extremely unique and a true "one-of-one" collector's item. Exquisite basketball initially retailed at $500 for a box of 5 cards and peaked around $700 a box or roughly 1000-1400 times the cost of a pack of cards during my youth. There is no need to do a double take; do the math and that is between $100 and $140 per card.

The LeBron James/Michael Jordan card was pulled by Orlando Macias of Santa Rosa, CA. Orlando spent a total of $2,500 over a short period of time on the Exquisite product in search of a "winning" card. As Macias told TradingCardCentral.com last summer, "I was standing to lose quite a bit of money. I was looking for a LeBron James rookie autograph, a Carmelo Anthony card or a Dwayne Wade card - anyone that would be worth the money that I had spent to that point."

Macias initially spent $1,500 to purchase a 3-pack case (15 cards) of Exquisite from a card shop in Rohnert Park, CA. "I was upset with the Exquisite product. The first case only had one card worth more than $800 and the other cards from the case did not even come close to covering what I had spent." Macias continues, "Luckily, I was able to buy more packs by selling the one nice card from the first case."

Again, I ask: Is this an example of collecting or searching for a winning lottery ticket? Macias is just one of thousands of collectors that spend a small fortune each year in hopes of hitting it big with a card potentially worth thousands of dollars. While there is no arguing that the Upper Deck Exquisite product is beautiful and generally restricted to high-end collectors, I still consider it a form of gambling.

So, why has the card industry evolved into such a high-end market? The answer is simple - competition. The sports card industry is a lucrative, yet extremely competitive market. Card manufacturing alone is roughly a $1 billion a year industry. According to a leading financial site, Hoover's Online, The Topps Company, Inc. (one of the leading card producers) has an annual revenue stream of roughly $300 million dollars (FY 2005) with The Upper Deck Company, LLC estimated to take in $200 million (FY 2001).

Today, there are seven major card companies vying for a shrinking pool of collector's money. Besides Topps and Upper Deck, Donruss Playoff, Fleer/Skybox, In The Game, Press Pass and SA-GE all compete in a flat market. Producing high-end, high-margin products and driving up demand through rare inserts seems to be the best strategy to increase market share and profits.

It's all in the Marketing

Almost every box of cards produced by these companies is engineered to appeal to this lottery mentality. Take a look at your typical box of sport cards. Do the companies advertise how great their base cards are? No, they advertise the rare inserts. A typical box of sports cards will read something like, "Great new product featuring loads of rookies, jerseys and autographs. Look for a Game-Used Patch card and 1 Autograph per box." This is the norm and not the exception. Take a closer look at the specific inserts and you will also notice that they are getting more rare, driving up their value in the secondary market.

You also have to wonder why some inserts are in a pack of sports cards. For example, Topps offered "American Treasures" in their popular 2004 Topps Baseball product. These randomly inserted trading cards featured a cut signature of each of the 42 different U.S. Presidents. It was a brilliant marketing effort as their product sold like hot cakes. But, I have to ask the question: What do Presidential-signed cards really have to do with the game of baseball?

Every Presidential signature pulled by collectors was quickly sold on eBay or NAXCOM for thousands of dollars rather than going from a pack to a personal collection. Why not just randomly place $1000 checks into packs and cut out the secondary market all together? Well, that's exactly what Topps' new Pack Wars product offers. Inside the "prize" packs, a collector may just find real $100 bills folded up and placed inside a standard-sized trading card frame. With this recent development, is there really any question about the comparison to gambling?

Overall, I still consider the sports card hobby an exciting and fun place to spend my time and -for the most part - my money. There is no question that the industry has evolved considerably since the 1980s. For the most part, rare inserts are a joy to see and a true pleasure to pull. My main objection is the lottery mentality sweeping the card industry with $500 packs and rare inserts worth thousands of dollars. Soon, we may need support groups for collectors that have a true addiction and an empty bank account. The sports card industry should remain a hobby enjoyed by families around the world. Let's keep the hobby in our mainstream cities and out of Vegas!

About the author
Mike Silvia is the general manager/part owner of SportsCardSheriff.com. Sports Card Sheriff is the #1 most visited sports card community (according to Alexa.com) with over 5700 members. The site has over 70 moderators with 10 sport forums, a feedback system, a live chat system, a courthouse, a card gallery, a private message system, a through-the-mail autograph forum and more.

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