The way baseball cards collide with NFTs, SPACs changes the game

On a recent family ski trip to California, my children and I entered an old baseball bookstore in Sonora, a former gold mining town at the foot of the Sierra Nevada.

As a crazy book collector, I lit up when I saw the sign for BJ books and collections on the city’s main train. With the start of the baseball season, I bought each of my sons, ages 5 and 8, a pack of Topps 2021 books.

Before calling me, the owner, Bill Wiley, apologized, informing me that each package costs $ 5.50. This is more than a 100% increase over pre-pandemic levels. During the blockades, he said, the popularity of sports books increased, and small dealers like BJ had to pay big bucks to distributors to get inventory. It didn’t matter if you were talking about unique packages or the rarest collections.

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

Those $ 5.50 packages I bought for my kids in February would now cost $ 7, according to Wiley, who said she pays $ 148 for a box of 24 packages to make $ 20. 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 beginner trading card from Dallas Mavericks star goalkeeper Luka Doncic was purchased for $ 4.6 million. And in April, a debutant Tom Brady card was bought at an auction for $ 2.25 million, a record for football.

Wiley, 68, said shoppers today are much different than they were in the heyday of the industry in the 1990s, when collectors came in and spent hours looking through random boxes of books.

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

The unforeseen resurgence of the sports card industry that sellers like Wiley are facing is clashing primarily with two other booming trends that have caught the attention of investors: non-fungible chips (NFTs) and special purpose purchasing companies (SPACs).

On Tuesday, Topps said it will go public through a SPAC, which means it is purchased by a publicly traded blank check company. In the announcement, the 83-year-old sports book and chewing gum company promoted both the popularity of physical collections 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, mostly applications, is growing rapidly and that the blockchain will be a big part of the future. . However, he said physical cards still drive much of the current business.

“Cardboard cards are still extremely popular – we appeal to children,” Eisner said. “Digital cards are very popular – we target teenagers and young people. And with blockchain, we think we’re going to attract everyone.”

Topps revenues in 2020 rose 23% to $ 567 million, and the company expects 22% sales growth this year, followed by a 12% increase in 2022. By next year, physical goods and apparel products (Bazooka Gum and Ring Pops) will still generate almost 90% of revenue. In addition to its flagship baseball books, the company sells books for the UEFA Champions League, National Hockey League, World Wrestling Entertainment and Star Wars.

Eisner said the company settled on the SPAC transaction based on the trajectory of its existing business and that “the blockchain explosion came after we made this decision.”

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

For book dealers like Ron Gustafson, owner of MVP Sports Cards & 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 directly witnessed the remarkable rebirth of a business that, in recent decades, has evolved more toward traditional retail.

Gustafson, who has three daughters, opened his store in 2017 as a passion project and has been involved in the tax business he has owned since 2008. He said that when the pandemic hit, things were very slow at first. due to shutdowns and concerns about the economy. The resurgence began as the NBA resumed its season in the Orlando balloon in July, he said.

“This has really helped recover the sports fans,” Gustafson said. “The card market has grown completely. Maybe people were at home and more people had more time.”

Even with store limits and viewing meetings, Gustafson said he recently recovered the initial $ 250,000 he put into the business and now has a profit. While Topps controls most of the baseball market, the most popular products at the moment are soccer cards and the most expensive are basketball, he said. Panini America holds the licenses for those leagues.

Gustafson said his most interesting meeting came on a Saturday in March after he received a phone call from someone asking if his store had boxes of Panini’s Prizm football cards, which he sold for $ 1,500. . Gustafson said yes, and the man told her he would be there in half an hour.

When he arrived, the man asked Gustafson if he happened to have rookie cards for Alex Bregman, a player for the Houston Astros. Gustafson said he didn’t ask why he was looking.

“He said, ‘Because I’m Alex Bregman,'” Gustafson said. “Sure enough, 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 they had a game that day against the New York Mets in nearby Port St. Louis. Lucie. Gustafson said he initially intended to participate in the game that day and would let his store manager run the store.

“If I went to the game, I would miss Alex Bregman,” Gustafson said. Instead, he met Bregman and made a $ 4,500 sale.

Gustafson said he was not yet sure about the direction of the digital market. Panini has a blockchain product with online card auctions, although it has a “niche popularity,” he said. The handwritten autograph physical book is still what excites collectors, he said, as does buying and owning boxes of packages that grow in value as beginners that year turn into stars.

However, there are plenty of ways the blockchain could make even the traditional card market more efficient and reliable, Gustafson said. For example, there is no good way to value old and rare books. Sellers still tend to look on eBay to see the price of the last transaction. Others mail the cards and pay to be classified by specialist authenticators. These processes are boring and imperfect.

“People are warming up to the digital side of things because of what digital currency is doing in terms of investment,” Gustafson said, adding that he has invested little in bitcoin and ethereum cryptocurrencies. “Collectors want something physical in return.”

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