There arent many products that have the brand loyalty that has been built by Topps Chrome and it’s sister sets, or Panini Prizm and it’s sister sets. I think there are sets that end up being more valuable, but overall, from a popularity and importance standpoint, the chrome stock family of products are the most important aspect in the history of the hobby.
Yep, I’m leading with some MEGA hyperbole, because as we have seen with recent 7 figure sales of some Chrome cards, there is nothing that people want to have more for their collections than the iconic examples from over the years. More importantly than that, the cards achieve these insane values with a much lower product cost and much higher availability than just about any other product has ever had on the market.
Think about it, Exquisite and National Treasures bring the most valuable cards around, but the availability of those products pale in comparison to the products like Prizm, Bowman and Topps Chrome. Its actually shocking to me that Topps gambled so large with the first release of Finest and hit it so far out of the park that 30 years later, we are still living that premium approach in a giant portion of the hobby releases.
When reviewing the legacy here, it should go without saying that the way both Topps and Panini were able to create value in cards that have no autograph and no relic, is pretty admirable. The era in which these cards made the most of their mark was characterized by cards who’s value stemmed from autograph and relic content. Its impressive that both companies so successfully worked around that for so many sets.
Both Topps and Panini each release 20 or so versions of a Chrome stock product each year, which is saying something about its overall importance. The hobby has responded in kind, with Chrome stock products being the most heavily graded cards in the history of the hobby. Even during the most down periods of the hobby, people still loved the cheap fun that these products delivered, and in Topps’ case, they rarely made a mistake in the way things were built. Its a legacy of excellence that might not ever be overtaken by anything.
Panini Prizm, or as I have affectionately called it the past, “Diet Chrome”, has taken on a life of its own. Panini effectively owns like 80% of all the trading cards sold in the US, or some ridiculous number like that, and Prizm has become their go to set for driving a new license and creating margin in their product lines. Because Prizm has almost exclusively become the card of record for some of the most important NFL and NBA players, the exclusive license has made it the most important vehicle Panini has.
Funny enough, Prizm doesnt have the same excellent track record that it should have, if not only because the 2012 sets through the 2014 sets were some of the ugliest products ever made. Similarly, since it’s inception, it has always been the imitator rather than the originator. Go look at 2014 Prizm Football. That shit will haunt your fucking nightmares for years.
In 2015, when Topps was on the verge of losing their NFL license, something changed with Panini, something I think was THE best choice they ever made in the course of their trading card dominance. They decided to make Prizm much more like what Topps releases every year with Chrome, opting for simple bordered designs coupled with simple game photos to really re-create the iconic formula that Topps perfected.
This choice transferred over to Basketball, and in turn, created sets like Mosaic and Optic, which have never really reached the level of importance that Prizm has had.
On the Topps side, the creation of Finest in the early 1990s changed the face of Baseball cards forever. When it eventually came to the NBA and NFL, Topps Chrome was along for the ride, giving kids like me a window into the high end world of premium card collecting. To this day, Chrome remains my favorite set ever, and I will always buy a box every year for as long as I can afford it. I have sold my sports collection twice over, and each time, I have kept the chrome examples of my favorite players out of sheer reverence.
The main issue for Topps, is that they have lost all but a few licenses in their arsenal, something that could eventually change with the exploding landscape of the industry. Even with a dwindling presence over the last 8 years, they have managed to keep afloat because the Bowman Chrome and Topps Chrome lines remain as popular as they have ever been.
Prospecting in Baseball has become Baseball cards, only made more furious by the recent focus on rookie cards now claiming five figure sales so frequently. The sale of the Mike Trout Bowman Chrome Superfractor and the Kobe Bryant RC at more than a million have also brought a spotlight to the ongoing legacy that these cards have.
Similarly the rare late 90s inserts from top NBA players in the hobby have always driven ridiculous prices, but now make those prices look like ants seen from an airplane. Panini wasnt around when card companies could make Michael Jordan cards regularly, and they werent around when LeBron James, Tom Brady or Kobe Bryant were rookies. Topps and Topps Chrome were prominently featured, and that presents a giant advantage in the way collectors see Chrome’s importance in the long run.
That’s not saying Prizm hasnt driven its own fair share of eye popping sales, just look at what has happened with exclusive era Prizm rookies of Giannis, Patrick Mahomes and others. They are always among the top sales on eBay, and will continue to be long after the hobby potentially goes back on the decline.
When the dust settles and we can look back on this period in the history of the hobby, I dont think there will be a single person that can point to either brand and really complain. Its been such an important piece of hobby life over the last 30 years that its never going to be on the sidelines. I think its crazy that the current boom is defined so heavily by products relying on Chrome stock, but I guess that given the consistent performance and undying collector loyalty, its a no brainer.
Ill start off by saying that I hate exclusive licenses. Every collector hates exclusive licenses. Every sport has an exclusive license partner, which makes things worse. If you collect Baseball, you are buying Topps cards. If you collect Basketball and Football, its Panini. If you collect Hockey its Upper Deck. Because most collectors collect more than one sport, having one choice in each area becomes the most frustrating part of their hobby life.
On the other hand, manufacturers love exclusive licenses. It makes everything easier. From obtaining material to embed in the cards, to licensing autograph content, it becomes the best tool in their tool bag. It also builds lasting relationships, which in most cases, is just as valuable.
Why Are There So Many Exclusives?
This is going to take a bit to explain, so bare with me. League licensing is one of the most complicated and fought over parts of the industry side of the collecting hobby, and even with exclusives, it doesnt seem to get easier for the people involved.. Most of what I am going to say is second hand, but received from 10 plus years of direct communication from people who work at the manufacturers.
Back in 2006 and 2007, the seeds were planted for the situation we find ourselves in currently. Most of the sports had at least 2 licenses that granted the manufacturers the ability to produce cards with professional logos and professional players. One side is the “Properties” arm, which is all about the likenesses and names of the teams, stadiums, games, etc. The other side is the Players’ Association side, which gives access to use the likenesses of the active players themselves. There are other licenses that go along with these, including some for groups of retired players, the hall of fame, stuff like that.
Additionally, for almost every sport, there were at least two companies that owned both sets of licenses. Most of these licensing arms have been in place for many decades, and most of the time prior to the mid-2000s, leagues were much more likely to give them out to people who were interested in trying their hand at trading card production. This is the main reason why Upper Deck was able to storm the hobby in 1989, and release a Major League set – licenses were SEEMINGLY easier to come by and likely cheaper for card companies.
Things changed for a few reasons, need for access, need for content, and one other giant thing – money. When Upper Deck wanted to use the license to produce MLB trading cards in 1989, they only needed one thing from the league itself – access to take photos to use in the cards, and as the internet became more prevalent, even that became less of a need. If Upper Deck needed to make MLB trading cards in 2009, everything would have been infinitely more dependent on the league.
First, each league approval process had likely become much more stringent with protection of the brand as important as anything. There were also more products included in a license, sometimes more than 50, which required more headcount for approvals and processing at the league office, and thus more resources.
Secondly, with the addition of autograph content that drove 100% of the products released, access to the players became essential and necessary. The players’ associations would need to ensure that the players cooperated, or their license wouldnt be as valuable either.
Lastly, the content is also driven with pieces of game used material, which means that access to authentic jerseys for as many products as possible would inevitably fall on the league as well. If people wonder why Panini and Topps have switched almost entirely away from game worn, this is the reason. Game worn jerseys are sold by the league, valuable to collectors, and are hard to authenticate if the league doesnt provide them. Ill get to this more in a bit.
This is only a minor complication of the plethora of complications, some of which just stem from volume above everything. In 1982, there were like 2 products a year. In 2002 there were 20-40, in 2012, it was double that. You can see from a league perspective, that’s a lot of work for a part of your licensing arm that pales in comparison to something like sweatshirts and hats.
Remember, in the mid 2000s and well beyond, every week there was an article in the paper about how things have dwindled down, shops closing, shows empty. You can see why the leauges wanted to simplify their card existence. They just wanted things to be easier with cards.
Then something else happened – Upper Deck found themselves in a bunch of problems stemming from money, and even more problems from lawsuits with other licensors. For years, Upper Deck and Topps were the most important licensor in the hobby. Similarly DLP (Donruss, Leaf and Playoff Brands) was struggling, and Fleer had gone out of business.
Within a few short years, Upper Deck’s trouble had led to a loss of all of their major licenses, and a group from Italy known for sticker albums had purchased DLP to distribute a new brand of trading cards. Not only did this bring new consolidations of power, but also a new influx of influence and money that was absent prior. When I was writing this site back then, I commented how Panini’s new power was in their available cash. Topps was being bought and sold, and Upper Deck was reported on the verge of bankruptcy at least once a month.
Panini’s stability also gave the leagues something that they desired as well, money and resources. They knew that by giving Panini the exclusive license to their sport, they would solidify a stable avenue for the production of trading cards, and keep money coming in. By all accounts, Panini also overpaid by a drastic amount for each negotiation they were looking to become engaged with. You know what happened? They won, a lot.
The NBA was the first domino to fall their way, NFL being a huge win in 2015. NHL was theirs at one point too, leaving the Topps exclusive with MLB the only outstanding license they could never acquire during this run. They did manage to pry an exclusive away from Topps with the MLBPA, allowing them to use logo free designs with current players.
You should start to see a clearer picture of why this was happening – cards just werent that important, stability and money are important, and hence, the exclusive life began and continues today. The question is, how will licensing change now that cards are a top story, million dollar sales are national news, and investment in collectibles are the most surprising thing to come out of the pandemic?
League Licensing Battles In the Future
When a commodity is hot, the barrier to entry becomes that much more thin. Although there are still huge barriers in place, the desire to partake in the hottest thing out there can do some crazy things. Especially if you are a company with the means or methods to enter a market, and brand recognition isnt an issue.
Most of the league licenses are in place with exclusivity for a few more years. Topps has MLB through 2025, and Panini and the NBA/NFL are likely in a similar situation. In terms of hobby life, that is a long time. From a company perspective, it really isnt that long, as negotiations on a hotly contested commodity can go on for a long time. This means lots of prep, lots of posturing, and as we saw the last time the NBA license came up, some gamesmanship.
The world of the licenses has changed so dramatically over the last few years, one has to wonder what could happen if the bubble I referenced in the previous post comes down, or if things only get hotter.
Undoubtedly, the cost of the licenses is going to get quite a bit more competitive, especially now that there is leverage on both sides of the equation. The leagues have a lot of power, because there will be desire from every previous card manufacturer to get into a licensing position, and more desire for the leagues to likely want the piles of cash from multiple sources instead of just one. Right now, there is barely enough supply to cull demand, and that is creating huge secondary market volatility. The secondary market’s performance showcases there is enough to support multiple companies, and that is a HUGE piece of hand in the relationship.
Secondly, because each license has all of a sudden become insanely profitable, all manufacturers currently in business have plenty of money to throw at their business and the league. That includes the companies in power for each exclusive. Panini and Topps have more money to fight for the right to remain exclusive, as well as other companies like UD and Leaf have to show that they deserve a shot at a shared license. Because UD has a legacy of cards unlike any company (both good and bad), they have a lot of power to move their station higher in the consideration. Their history may be a red flag in a down industry, but that might be overshadowed now.
Topps has a huge runway as well, because their brand recognition is the top in the game. Even though Panini makes more cards than anyone these days, the choice to use an unfamiliar name that is shared with a grilled pressed sandwich means that they have less in their name than any other company. I would venture a guess that most casual Americans would know that Topps, Upper Deck and Leaf all make trading cards. Panini, very few would be able to identify outside the food connotation.
Player Licensing is Going to Change the Game
Right now, there are exclusives in place for players as well as for leagues. That’s why Michael Jordan hasnt had a card since Upper Deck lost their last licensing method to produce basketball cards. He has an exclusive partnership with Upper Deck, much like LeBron James, Tiger Woods, and a few others. Panini has them too, Topps as well. It used to mean a lot more, when shared licenses meant having to keep the biggest names for yourself.
Now, it means little to nothing, because few players would be able to appear in other products outside the ones officially licensed by the league. A few things have changed, however.
The craziest part of this entire thing is that athletes have become some of the most important drivers of the boom. Prior to 2020, most athletes saw cards as another thing they were required to participate in. Some even hated signing so much, that they dropped out of the game completely.
Obviously there were exceptions to the rule, but for the most part, athletes never really saw any potential in cards, unless they had nostalgia of collecting from when they were younger. With most of the rookies now being born past the original collecting boom back in the mid 1990s, the fun factor was greatly diminished before this year brought everything to the forefront.
You can imagine that if players like Deshaun Watson and Kevin Durant are taking cards seriously, their buddies and their agents are as well. Some players have historically been very involved with every aspect of their brand. Ask Russell Wilson. Now that cards have become such a gigantic source of potential funds, there could be humongous impact for those players with leverage.
Here is the caveat – every player covered by the PA license will continue to have trading cards if needed. The cost of adding autographs to those cards is a different story. Players have control over how much they charge per signature, and that’s where the volatility could impact their inclusion. More importantly, in some sports, the autograph has become a less important part of a set, with more and more focus on rare cards created through serially numbered parallels. This situation is a complete departure from previous years, and as with every negotiation, each side has their perks.
The same could be said for legends and retired players, as their licenses are rarely done with the same stroke of the pen as the league licenses are done. Many retired players join licensing groups or offer their own permissions, and with card prices soaring, all of that is going to change. This also means that their usage could be deemed unworthy and removed due to the cost of inclusion versus the value of inclusion. Once a player is no longer covered by the players’ association, it falls on a number of different levers to deteremine their worth to the overall trading card industry. For important guys, that could be one source of negotiating power, for others – it could be the end of their time on card fronts.
Overall, this is going to come down to sustainability. Can the bubble be sustained? Is it a bubble? Will the leagues consider this time as a benchmark for potential popularity? All of these things are going to have a ton of impact on the licensing future of trading cards. The more that card values and sales figures dip and rise, the more question marks are created. If anyone believes that this is the final form of the industry, money always has an effect. Right now, there is more money floating around than any other point in trading card history. Its time to see what that means.
When sports cards started creeping up, I saw a lot of excitement. The pandemic was supposed to wipe out everything we loved about sports cards, especially with millions of Americans out of work, and millions more left with a half job that wasnt going to cover much of anything. Instead of tanking the market, sports cards exploded, with so many people longing for the fix of happiness that ripping a pack can provide.
As the card market slowly approached unprecedented levels, a second narrative follwed suit almost at the exact same time. There is no way this tidal wave of value and investing could be a long term thing – this was a bubble, and as sure as the sun rises in the East, it would eventually burst.
I have to believe that many of the louder voices of this counter narrative were made up of a few different groups of people. The ones that had been priced out of their hobby that had brought them so much happiness over the years, combined with frustrated FOMOers, and finally those that had lived through the early to mid 90s. The frames of reference were true, its rare that a giant boom of interest was at all sustainable, especially at prices that only a fraction of a percent of people could afford to participate.
If the prevailing opinion that cards will eventually come back down, especially with Americans eventually having access to all those things that brought them joy and places to spend money prior to the pandemic, how will it look?
Is It a Bubble?
As it turns out, the pandemic did not start the upward trajectory in card investing and money, but rather augmented and accelerated an existing trend – at least in specific parts of the hobby.
Vintage and important cards from important players were already increasing in value, just not at the pace they did after the shutdowns started. Iconic and important cards from the most essential players in the hobby were also increasing.
Given that already existing trend, sports cards seemed primed for a nice few years of growth, mirroring the existing growth that had already taken place. What none of could plan, was that the pandemic would drive a spark in interest, driven higher by celebrity involvement and investor attention.
Bubbles exist because of artificially inflated prices that reflect a short term supply famine and a giant demand increase. If either of those aspects of the economics change, the bubble bursts. As we saw many times before, when demand greatly outweighs supply, the people in charge of the supply do what they can to increase their stock. If they can capitalize on the demand in time, the prices normalize.
With trading cards, there is a never ending supply of new modern cards. Its literally licensed at a level that Panini, Topps and UD can print as needed, as long as they have the means to do so. We have already seen Panini introduce multiple new formats across the calendar for every sport they own, and Topps doing similar with what they own. The supply of cards is going to change in 2021, and likely in a drastic way for 2022.
The last time this type of demand increase happened, 1987 Donruss and the junk wax era gripped the industry and almost drove it out of existence. The demand of the current era is supplemented by a similar starving collector base, but augmented by contrived scarcity. Unlike the era of junk wax, serially numbered cards and finite autograph resources make unlimited production relatively difficult. As we have seen, it hasnt stopped things from getting out of control, but its far from impossible to see resources drying up to continue down the path of the junk wax era in the same fashion.
Grading and the Long Term Success of the Bubble
Lets continue onto the part of the bubble that I feel is the one with the most vulnerability, and that is graded cards. Right now, the most important aspect of this explosion is the way hyper mint graded examples have driven exceptional market performance. Its two fold, demand for a limited number of high grade cards, and the limited number of those cards to begin with. Both of those aspects are vital to the success of trading cards as a long term investment play and how the grading business impacts the overall durability of this bubble.
To start, the grading impact on things isnt going away. If anything its going to get more important. As much as that makes me upset and disappointed, its a reality no one can run from. Certain high grade cards that populate the champagne room of this hobby may forever be unattainable for the majority of the hobby because of this state of affairs.
Although the million dollar sales may eventually slow down when things get back to normal in our regular life, the trajectory of value is not going to be stunted. There is too much toothpaste out of the tube to stuff it back in – especially with how many athletes and celebrities are catching on. News coverage of the top sales perpetuates one of the conflicts of interest I mentioned in the previous post, but it also spurs a blitz of new considerations. “If that card is worth 1.8 million, what is this more desirable card going to go for? Lets find out!”
These mega cards really share one specific trait that will forever make them the icons of the hobby – there arent many of them. True rarity, not contrived rarity drives a lot of that value, even if that rarity is in the subjective grade, rather than the rarity of the card. When we travel across the spectrum to the more every day examples, that’s where the true measure of this bubble really lies. Can the cards with no real rarity in a high grade continue to demand the kind of dollars that they do right now?
I think the answer lies in one very specific stat – the number of cards currently existing in the PSA backlog. We can guess that there are millions of cards currently waiting to be graded. Outside of the ridiculous price increases trying to dam the river, there are so many cards that are going to come onto the market in the next year, that the more common ones could see a flood.
That begs a question of whether or not the hobby can withstand the enormous supply injection and if the demand is truly as explosive as we all think. Its possible that it can, but we are foolish to expect that more supply will do anything but drive prices down.
What Breaks First?
People seem to be expecting a rapid downfall if/when this bubble does burst. I dont think I agree that it will happen the way people expect. I think it will be much more of a gradual process, and the new bottom will still be well above the old one.
The first indicator will be wax. If Panini and Topps continue to churn out cards that are indistinguishable from other cards released, the grading queue shortens, and people start seeing a clearer picture of how many cards exist in the hobby’s new universe, I think the first thing to start going back will be new wax from sets that were generally throwaways in the past. Right now boxes of product like Donruss and Score are 10x what they should be. I just cant see a future where those boxes remain desirable enough to sustain a price like that. At the end of the baseball season last year, wax prices seemed to settle hard. The desirable sets remained in an hyper inflated price state, but the rest really went back to something resembling normal. This could be the first indicator when things start to normalize.
The second indicator will be the value assigned to new cards of unimportant players and unimportant sets. Like wax falling off, the insane quantity of cards will eventually generate a supply that cannot sustain the type of demand that was initially there. The legacy sets like Topps Chrome and Panini Prizm will continue to drive the market, but paying $9000 for a second year card of an unimportant player in an unimportant set is going to be another hole in the wall.
The last indicator will be the lowered value of common cards in high grades with growing pop reports. We have already seen that enormously common cards, that were born during this new era have never existed outside of a sleeve from the moment they were pulled from a pack. This is different from cards that were released earlier and without much fanfare. The spectrum of grades that should span results of 7-10, will eventually be much more likely to span 9-10. It creates an artificial scarcity, which will change.
How Long is it Going to Take?
The saying is always buy low and sell high. The problem is knowing when a card or set will reach the peak of its value. Right now, people are holding because they feel that they still have room above.
There are other factors as well, stemming from environmental due to the eradication of Covid, and governmental stemming from the stimulus packages. As long as those things remain in play, the peak is still off in the distance. When those things change, that’s when we will start to see the decline come into focus – if it ever does.
I dont think there is a guarantee it will ever get back to where it was. In fact, I would say its likely not going to get there. But to think that this boom is infinite in its timeframe is short sighted. There are too many headwinds that should or will change.
We always used to wonder what the next big thing was going to be, thanks to years of stale products and lack of innovation. Right now, that stalemate could be a harbinger of trouble, especially with things like NBA Top Shot and other innovative collecting approaches taking hold.
If this boom lasts beyond the 2-3 years, there is going to be a number of questions that will need to be answered, most of which stem from basic things. We are talking product delivery, product configuration, grading, and community. The more things stay the same, the less of a peak the end will have.
Right now, group breakers and many shops are living their best life, with many of the products selling like they never have in the past. At the same time, rising cost and lack of access to affordable wax may limit the participation of many people who used to be the driving force behind many of the cards we chased on eBay.
This leads to more discussion of direct to consumer sales, changes in the way eBay manages their sports card related listings, and how products are configured to ensure group breakers never struggle to fill breaks.
In looking at this from how I would approach things, the key to long term success hinges on technology. Too many parts of the hobby function on outdated approaches, which is why Top Shot and digital collectibles have become the darling of many talk tracks in the hobby. The more Topps and Panini can innovate around creative uses of technology to connect, inspire, and track the progress of their consumers, the more likely this boom will continue to grow.
Like most people, I never expected this to happen the way it has. I never saw sports cards as the key to Pandemic era happiness until it was. Being a part of this hobby for so many years, Im excited we are finally getting our time in the spotlight. As they say, for most, there is only 15 minutes of fame – and we are all curious if we are on minute 3 or minute 14 here.
Its been almost six months since I have posted on this site, mainly because I have found that long form writing about cards has basically run its course for me. I still like to write, and do so a lot on my other sites and Twitter, but its important to recognize that I feel like the voice of Sports Cards Uncensored has moved to other places online.
Because those places limit the ability I have to write in any extensive or in depth sort of fashion, posting my thoughts here in a longer version seems to be the way to do it, especially for a subject as long and as involved as grading.
I have written more in depth explanations of my feelings surrounding the business of grading than many topics here on the blog over the years, but I feel its time to revisit those arguments. First because the collecting boom we are experiencing is unlike anything I have ever experienced in the history of my involvement with the hobby, and second because this boom hinges almost implicitly on high grade cards.
Background
Lets start back around the beginning of all of this craziness – not 11 months ago, Im talking about back when grading first got its start. Around 1991, PSA started grading the condition of trading cards. BGS and SGC started a few years after that. Because almost every sale was done in person, and the internet’s treasure trove of information wasnt the standard of gathering education, PSA’s service hinged on providing two things – condition opinions and authenticity opinions.
The mid 1990s were a similarly hot time to be a collector, with the first really crazy numbers being achieved for sales of rare and vintage cards. It spurred everyone and their mother (literally) to go out and try to find the next treasure to pass to their children in 30 years. This led to a few things, including more money flowing through the hobby, and of course, more issues with people taking advantage of new collectors who didnt know any better.
With a service like what PSA offered, collectors could at least feel safe that what they were getting was A) authentic, B) the right condition, and C) the right price. The consideration of a high grade card bringing more value was only really present in cards that condition issues ranged from poor to mint, not mint to gem mint the way it is today.
When eBay began globalizing the collecting economy through their auction site, a new reason for grading became very prevalent that was similar to the original purpose of the service. Most digital cameras were low resolution and may not offer the same level of sharpness to determine condition from a sale not completed in person.
A New Era of Graded Cards
Fast forward a few years to 2005, internet sales have become the new way to operate in the hobby, digital photography has advanced significantly, and grading has shifted away from its original purpose of peace of mind. Thanks to a new phase of collecting where collectors looked to seek out high grade cards of prospects and upcoming stars for sales later on, grading has become as much of a money making tool as anything.
Because the technology had improved and the methods of completing internet sales had changed, the original purpose of condition verification is really no longer needed in the same way. The split of modern and vintage had switched completely, with a new generation of cards that rarely achieved grades below 8. The grading spectrum had become all about mint and hyper mint grading, with miniscule condition variations separating the entire population of cards.
It was no longer about vintage cards that ranged from destroyed to generally mint. The cards were newer, the condition was rarely an issue, and collectors chose the best examples to send in for grading. It skewed the population in a way that was likely never considered, and created a need to market in a new way. Instead of marketing around verification, the grading companies needed to market volume, capacity, reputation, and the true trump card, VALUE in the completed product.
High grade examples of modern cards had been seen by the collecting base as a gem of their collection, leading to collectors seeking out and paying more for those cards. The subjective opinion of the grading companies had become the bible, rarely questioned, and rarely in need of accountability by the buying public.
As the shift to making money became the primary driver of the graded card collecting public, the grading companies recognized the true business opportunity early on. As a result, the way the industry was marketed and solicited changed as well. This is where my main issues started to become the norm, focusing on the giant conflicts of interest that are created by monetizing a subjective opinion with the promise of making money over a raw example.
Today’s Exploding Market
Right now, if a top card isnt graded, there is likely a reason. Whether it is altered, in unfavorable (but still far from poor) condition, or just not authetnic at all, its hard to want to spend hundreds, thousands or hundreds of thousands of dollars on a raw card.
Similarly, graded cards have achieved celebrity status during the recent Pandemic Era due to high visibility personalities showing their desire to invest in high grade examples of cards from across the hobby.
Due to the huge multipliers that are achieved by hyper mint condition cards, the grading companies have been overwhelmed. Its almost a result of their own doing, with many of the grading companies creating new tactics, like the BGS Black Label, to give competitive collectors a new avenue to get the best of the best for their collection.
Auction houses have started soliciting sports cards in a way that highlights the need for top condition cards, with the velvet rope area of the hobby functioning solely on high grade examples of the main rookie cards and chrome cards.
Some of these cards have become so important and so valuable that the $10,000 modern card ceiling has been obliterated. Just a few years ago, a card wasnt TRULY part of the champagne room until it was over 10,000 dollars. Today, that number is closer to $100,000 if not $500,000. The high grade Michael Jordan RCs have gone from a $25k win to a $500k windfall, and its all because of a subjective opinion from a company that requires no transparency and no accountability to the grades they provide.
Examining the Issues with the Process
With more and more high dollar sales being completed, my main issue centers around the process itself. Every business needs a proprietary offer that separates them from competition. Grading seems to be no different, trying to build in proprietary features for both the end product and the process to create the end product.
That’s where the issues start. The product that all the grading companies sell is their opinion. Unlike other opinion based services, the grading opinion is absolute and without evidence. If a card receives a hyper mint grade, that grade is likely going to exist forever. More importantly, there is ZERO information as to why the grade is what it is. BGS may peel the curtain back a small amount with subgrades, but its still just a number on a flip.
There is not a single prominent grading company in existence that offers any transparency beyond the number on the slab, and that is a huge problem when you are looking to pay the high prices that have been assigned to high grade cards over the past two decades. Both PSA and BGS cite trade secrets as to the nature of their process, and point to specific definitions on their site. Most collectors site the fact that the reputation and value is earned through results, but I would argue that the process itself might be the biggest part of the conflict of interest in its own right.
More importantly, with such insane money value assigned to high grade cards, most of the savvy collectors and dealers have found the easiest ways to manipulate the system to get the desired results. Basically, let me put it this way – a grade is only final to many participants when it reaches the highest possible grade. The condition of the cards never change, but because the difference between a 9.5 and a 10 is microscopic, it brings a game element to trying to catch a better grade just through subjective opinion.
One grader may have one opinion, another grader may have another. There are also multiple companies with multiple graders, which means that it becomes very easy to game the system. Resubbing cards has become a seven figure venture for many dealers, especially ones with people on staff who know how to play the game.
Add in that once a grade reaches the desired level, it is there forever. There is no need to validate the opinion in any way, shape or form. The lack of accountability, tracking and regulation drives the entire business side of the grading industry, and we havent even gotten to the relationship side of things.
More importantly, over the last 10-15 years, high value sales have generated major and mainstream national attention. Assigning a high grade to a card, without accountability can easily drive publicity for the grading company and their wares. I remember back a number of years ago, a Joe Montana rookie was assinged a BGS 10 at the national convention. This was a top cards, with a top grade, at the top show in the land. Tell me that isnt a perfect recipe.
These sorts of things make for some very interesting bedfellows, especially when the process itself is shrouded in a veil of trade secrets. There are people out there who can speak to the level of attention that is present across the entire grading spectrum, but its hard to ignore how many major issues exist.
More importantly, with attention comes time, and we are getting a first hand exposition into what happens when a process is ill equipped to handle volume, and may not have been equipped in the first place for any real volume at all. To microscopically examine every card takes time, and if people believe that the same attention is paid to each example, I have a bridge in Brooklyn I would love to sell you.
That doesnt necessarily mean that zero attention is paid, but I can only imagine how many of the mistakes that are frequently called out are the result of speed review rather than a truly air tight process. Remember, these are humans with an inherent bias that populate the employee ranks of these companies – not machines. Theoretically, machines can speed up without error, or at least have a scientific explanation of what risks are involved with more speed. Humans on the other hand, cannot add speed without loss in accuracy, which means the only solution to any volume process is more humans, not more speed.
Lastly, there is very little accountability in the tracking of completed graded cards, despite the PSA set registry being a major driving force in competition among collectors. Even though PSA has record of every grade they have ever given out, and shares that publicly, they do not publicly track which card crosses their path, and how many times that card has been submitted.
This creates a giant hole in exploiting the system, with grades frequently increasing the condition result, even if the card is exactly the same. No doubt, humans make mistakes that should have an escalation process to fix, but when a card numbered to 50 is submitted 180 times, its clear what is going on.
Relationships and Conflicts of Interest
For the majority of the time that modern cards have become the focus of grading, the conflicts of interest and creation of marketing tactics to sell more volume have brought my view of the grading business to an all time low.
Grading is a business and businesses exist to make money. Period. End of story. For a long time, grading was competitive, expensive and risky. Creating relationships with customers was a primary need for each business and creating value in their process had to be done organically, not systemically.
The grading companies had to show that the population was creating additional value in their high grade cards, and on the flip side, they had to create more opportunities for more value in the end result of their opinions. This meant things like preferential treatment, more grading styles, higher focus on partnerships, and offering bulk submissions had to become the standards.
Lets start with the creation of Hyper Mint condition, because that is what has made the grading business what it is. Before grading the best a card could be was Mint Condition. Sharp corners, straight edges, and bright colors with no defects on the surface. With grading, it has become about microscopic perfection, including some that I would argue are more of a made up qualifier than an actual condition to occupy.
BGS took it a step further with the creation of subgrades and eventually a black label for all cards that get four 10s across the four subgrade categories. This is nothing more than a sales tactic, but through marketing and contrived collector acceptance of a higher value for these cards, it has become a way to achieve exponential new value in an otherwise raw card.
Hyper mint does not need to exist. But I equivocate its creation to that of the Diamond business, where marketing and product placement achieved a perceived value in a common stone that has persisted to this day. DeBeers and their advertising department is responsible for the value a diamond has in today’s society. It has become generally accepted that their marketing is the truth, offering extreme value for a stone that was used for industrial functions during WWII.
This leads to another major conflict of interest in the relationships that are available and how it influences grades. Im in sales, and for each one of my top customers I do a few things. I give them better attention, better representation, and more perks. Otherwise, they will go somewhere else. In it’s essence, the creation of a business around a service means that this type of relationship is inherent to the process.
A customer that subs 500,000 should not get any different grade that a single sub customer will get. The fact of the matter is that we can assume the mass submission center is submitting that much for a few reasons. They find the process enjoyable, they make money, but most importantly, they get the results they want.
In listening to podcasts, reading blogs, and participating in message boards for years, its clear that relationships with the grading companies exist. Although accusations have been tossed around regarding preferential treatment, it should just be assumed that it is the case. It has to be the case, because the business model is ripe for that type of manipulation. There is also no grading ethics committee, no federal committee on grading, there is nothing holding the grading companies back from giving this treatment to their top customers other than their reputation.
One could argue that this reputation is too important to risk, but at this point, with over a billion graded cards in existence or coming into existence, a scandal surrounding the top submission machines would not only not hurt anything, it has already happened.
In fact, scandal and lawsuits have existed all over the grading industry for decades. When the feds raided the NSCC a few years ago, grading companies were at the center of that investigation. The ownership of each grading company has repeatedly found themselves at the center of scandal, with the feds, the grading public, and the businesses built around them frequently having reason to get involved.
None of this has struck a chord with any collectors, as we have seen, with trimming scandals, authenticating counterfeits or any of those major misdeeds having any impact on the value of a high grade card.
In fact, things have gotten so busy for the grading companies, price hikes have been announced without adding any additional service, any additional feature, and as if this wasnt comical enough, likely a promise for slower service. This isnt a service anymore though, it seems more like an elaborate grift.
This timing situation creates a situation that I find shocking hasnt taken more of a hold in the recent hobby explosion. Most cards need to be graded to achieve their top sell value. At the same time, most grading can take 6-10 months at this point, unless you are willing to pay hundreds of dollars per card. Add in that boxes now cost 10x-50x what they used to cost, the expectation of grading is asking people to take out a six month, interest free, deposit just to sell what they pull out of a box.
The buyer’s expectation demanding a card be hyper mint to achieve the full value is just insane, and the fact that sellers (not high volume dealers) put up with it, depends on their liquidity used to buy the inflated boxes and inflated cost of raw cards. Pretty crazy to say the least. Its almost removed the casual wax breaker from the hobby.
How Do We Fix The Issues?
So far this post has been all about what is baked into the grading business as a drawback. If all these things are the problem, how do you fix it?
Honestly, that’s where things get even more complicated. Removing the lack of accountability and lack of transparency will only hurt the people making the most money off graded cards. They thrive on exploiting the gaps that exist so that they can turn a 1x profit into a 100x or 1000x venture.
Until the transparency around the process is fixed, grading companies take an active role in providing both an ethical service and one that offers clear tracking, none of the issues I have will ever stand a chance of reaching an above board level.
There have been new grading companies that have come on board and worked to offer exactly that, but they are a small minnow in an ocean of PSA and BGS, with a very small chance of success.
I also believe that the government is likely going to need to get involved, as the industry has reached a point that makes it impossible to hide in the shadows of irrelevancy. There is no doubt that class action lawsuits are likely on the way, and major federal investigations will follow. Too many people have spent too much money, and the government will want to collect their cut. They will also want to ensure that no one is effectively and deliberately running the circle jerk that seems to have taken over the hobby.
To close, this post is the equivalent of screaming into a tornado the size of Chicago. There is no way anyone is going to take what I say and apply it in any meaningful way. When investors and new hobby participants are joining the ranks and jumping directly into the deep end of graded cards, they will assume their collection cannot be important without the best graded examples.
Its a self perpetuating daisy chain of ignorance, with many collectors acknowledging that the money they make is more important than the sanctity of the process. Not only can I not blame them for their feelings, I actually understand their position more than people think.
I just hope that a new influx of ownership and more familiarity with the pitfalls of the process leads to a better understanding with the general public. I doubt it will have an impact, but we can always hope. Crazier things have happened right?
Again, this year’s focus is all about the insane wave of value increases starting in March and continuing with the pandemic era late into the year. Some have said that there is a ton of new money that has entered the hobby, but I dont see it with the same rose colored glasses – as I have said before.
Most of what I am seeing is people who would be spending on lavish or even regular trips for the summer months, instead spending on cards with no travel options available. At the top end, investing in the most expensive cards available, things may be different, but most still believe there is a bubble that exists.
Cards like these are really where things have exploded:
These cards really only apply to the top of the top spenders, mainly the top .0000001% of the hobby. Mostly they are investing in high graded versions of the most important players’ rookie cards in each sport.
Then there is this subset of value bumps that I just have no idea about. Things like spending insane money on a time that a player first appears in a Panini Prizm sets. Dont even get me started on that garbage.
Among all these different trends – one thing really remains the same. Rookie cards remain the coin in which cards are standardized across, with few exceptions (Upper Deck Jordan cards anyone?). That begs the question – for people looking to really invest rather than collect, is it worth buying any other cards besides the main rookie cards that people chase at top end of things?
Going back to my previous article – I said it was a select group of sets that really set the standard. Chrome stock based products for Topps and Panini, NBA and NFL National Treasures, NFL Contenders, and few others. In fact, the super-super-super premium wax like Transcendent and the like really dont set the standard the way Bowman Chrome does. Same can be said about Flawless. For such an expensive box, it doesnt perform on the secondary market the way NT and Prizm does.
At the time of release, Flawless was designed to be the more expensive product based on MSRP. Eventually NT became insanely more expensive, mainly because collectors see NT as the standardization, not Flawless.
Going back to the point of this article, if the purpose is resale and long term gains on investment, why would anyone buy any of the products that dont offer the cards that eventually become the top cards in the hobby?
Other than the fact that prospecting on the main products has caused wax to skyrocket in price even before the cards are released, the answer should be pretty simple. Buying boxes of the flavor of the month to pull cards that are the flavor of the month, isnt a good business plan. There are exceptions to the rule, for sure, but nothing like just spending money where you know the top cards available will ALWAYS be the top cards.
I know, its not fun to just buy the cards instead of pulling them yourself. I would argue that the investors who have made enough to pay off their house these last few months arent ripping boxes left and right. Their dopamine rush isnt coming from ripping packs. Its buying stock in RCs that they know to be the cards surrounding the top players for years to come.
Even though Panini puts out 40 NFL products a year, the only ones that matter are WELLLLL known. Why do you think Topps puts out 18 bowman products and 18 topps base set products a year? Its the place where the secondary market looks to set the standard for their goods.
I just find it hilarious to see self titled investors pumping THOUSANDS into products that fail to meet the standards established over years worth of investing prior to the popularity during 2020. If you are among that group, maybe I have been gone for too long to truly see the short term benefit of rip and flipping garbage like Illusions or Phoenix. From a long term perspective, I dont seem to be far off.
