What happened to GAI Grading? And how a bad grading idea sunk their successor Global Authentic.

Introduction

In a past post, I wrote about how GAI grading (Global Authentication Incorporated) went bankrupt in 2008-2009 as the sports card grading market went from four mainstream competitors to three (e.g., PSA, SGC & Beckett).  That description was not fully adequate as the bankruptcy process in the United States is very complex.  While GAI did file for bankruptcy in December of 2008 (footnote 1), its bankruptcy petition was later dismissed by the courts when the company failed to notify all creditors about an upcoming creditors meeting and also failed to file a number of required legal documents. (footnote 2).

How GAI actually disappeared was through a "split up" after their bankruptcy petition was denied.  Mike Baker, who was head of the card grading division at GAI and a former grader at PSA, purchased the rights to grade cards under a slightly altered brand name, Global Authority, along with the pressing machines, supplies and other items needed to physically grade both cards and unopened packs of cards.  Global Authority was relocated from Southern California to Bettendorf, Iowa (footnote 3).  One can assume that rent was less expensive in that location.  The rest of the company’s assets, what little were left, remained in California in the form of Global Authentics, which was mainly an autograph grading company.

It is not clear how much creditors received for their outstanding debts, which totaled between $1 and $10 million (footnote 1).  Mike Baker, the new part-owner of Global Authority, was listed on the bankruptcy petition as the second of the unsecured creditors, so I suspect that his purchase of the card grading assets satisfied his claim and created cash for some other creditors.

Why did the original GAI fail as a business?

Without inside knowledge, it is hard to specify the exact reasons the original GAI failed as a company in California (more on its Iowa step-child later).  GAI was started in 2001 or 2002 by Steve Rocchi, who was its President and Chief Executive Officer.  He had been either pushed out or voluntarily left Professional Sports Authenticator (PSA) in 2001 after having founded PSA and had served as its President for over a decade.   However, PSA was part of a larger firm, Collectors Universe, so he was not head of the entire company.  Rocchi was the first employee of PCGS, the predecessor of Collectors Universe (parent of PSA) and served as its Operations Manager from 1988 to 1991 (footnote 4).  There was a clear brewha between Collector’s Universe and Rochi (for example, he is listed as a key employee on the prospectus filed for Collectors Universe to go public in 1999, but is missing from the 2000 Collectors Universe annual report), and he left to form GAI as a competitor.

From my recollection of the industry, GAI received good market acceptance upon starting operations.  Their grading standards were very similar to PSA’s standards, using a similar ten point scale for card grading.  All graded cards were also serial numbered and slabbed in tamper-resistant cases.  A card buyer could also check the certification number of any card sold on eBay.  Where GAI made their biggest splash was in introducing pack grading.  As the first unopened card pack grader, they were able to capture the market initially for grading packs.  In some senses, that made GAI an innovator in the market.

GAI falling into filing a bankruptcy petition, likely had to do with three events.  Again, I have no inside information of the company.

1. As the smallest of the four major grading companies, they were at a distinct disadvantage.  As I have discussed in other posts, the card grading market provides significant advantages to the firms that have the highest market share or have high market share within a card niche. (see: http://junkwaxandobservations.blogspot.com/2012/09/why-are-there-so-few-legitimate-card.html).  Other than in graded unopened packs, GAI was the smallest player in the industry.  This meant that GAI had less set builders trying to compile sets of GAI-graded cards and your cards were more marketable on eBay with the PSA or Beckett brand name.  The one market that they dominated for a while, pack grading, did not have set builders (e.g., you cannot build a set of graded packs).  Thus, no “pack registry” competition could exist among collectors to lock them into GAI pack grading.  Thus, any lock-in advantage from being the first-mover in pack grading did not exist.

Indeed, I think the only reason that GAI Grading even got off the ground is because many of their personnel were former PSA people.  That gave the company instant credibility, along with early cards being graded by GAI seeming to have high standards.  With low standards, they would have just become another one of the low-end grading companies whose graded cards are always more suspect.

Caption: This photo shows two labels or "flips" from graded cards.  The top label is the old GAI grading company that was based in California.  The bottom flip represents the subsequent Global Authority company based in Iowa.  While both companies are out of business, collectors have more faith in grades assigned by the older company (e.g., top label)

Also, in the early years of the 2000s, the card grading business was booming as many vintage cards still had not been graded and some junk era cards were still worth grading at that time.  This boom in grading may have masked the underlying weakness of GAI’s market position until the later part of the decade.

2.  In 2006, PSA introduced pack grading.  This service introduction must have cut dramatically into GAI’s unopened pack grading business where they had been the only show.  Without a registry to keep customers locked into grading their unopened packs through GAI, it made sense for many customers to switch to the biggest and most well known grading firm.  My guess is that PSA cut heavily into GAI’s volume with this service offering.  It also probably capped the price that GAI could offer for pack grading.

3. The 2008 financial and real estate market collapse shrank the demand for grading.  For example, PSA’s number of cards graded annually declined about 12 percent in the year between June 2008 and June 2009 (source: Collectors Universe 2009 Annual Report).  Because sports card grading and collecting are not necessities but rather luxuries in the economy, they decline when economic times get tough and people have less money.  The grading firms that were smaller than PSA likely suffered even worse percentage declines in sales or cards graded during the crisis.

The combination of these three events likely clobbered GAI grading.  They must have been walking a thin line of staying in business before the financial crisis since they filed for bankruptcy in December 2008, and the bellwether of the crisis, Lehman Brothers Bankruptcy, occurred only several months earlier in September 2008.  This hypothesis is supported by the fact that almost a year earlier GAI was evicted from their office space in Southern California and was also cited for operating without a business license (footnote 5).   

My guess is that money was always tight at GAI.  The large decline of revenue caused by the financial crisis was likely the last straw as it would have been likely that they could not have covered their fixed costs of rent and utilities.  The fact that GAI employees were some of the creditors listed in the Chapter 11 filing indicates that they could not make payroll at the end.

The Disaster in Iowa

After moving to Iowa and re-starting as Global Authority, the company never really got off the ground and then basically committed suicide with a major strategic blunder.  The company’s CEO was Demian Werner and GAI’s Mike Baker was director of grading and authentication.  Werner was likely the source of capital to the firm as Baker had to purchase the card grading assets from GAI (this is pure speculation by me, however).  From the little information that I can find publicly about Werner, he is based in Bettendorf, Iowa, was active is selling sports collectibles and now runs a small security firm based in Bettendorf, Iowa (footnote 6).

Global Authority originally started by attending shows and grading cards under the Global Authority brand name.  They even started a Facebook page that still exists as of this writing on February 9, 2015 (https://www.facebook.com/globalauth).  In May of 2010, Global Authority announced the idea that would become their undoing:  Free Grading (footnote 7).

Why was free grading a terrible blunder?  Here’s how it worked.  A customer could submit cards to Global Authority.  They would be graded for free.  The customer would then choose the cards to encase and pay the grading/encapsulation fee only for those cards.  This seemed like an offer to good to be true.  As one blogger wrote:

FREE CARD GRADING.  Did that get your attention?  In a time when the economy is soft and people’s discretionary (collecting) income is less than it used to be, GAI is the first only only card grading service to offer this value.  Collectors can choose to have there cards returned to them graded or pay to have them encased.  From the very beginning, card entry, tracking and easy of use of GAI’s service is some of the smoothest and best that I have used.  You can watch and control your submissions through the whole process.  The advantage of having you enter your cards into GAI’s live system is a quicker turn around time.  Instead of having to wait for them to receive your cards and have them enter them, you are already one step ahead with having entered your cards yourself.  Once your cards are graded, you can choose to have any or all of them encapsulated, returned or placed on consignment with GAI.  With regular e-mail updates of when they receive your cards, grading is finished, encapsulation is finished and when they send out your cards, you are never left out of the loop and wondering what or when the next step is.  The card holders themselves are stack-able and the thicker memorabilia card only required a slightly thicker holder.  What I really like about GAI’s holders is the card information and grade on the top spine.  This saves time and makes for easy identification of your graded cards when stored vertically.  The value and ease of use of GAI’s on-line submission make their service one that collectors and dealers both will enjoy.  I strongly recommend GAI grading service for collectors who like to have more control in the grading process and to see if their card is worth encapsulation after the free grading. (pasted from http://www.going9baseball.com/2011/07/07/bike-spoles-and-show-boxes-global-authority-inc-grading-service-review/ on February 9, 2015)

It was too good to be true.  Think of the economics of this grading strategy.  How many modern sports cards exist in the world that are only worth something more than pocket change if graded a GEM-MINT 10?  Tens of millions is the answer.  Think of the 1990 Fleer Michael Jordan (and like cards) that one cannot sell on eBay for fifty cents ungraded but will sell for $25.00 if graded GEM MINT 10.  Hence, this grading strategy attracted a tidal wave of junk era submissions to Global Authority where the vast majority of cards would not turn into revenue but still had to be examined.  It’s very likely that customers might submit 100 cards with only the 3 that graded GEM MINT 10 being converted to actual revenue.  Global Authority would still have to look at the other 97 cards and also ship them back to their original owners.

Given this situation, Global Authority literally drowned in submissions.  As a small operation, it was largely swamped by a tsunami of cards that would likely not lead to revenue.  This title wave of cards also creates costs.  You have to have a system of keeping orders separate, and legitimate graders pay for insurance to cover the cards that are in their possession for grading.  The costs of managing this tsunami of cards were extremely high for such a small amount of revenue.

The results can be seen by running a Google search on the words “Global Authority” and “Better Business Bureau” (use quotes around the words).  Global Authority soon fell months behind on processing orders and eventually the whole system collapsed with no cards being graded.  Some orders were lost.

You will see Global Authority roasted on chat boards all over the sports card collecting world for ripping off customers.  Customers sued them, contacted the Iowa Attorney General and complaints exist even to this day.  As of 2014, the company was no longer grading cards and was trying to return submissions to their owners.  All presence of their web site has been pulled off the internet, so one can safely assume they are out of business.

What does the story of free grading tell us?  First, customers are not always right in every aspect.  Customers would love companies to give their products or services away for free.  Customers are always right when it comes to promised service and quality within a desired price range, but that is quite different.  Second, a business has to think through the economics of pricing very carefully.  It’s clear that neither Baker nor Werner put enough thinking into the free grading concept before launching it.  Maybe Global Authority was desperate for volume at the time of the pricing idea, but volume can sometimes drown a business, especially when it is unprofitable volume.

End Note

Like all other posts, please feel free to make comments.  I review all comments before they are posted in order to reduce spam and keep things on topic.  Also, it may take me a few days to review comments.

Footnotes:


1.  GAI’s actual bankruptcy filing can be found here: http://bankrupt.com/misc/ccb08-18315.pdf

2.  http://www.sportscollectorsdigest.com/news/global_authentication_backruptcy

3. http://www.sportscollectorsdaily.com/gai-split-baker-buys-grading-division/

4. http://www.bloomberg.com/research/stocks/private/person.asp?personId=28491653

5.  http://www.sportscollectorsdaily.com/gai-hoping-to-move-forward/

6. https://www.aihitdata.com/company/0066A45A/GLOBAL-AUTHORITY/people#main

7. http://www.kcrg.com/news/local/Bettendorf-Company-That-Kept-Clients-Trading-Cards-Promises-to-Return-Them-167370735.html

Why most ‘Buy It Now’ sports cards on eBay are overpriced

Introduction

As a vintage set builder who largely uses eBay to buy cards, I often get very frustrated with not being able to acquire certain cards at market prices.  I have a number of “Followed Searches” on eBay (e.g., what used to be “Saved Searches” but apparently the word “followed” test markets better) through which I get daily updates of new listings on eBay of various types of cards.  For example, I have an eBay search on the words “1950 Bowman” with “SGC”, because I have a 1950 Bowman baseball card set in which all the cards are SGC graded.  I have probably purchased one hundred cards because of this search.

One of the aspects of eBay searching that bothers me is that week-after-week or month-after-month, I will see the same listings that come up repeatedly trying to sell a certain card for well over 200 percent of its market price.  These listings are almost always fixed price (e.g. Buy It Now) listings, but they can be auction listings where the starting action price is above the market value of the card.  Some of these listings can be attributed to the seller not knowing the true market price of the card, but others I have seen literally for years with the card in question not being sold over probably fifty different eBay listing periods.  To collectors, these listings are just an annoyance because they create background noise and waste our time when we are looking at the results of our saved searches or are paging down on eBay after a search.

Since the conversion rate (e.g., actual completion rate where somebody buys the card) on overpriced auctions is very, very low, why do some sellers continue to list cards that are very overpriced?  For cards relisted many times, it is not seller ignorance of the market price, because an economically rational seller would adjust his or her price downward after initially overpricing the card when the listing does not convert into a sale.  To understand some of the dynamics of overpricing, let’s run an experiment.

The Experiment

I went to eBay and looked at all the listings selling a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade.  This card was chosen because it is an iconic modern rookie card of one of the best players of recent decades who is a sure-fire Baseball Hall of Fame player.  The card also exists in sufficient quantity at PSA 9 grade so that determining an average market price can be based on many observations (e.g., converted listings). As such, any average price figure will more likely represent the true value of the card.

While some people might argue that the PSA 10 version of the card should be the standard examined, PSA 10s are less numerous.  Also, the sort of mystical way that cards are given PSA 10 grades versus PSA 9 grades likely makes their market less efficient.  A Griffey PSA 9 is a good benchmark because such cards are “Mint”, generally look the same and cannot have qualified grades by PSA standards.  Therefore, a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade is a standardized card for the most part.

I examined all listings for this card that closed on eBay between 9-27-2014 and 10-31-2014, finding these listings using a number of different search terms related to the card so as to minimize the chances of missing any listing.  While the time window is sort of arbitrary, it covers over a month of concluded listings.  I also did not use listings where multiple copies of the card were being sold or the card was bundled with some other cards.  Only PSA 9 listings were counted.  Shipping was included in any prices reported so as to eliminate the effect of various shipping cost strategies. (footnote 1)

Here’s a description of the raw data:

Number of completed and successful auctions: 40

Number of completed and successful 'Buy It Now' listings: 9

Number of unsuccessful auctions (e.g., opening price was too high) or unsuccessful 'Buy It Now' Listings: 21

The chart below shows the results.

Of the 40 successful auctions, the average price was $42.56.  Prices ranged as low as $36.10 to as high as $51.98 in successful auctions.  However, the market for this card seems to be relatively informed as there is a normal distribution with a vast majority of the auctions clustering between $40 and $46.  Therefore, most final bids squeeze into this $6.00 price window.

The price of convenience. We can actually calculate the price of convenience from the data.  As shown in the chart, the average successful 'Buy It Now' price was $48.38.  Therefore:

$48.38  - $42.56  = $5.82

Thus, the average buyer, who did not want to compete in an auction and thus wait to buy or possibly be outbid, paid $5.82 for the convenience of getting the card purchased right away.  Nine buyers went this route versus 40 who got the card through auctions and generally paid less. (footnote 2)

Returning to the opening thesis of this post, the average price of unsuccessful 'Buy It Now' listings (or auctions where nobody bid on the opening price) was $61.58, which is approximately 145% of the average final successful auction price.  This was also not a trivial amount of the overall listings at 21 unconverted listings.  One seller was even listing the card at $99.99 with free shipping, which is 235% of what the card is worth at auction.

Therefore, we have established with this analysis that some sellers list cards at way above their price in a range that will not lead to the cards being purchased very frequently.  The fact that only 9 of the 30 Buy It Now listings were actually successful indicates that possibly a majority of Buy It Now listings are significantly overpriced, even when one factors in the convenience of not having to participate in an auction.

The Why of Overpricing

So why do sellers list a card in a price range where it is very, very unlikely to sell (for example, the 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade at $99.99)?  Here are the reasons that come to mind:

1. They are hoping for an uniformed buyer.  This idea has to be the basis for most of this pricing.  While most buyers of sports cards on eBay tend to know pricing, especially for graded cards, occasionally somebody’s parent or significant other goes online and wants to find a gift.  You would have to be a ‘newby’ to buying sports cards to fall for the $99.99 price on a 1989 Upper Deck Ken Griffey Jr. at PSA 9, but this might happen on rare occasions.

2. There is no seller penalty on eBay for unconverted listings.  Because eBay gives away so many free listings to sellers, the marginal cost of listing a card at too high a price is $0.00.  Therefore, it does not cost the seller anything to go fishing for somebody uninformed.  eBay will now even automatically relist unconverted listings for you, so it does not even take time to relist a very overpriced item.

3. There are no negative reputation effects for overpricing.  Because eBay buyers only rate converted auctions, sellers who frequently list 'Buy It Now' items at too high of a price do not receive any reputation loss.  Only if the shipping is priced too high, could it affect their feedback.  As a result, many of the overpriced listings also come with free shipping.

4. Most eBay sellers are not business people.  Business people rightfully consider inventory holding costs as part of their business.  There is an “opportunity cost” to not selling inventory, which is that you do not get the cash for the item that can then be used to buy more inventory to sell.  Since the average seller on eBay is a collector or a small business person, they often focus excessively on getting the best profit margin for card without considering the cost of money tied up in inventory.

5. In some cases, a seller may overprice a card when they are unsure of the market for the card.  I have done this myself.  This type of seller is less of a nuisance because they ultimately drop their price upon relisting as they learn the market.  I suggest that such possible temporary overpricing may even be a good strategy in markets for cards that are thinly traded (I will have another post down the road on thinly traded card markets).

What to do

Unfortunately, I do not think buyers can do much about the nuisance of dramatically overpriced cards on eBay.  Why I call the situation a nuisance is that these listings waste your time as you are looking for cards and have to scroll paste them.

In a perfect world, eBay would provide the solution by changing their pricing structure.  For example, cutting the final value fees by 25% on auctions that start under $1 with free shipping would be a possible solution to this problem.  This could be combined with less free listings.  A lot of sellers listing cards would embrace this option because they are already doing it anyway (e.g., having low starting prices).  Others would follow and volume upticks might offset lower final value fees for eBay.  The relative scarcity of free listings would stop the fishing expeditions with the high priced 'Buy It Now' auctions.

However, I cannot see eBay accepting this idea because the number of listings is a key metric they report to Wall Street.  I wish Wall Street would pay more attention to converted listings.

To do yourself a favor when you search for a widely available card on eBay, click on the button to display Auctions only.  Ultimately, you will pay less, on average, using an auction to acquire a card.  Also, your eyes will thank you with less listings to scroll through since you will not have to look at the Buy It Now listings.  If you do want to pay for the convenience of buying it now, I suggest a quick look at the recent sold listings, which can be found by clicking on a box in the left hand column as your go down the search results page.  That way, you can get an idea of how much you are paying for convenience and if a Buy It Now price is too high.

My advice for sellers who want to sell cards through Buy It Now auctions is to also examine the recent finished auction prices.  As shown on the data on Ken Griffey Jr.’s Upper Deck Rookie card, you would want your Buy It Now price to be at the upper end of the normal distribution of auction prices.  There are some auction buyers willing to pay at the end of the right tail and you can capture those higher than average prices without having to list your card a dozen different times.  The key is to again scan the recent completed auction results and set your price around the level of the highest converted auctions.  Also, you should realize that eBay charges generally higher final value fess on Buy It Now listings.

End Note

Like all other posts, please feel free to make comments.  I review all comments before they are posted in order to reduce spam and keep things on topic.  Also, it may take me a few days to review comments.

Footnotes:

1. I did exclude one successful auction that was an outlier.  In this auction the seller claimed that the card was under-graded and should have been a PSA 10 instead of a PSA 9.  They also included many high resolution scans to back their claim.  This approach seemed to convince some buyers, because the auction closed much higher than other auctions.

2. Two auctions actually went higher than the average Buy It Now price.  Such situations are quite possible when bidders become emotionally attached to “winning” an auction.  Such emotional attachment only costs a couple of dollars on a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade.  However, if one was buying a house at a Sheriff’s auction, such emotional attachment could be more costly.

Conflicts of Interest in the Sports Card Ecosystem Post 1 - Card Companies and Collectors

A conflict of interest is a situation occurring when an individual or organization is involved in multiple economic interests with one of these interests possibly motivating them to act with impropriety in another interest. (footnote 1).  Conflicts of interest are why the President of the United States must put almost all of his or her wealth in a blind trust (e.g., The President does not know what investments he owns), so that economic decisions are not made to benefit their own wealth.  Without the blind trust, a President might be motivated to have defense contracts steered towards companies that they own.

Conflicts of interest occur in many industries or economic ecosystems because companies produce multiple products, but sometimes they can occur because of the fundamental economics of an industry create conflicts between buyers and sellers.

The conflict between card manufacturers and collectors.

As I have talked about in prior posts, it wasn’t really until the 1980s that Sports Card Collecting became a true collectors’ market, sometimes referred to by insiders as “The Hobby”.  Before the 1980s, the vast majority of sports cards were produced for the consumption of children who read their cards, played with them, tacked them on boards and eventually destroyed them.  Because nobody worried about the value of their cards, there was no conflict between card manufacturers and buyers.  Manufacturers tried to put out a product, usually with gum, tobacco or some confectionary product, and they would produce as many cards as customers would buy.  Long production runs were obviously good for the manufacturer because it meant that more gum, caramel, tobacco or eventually cards were being sold.  The business was obviously lucrative enough in the 1950s through 1970s for Topps, Bowman and Fleer to battle both legally and through signing players to contracts in an attempt to capture as much of the market as possible.  However, the customer was not poorly served, especially when these companies had competing sets at various times throughout the time period.  Competition just meant more and better cards for kids, as evidenced by the advances in both the physical size and quality of baseball cards in the 1950s.

As a side note, the only potential losers in the pre-collectible era were the players themselves, and they did not even know it.  As has been documented in a number of places, most players were dramatically underpaid for signing off on their photos for baseball cards.  While a few such as Ted Williams were able to profit more handsomely by selling their likeness to the highest bidders (e.g., the 1959 Fleer Ted Williams set), the average player in the 1960s was getting $125 From Topps for his annual license plus $75 every other year as a signing bonus until Marvin Miller became the head of the player’s union and realized how much Topps was profiting off the players (footnote 2).  Miller quickly fixed this problem.

However, once cards became part of “The Hobby” and had value as collectibles, a clear conflict emerged between card manufacturers and buyers who were now collectors and not kids who destroyed their cards.  The conflict comes from the value of any collectible being determined by the supply and demand for that collectible.  It’s basic economics, but the greater the relative demand for a particular card versus its supply will increase the amount collectors pay for the card.  It’s why we pay more money for Derek Jeter baseball cards than Bobby Meacham baseball cards.  Jeter will be in the Hall of Fame, and we want his cards, while Meacham had six undistinguished years with the Yankees.  We do not want his cards very much.

Where conflict emerged between card companies and collectors was in relative supply.  Long production runs where a card company sells as many cards as possible were still economically good for the manufacturer but not so good for the customer whose cards went down in value as production runs got longer.  Your 1989 Upper Deck Ken Griffey #1 Rookie Card was worth less as Upper Deck sold more of them.  This created the fundamental conflict between card companies and buyers.  The more cards that were printed reduced the average value of the card as a collectible if other factors were held constant such as the quality of the player on the card.  None of this mattered, of course, when cards were not collectibles, were destroyed by their owners and the value of your cards did not matter.

As I have talked about in previous posts, it was both faulty information and overly-euphoric assumptions about future supply and demand by collectors that created the Junk Wax or Junk Era from the mid-1980s to the mid-1990s (see this prior post: http://junkwaxandobservations.blogspot.com/2012/10/what-is-junk-wax-or-what-are-junk-era.html ) where there is so much supply of cards from that era still available today that the cards are almost worthless.  A major part of the information aspect of the building oversupply was that none of the companies during the junk wax era such as Upper Deck, Topps, Fleer, Donruss and Score ever published how many cards they were producing (footnote 3).  One has to believe that withholding production run numbers was purposeful.  At the start of the junk era, card companies usually had one mainstream brand of card at a single price point, as opposed to multiple brands and prices like in 2014, and they were going to sell as many of those cards as they could sell.  Collectors bought them by the case believing that they would sky-rocket in value just as vintage cards like 1950s Mickey Mantle cards had rocketed in value.  If they had known that Upper Deck printed over 4 Billion baseball cards in 1991 (footnote 3), they might have tempered their euphoric buying after thinking about how all these cards were being preserved by their owners.  Thus, publishing print run numbers only could have helped pop the sports card bubble earlier.

While the card companies had no legal obligation to publish print runs, it clearly shows the conflict of interest that existed between card companies and collectors.  Card companies made more money by selling more cards.  However, the more cards that exist hurts the value of their customers’ collections.

This conflict of interest was taken to the extreme by managers at Upper Deck in unethical fashion.  In his 1995 book Card Sharks, Pete Williams builds a very convincing case from interviews with former company executives and industry insiders that Upper Deck executives would have the plant managers reprint certain cards, even supposedly out-of-print cards, that were selling for large amounts on the secondary market.  The executives would then sell these extra cards for personal profit through dealers and other intermediaries.  Since these cards were the same as the originals and off the same presses, they went into the hobby and some probably into your collections.  They can never be known as counterfeits. (footnote 4)

What this scheme did was put big money into the pockets of Upper Deck insiders at the expense of their customers.  Their customers lost because the increased supply of high-value cards reduced the value of customers’ collections.  Such behavior is, of course, unethical because it is cheating your customers.

Today – The uneasy relationship between companies and customers.

Because cards are generally preserved by the collectors that purchase them today, it is hard to create scarcity.  Any form of scarcity is artificially created by the card companies by having certain high-end brands with limited production runs and various types of inserts that are often numbered.  I like the idea of numbered inserts (e.g., 004/125 on the back of the card) because it acts as sort of a warranty from the manufacturer of a card’s scarcity.  Any card manufacturer who printed many duplicate numbers on the backs of cards to increase supply would likely get caught due to the ability of eBay and the internet for card traders to share information.

Yet, because all scarcity is artificially created, the card companies are put in a tough position to try to deliver what collectors perceive as value (e.g., cards scarce enough to be worth their money) but still produce enough product to make a profit.  Because a card company’s input costs are high in terms of licensing fees (please see my earlier post: http://junkwaxandobservations.blogspot.com/2012/08/how-sports-card-royalties-work.html ), they are increasingly squeezed on their margins, which is why we have seen so many of them disappear in the past two decades.  Profit comes from either high volume with OK margins or very high margins with lesser volume.  The proliferation of brands at the major companies and the sky-rocketing costs of packs of higher-end brands indicates that the profits seem to come from the high-end of the market, which is consistent with a smaller, collectibles-based set of customers.  While Topps and Panini (with Score) have their high-volume, lower cost mainstream products, I suspect that the profit is more in the top-end of the market.

Whenever I read product reviews of new card sets that comes out each year on Cardboard Connection or other sites, the reviewers tend to focus quite a bit on the "value" they see in a new release.  Value obviously means bang-for-the-buck in terms of collectible value versus the price one pays for a pack or box of cards.  Sometimes, the reviewers make it seem like the card companies can produce value upon command, and the reviewers are disappointed when that value does not jump out of each pack.  The problem with this perspective is that creating value actually takes money.  Smaller print runs, great autographs and smaller-numbered inserts all increase production costs tremendously.  Therefore, creating value while making a profit is difficult.  This makes being a card company an difficult task because they must create enough value for collectors but the cost of generating that value must be less than its value to The Hobby.  This creates an uneasy relationship.

End Note

Like all other posts, please feel free to make comments.  I review all comments before they are posted in order to reduce spam and keep things on topic.  Also, it may take me a few days to review comments.

Footnotes:

1. Conflict of interest definition adapted from: http://en.wikipedia.org/wiki/Conflict_of_interest

2. Williams, P. 1995. Card Sharks: How Upper Deck Turned a Child's Hobby into a High-Stakes, Billion Dollar Business. Macmillan Publishing, New York. p. 24.

3. Williams, 1995, various pages.

4. Williams, 1995. Chapter 14 of the book is dedicated to the Upper Deck reprinting scandal.

Dead Men Don’t Wear Plaid, But Phil Esposito did Wear Plaid in his early 1970’s Hockey Cards

Occasionally, some sports cards are memorable because of their oddball nature or when something just seems out of place.  Ask any person who was an avid hockey card collector in the early 1970s like me if there was anything strange about Phil Esposito’s cards.  They will say: “the plaid pants”.  It’s funny, but a lot of my friends who collected remember the ridiculous plaid pants that were visible for three years of Esposito’s cards in 1970-71, 1971-72 and 1972-73.

Caption: Above is Phil Esposito's 1970-71 Topps card.  That must have been a sweet leisure suit he was wearing before the photo shoot.

It all started with the 1970 hockey set for which Topps, and their affiliated O-Pee-Chee Canadian partner, decided to get new photos of virtually all players for the 1970 card hockey issue.  The photos were likely done in a studio or conference room because the players’ silhouettes appear in front of the solid backgrounds that in the 1970-71 set also had what seem to be added ‘spotlights’ around the player’s body.   The studio nature of these shots can also be testified to by the fact that most players, other than goalies, are not wearing shoulder pads under their jerseys with a few exceptions.  Most goalies did seem to bring all their equipment with Ken Dryden notably wearing his mask unlike the other goalies in these cards (maybe his shot wasn’t a studio shot).

Caption: Above is Phil Esposito's 1972-73 Topps card.  This was the last year that his plaid pants were visible.

Apparently, when some of Boston Bruins showed up, it must have been a totally half-baked affair (or maybe the players were half-baked).  Either somebody forgot black hockey pants for part of the shoot or Esposito refused to wear them.  It was more likely the former case, because Ken Hodge was shot in his street pants also with that photo only appearing in the 1971-72 set with different, closer-up shots of Hodge used in the other years where his pants did not show.  Maybe Hodge refused to wear them too.  Who knows?

However, this biggest piece of evidence of systematic disarray at the photo shoot theory is that at least five different Bruins appear in the 1970-71 set in wearing Fred Stanfield’s hockey gloves.  The Bruins team put their player’s numbers on their gloves, and Fred Stanfield’s #17 gloves are worn in the photos of Stanfield, Ken Hodge, Phil Esposito, Wayne Cashman, Garnet Bailey and Ed Westfall.  All other Bruins players, like Bobby Orr, are photographed wearing their own gloves if the numbers are visible on the cards.

Caption: Above is Ken Hodge's 1971-72 Topps card.  Ken also joined the no-hockey-pants brigade for one year.  Note that he is also wearing Fred Stanfield's #17 gloves like Phil Esposito.

The fact that Esposito was a great player and future Hall of Famer made the plaid pants all the more noticeable.  When you were a kid in the 1970s, Espo’s card was one of the ones you read, looked over and maybe taped on your wall.  Those plaid pants were just weird.

By the way, if you do not remember, Dead Men Don’t Wear Plaid was a swing-and-a-miss old detective movie spoof comedy that was a collaboration between Carl Reiner and Steve Martin in 1982.

 End Note

Like all other posts, please feel free to make comments.  I review all comments before they are posted in order to reduce spam and keep things on topic.  Also, it may take me a few days to review comments.

1970s Topps Football Cards – Sweaty Guys and Airbrushed Pictures

Topps baseball sets in the early 1970s showed many design innovations like (1) the beautiful black bordered 1971 set, (2) the groovy, hip 1972 card designs, and (3) the 1975 bold color and mini-test-market designs.  These sets were eye-pleasing with mostly good, clean staged photos of players with occasional in-action shots.  As a result, many 1970s Topps baseball sets are still sought after by set builders today.  Thus, despite Topps being a monopoly in baseball cards, product designs were generally fresh in the early 1970s.

In football, Topps went in the opposite direction.  The football card sets basically were pretty awful with the exception of the 1972 design, which built on the bold block lettering and bright colors similar to many late 1960s and early 1970s consumer products.  However, in my opinion, Topps football cards of this era were really just below par because the pictures were not very good.  There was a reason that the pictures on football cards were bad throughout most of the 1970s.  As a cost savings measure, Topps only licensed from the National Football League Players’ Association (NFLPA) and dropped licensing from the NFL from 1970 through 1981 (footnote 1).  As a result, football cards could not show any team logos or other NFL copyrighted images (see my earlier posting here on how licensing works: http://junkwaxandobservations.blogspot.com/2012/08/how-sports-card-royalties-work.html ).  Football cards would have to be produced without using any NFL licensed material.

Why would the Topps Company go without an NFL license?  Obviously, it saved them money, but the main reason Topps could undertake such a money-saving move was their monopoly position in sports cards in the USA in the 1970s.  While Topps had only the MLB players locked up by contracts and thus entry was possible in other sports, very few other companies seemed to want to enter the sports card business, possibly because they could not enter the baseball market, which was the major market by size at the time.  There are likely economies of scale to producing cards for a number of sports rather than just one sport.  You can allocate the capital cost of printing presses, salaries of card designers and general overhead across print runs for multiple sports year round.  For a market as small as sports cards, not being able to market baseball cards to anchor your cost structure was a fairly significant problem (footnote 2).

Anyway, the lack of an NFL license in the 1970s meant that pictures of many players would have to be close up still photos, posed shots or airbrushed action photos.  The photos would need to be airbrushed to clean off all the NFL trademarked team logos to avoid infringing upon NFL-owned properties.  While airbrushing and working around logos is common in the sports card trade, Topps position as a monopolist seemed to make them lazy in the production qualities of the 1970s cards with the pictures on the front especially suffering.  The quality of the airbrushing work was not very strong with colors often not quite matching team colors.  Also, by the late 1970s, a large number of football card pictures seemed to be close up shots of players on the sidelines staring off into space.  These were easy photos to take and did not require much airbrushing to clean up if taken at an angle where no copyrighted logos could be seen.  However, as a result, we have lots of pictures of sweaty players doing nothing.

Caption: Nick Mike-Mayer gets the almost neon green airbrush job of his Eagles helmet in his 1978 Topps card attempting to join Marvin the Martian.  “That makes me very angry.” says Marvin.

When firms are monopolists, they can provide a fairly lousy product or service and charge a high price for it without worrying about competition.  In terms of quality, the monopolist has to produce a product at a quality level that is just high enough to keep customers buying the product since sports cards are not a necessity.  Topps also expanded the size of their football sets in the 1970s, thus making any set builders buy more of their poorly designed cards.

Caption: 1978 Topps Football Cards. Stu Voigt in a posed photo still has a monstrous cowlick.  Give the guy a comb.  On the right, Joe Lavender apparently was reading a good novel on the sidelines.

The 1978 Topps football set represents the low point in picture quality in my opinion.  Now, it did not help the situation that the hair styles of the time were long hair or big afros.  This made football players all the more sweaty or unkempt.  However, we often see in Topps baseball cards from the same era, very nice posed shots of players who have big clean afros or washed hair.  Also, the baseball cards had much better use of lighting without players’ faces being in shadows.

Caption: 1978 Topps Football Cards. Ron Saul and Oliver Davis stare aimlessly off into space.  For some reason, the top of Davis' head has been cropped off.  Apparently, he has too much hair.  Love those sideburns!

Why Topps 1970s baseball cards were so much better than football cards in production values is possibly puzzling since Topps was a monopolist in both products.  One explanation might be that because Topps had a license that paid MLB with royalties that the baseball league gave Topps greater access to players or possibly even demanded better quality.  The NFL had no direct financial stake in Topps' 1970s products, so football teams may have been less accommodating.  Another possible explanation might be that Topps didn’t spend much on the photos because of the size of the market for football cards did not make it cost effective.  A third possible explanation would be that in the late 1970s that Topps card designs deteriorated in general across all sports and that football deteriorated more quickly because of lesser attention by Topps.

In the early 1980s, Topps’ design and photo quality in football cards became much better.  In 1981, Topps introduced a subset of cards in their football set called Super Action cards that had very nice photos of game action.  In 1982, they signed a license with NFL properties and could shows players in their uniforms without airbrushing out team logos.  This made both action and sideline photos easier because the photographer did not have to worry about capturing “too much logo” in any shot that would have to be subsequently airbrushed out.

 End Note

Like all other posts, please feel free to make comments.  I review all comments before they are posted in order to reduce spam and keep things on topic.  Also, it may take me a few days to review comments.

Footnotes

1. http://www.cardboardconnection.com/1970-topps-football-cards

2. Additional evidence of the economies of scale theory would be the short-lived tenures of both Fleer and the Philadelphia Gum Company in the football card market in the 1960s.  Fleer produced cards from 1960 to 1963 for the upstart American Football League (AFL) with Topps having the NFL contract.  When Fleer was sued by Topps in 1963 for beginning MLB baseball card production (and had to stop producing cards after printing their first 66 card series), they did not seem to pursue aggressive renewal of their AFL rights.  I suspect that being denied entry into baseball card market limited the attractiveness of making football cards.  Surprisingly, Philadelphia Gum Company backroom-dealed Topps to get sole NFLPA rights in 1964, which sent Topps scrambling for the AFL players’ rights, which had previously belonged to Fleer.  Philadelphia Gum Company exited with sort of a whimper after the AFL and NFL merged and the NFLPA awarded Topps sole rights to NFL players’ images in starting in 1968.  There is no evidence that Philadelphia aggressively tried to outbid Topps, so I suspect that producing football cards alone was marginal economically (see: http://www.psacard.com/Articles/ArticleView/5019/collecting-the-1966-philadelphia-football-card-set for more on Philadelphia cards from the 1960s and discussion of these contract issues.)

That Insane Autograph Set: Collecting 1997-98 Be A Player Autographed Hockey Cards

Introduction (This is a revision of an earlier posting from 3 years ago.  I would like to thank an anonymous reader named Mike for alerting me to the foil-color-based identification of the manufacturer autographs)

As noted in previous posts, autographs are by far the scarcest commodity in sports card collecting.  Obviously, card companies can make limited runs of game-used jerseys or other types of unique, low-print run inserts, but the willingness of a player to sign his or her name and is by far the most limiting aspect of card production.

Indeed, it is the scarcity of autographs that makes the 1997-98 Be A Player hockey set so amazing to many die-hard collectors.  Because most of the cards in the set had a very large number of autographed parallel cards, it is possible to put together almost the entire set with autographs.  I currently own all of the possible 249 cards with autographs that could be pulled from packs.  In this posting, I will give a history of this set and discuss some of its quirks and great characteristics.

The early history of the “Be A Player” brand

The “Be A Player” brand is a property of the National Hockey League Players’ Association (NHLPA).  Back in 1993-94, the NHLPA contracted with Upper Deck to produce the Be A Player brand without NHL licensed trademark logos as a way to produce another revenue stream for the NHLPA. (footnote 1)  Because the NHLPA and NHL have gone through a series of strikes and lockouts over the past 25 years, the brand was started largely a way to hedge some extra money for the association and players in case of a work stoppage.  In 1994-95 and 1995-96 Upper Deck produced sets with the innovation of having one autograph card per pack.  This was an insanely great bargain for collectors at the time because the packs were actually not that expensive as a mid-priced product.  With the 1994-95 season starting with a long-planned lock out by the NHL owners, NHL players probably had a lot of both time and incentive to sign cards for the first year of Be A Player cards.

The 1994-95 Be A Player set was 180 cards with one autographed parallel card per pack.  From what I know from talking or emailing with people over the years, only 178 cards were available in autographed form with common players signing around 2400 cards each and star players signing less.  Wayne Gretzky was the key autographed card in the set, and Gretzky’s card was super-short printed (SSP).  Upper Deck applied stickers to the back of the autographed cards thus indicating their authenticity.  Upper Deck expanded the set to 225 cards in 1995-96, but I do not know if any players’ autographs were missing from the set (any help I can get here would be appreciated).  Similar to the prior year, there was one autographed card per pack, which was an insane bargain.

In 1996-97, the NHLPA shifted the Be A Player name brand to Pinnacle Brands.  Pinnacle expanded the set to include insert cards that could also be found in autographed format.  These insert series were titled “Biscuit In The Basket”, “Link To History”, and “Stacking The Pads”.  In what would become an ominous sign for the future, Pinnacle did not put stickers or other authenticating marks on the backs of the cards to indicate that the autographs were authentic.  I do not know much about the numbers of cards signed in this year and have not seem many cards from the set.  I assume Pinnacle made it so that one could identify manufacturer autographs with the color of foil on the card.

The 1997-98 Be A Player set

By 1997, Pinnacle Brands was in a lot of financial trouble.  They had entered the sports card industry when it was booming in 1988, but the Junk Card Era of too many card manufacturers was about to take Pinnacle as a victim.  This showed in their execution of the 1997-98 Be A Player set.

While the set was expanded to two series of 125 cards (Series A and Series B = 250 total cards) plus inserts, the execution of the set left a lot to be desired.  Again, autographed cards were inserted one-per-pack but did not have stickers or different back marking authenticity as a manufacturer autograph.  The way that one tells manufacturer-autographed cards from other cards is by the color of foil used in the player's name and the Pinnacle logo.  Gold foil indicates an autographed card that was certified by Pinnacle and pulled from a pack.  Silver foil indicates a base card that should be without an autograph.  If one finds an autograph card with a silver foil name and logo, the card is either a forgery or was signed in person after being pulled from a pack as a base card.  This situation can make identification confusing as one comes across these cards.  Because Pinnacle vanished into bankruptcy, there is no web site or published guidelines to tell collectors 20 years later about the foil color differences.

Caption: Eric Lindros #1 base card is on the left.  Note the silver foil ink used to print his name and the Pinnacle logo.  On the right is an authenticated Brett Hull autographed card.  Note the gold foil ink used to print his name and the Pinnacle logo.

When Pinnacle ran into financial trouble in 1998, much of the production from Series B was left in limbo in boxes in the Pinnacle warehouse (footnote 1).  This problem with Series B has actually been a blessing to collectors interested in completing the set today.  Because these boxes were sold off to distressed merchandise liquidators and other parties, it took them longer to work their way into the system to be available to collectors.  Indeed, unopened boxes of both series still sell for around between $55 and $100 on eBay (checked 12-9-2016) and are a bargain at 16 autographs-per-box, which is insane by today’s standards for a middle-market product.

Attributes of the Set

The hit rate per pack for auto and inserts was:

Autographs 1:1 (These are autographs on any version of the card, regular or die cut)

Die Cut Autographs 1:7

Prismatic Die Cut Autographs - 100 sets made

One Timers 1:7

Stacking the Pads 1:15

Take A Number 1:15

However, this is where things get a little weird and you have to know something about the set.  First, none of the “One Timers”, “Stacking the Pads”, or “Take A Number” insert cards were autographed.  This was a change from previous years.  Second, certain cards were extremely short-printed.  Basically, Eric Lindros only autographed the Prismatic Die Cut cards, so there are only 100 Lindros autographs in existence in this set. (This observation on Lindros comes from an old card dealer with whom I have emailed.  I have never seen it written anywhere.)  Die cut cards have the word PLAYER cut in them along the right border.  Prismatic die cuts are harder to find than foil die cuts with a print run of 100.  When Lindros #1 autographed 1997-98 Be A Player prismatic die cut cards occasionally change hands on eBay, they go for hundreds of dollars despite Lindros never making it to the Hall of Fame due to injuries.  Again, set makers know the Lindros Die Cut Autograph is the scarce card in the 1997-98 Be A Player set.  Indeed, you can buy an Eric Lindros certified autographed card from other sets for under $5.00.

Caption: Eric Lindros #1 Prismatic Die Cut is the hardest autographed card to get in the series.  Only 100 were produced. I had the Lindros autograph authenticated by SGC along with all the Hall of Fame caliber players' cards because they do not have stickers or holograms guaranteeing their authenticity. 

Another anomaly in the set is that no known factory-autographed version of #18 Bryan Berard has ever surfaced in regular or die cut format.  There is no known reason for this omission.  1997-98 was several years before Berrard received a horrible eye injury that cut short his playing career, and he was not between teams that year.  One just has to believe that Berard never signed his cards or that Pinnacle never sent them to him.  They may have thought they would insert them in Series B, but financial trouble kept them from following through.  Who knows?

What makes the 1997-98 Be A Player autograph set fun to try to piece together is (1) it can be done (with the exception of Berard’s and to some extent Lindros’ cards) on a relatively tight budget and (2) that it was such an insane undertaking in 1997-98 by today’s standards.  Getting so many autographs from so many players would likely cost a fortune today and the prices of packs would have to be astronomical.

Overall, one can build a series of most of the common autographed cards in this series on eBay quite quickly, even in 2016.  The series is stacked with lots of minor players who signed a ton of cards.  I have seen 100 autogrpahed card lots go for $30 plus shipping.  The tougher autographs, outside of the Lindros Die Cut, in the series are Martin Brodeur, Brett Hull, Joe Sakic, Al MacInnis, Ray Bourque, and Ed Belfour.  I believe that all of these cards, except maybe for Al MacInnis, were short printed.  There are lots of semi-stars in the set like a young Joe Thornton and Tomas Holmstrom but their cards are pretty plentiful.  Since Pinnacle is not in business, only people that have the original print run specifications for the set, who might have been dealers, would know.

Caption: Ray Bourque #248 and Martin Brodeur #2 are short-printed autographs in the set.  They are still surprisingly affordable on eBay at around $30.

In buying 1997-98 Be A Player autographed cards on eBay, bidders should take care.  Because the cards do not have stickers, holograms or printing on the back saying they are an authentic autograph, there is the chance of forgery.  Make sure that the autographed card has a gold foil ink name and logo and not silver foil ink.  An autographed silver foil card is very likely a forgery.  However, any die cut cards' autographs must be genuine because die cut cards (either foil or prismatic) were not issued without autographs.

The good news for most players' regular-issue cards in the set is there is not much economic incentive to forge signatures because the players were not major players and they signed a ton of cards.  There are plenty of the cards around for little money of these players.  For the bigger names, look for the gold foil or try to pull them directly from packs yourselves.  Since you can still find boxes of 1997-98 Be A Player cards around, this is possible.  Also note that all 1997-98 Be A Player autograph hockey cards were signed with black permanent sharpie-type ink with a relatively thin pen line.  Several cards have slightly wider pen signings, but still in black color.

Also, never purchase an Eric Lindros #1 autographed card that is not a prismatic, die cut card. If anybody owns a gold foil regular issue Lindros card, please send me a scan, and I will update this posting.  While that situation is possible, any buyer should be wary.  All other cards in the set are available in autographed format in their regular version (e.g.,  not a foil die cut or prismatic die cut).

Postscript

After Pinnacle’s Bankruptcy, the Be A Player brand was shifted by the NHLPA to a company started by Dr. Brian Price and was produced in 1998-99 before the NHLPA decided to change the name of their authorized brand to “In the Game”, which eventually became the name of Price’s company.  In 2005, the Be A Player brand was resurrected when the NHLPA broke away from the In The Game company and re-signed with Upper Deck.  However, Upper Deck has not produced Be A Player branded cards since the 2009-10 series.

End Note

Like all other posts, please feel free to make comments.  I review all comments before they are posted in order to reduce spam and keep things on topic.  Also, it may take me a few days to review comments.

Footnotes

1: http://prezsez.wordpress.com/2011/06/10/could-this-be-the-end-of-be-a-player-trading-cards/