What is an error card? (or variation card)

What is an error card? (or variation card)

I recently listed some 1991 Fleer baseball error or variation cards on eBay, which got me thinking about what actually determines if a card is a “true” error card?  Ultimately, the market for sports cards determines if a card is an error or variation card worth collecting.   If enough people are willing to collect a variation card, it obviously exists as a variation (social scientists would call this the social construction of reality, but I won’t delve into academic theories here...). Obviously, there has to be another version of an error card to make both worth collecting for a set builder or somebody that collects error cards.  Indeed, the 1991 Fleer baseball set is riddled with uncorrected error cards (usually labeled “UER” in a Beckett Guide or the Standard Catalog of Baseball Cards).  Uncorrected error cards usually have no extra value because there is no other corrected version to own.  While the errors might be funny or just plain innocuous on UER cards, they affect the value of the card very little in 99.99% of the cases where no corrected version exists.

So what is a true error card?

While this might seem like a silly discussion to people who do not collect sports cards, one just needs to go to eBay and search on the words ‘1990 Pro Set error’ (no apostrophes) to see a number of cards being sold as error cards that probably are not true error or variation cards.  The 1990 Pro Set Football set is so riddled with true error cards, which were later corrected by Pro Set, that thousands of collectors chase after the various versions of the cards. This situation has created an actual market for Pro Set error cards.  While I think this is a great and a fun collecting strategy for an otherwise hugely overprinted set, opportunists now often list 1990 Pro Set cards on eBay with simple printing errors that they try to claim are variation or error cards. To me, a print dot or slightly astray print line is not an error.

Indeed, I prefer the following definition for error cards:

“An error card is a sports card that contains some sort of mistake, such as a misspelling or a photo of someone other than the athlete named on the card.” (footnote 1).

I would further add the word ‘human’ before mistake to make the definition complete.  In other words, some person had to mess up or make an error in the process of taking a card from inception to printing it for consumers for it to be an error.  That error could be in proofreading the card for typos to having the wrong player on the card.

A perfect example is the 1989 Fleer Kevin Romine #98 card pictured below.  The error version on the left has the photo of Randy Kutcher – the wrong player.  Fleer, in later print runs, corrected the error with Kevin Romine’s actual photo in the card of the right.  It’s a pure human-error-caused variation.  Either the photographer messed up writing down whose picture was taken or somebody in the Fleer design studio chose the wrong picture in the first version.  Because Fleer also corrected the error, some collectors believe you need both cards to have the full set.  Again, uncorrected error cards, while interesting, do not create a possible second card to collect.

Caption: The card of the left is the 1989 Fleer Kevin Romine error card (#98a) that has a photo of Randy Kutcher instead of Romine.  After the error was discovered, it was corrected in later print runs with card #98b with a picture of Kevin Romine.  Both cards carry just #98 on the back of the card.

Because of the need for human error in the above definition, printing defects, mis-cut cards and other types of factory production mistakes would likely be ruled out as true error cards.  Such errors come from production presses, which while maybe caused by human errors such as poor printing press maintenance, are not systematic to the design of the card.  Being systematic to the design of the card is an important aspect of the error card because all copies of the same sports card are ultimately printed and centered uniquely when put under enough magnification such as a microscope.

So what is a true variation card?

A variation card (where no error occurred) would have a similar definition:

A sports card can have legitimate variations if the systematic design of the card varies due to human intervention in the process that changes the design, picture or wording.

A classic example of such variations would be Fleer 1991 Team Logo Stickers that were packaged with baseball cards in wax packs.  Each 1991 MLB team has two sticker variations.  While this difference was never acknowledged by Fleer, it has been speculated that Fleer used two different companies to print sticker inserts for 1991 and that each was sent slightly different designs by Fleer or allowed to adapt their own designs (footnote 2).  This explanation makes sense as it has been established that Fleer used two printing firms to make the actual baseball player cards in 1991 in order to maximize the amount of cards that would be printed (footnote 3) and thus flood the market during the junk era mania.

Caption: Above are Atlanta Braves 1991 Fleer Logo Stickers that are visibly different in design and thus are variations.  They have been given the designations NNO1a and NNO1b by the Trading Card Database.

Again, human intervention or error is central to creating variation cards.  Even if the card has no errors, the human decision or confusion that leads to two designs creates the legitimate variation.

As should be pointed out, arbiters play a key role in determining errors and variations for collectors.  For example, Beckett Price Guide recognition of an error or variation card gives it legitimacy for many collectors.  It suddenly becomes part of the set as listed in Beckett.  Some web sites also play influential roles.  The Trading Card Database tries to log all the error and variation cards in a set as reported by its crowd-sourcing users.  However, in either case, a collector must convince the editors or web site masters that a card is a legitimate error or variation card.

Caption: Above are two variations of Nolan Ryan's card #302 in the 1991 Fleer set.  The variation is subtle (e.g., where the lines are ruled through the years of stats on the back side of the card).  I would consider this card to be a legitimate variation because human intervention created the line ruling differences.  Note: Beckett does not recognize this variation in their set list for 1991 Fleer baseball.  It has been recognized the the Trading Card Database.

Returning to the original paragraph of this post, I would like to point out that the market of collectors usually determines if a variation/error card exists.  If enough collectors are willing to chase and acquire a card that is a different version of the same card, that card will be considered a variation by those collectors.  The purpose of this post was to try to encourage some collectors to think about what makes a variation card worth collecting versus a printing defect or some other non-human-based variation.

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.

Footnotes:

1. Definition from: http://sportscards.about.com/od/sportscardglossary/g/error_card.htm

2. http://fleersticker.blogspot.com/2009/07/1991-fleer-baseball-stickers.html

3. http://keymancollectibles.com/baseballcards/fleer/1991fleerbaseballcards.htm

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