Not the stale gum: speculative bubbles. The term “bubble” may be familiar from the news, in regards to the housing and banking crises. I am going to discuss how a bubble can happen with any consumer good (commodity), specifically, baseball cards. I will start with a quote from writer Dave Jamieson, who shares his experience in trying to unload a box of baseball cards that he had found tucked away in his closet from childhood.
“First, I got a couple of disconnected numbers for now-defunct card shops. Not a good sign. Then I finally reached a human. “Those cards aren’t worth anything,” he told me, declining to look at them. If I had to guess, I’d say that I spent a couple thousand bucks and a couple thousand hours compiling my baseball card collection. Now, it appears to have a street value of approximately zero dollars. What happened?”
It is necessary to tell some of the history of baseball cards…
- Birth in advertising
- A marketing tool for tobacco companies in the 1870s.
- Included in a pack of cigarettes.
- They became popular as collectibles amongst baseball fans.
- There was no value associated with them.
- After WWII, Topps became the first company to issue a set of trading cards with bubble gum.
- Baseball cards became a commodity. Something to be bought by a consumer.
- At first it was a child-collector industry.
- Traded, or in bike spokes; sound.
- Topps had a monopoly on the market.
- They defeated an anti-trust type lawsuit from competitor Fleer in the 1960s.
- Fleer would re-emerge on the scene in 1981, along with another company called Donruss.
- They would then provide competition to Topps.
And thus began the baseball card bubble
- Rookie cards (define) started to become highly valuable.
- 1st year player cards.
- Also including unheralded stars and Olympic team players.
- Minor league players who were considered major league prospects.
- Some of the rookie cards would become quite valuable.
- Older collectors entered the market.
- Baseball cards became an investment. (Scarcity)
- Unopened packs from the seventies, originally costing a quarter were being sold for $100.
- The odds were fairly good that you could get a good rookie card in the pack.
- Cottage Industries
- To service the market, cottage industries were borne (much like cell phone accessory market).
- Nearly every weekend across the country, “baseball card shows” would be held hotels and convention centers.
- Beckett’s Baseball Card Monthly became the collectors “bible.”
- Baseball card shops opened to capitalize on the growing market.
- In the early 1990s, higher quality cards hit the market with new brands like Upper Deck.
- This caused a shift by all card companies to produce higher quality cards.
- The industry started to cater almost exclusively to what Beckett’s associate publisher described to me as “the hard-core collector.”
- Prices increased, and the market was further flooded with new sets, offering “scarce” autographs, gold foil, and game used memorabilia.
- Like the earlier rookie card mania,
- These cards would include stars
- Also many “no-names.”
- More brands would enter the market.
The International Herald Tribune reported: “It’s a recession-proof business,” says John Brigandi, co-owner of a New York specialty shop where card prices range from $8 to $40,000. “Our sales last year were $2 million, double the previous year.””
- Market Saturation
- Too many sets, too many cards.
- Sets that featured only 132 cards in the past, now featured over 800.
- People began to purchase the complete sets, as opposed to the packs.
- The cards were no longer scarce.
- The increase in prices would push the child collector away from baseball cards.
- The cards lost value.
- The card “shows” died down, and collectors left the industry.
- The burst bubble
- There are now over thirty different sets in the hard to follow market
- Fewer consumers.
- Continued rising prices.
- Little demand considering the amount on the market.
- Baseball card shops, once roughly 10,000 strong in the United States, have dwindled to about 1,700.
- A lot of dealers lost money. (Those that didn’t get out)
- “They all put product in their basement and thought it was gonna turn into gold,” said “Mr. Mint,” a famous baseball card trader/dealer.
That is a common story, not only tied to baseball cards. There are other consumer commodities that experienced bubbles, and oftentimes, they follow a similar pattern. Every commodity has a “boom” cycle: From bank lending to beanie babies, and baseball cards. The industry will appear to be healthy and rapidly growing, causing many to jump on board. Eventually, this participation creates a level of speculation that isn’t sustainable.
The bubble is usually only noticed in hindsight, when a sudden drop in prices appears. By then, goods have become over produced, and the market for the item contracts or disappears. Ultimately, the “bust” or crash which usually follows an economic bubble can destroy a large amount of wealth, and the industry is left scrambling to recoup losses while still trying to maintain the business. On that note, I would like to add that “the bubble” is an example of how “all good things must come to an end.”
Thank you for your time.
Jamieson, Dave. “Requiem for a Rookie Card” July 25th, 2006. http://www.slate.com/id/2146218/nav/tap1/ (accessed May 10th, 2009)
Ryniec, Tracey. “Anatomy of a Burst Bubble: Part 1: Baseball Cards” September 20th, 2006.
http://traceysmarketupdate.com/2006/09/20/anatomy-of-a-burst-bubble-part-1-baseball-cards/ (accessed May 10th, 2009)