The Uneven Playing Field

Or: Panini, price fixing, market saturation, exclusives and the cyclical nature of markets as they relate to cards.

Yeah that’s a long and dull intro, but if you stick with me (which I hope you will) this might be interesting.

Recently the trading card market (both sports and non sports) has been going through what I can only really describe and a state of flux. A lot of things are changing in a short space of time, and that’s always news worthy, even if it’s not always a cause for concern. A lot of interesting things are going one, and they more they change the more it seems some of them stay the same. Many years ago in card history (Baseball card history at any rate) Topps was essentially the only kid on the block as far as mainstream Baseball cards, it put up a real real fight to stop others from entering the market. History has shown the market expanded greatly once it was eventually opened to competition however and Topps befitted greatly because of this.

Simply put competition leads to innovation, you have to work to make a better whatever, or else consumers will look at other products. A lack of competition leads to stagnation. From a manufacturers point of view why spend money on innovation when you already own the market? If people are going to buy the product they HAVE to buy yours.

But wait Jason I hear some of you saying… people will stop buying! Well yes and no often some companies (big well known companies who will remain nameless ~Cough~Marvel~Cough~) would like to lose customers. If you raise your prices you will probably lose some customers, on the flip side the customers who remain are paying more and making up the short fall… on top of that your costs go DOWN because you don’t have to print, pack and ship as much product… Is this cynical? Absolutely. Is it something actively considered by most companies? Again absolutely.

Competition can help put a stop to this sort of thing. Then again their can be valid arguments for exclusive deals, if you are protecting a market from over saturation for example. Lets take some entertainment examples, say Smallville , a popular show (though very niche when it started) and licensed to the now sadly departed Inkworks. Could the market have coped with another company producing cards on this show? Unlikely, had more cards been produced the market would very probably have been over saturated and it would have devalued the license and the property as a whole. No license holder wants a property associated with remaindered and generally unsold stock. It just looks bad. So in some cases exclusivity can be a benefit to a growing market, the question really becomes who judges the situations. That is something I think is best saved for another topic at another time. I would however say this:

Licensing is predominately about one thing and that is profit, which is fine as long as that profit is not derived at the detriment of the consumer. A good example of this: Harry Potter has official license trading cards, these are created by Art-Box for the hobby market and have proven to be very popular. Art-Box had an exclusive deal which as of last year has been altered. Now they have an exclusive US deal. In other parts of the world Panini have the rights to produce Potter cards of there own. Essentially the rights holders can sell the same license twice while stifling competition.

If the Harry Potter brand is suitable for more than one license then why wouldn’t it be suitable for competition? Simply put a license like this would be fine with competition but Time Warner can be paid twice for preventing it. I can only guess the second company might not pay Time Warner if they thought they had to produce a competitive product! Art-Box now are unable to export their cards to places like the UK (you know where Harry Potter was created) and the card collectors will be forced to buy on the grey market, which means higher prices for the consumer. The other option is to simply buy the mass market Panini product and forget about the hobby product. These options seem less than reasonable to the average collector, but from the finical standpoint of the manufacture and and licensor’s it’s a great way to milk your money.

Look at a company like Rittenhouse Archives, they export very little outside of the USA and Canada these days apparently because of the contracts they have to sign. Because of this markets are left devoid of any cards, often on subjects that would have sold well. How can this be a good thing for the consumer or the whole of the industry?

Worse still seems to be the growing inability to understand the market we are in. Some people think that by attempting to artificial control the market we can bring back some sort of pre eBay heyday of golden card joy. To put it simply this is utter crap. This is why I think Mike Anderson, Rodney Alsup, and the rest of Panini USA are not only wrong but extremely hypocritical.

Ok I am sure I lost some of you with that so I will give you the background and some links, oh and I will tell you who these folks are. Lets start with that one: Mike Anderson is the Senior Vice President for sales and marketing at Panini USA. He probably has his own parking space to go with that tittle, but I am guessing at that. Needless to say a mid-sized fish in a small pond. He has been working in cards for a long time so should really know better. Rodney Alsup is the Hobby Sales Director… probably a smaller office the parking space is anyone guess.

Panini have announced that they are completely changing the way the sell and distribute all of there products. They will be artificially helping small hobby shops to the detriment of non shop owning dealers and mid sized resellers. They also want the Internet distributors to go. Mike talks about Wholesalers and retailers:

“You are one, or you are the other,” Anderson said. “And never the twain shall meet.”

And if you are a retailer with some wholesale customers:

“Again, no warnings,’’ Alsup said. “They will be black-listed”

Wow ok so Panini not only want to control the production of there cards they want to control what you do with them once you have bought them that is IF they let you buy them. Oh and they are talking about setting a minimum price that there cards cant be sold below… This news was welcomed by a larger number of hobby shop owners… you know that’s hardly a shock, that’s like telling fish your pro water… what response do you expect? The rest of the market might have a few things to say about it however. It reeks of protectionism and it specifically targeting online resellers and wholesale distributors. Now this is the hypocritical part: (this comes directly from the BeckettBlog)

The Panini executives credited CEO Mark Warsop for the company’s renewed commitment to integrity in distribution and admitted that, prior to Panini’s purchase of the former Donruss/Playoff LP in early 2009, the company made distribution choices that were not in its or the industry’s best long-term interests. Some of those choices included selling significant a volume of new issues and closeouts to online retailers, and allowing certain wholesale distributors to develop and operate online retail businesses.

“We turned a blind eye toward those things, because, honestly, we had to. Our ownership needed the money, and we perpetuated the industry’s problem,” Anderson said. “But under Panini ownership, we work for a CEO who is allowing us to do what should’ve been done 10 years ago. We are well structured, well financed and committed to doing what is best for the brick-and-mortar stores who are the lifeblood of this hobby.”

Bricks and Mortar stores are important to the hobby but only as far as the market will support them.. this is akin to publishers saying we will not sell books to Amazon because they are harming the real Bricks and Mortar book shop… the life blood of the hobby is NOT a shop it is the collectors, the consumers who spend money on your price fixed products drive the hobby. The delivery method by which they obtain the cards is much less relevant and intervening to harm one method while propping up another is an anathema to free market economics. Card shops are NOT to big to fail. Don’t get me wrong I like card shops I think we should have more of them, and if enough people think like that we will, but putting folks out of the market to force people into card shops is not how this should work. Looks like that’s the way it will be however, at least if you want NBA or NFL cards because Panini have the exclusive rights… Licensing meets intentional market manipulation.

It seems like every time you see a loser you know its a consumer. Its also a little rude to in no uncertain terms say to distributors and online resellers yes you were OK when we needed the money but hey you can take a flying jump now that we have cash!

Obviously as a company they can chose who they sell to but they cant enforce price fixing. Nor do I think this will help them with the large segment of the hobby that shops on-line. Those retailers looking to grow and expand are also shut out…

What I find most amusing is the total lack of hobby support any of these companies have outside of the USA. Panini UK refuse to respond to ANY questions and Topps promised a response in January to questions about hobby support in developing markets like the UK. Still waiting….. years ago card companies opened up to competition and everyone benefited for a while, now we have returned to exclusivity, and very possible mediocrity. Its no longer a choice about whose cards should I buy it’s more a question of should I bother at all, and that’s not the way it should be. Go out an support the “hobby” by buying what you like from who you like and don’t let manufacturers tell you what is best. I wonder how happy Panini will be when this sort of decision hits the profits.

Also as you finish reading this that I only said it MIGHT be interesting, it wasn’t but hey you had fair warning. Still it could always be worse!