- Created on Tuesday, 01 January 2013 20:11
|Dear Sports Card Makers of all Shapes and Sizes:
These issues need to be addressed. If I do not see progress toward these fronts I will personally raise these questions at the 2013 Las Vegas Industry Summit, the 2013 National Sports Collectors Convention in Chicago and on your favorite social media venue of choice. I have spent the better part of my life involved in the sports card industry. In the glory years of the 1990's I sorted cards in the back of a bustling California card store. In the early 2000s I was a "pajama retailer" - selling boxes on eBay of 1996-97 Finest Basketball and 2003-04 NBA products to make extra money while in college. In 2008 I went broke with my brother running our own card shop for two years. Down and out in 2008 my brother started Sports Card Radio while I went to work managing a medial office....... In late 2009 I "retired" and began working on Sports Card Radio and a number of other sites my brother created. In 2012 over 1.3 million people visited Sports Card Radio making it one of the most viewed sports card sites on the internet. All of the work on the site is done by either myself or my brother Colin. We've turned down countless requests for advertising in an effort to keep the information bias free. We didn't create this site to sell ads or make friends with card companies. We created this site for collectors and their interests.
I've seen card companies, and more importantly, customers of sports cards dwindle from those early 1990's glory years. Which isn't necessarily a negative thing. Those years in the 1990's were unsustainable from a business perspective, and was a bubble that was bound to pop. In 2013 people still love collecting cards. It's just more niche and specialized. I love people who geek out about sports cards. I'm a fellow sports card geek who happens to also like aggregating information for people to enjoy for years to come. A blessed sports card geek in a way. Because I certainly have the time to travel to Vegas, travel to Chicago, travel anywhere I need to in 2013 to make sure these issues at the very least get addressed.
1) Do NOT address customer service issues with "Well this is not my department...."
|From what I can gather Anne made a purchase on ShopTopps and ended up being shipped the wrong item. She originally posted on Topps Facebook on December 6th, 2012 to no response. She posted again on December 19th which got this reply from the administrator of the Topps Facebook. She also stated that she had been repeatedly calling customer support on the phone to no response. The item she ordered was going to be a Christmas present.
Don't do this:
- If you are the administrator of a company Facebook page, and post under the company name, then customer service is your department. Point blank period. Post under your own name if you want to say things like "this is a completely different department." Do not post under the company name and say that to a paying customer. That should be common sense.
|2) You need to give people a choice when you can't redeem redemption cards|
|Open just about any product now and collectors will have a good shot at pulling a redemption card. There is also a decent chance that the card company will not be able to fulfill that card. More often then not, redemptions are for autographed cards. Sometimes, companies cannot get the athlete to sign their cards and that might be totally out of the card manufactures control. Athletes can be lazy (about signing cards) or hard to track down. Collectors by and large (have come to) understand that.|
But here is what card manufactures don't understand. Don't just dig through a box, find a "Beckett valued" equivalent card and send that as a replacement for an un-fulfilled redemption. That's a joke. You realize that people live and die by some of these cards? They wait and wait for the card of their favorite player to come redeemed in the mail. When you can't come through for your customer, bend over backwards for them, or don't put the damn redemption cards in packs. Give them choices when you can't redeem a card. Don't disappoint them by you arbitrarily picking a replacement for them. They didn't win that redemption card in a contest. They bought that card with their own hard earned money. Now card companies you need to earn your money. The way you deal with redemption cards you can't fulfill is a joke. Fix it.
As a side note - the other issue is the cards having an expiration date all together. I've heard this question get raised many a times at many different venues and never gotten a great answer. I'll see what I can do in 2013 to get a clear picture.
|3) Stop letting product hit retail (Target/WalMart) before hobby shops get it|
This issue is what helped me go broke back in 2008 running a card shop. I remember people telling me about finding 2006 Topps Allen & Ginter at retail 2 weeks before I could get it. Now you see it happen all the time, mostly with Topps products. Any retail heavy product, Topps Series 1, Bowman, Topps Update, etc can be found at place like WalMart before hobby shops get their boxes. It's a slap in the face to those shop owners. Because they get their customers wondering why "you don't have it but Target does."
|I get how Target and WalMart pushes out product. I was a manager at Target. Time sensitive material like Video Games, Music CD's, DVD's, were stored in this locked environment until release day. You can't do that with baseball cards. It's just too expensive and Topps, Panini and Upper Deck don't really care. But your dealers do. Ship the Target/Walmart crap out after the Hobby stuff. You can do that. You can control what gets shipped when.|
|4) You got to do something about these sticker autographs|
They look weak. And..... in 150 years will that sticker autograph still be attached to the card? How strong is the glue you know what I'm saying? I know that is the furthest thing from your mind. But geeky dorks like me actually think about how these cards will be perceived long after I'm gone. The reason for the stickers is obvious. It cuts costs and allows you guys to crank out the required sets per sport. But they are potentially worthless cards, literally, if the glue ever wears out on those sticker applied autographs.
|You don't want to make on-card autographs. It's too much work. Way too much work. Every damn card needs to be approved by the league. Cards need to be printed in advance and it's real easy to just go to that file with 1,000 Ryan Broyles stickers with autographs on them. It's easier for the athlete as well. He/She just signs a bunch of stickers and is paid and done.
But when is crap just crap? When has a sticker autographed card looked nice? Talk to the people who have your license. The NBA, NFL, MLB and NHL. Plead with them. Tell them you are making products just to compete and crank out 18 sets a year per sport. Tell them you need on-card autographs. Have that conversation. See what they can do. Can they be of any help?
5) Treat people with respect and reach out to dealers not on social media
Seems obvious. But just do a quick glance at company Facebook and Twitter (gloss over all the free swag being given away) and look at some of the customer complaints. Many go un-answered. I've seen numerous, what I'd characterize as rude, comments by company employees on Twitter. Search sports card forums like Blowout Cards and Freedom Cardboard for "Customer Service" and read for yourself how some long time collectors get treated.
I have a tremendous amount of time to monitor these issues to see if they are getting addressed.
- Created on Thursday, 27 December 2012 01:46
|2013 Canada National Hockey Card Day
When: Saturday February 9, 2013
What: Free 5 Card Upper Deck Pack
Canada Only! Participating Certified Diamond Dealers Only!
*The Gretzky/Lemieux #16 card is free with purchase at the shop.
|Despite the ongoing NHL Lockout, Upper Deck will sponsor and promote a 2013 National Hockey Card Day. These packs will be available at Certified Diamond Dealer Hobby Stores in Canada. Packs will not be available at mainstream retail stores, only sports card specific hobby shops. You can walk into any of the shops and get one free pack. If you make a purchase you get card #16 Wayne Gretzky/Mario Lemieux.
The 2013 cards will feature the players in Team Canada uniforms and not the NHL gear (because of the lockout). Select packs will have autographs randomly inserted. Each pack has 5 cards.
Dealers can get bundles of 100 packs from their local distributor. The packs are not meant to be sold and are to be given away. Only Upper Deck Certified Diamond Dealers in Canada are eligible for the promotion. You can browse a few of the Canadian diamond dealers on the Upper Deck website.
- Created on Monday, 08 October 2012 02:03
|It all began when brothers Benito and Giuseppe Panini were in Italy running a newspaper distribution business and in 1960 bought a bunch of soccer player stickers (called figurines) from someone in Italy who couldn't find a way to sell them. The brothers re-packaged them and in one year sold 3 million packs and a business was born. In 1961 15 million packs were sold. In 1962 29 million were sold. Today, old soccer stickers from that era are treasured and valued like vintage baseball cards.
Panini is a massive company and only a small percentage of their bankroll is tied up into the production of American sports cards. But it doesn't take much money to wipe out competitors Upper Deck and Topps in the U.S. space. It started in 2009 when Panini entered the U.S. market and flexed it's muscle. Upper Deck and Topps were making NBA basketball cards in 2008-09 and were in the running to have their licenses renewed by the NBA. But Panini is a billion dollar business and swooped in to land an exclusive. You can believe it all came down to money. Topps is a conservative spending company and they were looking to reduce their licenses even if it meant losing a segment of the American market. Upper Deck was just beginning to go through some legal and financial trouble but they didn't have as much cash to blow as Panini did anyways. Upper Deck is a private company but did disclose at it's peak they were a $200 million a year business. Not bad but a far cry from the $1 billion Panini can rake in. The fact that Panini has a strong overseas brand name probably didn't hurt in landing the NBA deal either. Globally, the NBA might be the most popular sport in the world behind Soccer. And while it's hard for people in the United States to grasp, worldwide, Panini is a bigger brand and has more resources then either stateside card competitors Topps and Upper Deck.
Panini entered the NHL market in 2010 and produces licensed hockey cards along with Upper Deck. In 2011 Panini obtained a Major League Baseball Players Association (MLBPA) license. Not to be confused with Topps' exclusive MLBP (Properties) license. Topps can show images of players in uniform, include team names & logos on cards, etc - Panini cannot. There have been rumblings that Panini may get a Properties license..... perhaps soon. The MLB baseball card market is the largest in the United States when compared to the NBA and NFL, despite the latter two being more popular with fans as a sport and on television. If Panini was flashing cash to the NBA, NFL, and NHL you can bet they will try and get in front of MLB Properties decision makers and try and write a big check. It's up to the MLBP if Panini will ever be able to produce licensed MLB cards that are so popular in the U.S. market.
If true that Panini can generate revenues in the $1 billion annually from some of the businesses listed below, then money spent in the U.S. sports card market is a drop in the bucket for the company. In fact, there is probably a long term plan in place where the Panini Group doesn't expect to see a huge return on American sports cards. Meaning they are willing to shell out cash to obtain licenses and grow their presence in the U.S. without worrying about the bottom line of the balance sheet.
It may very well be that Panini doesn't "make money" on their NBA, NHL or NFL cards. But Panini's goal is most certainly long term profits and not a short term money grab. Panini's main sources of revenue happen outside the United States. Prior to 2009 collectors of sports cards may have been unfamiliar with Panini, but you can see why they have been able to win licensing battles against the weaker U.S. sports card players. Panini has resources that Topps and Upper Deck don't and that can woo any licensing exec with the leagues. For many years U.S. card companies had been going broke and now a knight from Italy shows up with checkbook in hand! The tone was set when the NBA kicked Topps and Upper Deck out, when both expressed interest in continuing making basketball cards. In just three short years Panini is now considered the second largest producer of sports cards. That's how weak the market was when Panini came to the U.S. and expect them to continue to take market share in the category.
How Panini Rakes in $1 Billion Worldwide:
The company has built it's brand around the globe thanks in large part due to their massive production of collectible stickers. Panini dominates this niche by obtaining licenses and marketing the stickers usually to a younger audience. They've produced stickers for just about everything under the sun. Including popular kids movies Cars, Brave, Ice Age and Spider-Man.
Their sports stickers might be familiar to American card collectors. In recent years they have produced sticker collections for NBA, NFL, NHL, various soccer versions including FIFA World Cup, UEFA, Manchester United and more. According to Panini Group, collectibles and specifically stickers have provided the company an opportunity to grow. This is probably a high margin business. It doesn't cost very much to produce the stickers Panini makes.
A focus for American collectors, but this is just a small subset of the Panini's overall business. In 2009 the Panini Group decided to take their piles of cash and enter the United States market. USA collectors recognize the Panini Group subsidy Panini America as the face of the state side card company. Panini blew competitors Upper Deck and Topps out of the NBA basketball card market to land their first US sports license. But the big acquisition to help aide in establishing operations in the U.S. was the purchase of Donruss Playoff in March 2009. Donruss was a well known U.S. sports card brand that had successful titles including Elite, Contenders, Certified, Threads, National Treasures and more. Panini immediately took over the NFL license that Donruss had. The sale of Donruss came at a needed time for both companies. Donruss had lost it's MLB license in 2006, severely reducing it's revenue potential and Panini needed a brand, and talent (employees) who understood the U.S. sports card market. Panini also took talent from rival card company Upper Deck. Several employees left California based U.D. when they were going through legal and financial troubles.
Panini has entered the U.S. market and spent money. They spend more to market their products then competitors Upper Deck and Topps. At key trade shows like the NSCC and the Las Vegas Industry Summit the corporate booth Panini has usually doubles the size of Topps & Upper Deck (Topps recently has not had a corporate booth at the Vegas Summit). Topps is an established American brand that was purchased off the open stock market in 2007 by Madison Dearborn Partners and Tornante. Since the sale it appears Dearborn and Tornante were seeking to capitalize off the $30 million in estimated profits that come out of the business annually. Topps does not have to market it's products very much because of it's iconic brand status and they have no reason to innovate a space they have dominated since the 1950's in the United States. Upper Deck is considered an industry innovator since it was founded in 1989, but they have fallen on hard times and were hurt the most by the economic downturn in the U.S. that started in 2008. Upper Deck can no longer market their products like in years past and have lost out on some key U.S. sports licenses (NBA, MLB, NFL).
Panini does big business in Europe. So they have a distribution center where they can get product into 500,000 stores in Europe within 72 hours. They not only distribute their own collectible products through this channel but they will distribute other companies books, comics, pre-paid phone cards, toys, soccer merchandise and many other items through this channel. This means money in the bank for Panini. They run popular online soccer merchandise store "FootCenter" through this channel. Panini also has a distribution center in Italy, dubbed PAN, where essentially the same business goes on. Panini is able to get their products into the hands of customers very easily because they own their own distribution network. They also can earn revenue by distributing other companies products. Sounds like a great business if they can dial in their operating costs.
This is software that analyzes the movements a player will make during a soccer match. This data is then sold and used by soccer teams, media groups, video game companies and other interested parties. Much like statistical information in Baseball, having advanced metrics to determine the value of a player is key in a sport like soccer when there is not much scoring or other simple statistics being recorded.
Behind collectibles, this is the Panini Group's biggest business. It's also it's fastest growing. Over 4,000 comics, magazines and books are published each year by Panini. They publish primarily publications related to kids and their interests, establishing Panini as one of the leading publishers of youth oriented products in Europe. Huge revenue stream. Buying a popular Marvel, DC, or Vertigo comic in Europe? It probably came through their publishing and distribution network. This business pumps huge money into Panini's bank accounts.
The Future of Panini Group
Things appear to be going well. They have a strong footprint in Europe and other parts of the world. This isn't a sports card business. That's just a small piece of the pie. But they have cash other U.S. sports card competitors don't. Panini will easily be able to win over leagues that hold the key to licensing with their balance sheets that show a killer worldwide operation of businesses. Panini won't innovate the sports card world like Upper Deck did in 1989. But their presence is much needed to help stabilize an industry that has seen countless companies big and small go broke.
It takes a lot of money to enter the U.S. sports card market. Licensing with the big pro sports leagues doesn't come cheap and they like to see you have a multi-million dollar bank account....... even after you cut that check to them. Panini is a dominant player in the licensing game. Some recent licensing deals include: Michael Jackson, Justin Bieber, and Disney. Those don't come cheap. The fact that Panini is not reliant on sports cards to make or break their budget is a collector's dream. Even if you don't enjoy their products, I'd advise being patient and give them a chance. At any moment, these Italian billionaires could just go back home, milk Europe, milk South America, milk the portions of their business that have unlocked unspeakable amount of riches for them over the years. They don't need American sports cards to make money. It's literally a drop in the bucket for them.
Here is a question. What is your favorite sports team? What would you rather have, the owner of that team to have so much money that he will spend whatever it takes to try and win? Or an owner who looks for loose change under seats after games? We know the answer. Panini may not be on the same spending level as Mark Cuban or Jerry Buss, but they have the biggest wallet in the sports card game at the moment. Dearborn and Tornante's Topps have a huge collective wallet as well, but just don't have any reason to spend it to grow their sports card business. In fact, Topps has failed and lost millions when trying to innovate and grow the business. Dearborn is a leading private equity firm and has ownership stakes in dozens of companies but they are not related to sports or even collectibles (Metro PCS for example). Panini has reason to spend cash though. Panini has reason to try and grow their business. They are just breaking into the U.S. sports card market and want to make it a lasting business. It will take many years to see if that will happen.
- Created on Saturday, 06 October 2012 01:55
|Becoming a sports card manufacturer would be tough. Could you imagine going up in front of the investors on Shark Tank pitching a new line of sports cards? You'd probably be laughed off the floor. Considering that entry into the major sports card market is regulated, meaning, if you don't get a license with one of the leagues, NBA, NFL, MLB, NHL...... best of luck to you. The trail of bankrupt card companies from the last 20 years is long, and even some that had a license couldn't gain traction in what is now a very niche market. And only a few companies remain in a very low competition environment.
Stop The Madness Initiative
The Godfather of Baseball Cards, Topps, enjoys the fruit of no competition more then most. MLB Baseball cards generate the most revenue despite not being the USA's most popular sport. A huge % of the sports card pie lies in the baseball card category. But there is very little incentive for MLB Properties to allow anyone other then Topps to produce licensed trading cards. Competitor Panini America does have a license with the MLBPA (Major League Baseball Players Association) as does Topps. But Panini does not have a MLB Properties (MLBP) license and can only show player images but not team names, uniforms, logos etc. MLBPA licensed cards are less popular with collectors. The MLBP has seen, not just with trading cards, what the over dilution of licenses/products can do. Topps had a plan back in 2007 they dubbed "Stop the Madness", a long-term strategic initiative intended to put a stop to the crazy amount of products and licenses that boomed during the late 1990's - early 2000's. Instead of Topps seeking out licenses and throwing mud at the wall in hope some sticks, Topps wanted to reduce the number of licenses they had and also stamp out some of the little competition left.
Chief Operating Officer (at the time) Scott Silverstein puts the sports business in perspective in the 2006 Q3 Call: "In 1997 you had a big part of the sales and profits coming from the sports card business which had relatively few releases and was very high margin. Last year (2005) we did over 60 product releases with an incredible amount of complexity that both shrunk gross margins and increased overhead because of the complexity."
Topps began reducing the number of sports licenses shortly after 2007. In 2009-10 they released NBA Topps and Topps Chrome before Panini wiped everyone out of the NBA market with what has been called a whopping bid to land the exclusive. In reality 2008-09 was Topps' last year with a full run of Basketball cards. Topps hasn't produced NHL cards in many years. A Topps employee recently said at the NSCC Collector Panel that they would "love to (produce cards) in every sport" but that kind of decision moves far up the food chain and statements like that are just wishful employee speak. Topps made a business decision to limit the amount of licenses many years ago and focus on the cash cow (Baseball) portions of their product lines.
Buy Back Program: Not Cards Silly, Company Shares!
The Topps Company makes money. Make no mistake. Even in the difficult years of sports cards, post 1994, Topps made healthy earnings per share from 1990-2005 (note: 1997 was essentially flat). Sure some of that EPS is not exclusive to sports cards. Pokemon was owned by Topps, and it was a huge part of their business in the late 1990's. But Pokemon fell off quick. The candy business was so-so. Wisely, the company stacked cash - upwards of $158 million in the bank at one point (and no debt). Instead of returning that cash to shareholders (owners), the company decided in 2001 to "buy back" it's shares to try and create value for owners who held on during the lean years. Buying back shares is a simple idea. Think of it like this: if there were 100 copies of a 2011 Bowman Bryce Harper Card and Topps goes out, buys back 50 copies and burns them on YouTube, suddenly there are only 50 Harper cards left. The price of the 50 remaining Harper cards should go up. Same idea with a stock buyback. Topps buys back many millions of shares of it's own stock in hopes the shares left will be worth more.
Management Blunders Stock Buy Back, then Sells Company Cheap
The stock buy back was perhaps a great idea in theory, but Topps was sold just six years after the buy back program started, for less then what they were buying back shares for. Oops. By most accounts, Topps was led by poor management pre-2008 and the buy back blunder speaks to that. When the company was sold they had roughly $80 million in cash in the bank (off from reported highs of around $158.74 million pre buy back), and no debt. Still great numbers. An "$80 Million discount" to whomever bought it. So when Michael Eisner and Madison Dearborn partnered and got it for around $385 million, that number is very deceptive. Because they got the keys to the bank account with the $80 million in straight cash. Essentially getting $80 million back right when they bought the company. A great deal, because they also got a company that can create an estimated average of $30 million in free cash flow each year.
Granted, we haven't seen any balance sheets since 2007, but there is little evidence that anything has been run into the ground in New York. In fact, Topps eliminated some competition, Upper Deck, in both the MLB and NFL markets since 2007. While Panini has entered the NFL market, they remain on the outside looking in on the cash cow that is the MLBP license. Topps is an iconic brand. An iconic American brand. Synonymous with the words baseball card. And that has huge value that can't be measured by money in the bank.
Competitor Upper Deck Guns to Buy Topps
The Topps brand is strong but the only known competing bid in 2007 to Eisner & Dearborn was from Upper Deck. At the time UD appeared healthy. Gaining market share on Topps, who was clearly their main competition in the sports segment. Upper Deck was the standard for innovation in the sports category, something that for Topps is not a main focus (more on this later). Upper Deck even offered more money then Eisner & Dearborn. But not enough. The board of directors and shareholders of Topps had no reason to deal with Upper Deck when the FTC would be on their doorstep blocking a deal. Just like Google can't buy Yahoo. Verizon can't buy At&t. It's a simple term called a monopoly. And even in a niche as small as sports cards, the FTC would have unquestionably stepped in. And Upper Deck's offer was too low to be considered anyhow. The value of owning the Topps brand is worth, potentially more then the $80 million in cash sitting in the bank. Way more I would argue. Hundreds of millions in 'goodwill' value to a company like Upper Deck.
Upper Deck Innovates. Dearborn & Eisner Milk Cash Cows
But Eisner and Dearborn aren't looking at the Topps business from Upper Deck's (2007) perspective. The 'goodwill' value of the brand meant something to them, but not as much as it would to competitor Upper Deck. Eisner and Dearborn saw a company in Topps they could buy at a $80 million discount and that rakes in maybe $30 million or more in straight cash each year. No debt either. They didn't come in to buy Topps to revolutionize the industry, they bought it to milk the cash cow business. Nothing wrong with that. That is not a negative reflection on Topps. That's business. That's Madison Dearborn Partners specialty. That's the type of business I'd invest a portion of my pie in.
Topps Doesn't Innovate. Because it's NOT Smart Business to do so.
Game used jersey cards didn't start with Topps. Autographs didn't either. Serial Numbering didn't either. Topps didn't jump into the "video card" hype a couple years ago. Sets like 2012 Topps Archives are popular, because they look like the old cards. The brand. The iconic brand of Topps sells cards. Card designs made many moons ago are used. Topps doesn't innovate in the sports card segment. They don't think of very many new ideas. Because they don't have to. And it would be a dumb business move to try and innovate (actual numbers listed, keep reading to "The Pit").
What is the incentive innovate? Spend a bunch of money to innovate a stagnant hobby? To compete against whom? And in the largest cash cow segment of the industry, the MLB, why do that? It literally makes no sense. Milk the potential average of $30 million coming in annually from the overall business. Run a lean business. Cut headcount down to only the minimal amount. It's sounds awful from a hobby/collector perspective but that's business. And in reality, that's smart business. Could Topps spend a bunch of money on technology, talent, and marketing to grow the sports card business? Sure they could. But that's gambling. People like Dearborn and Eisner don't gamble. They see Topps is in a low to no competition niche market. They have a low priced product (for the most part). And did I mention is an iconic brand?! Throw in the $80 million discount. And oh yeah, when people thought the baseball card industry was dead - Topps was still a profitable no debt business! Heck yeah, I think Dearborn and Eisner got a great deal back in 2007. It's why they still have the company. In present day 2012 - I'd be stunned if they didn't run a profit and have several million in the bank. Anything to the contrary would speak to mismanagement.
MLB Cards. The Cash Cow Sports Segment
Topps makes money on their MLB line. I'd fall out of my chair if they didn't. Every metric seems to suggest there is profitability there. How much money? Who knows. Even when Topps was a public company they didn't divulge "this is how much money we make specifically on MLB, NFL, etc." Packs used to cost $0.01-$1.00 up until about 1994-ish. The move to premium cards was aided by competitor Upper Deck. Pack prices soared and the market shifted from a fun kids hobby to more serious collectors buying cards that at times are described as investments.
It's a smaller market now then it was in the early 1990's. What was a billion dollar market is now rumored to be in the hundreds of millions today. Of which Topps gets a huge chunk. Before selling to Dearborn and Eisner there were talks of Topps innovating in the sports segment. They started the now defunked eTopps and was the original owner of The Pit. Perhaps they saw back then a way to capitalize on the huge, massive secondary market of cards (that California's NASDAQ: EBAY has proven can be a large revenue stream). Websites like eTopps and The Pit require a lot of time, headcount, some decent money, and some innovation. Topps reported a loss of $3.7 million from The Pit in Q3 2006. You can guess that the potential losses on eTopps was more. All of which flies in the face of what made Topps a solid business back then, and on the outside looking in, what makes it a good business today. Is there upside in having websites like The Pit and eTopps? Maybe, but again, it's gambling and remember, that's not what Eisner and Dearborn bought this company for.
NFL Can Profit, but More Risky
The NFL is different. I could see them having some profit swings in this segment. Even going back to old conference calls, 2006 was a big year for NFL cards because of rookies Reggie Bush, Matt Lineart, and Vince Young. While all of those guys flopped to an extent since, back then they were the hottest thing going. Old employees in conference calls mentioned that some 2006 NFL card sets sales rose upwards of 50% over 2005 levels. That was all from the hype of Bush, Lineart and Young. 2005 featured a then struggling Alex Smith and an Aaron Rodgers who was sitting on the bench behind Brett Favre. NFL sales, more so then MLB believe it or not, are rookie card driven. As collectors have seen in 2012 Topps Football sets, autographs of Robert Griffin III and Andrew Luck are much more rare then other rookies. This all points to the rising costs of obtaining signatures of top NFL rookie stars. It wouldn't surprise me at all if Topps had to spend more, per autograph, for Luck and RGII, then autographs they purchased of MLB player Bryce Harper. The NFL is more popular in the USA as a sport, but Football cards are not nearly as popular as MLB cards.
The Future of Topps. Stick With What Works
They have a very simple business from the sports segment side. Try and limit the licensing to competitors. When you keep competition low it allows you to not innovate and just milk the iconic Topps brand. Topps is also limiting the sports licenses they have as well. Should Topps produce NHL, NBA, Lingerie Football League, Golf cards? They don't and I'd argue they are right in staying away. Of course if the money is right on a licensing deal, then they will most certainly take advantage, but none of those sports are the cash cow that is MLB Baseball. Again, sounds awful to the average collector who doesn't care about the balance sheet. But this on the surface appears to be a great business. Sure, not a business with a lot of upside. At all. But I can see exactly why Dearborn and Eisner bought it for the steady stream of cash flow annually, not to mention the $80 million discount. It's also a low risk business if they keep operating costs down (that's why you see low innovation, and low headcount).
MLB has no reason to get rid of Topps as a partner. They have been married since the 1950's so why the heck would that change? That bodes well tremendously for Topps. Could the MLB open up licensing? Perhaps, but that would seem probable they (the MLB) did research to suggest that the market is growing. Topps, by running a low innovation, low expense business actually helps keep the MLB baseball card market relatively flat.
Could Dearborn and Eisner eventually sell Topps? Sure they could. Dearborn just sold a company in the week this was written. But the line to buy a sports card company, even as iconic as Topps, is a much shorter one then the collector line at the NSCC for the exclusive Topps card sets. If it's still true that the company spits off $30 million in free cash flow each year...... by around 2017 Eisner and Dearborn can have their entire original investment ($385 Million) they made in 2007 - realized in cash profits (taking into account the $80 million in cash discount they got when they bought the company).
In reality it's very difficult to know the overall health of Topps. But Dearborn and Eisner aren't dumb. Dearborn is one of the leading private equity firms out there. They knew what they were getting into back in 2007. That is clear. Back then there were rumblings that Eisner was going to revolutionize the business. He's smarter then that. Don't work hard. Work smart. Topps when he bought it was a profitable business with no debt, nearly $100 million in cash, and little to no competition. Just milk that sucker. That's what I would do. That's a great business.
When Topps was a public company (TOPP) I held no shares in the company.