Last week, in our discussion on Case Breakers and the Value Cycle, we noted how the rapid emergence of the case breaker has created increasing pricing pressures on the initial secondary market for new releases, squeezing case breaker profits. Worse, combined with Topps’ “print to order” policy, increasing case breaker demand has also pumped up the supply of new issues, fundamentally devaluing the products in the process. In addition, we also noted that this combination could lead to accelerated value cycles, with potentially wild swings in supply of new card issues from year-to-year, or even set-to-set.
This brings up an interesting question: Are case breakers bad for the hobby?
This is a more complicated question than it might seem on the surface, and the first thing we need to do is understand what case breakers do and how they fit into the marketplace. That said, case breakers generally fall into at least one of three categories:
- Fixed price case breakers (commercial)
- Rip-and-flip case breakers (commercial)
- Case- and box-busting collectors (non-commercial)
The most visible and most recognizable of the case breakers are the fixed price case breakers. These case breakers typically sell fixed price team slots prior to the actual break. Some breakers allow the consumer to choose his/her team, while setting different prices depending on the team; others sell slots for random teams.
This is a strictly commercial (for profit) operation, and the business end of the math is simple. Let’s say a box costs $100, and there are 30 teams in the league; if you can sell 30 slots for $5 each or $150 total, you have a gross profit of $50.
From the collector’s perspective, this is a direct substitute for buying sealed packs and boxes. It’s clearly a bad bet value-wise – in the example above, you’re paying the equivalent of $150 for a box that cost $100 – but the collectors who buy case break slots are apparently willing to pay a premium to take a chance on getting box or case hits for a relatively small cost.
Rip-and-Flip Case Breakers (Commercial)
The rip-and-flip case breakers are not any one type of breaker, but rather a range of breakers. Some breakers sell sets while auctioning off the hits, while others sell player slots (say, for all of the autos or non-autos of a given player). Dealers – brick-and-mortar or otherwise – who merely break boxes or cases and sell singles or lots also fit into this category.
The rip-and-flip breakers are the breakers operating most at the mercy of the market. While fixed price breakers retain some nominal pricing power (assuming they can sell slots), some of the rip-and-flip breakers are ripping and dumping supply on the market, while the other rip-and-flip breakers are complaining about the prices some of these cards are being dumped at. The problem is, if you are trying to rip-and-flip and have a short holding time frame, you have little pricing power, and no control over the market.
If you understand the terms “economic profit” and “perfect competition,” then you also understand that it would be very difficult for a purely rip-and-flip case breaker to sustain an economic profit over the long run.
On the other hand, from the collector’s perspective, rip-and-flip case breakers perform a vital service. If you are a collector-investor looking to acquire key hits (such as rare parallels or RC or prospect autos) and/or build investment lots of a given player, the rip-and-flip breakers are often the guys you wind up buying from.
Case- and Box-Busting Collectors (Non-Commercial)This is where this discussion starts to get even trickier, as the group of people dumping supply on the market upon the release of a new issue is not limited to people doing it strictly for profit, but also includes ordinary collectors. Many collectors buy cases or boxes, keep the cards they want, and dump the cards they don’t want on the market; regardless of profit motive, this results in increased pricing-power-sapping supply on the initial secondary market.
Essentially, anybody who buys sealed wax and doesn’t keep every card is performing a case break function. In addition, this group of collectors also includes collectors who buy into case breaks and dump the unwanted cards that come out of the break onto the market.
So Are Case Breakers Bad for the Hobby?
Regarding strictly commercial case breakers, the short answer is “Not necessarily,” and I think the old maxim “Don’t hate the player; hate the game” applies here. Functionally speaking, a commercial case breaker is simply a service provider – or another form of dealer – meeting a fundamental demand in the marketplace.
Part of the reason the demand for case breaking services exists in the modern hobby is because the most desirable, most collectable cards – the hits – don’t come around very often, and because there is such a disparity in value (collectability) between the biggest hits and the more common cards. Another reason that the demand for case breaking services exists is because box value (another complicated subject for another day) is often relatively poor, particularly for the average collector who has neither the time nor the will to sell off the scraps out of boxes.
In short, it is often far more economical for a collector to simply buy the singles he/she really wants from a rip-and-flip case breaker rather than bust expensive boxes in vain pursuit. Meanwhile, there appears to be a strong appetite for collectors to pay to take take a flier on a case break slot rather than pay for boxes whole.
Case breakers as a class are here to stay.
That said, in the same way that the Federal Reserve System of the United States serves to manage the money supply and control inflation, it is incumbent on the card manufacturers – chiefly Topps, Panini, and Upper Deck – to control the growth in the supply of new card issues. And ultimately, the manufacturers’ policies towards commercial case breakers will be paramount to controlling supply growth going forward, and ensuring the long-term health of the hobby.
Jeff Hwang is a gaming industry consultant and the best-selling author of Pot-Limit Omaha Poker: The Big Play Strategy, the three-volume Advanced Pot-Limit Omaha series and The Modern Baseball Card Investor. Follow Jeff on Twitter @RivalSchoolX.