Leading Off
2022 was an interesting year in the hobby — Fanatics acquired Topps, eBay acquired TCGplayer, startups like Altan Insights and Arena Club raised funding, the first MINT Collective was held in Las Vegas, most card prices declined, and more. So as we turn the calendar — new year, same hobby?
In this edition of Mint Condition, I lay out my thoughts on what to expect in 2023.
Let’s get into it…
Mint Condition’s Take:
(1) Upper end of the hobby and vintage remain strong, rest of market sees continued decline
With the broader economy in flux, the hobby will mirror the rest of the market: high net worth individuals will be least affected and collectors will fall back on “value” investments. Both the upper end of the hobby — grails, stars, rare pieces, pricey wax — and vintage will show strength in an otherwise sleepier year for the industry. In economic turbulence, while all individuals are impacted and spending power declines, high net worth individuals typically are least impacted, meaning they still have ample money to spend and invest. Expect the “high end” definition to narrow though — those who continue to pile money into the hobby will focus on the grails, low pop, and rare vintage portions of the market.
I believe the other parts of the overall market will continue to show declines like we’ve seen in the last 6-9 months. There should be some bright spots though, as I expect some of the more niche sports, like F1, to draw more interest, especially given they will come to the U.S. for three events in 2023 vs. two last year. Soccer will see momentum coming out of the World Cup, but expect that to fade by the second half of the year. Finally, with Netflix’s launch of an F1-like series for both golf and tennis, popularity for the sport and star players should increase, which will trickle down to the collecting world.
(2) Fanatics makes another big splash
I hope you don’t think this is a cop out given it seems like every month now we are waiting another big announcement from Fanatics, but hear me out. We have just passed the one-year anniversary of Fanatics acquiring Topps. It takes immense time to integrate a $500 million business in an industry, collectibles, that Fanatics was new to. Josh Luber was at the helm, then he wasn’t, so it’s possible Fanatics had to rethink its vision. They hired a CEO in June and a CFO in December. A lot of moving pieces, which is why I believe Fanatics hasn’t made another splash since the Topps deal.
2023 will be different with an established management team in place and ample capital to spend with Fanatics having just raised $700 million specifically for acquisitions in its collectibles, betting, and gaming businesses. Additionally, a down year in the overall hobby could make targets more willing to sell at a lower price, something Fanatics will be sure to take advantage of.
So what will the next announcement be and will it even be an acquisition? It is fair to believe that Fanatics has been talking to all the key players in the hobby, whether that be in getting itself up to speed on the industry, discussing partnerships, or taking steps to acquire certain companies. Whether it be Panini or Upper Deck, a marketplace, or a grader, Fanatics could go many different ways. However, the key variable for me here is that it takes two to tango. While Fanatics might have a vision, targets need to be willing to actually sell. Of course, with the money at its disposal, Fanatics can probably pay as much as anybody else and sometimes that is what is most important to sellers. But for some, it will also come down to whether sellers want to join Fanatics’ ecosystem, prefer to join another’s (e.g., Collectors), or keep at it alone. From my vantage point, I think it was easier for Nat Turner and Collectors to start building out an ecosystem of brands (like Goldin, Card Ladder, and Wata) because Nat is a lifetime hobbyist vs. what Fanatics is trying to do. The hobby is unlike most industries in that a lot of business owners are traditionalists who might care the same or more about who they sell their business to than the price they get paid for it. All that’s to say is that I expect Fanatics to make another splash or two, but it might prove more difficult than it seems from the outside.
(3) Hobby startup funding slows with certain companies pivoting and even a few shutting down
The last two years were a boon for new companies entering the market seeking to find a foothold in the fast-growing hobby. Venture capital and private equity money was readily available and making large bets across a number of different collectible companies. With those funding sources tightening their belts just a bit in 2023, new money will not be as easy to access. Hobby companies will need to be efficient with their cash-on-hand and start proving out profitability if they aim to raise more money, as VC and PE firms are rewarding profitability moreso than growth at all costs, a shift from recent years. As I discussed a few months ago and believe still holds true, some companies might need to pivot their idea at least once and not all will survive. For example, there are several new marketplaces coming off fresh funding in the last two years. With hobby growth slowing down vs. prior years, that lends itself to a lower number and value of transactions taking place, which will have a direct impact on marketplaces’ growth. Perhaps we see a company or two pivot, combine with another marketplace, or close up shop completely if they run out of money.
Additionally, I expect the overall competitiveness between hobby companies to increase. In good times and with a growing pie, everyone is more likely to play nice — there is enough to go around for all. But with some cracks being seen in the market and unknowns on the horizon, the public and private chatter and moves by those playing in the same space will become a bit more adversarial.
As always, I would love to hear your thoughts. You can reach me at [email protected] or on Twitter @jbmintcondition
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