Grand Cards: YIR: Topps the Monopolist

Wednesday, December 29, 2010

YIR: Topps the Monopolist

Ask Adrian Beltre how it works.

2009 was a contract year for Topps. By all accounts they knocked it out of the park. Heading into this year they were the proud owners of an exclusive MLB contract and were, effectively, the only game in town.

Ask Adrian Beltre how it works.

In baseball, we've seen players outperform their averages in a contract year, only to seriously underperform once they've got a new contract in-hand. It happens all the time. It also happens to businesses that don't face any legitimate competition. It is one of the fears with a monopoly--quality goes down (cost saving) and/or prices go up. With no one to compete with it is the collector who gets hurt.

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There has certainly been a lot of complaining about Topps in 2010. People are bored with the products out there; disgusted by missing hits or poor collation; bad quality control; bad customer service (a point on which I disagree); lazy design; weak checklists; lethargy. The list really does go on in on and you can see it splashed all over blogs and message boards across the internet. Of course, that doesn't mean that all of these people are right. It doesn't make them wrong either. Rather, I think that, barring a couple major points, Topps the Monopolist in 2010 performed relatively similar to Topps in a contract year (2009).

If you were to break it down product by product you would see this:

2009 2010
Bowman Trilogy Bowman Trilogy
Topps 1,2,U&H Topps 1,2,U&H
Triple Threads Triple Threads
A&G A&G
Heritage & Hi# Heritage
Tribute Tribute
Finest Finest
Topps Sterling Topps Sterling
Topps Attax Topps Attax
Bow. Sterling Bow. Sterling
Topps Unique National Chicle
Topps Chrome Topps Chrome
T-206 T-206
Opening Day Opening Day
Ticket to Stardom Pro Debut
Bow. Platinum

From a product perspective, very little changed from last year. The much derided Ticket to Stardom was cut, as was Topps Unique, a product met with equally little enthusiasm. To the dismay of some, Topps Heritage didn't release a "High Numbers" set in 2010. New for 2010 were three products: Topps Pro Debut, National Chicle and Bowman Platinum.

The point is this: for those upset with Topps because of the products it released this year, I've got news. This year was no different for Topps than it has been in any other recent year. In fact, there were arguably more interesting products (in Chicle and Pro Debut) than what was cut off of last year's slate. Now, whether their product mix needs to change is a matter of debate (I think it does) it certainly wasn't the result of their monopoly power. Rather, traditional monopoly economics would suggest that they would cut the number of different sets the offer even further and raise prices on what was left--effectively inducing scarcity. That's not what happened at all. In fact, that's the opposite of what happened.

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Problem #1: Overproduction

Everything was fine until you came into my life.
--discarded company love letter memo to Stephen Strasburg

It's all Stephen Strasburg's fault. Seriously. We were all getting on with our lives just fine, enjoying the fruits of Topps' early season release calendar, when BAM, Stephen Strasburg is in 2010 Bowman. Mothers lock up your daughters.

What resulted was an astronomical run-up in prices on subsequent products. Bowman, which had been produced before Strasmas, was outrageously expensive due to production below demand. Pre-orders on subsequent products "Now with Stephen Strasburg!" were ridiculous. Before you could say "Tommy John" prices on all products in the heart of baseball season went crazy and Topps abandoned whatever gameplan they may have had for the year and went All-Strasburg all the time. I remember reading something that indicated that Stephen Strasburg had increased card sales more than any other figure in the last 20 years.

The problem is that there is only one way for Topps to cash-in on the craze--make more cards.

You see, card collecting is driven by the secondary market. When a Strasburg happens (2010 Bowman e.g.), dealers make a mint while Topps has effectively left money on the table by underproducing and undercharging. To "remedy" this, Topps included Strasburg in more products to induce more pre-sales so that they could produce more units and sell more product. Makes sense right? Uh huh. The problem is that baseball cards are a scarcity-based product. If Topps could produce more without it being known, they could sell much more product up front, and if prices crash on the secondary market, so be it.

Guess what happened. CRASH.

2010 had the strongest rookie class in decades. Topps knew it, and with SS as the Captain, ran the printing presses until they burned out. The result was a series of products released in the second half of the year, that may go down in history as having the least value of any cards since the mid-90s.

If you don't really care about the value arguement (I don't), there was an even worse consequence. As Topps ramped up their production, they overextended themselves. Their new printer shat the bed and Topps and Bowman Chrome suffered from a combination of massive overproduction and horrible quality. A box of Topps Chrome could be had for under $40. Are you kidding me?

This wasn't the Topps Monopoly that we all feared rearing its ugly head. Nope, it was just good old fashioned greedy capitalism, trying to maximize its profit. And hey, they probably did. The problem is that these things don't happen in vacuums, and the effect of 2010 could linger into next year and beyond.

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Problem #2 Product Calendar

Am I the only one who thinks that baseball cards should be released during baseball season? Is there a reason that in the first half of the year, there each product seemed to have a month (or more) to itself, and in the second half of the year, they were churning them out every few weeks? People are tired of baseball by October/November. I'm tired of baseball and I LOVE baseball.

This year this was a definite feeling of card-based stagnation at the peak of baseball season, followed by an explosion of products towards the end. It was too much--I blame poor planning.

Problem #3 Boring Products (?)

This is as subjective of a measure at any, but if you compare the product calendars between 2009 and 2010 not much changed. What did change is that two "modern" sets were effectively replaced by a minor league set and a "retro" set (Chicle). Everything else was the same as it has been, following the same formulas.

From a design standpoint, things weren't as crisp this year either. Topps Heritage was dull compared to the previous year (not that this is Topps' fault, it's just that 1960 Topps was cooler and more lively than 1961). Topps Finest was miserable compared to a fantastic 2009 design. Regular Topps was fine, although it fell short of a spectacular 2009 (FWIW I think 2011 looks phenomenal). Everything else was the same. Bowman was Bowman. Chromes were chromes. All of the high-end stuff is exactly the same as it always has been and always will be.

And this, I think, was the biggest casualty of Topps' Monopoly. It isn't as though Topps got lazy with their designs, or even lazy with their products. To me, everything pretty much fits in with what they've been doing for the last five years. The difference is that we didn't have an Upper Deck counterbalance.

Now, don't get me started on Upper Deck's product mix and designs--I was not a fan of the majority of what they did--however, they served an important purpose. Upper Deck was fundamentally different than Topps. They made more modern looking sets, where the player is the focus and then some wacky multi-colored angular background fills it in. Topps has nothing like that. Upper Deck added an important diversity to the low- and mid-priced sets.

What's more, they were so much better at the High-end sets it was a joke. Their designs were often fresh and exciting compared to the Topps Triple Threads model. Although I will say that I think that Topps made some improvements on that front. Topps Sterling has some very nice cards with on-card autographs. Tribute was the same way. Even Triple Threads. In fact, if there was one thing that I gathered from 2010 it was...

Topps is listening

Is this for real? I think so. After years of feeling like we had no influence on the card industry, it is beginning to change. Topps has multiple twitter accounts, each of which is quite responsive to consumer comments. They set up a card forum at the 2010 National in Baltimore to get collector thoughts. Of the changes they've begun to made, one is profound--the near complete replacement of their traditional über-shiny stickers with a combination of clear stickers and on-card autographs. This is HUGE.

What's more, they were aware of the collector backlash to quality-control and overproduction issues and in response issued a series of wrapper redemption programs to add additional value. I just got my Topps Chrome redemptions the other day and love them. They are crisp and nice and not warped--I think that Topps should start a redemption program for every product they make, especially if they want to differentiate Hobby from Retail.

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Topps the Monopolist?
For me, the bottom line is that Topps, believe it or not, didn't do that bad of a job in 2010. Of the things they did do wrong, almost none of them were because they have monopoly power in the card industry. In fact, I'm not sure that they really do.

Sure, Topps has an exclusive contract to producing baseball cards. Fine. But they didn't really act like a monopoly in 2010. In fact, all of their problems seemed to stem from the fact that they acted like a normal business in a competitive market, increasing production to meet demand instead of simply raising prices.

It may be the case--and I might beg Chris Harris for his thoughts on this--that the dynamic of the market is different than the Monopoly we've made it out to be. It seems to me, that Major League Baseball has played the role of Monopsonist, and has parlayed their market power into a profit-maximizing situation for them, through the issuance of an exclusive contract. That this leaves Topps as a sole-producer is immaterial, as they don't really have market power; are answerable to their licensor (MLB), leaving them unable/unwilling to develop poor product for fear of losing their license; and are obligated by the terms of their contract to produce X products.

Was card collecting less fun and exciting in 2010 than it was in 2009? Sure. There were half as many products in the market. Was that Topps' fault? I don't think so. They seemed to do what they've been doing for some time. Of course, unless they can actually start to improve their products to make up for some of what Upper Deck brought to the table 2011 may be more of the same.

But maybe we should start complaining to MLB Licensing about that.

1 comment:

  1. This is one fantastic post which summarizes everything I would have said. I wish I would have written it first, but I think you're take on the year that was is better than what I could have come up with.

    Happy new year to you.

    Sincerely,

    JayBee Anama
    bdj610

    ReplyDelete