Is it the End for Topps?

Everyone in the card world knows that Topps is synonymous with Baseball. Having a 70-year run on being the authority on baseball cards, Topps has cemented itself as the brand for collectors and investors worldwide – many collectors consider Topps to be the only brand of baseball card worth buying, and this sentiment reflects in the pricing of graded cards as well, with Topps cards traditionally commanding a higher value than any other printer. So, with the news last week of Topps losing its 70-year reign on being the exclusive licensee for Major League Baseball trading cards, what does this mean for Topps, baseball card investors, and collectors?

Last week it was reported that Major League Baseball and the MLB Players Association had awarded exclusive licensing rights to Fanatics, a global leader in licensed sports merchandise. This news came just before a planned special purpose acquisition merger agreement between Topps and Mudrick Capital Acquisition Corporation to take Topps public with an IPO which was expected to funnel $571 million in cash to Topps and give Topps a $1.3 billion valuation. With the loss of the MLB and MLBPA licensing rights, this deal has already been terminated through a mutual agreement between Topps and Mudrick Capital, and obviously for good reason. I think the saving grace for many investors out there (Cardboard Prospectors parent company included), is that the loss of the licensing rights happened before the IPO, preventing potentially millions of dollars in loss to investors.

The terms of the licensing agreement with Fanatics have yet to be released, however, we do know that the MLBPA deal is set to start in 2023 and the MLB deal is set to start in 2026, and apparently, both MLB and the MLBPA will have an equity stake in a new company formed by Fanatics with the sole purpose of produce trading cards. We also know that Fanatics has hired StockX founder Josh Luber to run the new business. Major League Baseball reportedly offered Topps the option to match the deal proposed by Fanatics, however, Topps was unable to match the offer.

With the loss of the MLB and MLBPA licenses, Topps is left with only Major League Soccer, Bundesliga, and UEFA Champions League licenses. Topps does produce stickers for the NHL, however, Upper Deck retains exclusive licensing rights for NHL cards. While the exclusive rights to MLS does leave Topps with one U.S. sport, the retail on MLS is exceptionally lower than all of Topps baseball products. In comparison, a 2021 Topps MLS hobby box can be purchased on eBay at the time of this writing for $69.99 with free shipping, while a Topps Chrome Baseball hobby box commands a much higher price, with the cheapest box we found coming in at $239.99 with free shipping.

So where does Topps go from here? Speculation around the card collecting community seems to point towards to eventual acquisition of Topps by Fanatics, which would preserve the Topps name, and from a business standpoint be an extremely smart move by Fanatics. The big question is when this potential acquisition would occur. Many believe that Fanatics would wait until the MLB license with Topps is exhausted in 2026 so that Fanatics can get Topps for pennies on the dollar, while others think that Fanatics would likely try to acquire Topps before the licensing deal expires so that Topps manufacturing could continue without interruption. While none of this has been confirmed, acquiring Topps would be the smartest business move in our opinion, as it would keep the Topps name alive and potentially preserve a loyal following of card collectors and investors.

The big question, and another concern we have heard voiced in the card community, is the affect this new licensing deal will have on the price of trading cards, and how it will affect the availability. The days of the $0.50 wax pack are long behind us, and with the most recent release of Topps Chrome baseball at $29.99 for a retail blaster box, card collecting, in general, has become an expensive hobby. The deal between Fanatics and MLB and the MLBPA is reportedly around 10-times the amount in which Topps is currently paying! With such an increase in licensing costs, it is obvious that one of two things will happen (if not both); card prices are going to skyrocket, and/or we will see a new generation junk wax era with overprinting. The potential for overprinting is a real possibility now, as Topps might ramp up production to try and squeeze as much profit from their remaining licensing terms as possible. Meanwhile, once Fanatics has control of licensing, the possibility of overprinting to keep retail prices lower is also a real possibility – assuming however that trading cards from Fanatics will be available at the retail markets.

Fanatics has a long history with its other sports merchandise and memorabilia products of employing a direct-to-consumer business model, cutting out the distributors and retails completely. Having operated businesses in the past that manufactured products, I personally know the advantages that this business model has in cost savings to the consumer – when you cut out the wholesalers/distributors and retailers and market the products directly from the production line to the end consumer, the consumer generally wins because the products haven’t gone through the markups. However, this business model also produces the challenge of wide-scale availability, because the manufacturer has limited the availability of where the product can be purchased, which could spell disaster for local card shops and online retailers across the hobby! I can speak from personal experience that it is already hard as hell to get your hands on new sports card products from the distributors, so if Fanatics employs the direct-to-consumer business model to the new sports card company, businesses across the nation are going to feel the consequences.

Overall, I hate the idea of Fanatics getting the licensing for MLB and the MLBPA – the risks to the hobby are apparent and overwhelming; and with news that Fanatics has now also purchased exclusive licensing rights to the NBA and the NFL, Fanatics has set themselves up with a monopoly on the three largest grossing sports card market segments, threatening the continuance of Panini as well as Topps, an issue we will delve into in a forthcoming article.

Let me know in the comments your thoughts and predictions on how the Fanatics licensing deal will affect Topps and the hobby. In the meantime, happy ripping!

*Disclaimer: Investing in trading cards, comic books, memorabilia, and any other item involves a substantial risk of loss and is not suitable for everyone. Cardboard Prospector does not provide financial advice, and none of our articles or opinions should be construed as financial or investment advice. We do not guarantee results from your decision-making based on our opinions and content. You should always conduct your own research and due diligence prior to making any investment.

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