MBA Thesis Andreychikova Yana

Tactical Card Games can be used as an Alternative Asset. An Analysis based
on “Magic: the Gathering” Card Game
A Capstone
Presented to the Faculty of European University
In Partial Fulfillment of the Requirements for
The Degree:
MBA with a Major in Global Banking & Finance
By: Yana Andreychikova
(30.04.2014)

2
Foreword
I would like to acknowledge help of my friend Antje von Loeper for her valuable comments on
my research. Thanks to my brother for introducing me to Magic: the Gathering game in 1998
and tireless contributors from the forums, dedicated solely to MtG, who signed up for interviews
and surveys with their altruistic motives. They provided me with the most essential knowledge of
the topic – this thesis could not be possible without your feedback. In retrospect, I am very
thankful to the dean of university and my friend Sascha Liebhardt for everything.

3
Index of Abbreviations
ATC – American Tobacco Company
CCG – Collectible Card Game
EDH - Elder Dragons Highlander
FNM – Friday Night Magic
GM – Gem Mint
MCM/MKM – Magic Cards Market/Magic Karten Markt
MtG – Magic: the Gathering
NM – Near Mint
P 9 – Power Nine
P10 – Power Ten
SCD – Sports Collectors Digest
TCG – Tactical Card Game
WotC – Wizards of the Coast

4
Executive Summary
Due to the high volatility of the stock market, many investors have been searching for the ways
to diversify their portfolio, thus finding safer ways to invest their money. That is where
alternative investments come into place.
An alternative investment is any investment other than the three traditional asset classes:
stocks, bonds and cash1
. Interest in alternative investments is not restricted to professional
investors. A myriad of different possibilities is given these days, shall that be coins, baseball
cards, stamps, art, antique and others. Bullish financial markets as well had an emulation effect
on the collectibles’ market, which made it much more attractive, investment wise.
With the advent of Internet and web-based auction sites, the pricing of many collectibles has
become far more transparent. This has led to more efficient markets in such collectibles2
.
Despite the growing interest in Magic: the Gathering collection card game, finance academics
have devoted only limited attention to this realm of research.
An inevitable part of the trading card game genre’s success originates in the search for a trade of
scarce cards. Magic: the Gathering was the first game to apply baseball cards principle3
.
Magic: the Gathering – a collection card game with more than twenty years history on the
market is a product of a company Wizards of the Coast, which in 1999 was purchased by Hasbro
– a well-known American multinational toy and board game company.
Magic and the whole gamers’ world may be foreign to an average person on the street, but
dealing in Magic cards is no small business endeavour4
. Due to the collectible nature, the game
with twelve million players5
has a robust and active secondary market. Magic: the Gathering
alone has a stake of approximately 241.000 single cards being currently traded on Ebay, out of
which 24.000 are sold on auction (total market value of all single cards in circulation on Ebay as
of 15th
March 2014 is approximately $3.5 million)6
. Worth mentioning, the existence of the pre-
organized exchange platforms for these cards. For comparison, Magic Cards Market - European
pre-organized exchange has approximately €5.0 million in circulation. This site is being operated
with a commission on sales. Each card is assigned a different value. They sell for anywhere from
three cents to several thousands of dollars. This gives the whole idea of collecting the playing
1
"HowStuffWorks "10 Reasonably Safe Alternative investments," http://www.howstuffworks.com/personal-finance/financial-
planning/10-reasonably-safe-alternative-investments.htm, 15 Mar 2014.
2
Stephen Satchell, Collectible Investments for the High Net Worth Investor, (Burlington: Elsevier Inc., 2009), 8.
3
"Explaining the Popularity of Magic the Gathering," http://www.hobbyhub360.com/index.php/view-article/947354/, 23 Mar
2014.
4
Hatamiya, M., “Marysville game store has the magic”. McClatchy, “Tribune Business News,”
http://search.proquest.com/docview/1171797764?accountid=37942, 15 Mar 2014.
5
"ICv2 - 'Magic' Doubled Since 2008 - ICv2 : Inside Pop Culture," http://www.icv2.com/articles/news/21471.html, 15 Mar 2014.
6
Ebay, 15 Mar 2014.

5
cards a monetary value. Certain cards become highly valued through rarity or utility and may be
purchased for hundreds of dollars and more7
.
Due to the game’s collectible nature, robust secondary market activity and continuous ‘hunt’ for
the scarce and rare cards, Magic: the Gathering could be an attractive alternative investment.
With such a background, I hope to interject the discussions of investment into collectible card
games, which have evolved over the past twenty years or so but that have largely overlooked this
medium as a serious topic of inquiry. There are two main questions analysed within the paper:
one question is, whether Magic: the Gathering shares general characteristics with the existing
alternative investments: i.e. collectibles; another question is, if traders and non-traders alike
could invest in Magic cards and expect profit.
The research paper provides answers to the above mentioned questions based on adequate
literature and conducted case studies. The analysis is divided into two parts, namely theory and
practice. The theoretical part is made up of the on- and offline literature analysis, including
articles, blogs, and books. In order to test if Magic: the Gathering belongs to an alternative asset
class, baseball cards are taken, as the closest type of collectibles by similarities among the
alternative asset classes for a comparison. Whereas in the practical part of this research Magic:
the Gathering collection card game is investigated from an investment point of view using case
studies conducted with the individual collectors. The case studies are based on a questionnaire
which consists of twenty-six questions. The survey was split into three parts to cover collective,
competitive, monetary and strategic aspects of the game.
After a conducted research the financial side of Magic: the Gathering can be considered a deep
and multifaceted thing. The game shares the general characteristics with the already established
collectible alternative investment, hence making it an attractive asset to consider.
7
"Most Expensive Magic: The Gathering Card," http://most-expensive.com/magic-gathering-card, 23 Mar 2014.

6
Table of Contents
Foreword............................................................................................................................................... 2
Index of Abbreviations........................................................................................................................... 3
Executive Summary ............................................................................................................................... 4
Table of Contents .................................................................................................................................. 6
List of Tables and Figures..................................................................................................................... 8
Chapter 1: Introduction......................................................................................................................... 9
1.1 Background and Hypothesis Formulation................................................................................... 9
1.2 Structure of the Thesis............................................................................................................... 10
Chapter 2: Collecting.......................................................................................................................... 11
2.1 Definition................................................................................................................................... 11
2.2 Types of Collectors.................................................................................................................... 11
2.3 Types of Collectibles................................................................................................................. 12
2.4 Valuation of Collectibles........................................................................................................... 13
Chapter 3: Alternative investments..................................................................................................... 14
3.1 Definition................................................................................................................................... 14
3.2 General Characteristics.............................................................................................................. 14
3.3 Baseball Cards........................................................................................................................... 15
3.3.1 General Info........................................................................................................................ 15
3.3.2 History ................................................................................................................................ 17
3.3.2.1 Tobacco Baseball Cards.............................................................................................. 17
3.3.2.2 Bubble Gum Baseball Cards....................................................................................... 18
3.3.2.3 Elimination of a By-product ....................................................................................... 20
3.3.2.4 Modern Baseball Cards............................................................................................... 22
Chapter 4: Market............................................................................................................................... 25
4.1 Definition................................................................................................................................... 25
4.2 Characteristics of a Market........................................................................................................ 25
4.3 Financial Markets ...................................................................................................................... 25
4.4 Collectibles’ Market .................................................................................................................. 26
4.4.1 Supply & Demand of the Collectibles................................................................................ 26
4.4.2 Advantages ......................................................................................................................... 26
4.4.3 Ebay as a Collectibles’ Market........................................................................................... 27
4.5 Difference between Collectibles and Financial Markets........................................................... 28
Chapter 5: Collectible Card Games.................................................................................................... 30
5.1 Definition................................................................................................................................... 30
5.2 Peculiarities ............................................................................................................................... 30

7
Chapter 6: Wizards of the Coast and Magic....................................................................................... 32
6.1 Company Information ............................................................................................................... 32
6.2 Magic: the Gathering................................................................................................................. 33
6.3 Key facts and figures................................................................................................................. 36
6.3.1 Target Group....................................................................................................................... 36
6.3.2 Statistics.............................................................................................................................. 36
6.3.3 Game Formats..................................................................................................................... 38
6.3.4 Secondary Market............................................................................................................... 39
6.3.5 Types of Collectors............................................................................................................. 47
6.3.6 Types of Collections........................................................................................................... 48
Chapter 7: Case Studies Discussion and Results................................................................................ 50
Chapter 8: Conclusions....................................................................................................................... 69
Bibliography........................................................................................................................................ 74
Appendix ............................................................................................................................................. 81
Appendix 1.1 Questionnaire............................................................................................................ 81
Appendix 1.2 Case Studies.............................................................................................................. 84
1.2.1 Interview with Jordan S. – Canadian Individual MtG Collector. Date 20.03.2014............ 84
1.2.2 Interview with Fedor P. - Russian Individual MtG Collector. Date 20.03.2014................ 93
1.2.3 Interview with Ryan R. – American Individual MtG Collector. Date 20.03.2014............. 97
1.2.4 Interview with Sergey Z. – German Individual MtG Collector. Date 20.03.2014 ........... 102
1.2.5 Interview with Sergey P. – Russian Individual MtG Collector. Date 21.03.2014............ 106
1.2.6 Interview with Arias A. – American Individual MtG Collector. Date 21.03.2014 .......... 110
1.2.7 Interview with Andrey A. – Russian Individual MtG Collector. Date 21.03.2014.......... 114
1.2.8 Interview with Mike S. – American Individual MtG Collector. Date 21.03.2014 ........... 118
1.2.9 Interview with Ivan V. – Russian Individual MtG Collector. Date 21.03.2014............... 122
1.2.10 Interview with Bryan D. – American Individual MtG Collector. Date 21.03.2014 ....... 126
1.2.11 Interview with Anna A. – Russian Individual MtG Collector. Date 22.03.2014 ........... 130
1.2.12 Interview with Sergey G. – Russian Individual MtG Collector. Date 23.03.2014......... 134
1.2.13 Interview with Aleksey K. – Russian Individual MtG Collector. Date 24.03.2014....... 138
1.2.14 Interview with Denis A.– Russian Individual MtG Collector. Date 24.03.2014............ 143
1.2.15 Interview with an Anonymous Recepient – American Individual MtG Collector. Date
25.03.2014 ................................................................................................................................. 147
1.2.16 Interview with Alexandr S. – Russian Individual MtG Collector. Date 25.03.2014...... 150
1.2.17 Interview with Marcel F. – German Individual MtG Collector. Date 25.03.2014 ......... 155
1.2.18 Interview with Christian T. – German Individual MtG Collector. Date 26.03.2014...... 159
1.2.19 Interview with Nail S. – Tatar Individual MtG Collector. Date 28.03.2014.................. 162
1.2.20 Interview with Morgan E. – American Individual MtG Collector. Date 30.03.2014..... 167
Glossary ............................................................................................................................................ 173

8
List of Tables and Figures
Figure 1: Honus Wagner – the most expensive baseball card 1909-1911 T206............................ 15
Figure 2: The old and the new logo of Wizards of the Coast......................................................... 32
Figure 3: Table of the current Magic: the Gathering Cards Market Value calculated on Average
(Ebay)............................................................................................................................................. 41
Figure 4: Purchasing/trading process for MtG cards...................................................................... 42
Figure 5: Purchasing/trading process for MtG cards including speculation .................................. 44
Figure 6: Jace, the Mind Sculptor price ranges taken from Current Ebay Sales and Auctions...... 46
Figure 7: Black Lotus – the most expensive Magic: the Gathering card ....................................... 47
Figure 8: Table with examples of sets............................................................................................ 49
Figure 9: Table with examples of set expansions........................................................................... 49

9
Chapter 1: Introduction
1.1 Background and Hypothesis Formulation
Alternative investments are difficult to define. According to the Chartered Alternative
Investment Analyst Association (CAIA), one reason that a single definition is elusive is that
alternative investing is largely a new field and is rapidly changing. All the assets, besides those
which belong to the traditional asset classes such as stocks, bonds and financial market
instruments, are considered as alternative investments8
. More precisely, the work focuses on a
sub segment of alternative assets - the collectibles market. Collectibles are the most emotional of
alternative investments9
.
Throughout history people have been known to collect all kinds of different objects. Time and
time again, some things collected that seemed worthless, or only had emotional value to the
collector, became increasingly desirable objects. This is especially the case once the price of the
collectibles reaches a relatively high monetary value, and in so doing, attracts the attention of
more participants than were originally involved.
Tactical Card Games (later on TCG) have millions of players around the world, who trade cards
with one another over Internet platforms solely dedicated to this activity.
The market has become increasingly sophisticated, as collectors have become more organized in
their approach. More seasoned players are attracted to collecting cards, as more novice players
are drawn into the game. It is clear, that the gaming industry has recognized the power of
collecting and has even, in some instances, structured its strategy around the phenomenon of
collecting.
Magic: the Gathering (later on MtG or Magic cards or Magic) has existed for over 20 years and
is an “off-line” card game that utilizes the Internet as a means of keeping players informed,
interested and connected. The difference with the baseball cards, especially in the early stages is
that for Magic: the Gathering there are collect-to-collector communications fostered on many
card forums and user groups found all over the Internet. Many of these sites have on-going
threads dedicated to specific collectibles. The exchange of information and sharing of images
that go on over time in these venues gives specialty collectors a very real picture of which items
are much rarer than indicated by the price guides. As these collectors pursue their want lists, they
get a handle on what cards are worth of bids or buys at multiples of current book value. This
paper tests the hypothesis if TCG collecting is a valid and serious investment proposition for
players and non-players alike on a similar level as investing in any other alternative investment:
mostly collectibles, i.e., baseball cards.
8
"Collectibles as Alternative investment - BME OMIKK," http://www.omikk.bme.hu/collections/phd/Gazdasag_es_Tarsadalom,
23 Mar 2014.
9
“Are Collectibles Good Alternative investments?” http://millionairecorner.com/Content_Free/Are-Collectibles-Good-
Alternative-Investments.aspx, 30 Mar 2014.

10
This paper looks at the most sophisticated TCG trading community platforms; it also analyses
the needs and requirements of Magic cards traders measured against those of collectible
alternative investments’ traders.
The two main questions of the thesis are answered with case studies generated from
questionnaire surveys and after reading enormous on- and off-line material. Baseball cards are
taken a closer look at as the most similar instance of the collectibles. This collectible, being an
already established alternative investment, is compared to Magic: the Gathering cards.
1.2 Structure of the Thesis
The thesis is organized as follows. In Chapter 2, the phenomenon of collecting is analysed.
Peculiarities of the alternative investments are investigated in Chapter 3. In the same chapter,
baseball cards are taken a closer look at, and the unique features of this collectible alternative
investment are identified. A detailed history of the baseball cards is given, due to the importance
in the research: Magic: the Gathering resembles this alternative investment especially in its early
stages. In Chapter 4, market is explored. Financial and Collectible markets are being compared.
Chapters 5 and 6 are dedicated to the tactical card games and in details to Wizards of the Coast
and their product: Magic: the Gathering. Because, unless involved in a board game hobby, one
will not be aware of the product, very detailed description of the game is presented. The
interviews held are being analysed in the Chapter 7. First the demographics data is presented and
later on the qualitative answers are being grouped together to answer the hypothesis questions.
Finally, Chapter 8 concludes the results of the thesis.

11
Chapter 2: Collecting
2.1 Definition
The hobby of collecting includes seeking, locating, acquiring, organizing, displaying, storing,
maintaining, and perhaps cataloguing items that attract the collector10
.
Collecting is not a new term: humans are naturally acquisitive and are known to have been
collecting for centuries. Their collections range from the items that are available and cheap (or
even free): stones, bus tickets, leaflets, leaves, etc. to the ones that have a certain value and can
range from $1 up to several thousands of dollars, i.e. rare baseball cards, gems, stamps, and those
which prices are hard to determine. These can be worth thousands of dollars up to infinity, but
are less liquid: antiques, art.
2.2 Types of Collectors
When discussing the types of collectors, the psychological motivators that thrust collectors
toward collecting should be discussed. Included is pride, bragging rights, a sense of history,
creating a legacy, intellectual stimulation, social rewards, or even crafting a sense of order with
an object display. The psychological aspects are indeed person specific; for example, one
individual might be stimulated more than another by pride11
. There are certain collectors whose
main purpose is to trade the items they have. These collectors prefer to collect and keep certain
items in order to exchange for the rare items they need to complete their own collection with.
Another type would be a collector looking for profit. He/she collects items of a
rare/unique/limited value and makes money on the difference in prices throughout the time.
Many people buy items for personal use and satisfaction and because they enjoy having them.
They simply love collecting things. Adding another object to a collection gives the right amount
of satisfaction to any collector. It is indescribable how much accomplishment that is when a
collection of a specific item is complete. One more type of a collector would be the one who is in
it for fun or interest. The more the merrier, however, the problem is, that when a collection
becomes out of date, interest in collecting fades away fast.
Phenomenon of collecting is that despite having a collection of high dollar value, it is not always
the case, that the collector has an intention to sell it to claim the money. Collectors are often
known to be passionate about their purchases and often will pay more than what a purely rational
buyer would pay for a fair market value.
There are collectors who are looking for items that occupy a certain niche: stamps with a specific
art, statuettes from medieval times and so on. At the same time, there are general collectors, who
10
"Collecting can be fun and enjoyable | The Chronicle-Journal,"
http://www.chroniclejournal.com/publications/horizons/issues/2012/april/articles/collecting-can-be-fun-and-enjoyable, 9 Mar
2014.
11

12
have been known selecting a specific item of interest, indifferent of the specification; they could
collect the sets too. There are collectors with an aim: to collect a set issued in a specific year or,
as in the case with the baseball cards, all cards showing a particular player.
Not every collector starts a collection with a purpose to trade/resell/invest in it. Those who do it
for sheer enjoyment do not bother with extras and do what makes them happy. On the contrary, a
profit-seeking collector starts making a particular collection with an investment purpose. There
are a few things he/she needs to consider: aversion to periods of loss, need for a stable income,
regret at not participating in upward runs in the market, liquidity requirements, among other
factors12
.
2.3 Types of Collectibles
Apart from splitting the collectors into two types: general and specific, the timing of the objects
has to be considered. That could be a new item, which has just been introduced and caught the
attention of the collector. That could be an item, which we once considered a daily usage object,
which by a matter of subsequence became valuable and worth collecting (such items are called
Ephemera – items designed to be useful or important for only a short time, especially pamphlets,
notices, tickets, etc13
.) There are items 100 years of age or more, which are called Antique (of or
belonging to ancient times, especially of, from, or a characteristic of ancient Greece or Rome, -
an object having special value because of its age, especially a domestic item or piece of furniture
or handicraft esteemed for its artistry, beauty, or period of origin14
).
In general terms, the items that do not match a specific category can be simply called
collectibles. Should a certain collectible become outdated, another terminology comes into play
– Vintage (old or outmoded15
).
People have been known collecting things for a long period, which led to specific titles evolving
to generalize the term of collecting a specific object or item. Philately, Phillumeny,
and Deltiology (collecting postage stamps, matchboxes and postcards respectively) are examples
of forms of collecting which can be undertaken at a minimal expense.
There are a few types of collectible items that are popular in the whole world. Most areas of
popular collecting are dominated by middle income categories, including stamps, baseball cards,
model airplanes, beer cans, and ‘instant collectibles’ such as limited edition plates16
.
12
13
“Ephemeron – definition of ephermeron by the World English Dictionary,” http://dictionary.reference.com/browse/ephemeron
9 Mar 2014.
14
"Antique - definition of antique by the Free Online Dictionary," http://www.thefreedictionary.com/antique, 9 Mar 2014.
15
"Vintage - definition of vintage by the Free Online Dictionary," http://www.thefreedictionary.com/vintage, 9 Mar 2014.
16

13
2.4 Valuation of Collectibles
There are different factors to look at when determining the price of the collectibles. A few of the
main factors are age, condition (gem mint (GM), near mint (NM), mint, excellent17
), rarity,
supply and demand. Rare objects are more desirable than plentiful objects. This is a
straightforward reflection of the law of supply and demand. Certain types of objects have a
higher prestige than others, and the degree of the prestige might be related to the social
circumstances of the owner18
.
One can buy an item for a certain price and be unable to sell it higher later on. Vice versa, many
items appreciate in price drastically. One can see auctioneers, secondary market traders and
individual sellers setting a price either higher or lower than the original price they paid for the
item.
A number of collectibles have a lot of similar instances of an item but are only distinguished by
condition or provenance, as in the cases of wine, stamps, and classic cars.
The valuation of collectibles falls into two groups based on the homogeneity and liquidity points.
The market is now, thanks to the Internet, quite transparent, and purchase price comparison is
easy.
A vibrant market requires buyers and sellers – the more activity, the more liquidity. This
enhances the value - there is no secondary market for a single item unless there is a buyer for it.
One object, which is of a great value, can be worth nothing, because nobody would have a need
for it. The object’s value in this case is the highest bid a prospective customer is willing to pay
for it. It has to be said that one only needs a single buyer to complete the transaction, but two or
more significantly help the realizable price19
. Should the demand in this very object increase, the
price will be having an uptrend too.
17
Refer to Glossary.
18
Stephen Satchell, Collectible Investments for the High Net Worth Investor, (Burlington: Elsevier Inc., 2009), 96-97.
19
Stephen Satchell, Collectible Investments for the High Net Worth Investor, (Burlington: Elsevier Inc., 2009), 8-9.

14
Chapter 3: Alternative investments
3.1 Definition
Due to the high volatility of the stock market, quite a large amount of investors have been
looking at the options to diversify the risk and safer way to invest their money. So, alternative
investments have become increasingly popular. Apart from collectibles, examples of alternative
investments include real estate, commodities, options and financial derivatives. Alternative
investments are often used by hedge funds20
. The term is combining investment in non-orthodox
types of financing, including precious metals21
art, wine, antiques, coins, stamps22
,
forests/timber23,24
, film production25
and so on.
3.2 General Characteristics
Most financial experts agree, that alternative investments are best when used to diversify
financial portfolios. Historically, many of these alternative investments have been more popular
among high-net-worth individuals and institutional investors, such as private endowments.
That’s because many alternative investments require larger initial investments than stocks or
bonds. Also, while it may not be the case with fine art, wine or other collectibles, almost all
alternative investments are less liquid than traditional investments, meaning they cannot be
cashed in as quickly or easily26
.
Due to the large volume of shares, it is pretty easy to sell stocks and bonds at any point of time;
whereas when considering tangible items, like art, antique - it might take weeks or months to
find a buyer. Baseball cards, stamps and investments alike are somewhat more liquid, because
one can find most of the items for sale available on Ebay, online trading floors and auctions.
There is no data on the risk and returns or the data is very limited. There are barely (if any)
regulations and they are complex in nature. Alternative investments’ returns are not correlated
with those of the standard asset classes, such as stocks and bonds. Alternative investments do not
usually rise and fall in sympathy with the Dow Jones Industrial Average, as most traditional
investments do.
20
“Alternative investments – definition of alternative investments by the InvestorWords,”
http://www.investorwords.com/6401/alternative_investments.html, 9 Mar 2014.
21
“Investing in Precious Metals,” http://www.forbes.com/2010/06/22/investing-precious-metals-personal-finance-gold.html, 9
Mar 2014.
22
“First class returns for alternative investments,” http://www.telegraph.co.uk/finance/personalfinance/investing/3144943/First-
class-returns-for-alternative-investments.html, 9 Mar 2014.
23
“Forest Land Investment,” http://www.buildinglanduk.co.uk/forest-investment-uk.htm, 9 Mar 2014.
24
“Invest in forest,” http://www.telegraph.co.uk/finance/personalfinance/investing/2814623/Invest-in-a-forest.html, 9 Mar 2014.
25
“Investing In The Big Screen Can Be A Profitable Story,”
http://www.cnbc.com/id/39342145/Investing_In_The_Big_Screen_Can_Be_A_Profitable_Story, 9 Mar 2014.
26
"HowStuffWorks "10 Reasonably Safe Alternative investments," http://www.howstuffworks.com/personal-finance/financial-
planning/10-reasonably-safe-alternative-investments.htm, 9 Mar 2014.

15
The collectible alternative investments are not a subject to low interest rates, due to the tangible
essence of the items. Such items though are a subject to the external forces, which could ruin the
general condition - moisture, dust, mold.
It is difficult to determine the current market value of the asset; costs of sale and purchase may
be relatively high. Alternative investments could be a possibility of the investors to diversify
their portfolio and hedge against the risk; however, a high degree of investment analysis may be
required. Such investments can easily compensate for the higher risks with potentially higher
returns though. Art, stamps, coins can also greatly rise in value, as the private equity funds and
hedge funds infrequently deliver annual returns in excess of 30% with high volatility. In
addition, when considering alternative investments, most of the time they are tangible assets,
which could give non-financial return, which stocks and bonds usually lack.
To see how active the secondary market is and how sophisticated the market conditions became
that collectors were to adjust to them, the baseball cards will be taken a closer look at, as an
example of a relatively liquid collectible class within the alternative investments.
3.3 Baseball Cards
3.3.1 General Info
Baseball Card - a trading card with a picture of a baseball player and
information about his playing record27
. In a space smaller than a
postcard, they contain not only photographs, but also a wide range of
information: a player’s throwing, batting, fielding positions, his team,
hometown, hair and eye colour. Baseball cards have been around for
a long time. There are many items that are considered vintage or rare
and are very hard to get. There is a few, which prices range up to
millions of dollars. Baseball cards have been commercial artifacts,
forms of visual media, advertising mechanisms, popular art, and
objects of exchange28
. Exchange has been a central component of
baseball card collecting since it originated. They were, by definition,
an extension of sports spectatorship, used by manufacturers of
consumer goods to attract ‘market segments’ and in the process
27
"Trading card - definition of trading card by the Free Online Dictionary," http://www.thefreedictionary.com/trading+card, 9
Mar 2014.
28
John Bloom, A house of cards: baseball card collecting and popular culture, (Minneapolis: University of Minnesota Press,
1997), 4.
Figure 1: Honus Wagner –
the most expensive baseball
card 1909-1911 T206

16
creating more fans of sports. As it turns out, there are millions of people who collect baseball
cards and memorabilia or who have collected in their lives29
. These days, there are possibilities to
sell and purchase cards in antique stores, specialized dealers or from other collectors directly.
The market is not very liquid as the items are very limited, and one should dedicate much money
and time searching for items and following the updates on some cards. The Internet has
simplified the lives of many collectors as now one can be up-to-date with the trends and
participate in an auction for the baseball cards on an online exchange platform. Some collectors
may sell rare baseball cards over the Internet and very often on Ebay30
. The cards are to be kept
in good condition, because there is no certain price determined for the vintage and rare cards, it
is being decided upon how rare, unique and preserved the card is. Moreover, the price can be
different at times depending on the amount of collectors seeking for it. At the end of the day, the
one who gets it is the one who pays more for it regardless of its predetermined value31
. There is a
phenomenon, though: the rarest cards can be worth tens of thousands of dollars even in poor
condition32
. The most valuable baseball card of all time is the Honus Wagner: 1909-1911 T206.
The T206 has sold for a record setting $2.8 million thanks to its rarity and fame33
. The majority
of baseball cards tend to rise and fall in value and can be very cyclical, that just has not been the
case for the T206 Honus Wagner.
There are a few baseball price guides available online, as an example the worlds’ most trusted
source of collecting: Beckett Media has an estimated total number of cards equal to 1.569.637,
with a total number of 38.265 sets. This one of a kind database features checklists and pricing
from 1867 to the present and covers brands from Absolute to Zenith. The total value as of the
30th
of March 2014 is equal to $38.546.472,9434
. It has been argued, that Beckett’s guides were
probably creating card prices just as much as they were reporting them.
Thousands and thousands of dollars' worth of baseball cards have been thrown away over the
years. But today, even non-sports fans are aware of the baseball card and its presumed value -
and no one would dare to throw them out35
.
"The cards that I have from my youth have a meaning that takes me back to a time and a place I
always want to remember. They are a tangible memory of where I came from - my life, my
friends, and the games we played with those cards. The cards I have acquired in my later years,
29
“Alternative Investing: Two T206 Honus Wagner Cards For Sale In Same Month (CLCT, EBAY, MSFT, AAPL),”
http://247wallst.com/special-report/2012/01/30/alternative-investing-two-t206-honus-wagner-cards-for-sale-in-same-month-clct-
ebay-msft-aapl/, 30 Mar 2014.
30
“How to Collect Baseball Cards: A Guide for Beginners,” http://www.diamondfans.com/howto-collect.html, 9 Mar 2014.
31
“Starting A Baseball Card Collection,” http://www.essortment.com/starting-baseball-card-collection-58544.html, 9 Mar 2014.
32
“Nuns auctioning rare baseball card,” http://msn.foxsports.com/mlb/story/nuns-auctioning-rare-honus-wagner-baseball-card-
102710?GT1=39002, 9 Mar 2014.
33
“The 10 Most Valuable Baseball Cards,” http://www.celebritynetworth.com/articles/entertainment-articles/10-valuable-
baseball-cards/#!/honus-wagner-1909-1911-2-8-million_441, 9 Mar 2014.
34
“Baseball Cards Price Guide,” http://www.beckett.com/price-guides/baseball, 30 Mar 2014.
35
“Knowing how much your cards are worth,” http://www.netplaces.com/collectibles/sports-cards/knowing-how-much-your-
cards-are-worth.htm, 30 Mar 2014.

17
from the mid-1990s to present, of course also have a great importance, but they do not have the
same emotional attachment”, - Earl "Ken" Kendrick Jr36
.
3.3.2 History
History of baseball cards is somewhat parallel to the history of baseball, which turned out to be a
money making machine from an innocent American pastime. Baseball cards have evolved from
an unorganized level to the high plateau they now occupy.
Baseball cards indeed existed almost since the beginning of an organized professional game.
During the 1869 baseball season, Peck & Snyder produced a small advertising card, bearing a
glue-mounted photograph depicting the ten members of the first explicitly professional baseball
team – the Red Stocking Base Ball Club of Cincinnati37
. It is considered to be the first true
baseball card.
The adult baseball card collecting hobby emerged during the late 1960s, an era when popular
culture became a fertile ground for expressions of individuality and freedom38
. The Civil War
spawned the baseball card, and two generations later the Great Depression gave it an enduring
place in American boyhood.
Baseball cards may as well have been just one more piece of forgotten ephemera, had it not been
for a novel activity made popular by the war: cigarette smoking.
It was not until after World War I, that companies would package baseball cards with products
such as candy, gum, caramels, or cookies, thereby marketing products directly to children.
Baseball cards became increasingly important aspect of children’s lives during the twentieth
century, a commercial intervention into preadolescent play during an era in which child labor
laws, industrial mechanization, and mandatory schooling all extended childhood and made play
an increasingly central aspect of children’s lives39
.
3.3.2.1 Tobacco Baseball Cards
By the 1880s, the sport had emerged as a far-reaching commercial force40
. Tobacco companies
during the 1880s were the first to produce and distribute baseball cards to mass audiences, using
them as an advertising mechanism to sell their product as their industry became mechanized and
headed south new markets to avoid overproduction41
. The first tobacco company to put a baseball
36
“The man, the collector, the card and the collection,” http://www.psacard.com/Articles/ArticleView/6852/the-man-the-
collector-the-card-and-the-collection, 30 Mar 2014.
37
Dave Jamieson, Mint Condition: How Baseball Cards Became an American Obsession, (New York: Atlantic Monthly Press,
2010), 13.
38
1997), 87.
39
1997), 3.
40
2010), 20.
41
1997), 3.

18
player on an insert card was Allen & Ginter, a Richmond firm that had entered the cigarette
market in 187542
. Even though adults collected tobacco cards, the pursuit appealed primarily to
kids. Laws prohibiting the sale of tobacco to minors sprouted around the country, but were
generally ignored, allowing a child in many towns in 1887 to buy a pack of cigarettes just as
easily as an adult. It was the fickleness of young consumers that made cigarettes among the most
heavily and beautifully advertised products of the post-Civil War period43
. For baseball fans, the
timing of the tobacco advertising battles could not have come at a better time. As the hobby of
card collecting grew, the sale of cigarettes grew with it.
American Tobacco Company was founded in 1889. ATC was created to stop the marketing wars
and decrease budgets involved in the by-product printing44
. It was all about the popularity of
cards that lead to the formation of the most powerful monopolies in American history.
The American Tobacco Company (later on ATC) decided to introduce baseball advertising cards
into their tobacco products with the release of Wagner and the rest of the so-called T206 set just
as the company was losing hold of its monopoly. Between 1890 and 1907, it had devoured an
estimated 250 independent companies in the tobacco industry45
. The cards were included in
packs of cigarettes and produced over a three-year period until the ATC was dissolved. Baseball
cards, however, would all but vanish for the next twenty years after that.
Had it not been for the invention of that kid-friendly gum, baseball cards may have had no
reason to exist after the end of the tobacco wars. The start of the second golden age of baseball
cards can be traced back to a day in August 192846
.
3.3.2.2 Bubble Gum Baseball Cards
For candy and gum companies such as Topps, it was important to combine the sales with the by-
products i.e. baseball cards. Such products kept the company name in front of the customers, and
the company made a higher margin of profit than for other items produced and offered for sale.
During the 1930s, the Goudey Gum Company first used baseball cards to market bubble gum to
youths. By the end of the decade, gum companies increasingly associated baseball cards with
patriotic symbols, selling their product wrapped in red, white, and blue paper, evoking images of
baseball as the “national pastime”47
.
42
2010), 19.
43
“Old Judge Launched Early Baseball Card Craze,” http://www.sportscollectorsdaily.com/old-judge-launched-large-scale-
baseball-card-distribution/, 5 Apr 2014.
44
2010), 28.
45
2010), 36.
46
2010), 49.
47
1997), 3-4.

19
United States was experiencing the worst of the Great Depression. In 1933, the nation’s financial
system was heading toward collapse, leading President Franklin D. Roosevelt on March 6th
to
declare four-day bank holiday that left most Americans without access to cash. Professional
baseball would endure its most financially challenging season in years. Fortunately for the card
collectors, the growing popularity of bubble gum happened to coincide with two other post-war
phenomena: the baby boom and the glory days of professional baseball48
. Perhaps Topps was
nothing more than blessed in its timing. Topps’s new customers were the children of soldiers
who had returned home and women who were now free to leave wartime industries and resume
family life. By the end of the ’40s, 32 million babies had been born – 8 million more than in the
previous decade49
. Baseball was enjoying unprecedented popularity in the years after the war.
The stadiums were setting new attendance records, with crowds hovering at around 20 million
annually.
After World War II, companies regularly produced and sold yearly sets of baseball cards to
children for the first time. Beginning in 1948, the Bowman Corporation began printing and
selling annual sets of cards with bubble gum each summer. Berger and Gelman had created a
prototype for the modern baseball card. The design elements of the 1952 Topps set would kindle
not only the imaginations of baseball-loving children but also their collector’s instincts. Topps
was on its way to dominating the field of baseball cards for the next forty years50
.
In the late 1970s, only a handful could make a living selling baseball cards and memorabilia. By
the end of the decade, thousands of dealers across the country owned card shops and travelled
from show to show every year51
. As the collecting became increasingly prominent during the
early 1970s, these tensions became increasingly pronounced and were articulated particularly as
a conflict between nostalgia and money. Such a dualistic understanding of collecting obscures
important ways in which baseball cards were marketed consumer goods and commercial
artifacts52
.
One of the most important events in the development of adult baseball card collecting in the
United States occurred in October 1973 with the publication of the Sports Collectors Digest
(later on SCD) by John Stommen. SCD reported on card collecting conventions around the
48
2010), 67.
49
2010), 98.
50
2010), 91.
51
1997), 24.
52
1997), 81.

20
country, local sport collecting clubs, and news about various sets of cards or archives of
collectibles53
.
Between 1975 and 1980, the baseball card collecting hobby among adults grew rapidly in the
United States. Baseball Card Boom magazine asserts, that ‘serious’ collectors increased from
4.000 to 250.000 during this time, making baseball card collecting the fourth largest hobby in the
nation. Over the next ten years, the hobby continued to grow, involving between 3 million and 4
million people by 198954
.
3.3.2.3 Elimination of a By-product
More than 100 years ago, the first baseball cards were issued by companies looking to advertise
their business. It did not matter whether the company had any connection to the sport. Over time,
the cards have become a commodity in their own right55
. Cards produced after World War II
were not used to sell another product but were sold as products in and of themselves. By 1991,
sales of baseball cards had reached $1.2 billion annually. The cards became the core component
of an estimated $4-billion-per-year sports-memorabilia market, which was propped up by some 4
million serious collectors56
.
By 1996, A Fleer company survey of children revealed some disturbing news. Compared to just
a few years earlier, kids were vastly more interested in video games than in cardboard. During
the 1980s and early 90s surveys showed that the average age of a baseball card collector had
been around thirteen. After the strike that age skyrocketed. The typical attendee of the 1996
national baseball card show was a wheezing thirty-eight years old. Boys who grew up with
Nintendo found a ready alternative to baseball cards in Pokemon cards. Others gravitated toward
Magic: the Gathering or another of the legion of collectible card games that hit toy store shelves
in the ‘90s57
.
Children were no longer considered as a general target group, due to instability and change of
tastes. The companies started focusing on the adult generation, Topps benefited being the first
market entrant surpassing the competition with available resources to market itself. By 1990,
Topps had introduced a new line of baseball cards with the Bowman brand label it had bought
thirty-four years earlier, clearly creating a hook for the nostalgic impulses of its adult market.
During the 1990 season Donruss, then a subsidiary of the Leaf candy company, packaged sets
made up entirely of ‘rookie cards’ - cards marking a start player’s first season in major-league
53
1997), 76-77.
54
1997), 4.
55
"Baseball cards: Business and nostalgia | WOPULAR," http://www.wopular.com/baseball-cards-business-and-nostalgia, 22
Mar 2014
56
2010), 6-7.

21
baseball58
. This strategy underlines the recognition of the interest by the targeted demographics.
Collectors were indeed interested investing in rookie cards. It was as well believed, that the so-
called ‘error’ cards were made on purpose to stimulate the secondary market. Most of the
baseball companies were defining their consumer base with the demographic terms, missing out
on the complex motivations driving collectors to purchase decisions. By not having recognized
the motivations behind the drive to collect, such companies evoked a lot of tensions. Just as
companies fuelled the growth of the hobby, the number of dealers, shops and shows was
increasing. One could find listings of conventions and shows in SCD - such shows were held
regularly. They attracted thousands of adults and children. Many were attracted to it out of a
sense of belonging - they were public events that demonstrated a collective enthusiasm over
baseball cards. They were not explicitly organized around any common appreciation of baseball
cards, but rather instead as the venues for exchange59
. Both old and new material was available
for sale at different displays. With all the hype of direct marketing coming from the baseball card
companies, cable television, home shopping channels, it is not hard to recognize the significance
of commercial factors in seeding the popularity of baseball card collecting around the United
States during the 1980s60
. During these times, the secondary market was very robust. The
composition of sets was widely promoted similar to the vintage cards, which were sold or traded
among dealers and collectors.
With the increased attention to the monetary value of cards, theft and fraud became common in
the hobby. The value of cards was increasingly determined by physical condition in the 1980s.
Beckett’s Price Guide listed prices for cards in ‘mint’, ‘near mint’, and ‘very good’ condition in
the front of each volume. A mail-order grading service had been introduced; collectors could
send in their cards and pay a fee to have them assigned a numerical grade on a scale of 1 to 10061
.
The frenzy peaked around 1991 when, as an industry researcher determined, dealers and
investors spent about $1.4 billion on wholesale sports cards for the year ending in June. But that
number represented only what dealers paid directly to the card companies; after the sale of
vintage cards and the resale of new products, the actual figure was probably twice as much or
even more62
.
As Topps and the companies alike flooded cards into the market, the sales experienced a
decrease from that point on. The market was well saturated, and there were simply too many
57
2010), 186-187.
58
1997), 21-23.
59
1997), 28.
60
1997), 19.
61
1997), 25.

22
baseball cards in circulation. In 1994 more than 350 sets poured into convenience stores and card
shops63
. Collectors became overwhelmed by the staggering number of cards and sets issued each
year. Inflation of new card prices, drastic increases in some cards prices, unethical behaviour of
the dealers, collectors and grading companies – all led to the disappointment among the
collectors. Like any consumer, a collector enjoys having choices. However, there were too many
options circulating around the market and collectors started to have a hard time trading their own
cards with others.
The card companies were shrewd enough never to disclose how many cards they were actually
producing, but even conservative estimates put the number well into the billions. But just as the
market became saturated, the market for vintage cards started to take off.
3.3.2.4 Modern Baseball Cards
Worth mentioning, now a cult hero among hard-core hobbyists, Burdick was the first truly
monomaniacal card hunter. He is considered to be the one establishing an organized hobby of
collecting baseball cards. Despite not a high budget, he was able to make one of the most
impressive collections (by today’s terms). The pioneering research he conducted back in the
1930s, provided a foundation to the current thriving and robust secondary market activities. His
work in progress was called The American Card Catalog, and he eventually put out three
editions that are now considered the foundation of the baseball card hobby64
.
An average baseball card collector has always aimed to obtain each card in a particular set.
Modern collectors tend to pursue all of the cards of a particular player of the team. There are
collectors chasing the Old Judge too. There are perhaps fewer than ten collectors in the world
doing that. And those few must be prepared to spend an awful lot of money65
. When considering
any investments, they either appreciate or depreciate – same is applicable to the baseball cards:
vintage collectibles of high quality tend to dominate over the mass-produced items from the
1980s all the way up to modern day66
. And like any high-stakes and wholly unregulated industry,
the vintage-card market is full of altered cards and counterfeits. Buying rookie cards back then
was a way for fans to legally gamble on a player’s future. Some savvy collectors’ practices
included stockpiling rookie cards of highly anticipated players cheaply when they first hit the
62
2010), 174.
63
2010), 186.
64
2010), 76.
65
2010), 24.
66
“Alternative Investing: Two T206 Honus Wagner Cards For Sale In Same Month (CLCT, EBAY, MSFT, AAPL),”
http://247wallst.com/special-report/2012/01/30/alternative-investing-two-t206-honus-wagner-cards-for-sale-in-same-month-clct-
ebay-msft-aapl/, 30 Mar 2014.

23
market67
. Baseball cards were already being touted as a legitimate investment alternative to
stocks, with reputable financial publications referring to them as ‘inflation hedges’. In one of
several articles, the Wall Street Journal, ran expounding the liquidity of baseball cards, the
newspaper employed an apt term to describe this mode of investing: “nostalgia futures”68
.
According to Gidwitz, a well-known American collector, collectors have four reasons to sell off
their cards: death, debt, divorce, or a sudden lack of enjoyment in their acquisitions.
Baseball card collectors are, by and large, avid fans of the sport and do so for nostalgia's sake.
The returns for successful investors vary wildly and depend on several factors - first and
foremost, the supply and demand of the market itself69
.
It is being argued, that the number of serious collectors is decreasing perceptibly each year. New
collectors are no longer so many to replace the ones leaving the hobby. In many niches within
the vintage card hobby, the market is ‘thin’. It only takes two collectors to drive the price of a
particular card to previously unheard-of levels. There is not an official, sanctioned market that
regulates the exchange of baseball cards. Investors do their public buying and selling of the
cardboard commodities in physical venues like specialty hobby shops, auction houses and card
shows like the National Sports Collectors Convention. Online sites like Ebay, Beckett.com and
SportsBuy.com are also quite popular and contain several millions of user listings70
. There are
now a dozen or so auction houses that specialize in baseball cards and sports memorabilia, each
year putting together auction catalogues that eventually become collector’s items themselves. It’s
estimated that these houses and non-specialty outlets such as Ebay and Craigslist now churn up
half a billion dollars in baseball card sales annually on the secondary market71
.There are still
collectors whose budget allows them buying items for $10.000 or more, or another item that
would draw the attention of the press. The majority of the deals, however, is observed via Ebay
auctions of cards that carry catalogue values from a few dollars to selling $100, or more.
Currently, baseball card values are heavily dependent on a few factors, including (but not limited
to) the age of the card, the type of card (insert, a main set, memorabilia, autograph, etc.), the
scarcity of the card or set as a whole, the player represented on the card, the year of the card
relative to the player’s career and the grade or condition of the card72
.
In a baseball cards market, it is considered, that the oldest items are the most expensive, this is
especially the case with the items printed up to 1980. The rarity is very important in the world of
67
“The Top-Performing Alternative investments: Baseball Cards,” http://www.minyanville.com/special-
features/articles/collecting-baseball-cards-baseball-cards-baseball/2/17/2011/id/32424, 22 Mar 2014.
68
2010), 155-156.
69
70
71
2010), 8.

24
collectibles. Any collectible market is working by demand and supply. The rarer the card is, the
more valuable it is providing there is a demand for it. While vintage baseball cards still fetch
high prices, cards from the late 1980s have comparatively struck out. The blame is over-
production73
. Star players command high book values. Either the prices remain constant or
appreciate with time and demand. Since the grading services were introduced, the collectors
started using the terms ‘NM’, ‘GM’, etc., determining the condition of the card. Cards in ‘Poor’
condition have little or no market value except in the cases of the rarest and most expensive
cards. In such cases, value has to be negotiated individually74
. Generally speaking, the best
quality means the highest price, but in some instances, it is not necessarily the case, as the card
might be very scarce and therefore the quality will be ignored.
72
“How to Determine a Baseball Cards Value,” http://chmkadmin.hubpages.com/hub/How-to-Determine-a-Baseball-Cards-
Value. 30 Mar 2014.
73
“Are Collectibles Good Alternative investments?” http://millionairecorner.com/Content_Free/Are-Collectibles-Good-
Alternative-Investments.aspx, 30 Mar 2014.
74
Bob Lemke, Standard Catalog of Vintage Baseball Cards, (Iola: Krause Publications, a division of F+W Media, Inc., 2011), 6.

25
Chapter 4: Market
4.1 Definition
Market is a medium that allows buyers and sellers of a specific good or service to interact in
order to facilitate the exchange. The price that individuals pay during the transaction may be
determined by a number of factors, but price is often determined by the forces of supply and
demand75
.
One should not perceive the term market as a physical instance for trade. These days there are
many Internet-based stores and auction sites. The transactions take place virtually, and the buyer
and seller parties do not have a need to meet physically.
For a market to be competitive, there must be more than a single buyer or seller. It has been
suggested that two people may trade, but it takes at least three persons to have a market, so that
there is competition in at least one of its two sides76
.
There are many different types of markets. They vary in size, location, services/goods offered
and volume. Market participants consist of buyers and sellers. They determine the price for a
certain good traded.
4.2 Characteristics of a Market
Markets are a system, and systems have a structure. The structure of a well-functioning market is
defined by the theory of perfect competition. Well-functioning markets of the real world are
never perfect, but basic structural characteristics can be approximated for real world markets, for
example:
 Many small buyers and sellers.
 Buyers and sellers have equal access to information.
 Products are comparable77
.
Market size can be given in terms of the number of buyers and sellers in a particular market or in
terms of the total exchange of money in the market, generally annually78
.
4.3 Financial Markets
Financial markets facilitate the exchange of liquid assets. Most investors prefer investing in two
markets, the stock markets and the bond markets. NYSE, AMEX, and the NASDAQ are the
75
"Market Definition | Investopedia." http://www.investopedia.com/terms/m/market.asp, 9 Mar 2014.
76
Sullivan, Arthur; Steven M. Sheffrin, Economics: Principles in action, (Upper Saddle River, New Jersey 07458: Pearson
Prentice Hall, 2003), 28.
77
“Mechanisms of markets,” http://everythingaboutmarkets.wordpress.com/category/uncategorized/, 9 Mar 2014.
78
“Market Size – definition of market size by the InvestorWords,” http://www.investorwords.com/6576/market_size.html 9
March 2014, 9 Mar 2014.

26
most common stock markets in the US. Futures markets, where contracts are exchanged
regarding the future delivery of goods are often an outgrowth of general commodity markets79
.
The exchanges are auction markets, with transactions made on the exchange floors, subject to the
rules of the exchanges and which prices are determined by bidding. An exchange market is a
place where buyers and sellers come together to trade securities. To work properly, an exchange
market must continually offer the opportunity to buy and sell in an orderly fashion.
4.4 Collectibles’ Market
4.4.1 Supply & Demand of the Collectibles
Market depth is a term used to capture the elasticity of demand or supply, it can be thought of as
the extent to which one can buy or sell a commodity without influencing the price80
. Price
elasticity of supply is a measure of the responsiveness of the quantity of the product supplied by
sellers when the product price changes81
.
With only a few important exceptions, supply for collectibles is fixed at any point in time and
declines over time. The reason for the decline is that any collectible is a tangible object, which
can be damaged, lost, destroyed or can have the original condition worsened. Thus, the supply of
antiques and other collectibles tends to be inelastic82
. In most of the cases, the supply is limited,
but so is the demand too. Demand in collectible markets depends mainly on two factors: level of
supply and the so-called ‘expert sentiment’ - the affirmation of experts, including critics,
curators, and scholars determine the value83
. One could consider public opinion, market regard,
preference of collectors and investors as an expert sentiment. That is why it may be so difficult
to determine the price of a single item. Changes in demand are driven mostly by changes in taste
and perception.
Naturally, the collectibles’ market is a difficult and risky market to enter, if one does not have a
passion for it or the knowledge.
4.4.2 Advantages
According to Goldman Sachs, there is an expanding middle class (additional two billion by
2030). The countries belonging to the BRICS (Brazil, Russia, India, China, South Africa) are
expected to have a rapid population growth (double the amount) within the next fourty years,
means the disposable capital will be having a big uptrend.
79
“What are financial markets? What function do they perform,” http://www.justanswer.com/finance/4yy14-financial-markets-
function-perform.html, 9 Mar 2014.
80
81
Campbell McConnell et al, Economics: Principles, Problems, and Policies (New York: McGraw-Hill Economics 18th Edition,
2009), 86.
82
Campbell McConnell et al, Economics: Principles, Problems, and Policies (New York: McGraw-Hill Economics 18th Edition,
2009), 89.
83

27
The baby boomers generation, responsible for 80% of the world’s wealth, will be retiring within
the next twenty years, having disposable income and time to dedicate solely for their hobbies.
An estimated 75.000 boomers will retire in the US each week. (15.000 in the UK). Baby
boomers will impact the collectibles’ market for decades. Those investing now can capitalise84
.
Currently, there is an estimated number of serious collectors worldwide, equal to 200 million85
.
The alternative assets can only become more scarce, because supply and demand drive the
market: many of them get lost, damaged or enter museums and institutions – demand is
increasing which gives the price an uptrend too; moreover when talking about alternative
investments (collectibles), these are tangible items - they are not a subject to low interest rates
and there is a low correlation to the stock market. The proposition is to use the alternative
investments to diversify a portfolio of the classical investment types.
4.4.3 Ebay as a Collectibles’ Market
An online auction is an auction that is held over the Internet. Online auctions come in many
different formats, but most popularly they are ascending English auctions, descending Dutch
auctions, first-price sealed-bid, Vickrey auctions86
. In 2002, online auctions were projected to
account for 30% of all online e-commerce due to the rapid expansion of the popularity of the
form of electronic commerce87
. The investment or collectible goods market are the most
satisfying to its sellers and the one for which Ebay remains the most famous88
.
On the Ebay auction website, the Online Auction Format is a selling format, where the seller lists
an item for a set amount of time and buyers must place a bid to purchase. Buyers must place a
bid higher than the last bid placed. At the end of the auction, the buyer with the highest bid wins
that item89
. In general, items on Ebay are being sold in two basic ways:
1) Fixed price items are easy to identify because they have a ‘Buy It Now’ button with a price
listed next to it.
2) Auction items have a ‘Place Bid’ button next to a box for entering bids and show a ‘Current
Bid’ price. Auction items are open to bids for a predetermined amount of time. When time is up,
the item is declared ‘Sold’ to the highest bidder.
84
"Ten reasons to invest in Collectibles | PRESLEY | COLLECTIBLES," http://presleycollectibles.com/2014/01/07/ten-reasons-
to-invest-in-collectibles, 9 Mar 2014.
85
"Ten reasons to invest in Collectibles | PRESLEY | COLLECTIBLES," http://presleycollectibles.com/2014/01/07/ten-reasons-
to-invest-in-collectibles, 9 Mar 2014.
86
“E-Auctions,” http://www.accurateauctioneers.in/columns.html, 9 Mar 2014.
87
Vakrat, Y.; Seidmann, A. Implications of the bidders' arrival process on the design of online auctions, (Proceedings of the 33rd
Annual Hawaii International Conference on System Sciences. doi:10.1109/HICSS.2000.926822. ISBN 0-7695-0493-0, 2000), 7.
88
“Supply and Demand on eBay (continued): Selling collectible and investment goods,”
http://Ebay.about.com/od/sellingeffectivel1/a/se_demand_5.htm, 9 Mar 2014.
89
“eBay Online Auction Format,” http://www.webopedia.com/TERM/E/Ebay_Online_Auction_Format.html, 9 Mar 2014.

28
3) A few items have both kinds of buttons and show two prices at once. Items like this are for
sale both ways. If nobody uses the ‘Buy It Now’ button, the item goes to the highest bidder when
time is up.
Ebay auctions accept bids only for a specific amount of time. In a traditional non-Ebay auction,
bidders frantically place competing bids. When bidding slows to nothing, the auctioneer pounds
the gavel and the item is sold. On Ebay, auctions are open to bids for exactly 1,3,5,7 or 10 days.
When time is up, the highest bidder wins, even if people were frantically bidding90
.
4.5 Difference between Collectibles and Financial Markets
Because the collectibles’ market is dominated by private collectors, not investors and
speculators, the market value might not reflect any net present value of a particular piece,
whereas, in the public securities markets, there are no buyers who purchase solely for the
pleasure of owning the asset.
Stocks and bonds are traded over organized exchange platforms. They are considered liquid
assets in comparison to most of the collectibles. A liquid market allows the trader to relatively
easy entry and exit of the market91
.
Most of the alternative investments are known to be very illiquid; it means that owners cannot
cash them in as fast as they would want to. Collectors are brand different from the typical
investors; they are not necessarily interested in selling their collection, hence they are
compensated by a non-monetary return. The collectors can keep the illiquid assets in the
portfolio for a long period of time without putting it on auction.
Future success of the collectible depends heavily on collectors’ future taste which is not
predictable as stock prices or at least there is no convincing evidence that the future taste can be
influenced with certainty92
. For collectibles, the asking price itself functionally carries
information about the subjective value, but it is an unreliable indicator. Because collectors often
sell to each other, the same collectible can escalate in price simply moving between collections
of individuals.
A novice will not have the experience or expertise to understand why two pieces of collectibles,
seemingly similar, can command wildly different prices. Often the important differences are very
subtle to the untrained. In economic terms, collectibles have high model uncertainty in that the
relevant participants do not have a clear shared model as to how to value a particular collectible
and do not always assess the factors the same way, so valuation can be very subjective. If this is
compared to pricing of bonds, it is enough to know the credit quality, the maturity and the yield
to know precisely the value of the bond.
90
“Understanding eBay Bidding (continued),” http://Ebay.about.com/od/gettingstarted/a/gs_bids_2.htm, 9 Mar 2014.
91
Jack D. Schwager, Market Wizards: Interviews with top traders, (New Jersey: John Wiley & Sons Inc., 2013), 443.

29
Most of the financial assets have a few indices to follow, which are based on the basket of the
securities brought to a common denominator, whereas the collectibles are traded infrequently,
therefore, price movements can only be monitored at irregular intervals, and an estimation
should be applied.
Stocks represent the ownership interest in the profits and value of an enterprise, whereas bonds
represent a claim on an ascertainable amount secured by all or some of its assets. Publicly traded
stocks and bonds have very broad markets with many buyers for every security with significant
market capitalization, and they are highly liquid, with prices that are public and well understood.
For any particular issue, buyers and sellers can deal with fungible quantities. Publicly traded
securities can be traded in minutes or seconds93
. Collectibles are a brand different thing. The
value of them is solely a function of supply and demand. Alternative investments i.e. collectibles
have a very small number of interested buyers at any point in time.
92
"Collectibles as Alternative investments," http://www.omikk.bme.hu/collections/phd/Gazdasag_es_Tarsadalom, 23 Mar 2014.
93

30
Chapter 5: Collectible Card Games
5.1 Definition
A collectible card game (later on CCG), also called a trading card game or customizable card
game – is a game played using specially designed sets of playing cards. While trading cards have
been around for longer, CCGs combine the appeal of collecting with a strategic gameplay94
.
5.2 Peculiarities
There are a few games that match the description of the TCG, however, in order to get a better
understanding of the terminology, there should be a breakdown of what the TCG peculiarities
are.
Every single TCG has a fundamental rule book, which describes types of cards, objectives of
how to win the game and actions each player should take to combine the cards with a winning
purpose.
CCG has a certain plot and the story line. Magic: the Gathering, for instance, is based on a
fantasy genre, which explains why most of the cards have magical or mythical creatures from
different types designed on top of the cards.
There are millions of cards circulating around in the market and additional ones are being
published on a quarterly basis (can be annual/semiannual too), but the players are limited to
creating a specific deck which they can qualify to play with. The decks vary and change in type
and size, once the new editions of the cards are published. Continuous innovation is driving the
market. Players can strategically customize their decks to take advantage of favourable card
combinations with the cards from the new editions. Most of the TCGs have a limitation of 40-60
cards per deck though.
A few games have limitations about the amount of one unique card usable in a deck and some
cards are banned from the usage in official tournaments because of their imbalance. These limits
force players to think creatively when choosing specific cards and practice a few card
combinations when implementing a strategy.
Another common point bringing all card games to one genre is the phased approach of the game.
Only certain cards are allowed to be played at the beginning phase. In the combat phase, only
cards with power can attack, etc. If there are two players, both players have an advantage of the
first turn. One player has more cards to play, when another player can enter the attack phase first.
Normally the first turn is decided by the roll of the dice.
94
“CCGs (Collectible Card Games),” http://boardgamegeek.com/boardgamefamily/6040/ccgs-collectible-card-games, 9 Mar
2014.

31
In addition to actual physical card game itself, most of the collectible card games have added an
online playing version, as well. Magic Online was released before the existence of the iTunes
store or the Kindle, and the concept of a digital economy was still in its infancy95
. Card collectors
play online, purchase items online, but are limited to the online currency, and they cannot sell the
items outside of the game.
There are various degrees of scarcity in the games. Magic has the ones known as
common, uncommon and rare96
. Later on mythic rare type was added too. Apart from the card
types listed above, there are special cards launched for specific championships only. There are
cards published as promotional items. Promotional cards have existed almost as long as Magic:
the Gathering itself, as an example97
. The idea of rarity is reminding of the collectible nature
coming from the baseball cards, but in TCGs the level of rarity and most of the time the price is
determined by the utility of the card in the game process. If a card has a powerful ability and
could turn the match in your favour, there is a proportional correlation with the price increase.
The more powerful the card in terms of the game is, the greater its rarity. Some cards may be
underestimated at a particular point of time, because they can be counter targeted by other cards.
The price of those would be low, but could rapidly appreciate with the new editions or sets if
other cards could match it.
Another common point about the TCGs is, that the companies, which established the games, are
giving freedom for the participants in the secondary market. The collectors determine the prices
of the cards. The companies themselves participate in a primary market selling items as sealed
packs, containing a subset of the organized cards. There are a few common distribution ways:
 Starters – pre-ready packages for new players, who are introduced to the game. These
packages normally contain the rules of the game and ready-to-play decks.
 Boosters – 4-15 cards packages with a random split of cards. The prospective customers,
shall it be wholesaler or an individual buyer, only know the percentage of the rare,
uncommon, common and other types of the card’s breakdown among the booster packs.
 Display – a package containing a few boosters. Sold at wholesalers with a discount on it
(economies of scale).
The patent was granted to Wizards of the Coast in 1997 for "a novel method of game play and
game components that in one embodiment are in the form of trading cards" that includes claims
covering games whose rules include many of Magic's elements98
.
95
"The Dark Side of Magic: The Business by Darwin Kastle," http://www.gatheringmagic.com/darwin-kastle-editorial-
07152013-the-dark-side-of-magic-the-business, 15 Mar 2014.
96
Refer to Glossary.
97
“Promos 101,” http://www.starcitygames.com/article/24867_Promos-101.html, 30 Mar 2014.
98
“Trading card game method of play,”
http://worldwide.espacenet.com/publicationDetails/biblio?CC=US&NR=5662332&KC=&FT=E&locale=en_EP, 9 Mar 2014.

32
Chapter 6: Wizards of the Coast and Magic
6.1 Company Information
Wizards of the Coast, Inc., a subsidiary of Hasbro, Inc. (NYSE:HAS), is a worldwide leader
in the trading card game and tabletop role-playing game categories, and a leading developer and
publisher of game-based entertainment products99
. Wizards of the Coast (often referred to
as WotC or simply Wizards) is an American publisher of games, primarily based on fantasy and
science fiction themes, and formerly an operator of retail stores for games. The company's
corporate headquarters are located in Renton, in the U.S. state of Washington100
. One could argue
that Wizards of the Coast built a house of cards. The company is celebrating 20 years
anniversary this year, and that was another tremendous year, growing more than 30% and
marking the Hasbro’s brand’s fourth consecutive year of 25% revenue growth or greater101
.The
company was established in 1993 and brought to life by Peter Adkison (CEO) and game designer
Richard Garfield102
. Richard Garfield stated that the earliest design for Magic was in 1985 but
that it completely changed over time103
. Peter Adkison publicly announced Magic: the Gathering,
the first of the Deck master series of games on 8th
of April 1993104
, the official release date is,
however, considered to be 5th
of August the same year105
. WotC filed for a trademark for
“MAGIC THE GATHERING” which was registered on 19th
September 1995 and renewed in
2006106
.
Wizards of the Coast unveiled a new company logo in December 1994. The original logo did not
fit the company personality. The fortress motif was removed to differentiate them from other
companies using similar designs and to show that they did not just produce stock fantasy. The
new shooting star symbolized endless creativity107
.
Figure 2: The old and the new logo of Wizards of the Coast
99
“For wizards of the coast, nine is the number! magic: The gathering now featured in nine editions, nine languages.; in addition
to english and the newly added russian language, MAGIC is currently produced in french, german, italian, spanish, portuguese,
japanese and chinese (simplified)”, “Business wire,” http://search.proquest.com/docview/445423852?accountid=37942, 9 Mar
2014.
100
“Wizards of The Coast – Contact Us,” http://company.wizards.com/contactus, 9 Mar 2014.
101
Hasbro 2012, Annual report 2012, 1027 Newport Avenue Pawtucket, RI 02862-1059, Page 5.
102
“Magic: The Gathering Fact Sheet Revised 5/26/09,”
http://www.wizards.com/company/downloads/Magic_Fact_Sheet_Aug09.pdf, 9 Mar 2014.
103
Ryan William Rooks, A Collector’s history of Magic the Gathering, (Charleston: Volume I, ISBN: 1492229407, 2014), 7.
104
105
106
107

33
Wizards of the Coast had yearly revenue of $237 million in 1999. After that they were bought by
Hasbro, so their revenues are no longer public knowledge108
. WotC was purchased by Hasbro in
1999 for $325 million109
. Wizards of the coast is a company not only limited to MtG, in their
portfolio there are other games: several popular game franchises, including Dungeons & Dragons
and tremendous successful licensed Pokémon Trading Card Game110
. From the date of the
creation, the company has spread across the globe growing more popular.
2005-2008 Magic declined annually during these years. Little was publicly said about it. Magic
was still selling “nearly twice as many cards” as their closest competitor (Yu-Gi-Oh)111
. The
latest reports, however, reassure the sound financial situation of WotC: Hasbro has released its
Q4 and yearly 2013 reports, and interesting details about Wizards of the Coast and its properties
have come to light. Specifically, Magic: The Gathering is still growing, with the venerable CCG
up more than 20% for the year; according to Hasbro CEO Brian Goldner. Wizards of the Coast,
in general, was apparently up 23%112
.
6.2 Magic: the Gathering
Richard Garfield designed a game in 1982 called “Five Magics” influenced by Cosmic
Encounter. He was trying to create a card game with infinite possibilities so that no two games
would ever play the same. It could be considered a predecessor to Magic: the Gathering113
.
In testing the game was simply known as “Magic”. This name was too generic to trademark, so
the name was changed to “Manaclash”. This name was not as popular and never caught on with
the play testers. So the name was reverted to “Magic”, but the subtitle “The Gathering” was
added114
.
Magic cost less than $100.000 to bring to the market. When Magic started testing, WotC had six
employees and at the time of release they had eight. In 1998, the company already had over 500
employees115
.
Magic is the first and most widely played TCG. Collectors play a role of the powerful
Planeswalkers. Initially, “The Gathering” represented a gathering of mages in a contest or battle.
Each release was intended to have a different subtitle. For example, the second set was intended
108
“Game Monetization Lessons from Magic: The Gathering,” http://blog.betable.com/game-monetization-lessons-from-magic-
the-gath, 9 Mar 2014.
109
“Hasbro to Acquire Wizards of the Coast Deal to cost game publishing giant approximately $325 million,”
http://boardgames.about.com/od/companies/a/hasbro_acquires_wizards.htm 9 Mar 2014.
110 “Disney purchases Wizards of the Coast, announces Dungeons & Dragons theme park, Magic: The Gathering changes,”
http://www.gamerjargon.net/2013/04/01/disney-purchases-wizards-of-the-coast-announces-dungeons-dragons-theme-park-
magic-the-gathering-changes, 9 Mar 2014.
111
112
“Magic: The Gathering, Wizards of the Coast Financials Up Over 20% in 2013,”
http://www.escapistmagazine.com/news/view/132176-Magic-The-Gathering-Wizards-of-the-Coast-Financials-Up-Over-20-in-
2013, 9 Mar 2014.
113
114

34
to be “Magic: Ice Age”. Magic is a card game with mythological beasts to summon and ancient
sorceries to cast, using what’s called “mana”116
. The term “mana” was taken from Larry Niven’s
Warlock series of books which had, in turn, been taken from Polynesian mythology. Players
could use the power of enchantments, sorceries, instant spells, creatures to attack in order to win
the game. One of Richard Garfield’s early advancements was the elimination of dice. He wanted
the outcome of the battle to be unpredictable so that a stronger creature did not always defeat a
weaker creature. Instead, he accomplished this with spells that could be cast during combat117
.
It is a relatively simple game. It has five colours: Black, Red, White, Green, and Blue. Each
player is allowed to have 60 cards in the deck highlighting various types of cards. Having 20 hit
points, each player’s goal is to construct a deck in a way that they win the opponent. The more
powerful card, the more difficult it is to get it into the game. It takes a few turns to accumulate
“mana” to get one of those influential cards to play. Two players fight with one another in this
offline game, using decks they’ve prepared in advance. Most of the cards they either traded for,
collected in packs or purchased individually. Richard Garfield started with the idea of pre-
packaged decks with specific mixes of cards. It would be impossible to enforce play with these
mixes though, so he built the concept of the cards being tradable, collectable and even
disposable, into the design118
. There are many strategic nuances in the game, which a moderate
user of board games would consider complicated. There is a myriad of strategies to employ;
the walkthroughs are enormous, which makes it so interesting and ‘addictive’.
Initially, the game was only produced in English language. Later on it was translated to French,
Chinese, Japanese, German, Italian, Portuguese, Spanish and Russian. An interesting fact about
this card game is that whenever a card's text directly contradicts the rules of the game, the card
takes precedence119
.
It's unlike any other collectible in the world. It is a collectible card game - the first of its kind.
Since it's a game, unlike baseball, basketball or any other traditional sport cards, these cards
represent a function of the game as well as being a collectible, and a piece of history. For every
person who has ever been into MtG, they have specific memories that represent a time from their
past - fond memories of intense competition, camaraderie, and endless hours of game play are
forever instilled in the heart of every collector or player of MtG120
.
115
Ryan William Rooks, A Collector’s history of Magic the Gathering, (Charleston: Volume I, ISBN: 1492229407, 2014), 154-
155.
116
"Revisiting Magic: The Gathering as a grown-up nerd by Steve Heisler," http://www.avclub.com/article/revisiting-imagic-the-
gatheringi-as-a-grown-up-ner-84662, 12 Mar 2014.
117
11.
118
119
“Comprehensive rules of Magic,”
http://media.wizards.com/images/magic/tcg/resources/rules/MagicCompRules_20121001.txt, 22 Mar 2014.
120
"Daniel Chang – The Magic Man," http://www.psacard.com/Articles/ArticleView/6497/daniel-chang-the-magic-man, 12 Mar
2014.

35
There are thousands of cards available, and there is an unlimited variety of combinations one
could do with these cards. Every card is of a different design. There are sets of cards created by a
specific artist. There are players known collecting cards due to their design only. Some players
collect cards by a certain top fantasy artist. The card backs were designed by Jesper Myrfors to
look like a magical tome. Ever since 1995, the copyright on all artwork commissioned is
transferred to Wizards of the Coast once a contract is signed. However, the artist is allowed to
sell the original piece and printed reproductions of it, and for established and prolific
Magic artists, this can be a lucrative source of revenue121
. The Alpha artists were paid $50 in cash
and $50 in company stock at $5 per share plus royalties for each artwork. The artists received the
original pieces back and were allowed to retain certain rights to the images122
. In June 1996,
however, WotC drafted new contracts for its artists. The new contracts paid a flat rate per
artwork and changed how the intellectual property rights were handled. WotC would get all
rights to the artwork instead of the artists retaining it. The artists still kept the originals and were
still allowed to produce prints and other products123
.
The game experience itself is strategically rich which makes it very satisfying game play
experience for those who are looking at the game from a collecting point of view as well as for
those, who want to play and enjoy the experience of this game. Apart from the physical card
game, magic introduced the online game too; there are sets of the novels as well for those
looking for fantasy fiction books. Magic has spawned a global organized tournament system, and
the whole community is still centred on it. Company is oriented on retaining the current players
offering them competitive basis as well as attracting the new players, offering them the starter
decks for the beginners. A major game element was that cards permanently changed ownership.
The cards were collectable immediately and were intended to be124
.
In 1996, Wizards of the Coast established the “pro Tour” and has awarded more than $30
million in cash prizes since its launch125
. MtG is an international game - similar to soccer -
where there is an enormous global following. As time goes by, the nostalgic memories
people will have of the game will get stronger, and they will have a great interest in
collectibles, that pertain to the game they fell in love with126
.
121
“Magic: The Gathering From Wikipedia, the free encyclopaedia,” http://en.wikipedia.org/wiki/Magic:_The_Gathering, 9 Mar
2014.
122
123
124
125
“Magic: The Gathering Fact Sheet Revised 5/26/09,”
http://www.wizards.com/company/downloads/Magic_Fact_Sheet_Aug09.pdf, 9 Mar 2014.
126
"Daniel Chang – The Magic Man," http://www.psacard.com/Articles/ArticleView/6497/daniel-chang-the-magic-man, 12 Mar
2014.

36
6.3 Key facts and figures
6.3.1 Target Group
Based on an existing research, the average TCG player is 22 years old. In those cases where
players identify their gender, 84.1% are male and 15.9% are female127
.
There are conflicting statements as to what the target demographic for Magic is. At its inception,
the game was intended to be played by people in line at conventions. By the time of release,
various statements say that it was targeted at fantasy wargamers or college students or that it
even did not have a target demographic at all128
. In 1995, the demographic buying the most cards
was defined as ‘computer-literate males aged 12 and up’. In 1996, the largest active demographic
were males aged 12 to 40. In 1998, the typical Magic player was described as having a college
degree, a high household income and an affinity for computers. Most players were males in their
teens or twenties129
. According to Hasbro, Magic players are typical young men, primarily high
school or college students130
, although the full age range is 16 to 35. For the more than twelve
million players around the world, Magic is more than just a product and more than just a game,
it’s a lifestyle. The average tenure of the Magic consumer is over eight years131
. While the game
is quite popular, especially among young people, its gender demographic is highly skewed: few
females play the game compared to males. In addition, the game is quite addictive.
6.3.2 Statistics
Magic was demoed in July 1993. The 2.6 million Alpha card print run was released on
August 5, 1993. Alpha, a 292-card set is the rarest of all Magic132
. The number of each Alpha
rare printed has been stated at ‘Just over 1000’ and ‘approximately 1.400’, judging by
different sources133
. The Beta set, consisting of 299-cards, includes the same cards as the
Alpha set but offers five additional cards. The Beta set was limited to a production run of
just 4,000,000 cards134
, however, according to Richard Garfield, short after the Beta set was
printed, it was stated that there were 61,200 copies of each common card printed between
Alpha and Beta combined135
. In December, the 35 million cards Unlimited edition came out.
127
“Trading Card Game Industry White Paper From the T to the C to the G,”
http://www.top8magic.com/audio/2008q4/Trading%20Card%20Game%20Industry%20White%20Paper.pdf, 9 Mar 2014.
128
129
156.
130
Ferguson, J., “The geekery: A touch of magic”. McClatchy – “Tribune Business News,”
http://search.proquest.com/docview/1319072811?accountid=37942, 15 Mar 2014.
131
"ICv2 - 'Magic' Doubled Since 2008 - ICv2 : Inside Pop Culture," http://www.icv2.com/articles/news/21471.html, 9 Mar
2014.
132
“Daniel Chang Shares the Magic: Insights on Collection Magic: the Gathering Cards,”
http://www.psacard.com/Articles/ArticleView/4923/daniel-chang-shares-the-magic, 12 Mar 2014.
133
134
“Daniel Chang Shares the Magic: Insights on Collection Magic: the Gathering Cards,”
http://www.psacard.com/Articles/ArticleView/4923/daniel-chang-shares-the-magic, 12 Mar 2014.
135

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