Further Discussion of Value and Digital Cards

I hate to harp on this discussion, but I find it endlessly fascinating. I may have gotten a C in Economics in school, but I feel a force drawing me back to examining how value performs in the apps I play.

It all starts with my connection to both physical and digital cards. When you look at the overall lifespan of digital cards, its absolutely nuts how much it mirrors the journey that physical trading cards have gone through. Even more crazy is how quickly digital cards have moved through the gauntlet. Im curious what lessons have been learned by the Topps team, and what that might spell for the future.

I posted earlier this week about the ever dwindling value of cards in all apps that have higher card counts. With SWCT recently releasing a batch of 1/1 base cards, and Huddle releasing a new 1/1 per day, its clear that low count cards are what people want. They sell like crazy, and in Bunt, Huddle and SWCT, the app feeds off of the aura of the unattainable release. They might not get that the more low count stuff that is released the less it will be special.

This is something that is exemplified in physical cards since 2005, and only looks to be heading more and more down the same road in digital. Contrived scarcity has been a part of production for almost 20 years on the physical side, after almost a hundred years of cards being readily available as a whole. Although limited card counts have always been a value driver in the apps, cards had value for many different reasons up until recently.

It really has to do with supply versus demand, as well as the intrusion of secondary market sales information. Because value can be so subjective, and because there is no in game universal value indicator, trading and selling can almost be like playing roulette. Again, this is a very similar situation in physical, even though value is much less volatile because of how many cards are released in every product, and historical comparisons being more readily available.

Although physical cards have a price guide, it is a worthless cornucopia of arbitrarily assigned values in a monthly book. When card prices can change almost daily you can see how laughable a monthly guide would be. That being said, eBay is almost a universally accepted value indicator, something that is quickly being established in digital as well. The issue is that with instant delivery, buying and selling can happen a hundred times as fast as it does with any other material good. Volume is also still quite low, which can mean setting the market happens very quickly. One uninformed user, who doesnt know what they have, can easily set the market for a card well below where the value should be.

Similarly, because digital coins have no monetary exchange rate, things can get really out of whack. Free coins are given daily by the millions through check in bonuses, and this can be exploited easily by savvy users. This means that the cost of obtaining a digital card can be free, and any money received through a sale can be 100% profit, with no opportunity cost spent to ship the item to the eventual buyer. Its just insane how easy it is to offload a digital card in that manner. It contributes to cards being sold well below the cost to obtain them, both in terms of pack odds and pack cost.

This is beyond evident in the higher count cards that still have very tough odds. Take SWCT Vintage, which serves as the marquee marathon for the app. Odds are set at or around 1:75 packs, at 5k per pack. That means that if a user goes the full odds, it should cost 375k coins to pull one. When you look at how much money 375k coins take to buy right out, its more than 50 dollars. How much does the card sell for? You would be lucky to get 10 bucks on eBay.

This could be a measure of people not being aware of or not trusting the burgeoning secondary marketplace,  or it could also speak to how few people still assign value to cards with counts in the thousands. There are just too many of them to go around. It also doesnt help that people attempt to obtain them, just for the purposes of acquiring trade bait.

On the other hand, the culture of the 1/1 and hoarding low count inserts has become a thing. Its not really a fad, because having the best collection has always been part of the game. Its more of a public recognition of the importance of users who have the most low count inserts at their disposal. Value increases or decreases in many cases according to the public’s groupthink associated with these cards, and fame can be had for participation – something that is unlike anything I have ever seen prior.

Bringing this full circle to the point of the article, this is the exact same problem that physical cards have. Opening boxes of trading cards rarely results in a windfall – even though those situations do happen. 75%- 95% of the time, opening a box can result in a loss for the  consumer. Buying the cards you want right out is much cheaper in almost every case. It does remove the fun of opening the packs, much like digital, but that experience will cost you a lot to have.

Inherent challenges exist on the digital side, and Im not even sure I fully understand the problem in which to offer a solution. On the physical side, the secondary market is celebrated and embraced. On the digital side, the secondary market is attuned to a black sheep in the family. Everyone knows they are there, its just systematically overlooked on purpose. I feel as though it is a great thing it exists, but the issues are growing in prevalence.

Lets break this down:

  • Cost to acquire target cards through the app is exponentially higher than right out purchase on the secondary market
  • User demand for high count cards is diminishing by the day, which exacerbates the above bullet
  • Secondary market is growing in size, but not in value. Average sales for insert series is trending sharply down
  • Sales for low count cards are holding steady, especially for new stuff and 1/1s
  • Fraud through sales and trading impacts user experience, and has no recourse for the perpetrator. If trades for any card are accepted in game, there is no way to reverse if the deal is not legitimate. Many times the perpetrator is not punished for fraud.
  • Secondary market sales occur, but are technically not allowed per TOS. The sales themselves may not even be legal under US law. Reselling digital music is currently in dispute. There are ongoing cases under copyright laws that might prevent it from being legit. Although digital cards are MUCH different, Im curious how the above situation might apply to a the apps, knowing that we dont technically own our collections.

The ways of addressing the above challenges are extremely complicated, in my opinion. As I said prior, im not even sure I fully understand the economics of Topps Digital enough to offer feedback.

  • In game purchases of user to user single cards should be a focus for 2016 – whether it is digital currency used to bid on user auctions or monetary purchases, the secondary market needs to be brought in house. Topps takes pride in the fact that their digital cards have real world value, but they do not recognize how to realize that value in a legitimate fashion per their TOS.
  • The trade system needs to have punishment in place for breaking the rules – Topps needs to invest in ways to investigate fraud within their apps. Saying “be careful of scams!” does not wash their hands of users that game the system. Ways to return stolen cards needs to be implemented. Users that scam need to be permanently banned from the game in a public fashion.
  • The trader feedback system needs to be overhauled – this includes comments from people that can be used to warn of previous attempts to steal or scam.
  • Trade education needs to be made more robust – Universal value indicators should be a part of the game, made available from the start. Value is subjective, but card types have intrinsic strength that should be very visible.
  • Escrow services should be available for cross trading – disinterested third parties recognized by the app should be available for both parties to engage with in completing a high value trade or sale. Both users send their cards, and the third party completes the trade with the two sides to ensure proper completion of the offer. This can be automated.

Whether or not the addressing of these challenges will help to solidify the ever dropping values of cards remains to be seen. Although the lower count cards continue to increase in value, even the rock investments of the past are starting to feel the burden of the new economy.

Physical cards have seen this for the last five years, and I attribute the dwindling population of collectors for the situation. People have become disinterested in continuing to chase the stuff that you have to pay through the nose to get. Average box price is now in the hundreds of dollars, and that’s just the start of it.

This is not meant to be a discussion of how the sky is falling. That is not at all what I am implying. What I am saying is that we are still at a point where specific changes to the way Topps engages with the secondary market can have a tremendously positive effect.

 

 

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2 Responses to Further Discussion of Value and Digital Cards

  1. John J. Wall says:

    If we were going to throw down with some hardcore Econ you’d want to have a variable for the secondary market, a discount for the fact that you are moving the value out of the app. The secondary market takes a chunk of the card value in credits because you are getting real world dollars in exchange. Hmm – I never thought of a digital asset exchange rate before…

  2. Michael Hamm says:

    There should be a plan in place but its more of a game than collecting since how many cards have ever gone up in value in these apps? When card go up a new identity is created in the market as a whole and the game can still exist with the volatility of card values actually being worth something on the end. For right now all the value is immediate and dwindles after that, people need a place to see value to determine value…Ebay is what it is and you have to work with it but a price guide of some sort would be helpful.

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