Downsized baseball card industry looking to end slump

By: GREG RISLING - Associated Press | Saturday, September 24, 2005 8:16 PM PDT ∞

LOS ANGELES ---- The shelves are crammed with boxes of baseball cards at Mike Mittrick's store. It gives his customers lots of choices, but also illustrates how the hobby's landscape has become cluttered and confusing for collectors.

Faced with declining revenue in the last decade, the baseball card industry ---- once composed of four major manufacturers ---- has been halved in a matter of months.

One company closed its doors. Another had its license to make products in 2006 dropped, and the oldest, most recognizable brand was rumored to be up for sale.

Insiders hope the shakeup will bring the struggling industry out of its slump and help reclaim its main demographic ---- boys who are spending their money on other diversions such as video games and the popular Yu-Gi-Oh game cards.

"We felt the best way to position it for growth was to have fewer manufacturers producing cards," said Evan Kaplan, director of trading cards and collectibles for the Major League Baseball Players Association, which along with Major League Baseball charges manufacturers licensing fees to produce cards.

"We don't expect it to get back to the way it was like in the 1950s or 1960s, but this new model will be better than we have now," Kaplan said.

The downsizing is a mixed bag for such retailers as Mittrick, who runs 52 Mantle Card Co. in the Orange County city of Brea. He opened his store in the early 1990s, when the sports card industry posted revenue of more than $1 billion, as speculators scooped up cards hoping for a big return on their investment.

Baseball cards then comprised 80 percent of the industry's revenue, but now account for less than half ---- an estimated $120 million.

The rising cost of cards has played a major role in the decline. Collectors spent between 89 cents and $3 on a pack of cards in the mid-1990s. Today, the average price is about $5, as companies include goodies such as autographs, small pieces of jerseys or even bat slivers in a small number of packs to drive sales.

Some packs ---- guaranteed to have the extras ---- can command up to $150.

The changes have driven away some collectors and, in turn, forced many card shop owners out of business. A decade ago, there were about 4,500 card stores across the country. Now that number has shrunk to 1,200.

"People just do not have enough disposable income nowadays to be able to spend a ton on cards," said Jeff Beals, 19, of Nashua, N.H., who estimates that he spends about $200 a month on his hobby.

"If the companies place quality over quantity ... it will help the hobby a lot," he said.

Mittrick, 36, is one of the survivors. He said he sometimes makes only $5 to $10 profit on an entire box of cards. He's squeezed even more these days because his rent increased after he moved his shop to a new location. To supplement his income, Mittrick has been engraving plaques for the last couple of years.

Industry downsizing will allow him to trim the $6,000 a month he was spending to offer a competitive selection of cards. But it could also cut into his already-shrinking profits.

"Life isn't any easier," he said. "I'm getting less customers because of the move, and now I will have fewer products."

Dwindling interest in the hobby, coupled with exorbitant costs to put memorabilia into packs of cards, helped sink New Jersey-based Fleer. Saddled with more than $30 million in debt, the company went out of business in May, and rival Upper Deck of Carlsbad bought its name and toy car business for $6.1 million at auction.

In July, collectors were stunned when MLBPA opted not to renew its contract for 2006 with Donruss/Playoff of Arlington, Texas. The company laid off 30 of its 100 employees, but will keep making football cards.

"We truly felt that because of the quality of our cards and their popularity, that we would not have our license revoked," Donruss spokesman Ted Barker said. "It is safe to say that it's a very sad place around here."

Many collectors were upset about the fate of Donruss, a company they said scored points with strategies such as buying a Babe Ruth jersey for more than $260,000 in 2003, then slicing it up and putting the pieces into packs of cards.

Barker said Donruss has spent tens of millions of dollars on players' jerseys and other paraphernalia to offer with cards. The company also signed exclusive contracts with such legends as Hank Aaron and Willie Mays to sign autographs.

MLBPA's decision only leaves Upper Deck and the publicly traded Topps, which has been around since the 1950s but recently announced a 20 percent drop in first-quarter sales for its cards, collectibles and other entertainment products.

In May, the company responded to rumors that it might be looking for a buyer by noting that it hired Lehman Bros. to review its books and make recommendations about its future.

Manufacturers are expected to offer fewer sets of cards in the future, but Mittrick worries that they will boost the overall number of cards released.

"It's going to tick off collectors if that happens," he said.

The remaining card companies believe they can bring children back to the hobby, and intend to make more investments in marketing and product development.

"Clearing the clutter of too many products on shelves and making this hobby an easier one to understand is a major step in the right direction," Topps spokesman Clary Luraschi said.

Still, some cards can fetch high prices thanks to such Internet auction houses as eBay that help determine fair market value.

An autographed card of New York Yankees great Lou Gehrig recently sold for $7,000. But the granddaddy of all cards is a 1909 T206 tobacco card of Hall of Fame shortstop Honus Wagner that can sell for more than $200,000.

Many observers say the industry has turned into a gamble for collectors who chase the higher-end cards.

"Something had to be changed because the current model isn't working," said Scott Kelnhofer, editor of Card Trade, a monthly trade for distributors and card shop owners. "The end result is clear ---- the industry is losing revenue and losing collectors."

Lineup changes in the baseball card industry:

DONRUSS ---- Founded in 1954, the Arlington, Texas-based company began producing baseball cards in 1981 and has changed hands several times. Can't make baseball cards in 2006 because it was not granted a license by the Major League Baseball Players Association.

FLEER ---- Started in 1849 as a bubble gum business. Issued its first set of baseball cards in 1959. Along with Donruss, helped break Topps' monopoly in the industry. Fleer, based in Mount Laurel, N.J., announced in May that it will no longer produce cards after falling more than $30 million in debt.

TOPPS ---- The publicly traded company issued its first series of baseball cards in 1951, and now has exclusive contracts with such superstars as Alex Rodriguez and Barry Bonds. Based in New York City, Topps has made baseball cards longer than any other company still in operation.

UPPER DECK ---- The Carlsbad company came onto the scene in 1988, and was credited with sprucing up photography and featuring a hologram on the back of cards to ensure authenticity. Bought Fleer's name and toy car business earlier this year.