New TOPPS Deal Threaten Panini SPORTS CARD Monopoly?

On April 6, 2021 Topps decided to go public again. This time merging with a SPAC, which is a special purpose acquisition company under MUDS which stands for Mudrick Capital Acquisition Corporation. Valuing Topps at $1.3 billion. That's great man for a trading card company to be worth that much. SPACs are basically used to streamline the process and make it easier and quicker to go public. Now, Topps has been publicly traded before. They were taken private in 2007 by an investment firm, ran by former Disney CEO Michael Eisner in a deal worth $385 million. Eisner’s going to remain on as the chairman at Topps once the SPAC merger is completed. Full disclosure, I was actually able to pick up some shares in MUDS last week. I think they're around $11 a share as of right now, so definitely something to potentially take a look at.

So why is Topps going public? Well, the obvious answer is to get an infusion of cash to grow the brand. What do they plan to do with all that cash? Well, the plan according to Topps is to grow the company from an analog company - a company that's printing cards and like the traditional cardboard cards that you and I are familiar with - to more of a digital company. When Eisner took over at Topps they were a 6% digital company. As of right now, 25% of the revenue comes from digital. Also Eisner's connection to Disney, we could see Topps continue to get gain licenses that they hold such as Star Wars, Marvel, Pixar, and expand more products into those other offerings.

So how does this affect the sports card market and Panini? That's what today's video is going to be all about. Again, these are just my own thoughts. Always do your own research and come to your own conclusion. This video is mainly for entertainment purposes. So again, how does this affect the sports card marketing and Panini? Well let's talk about the sports card market before we get into the issues with Panini here. Slab stocks brought up a couple interesting points here in an article that they recently wrote on the topic.

First being Topps now being a publicly traded company. Now they've got shareholders to report to. Are they going to let profit override what's good for the hobby? I.e. over producing cards to continue to have increased profits. I don't really see that as being too much of an issue. I mean let's be honest cards are already overproduced anyway. Is Topps going to continue to probably maybe produce more cards to increase revenue? Potentially, but again they've already been over produced and Topps has already been a company that their main goal is to make money. So I don't really see that being as an overly concerned issue. They were a $500 million revenue company last year, so they've already been producing a ton of cards. Again, the goal of any business is to make money, but however this deal I think is going to have a huge positive influence on the sports card hobby, and here's why.

In regards to Topps, they've found this new cache and they’ll be able to expand their offerings into other options such as entertainment collectibles which you've already talked about. Currently right now, Topps is the only licensing holder to produce baseball cards. Yes, Panini does have a major league baseball player's license, which allows them to produce cards with the player's name on there, but they cannot use any of the MLB logos. Now, what I think is the most important thing on people's minds or what collectors are probably thinking about. Is Topps going to be able to get back into making basketball and also football sports cards? We all know everyone loves Topps Chrome. Especially the basketball cards, I mean they made some of the most iconic basketball cards of all time. Kobe Bryant’s rookie year, LeBron James’s rookie year, Dwayne Wade. Panini can't say any of that. Those cards have been fetching high dollar lately and everybody it seems to love the Topps chrome brand and their design. Topps also owns the Bowman brand which has made popular football cards for rookies such as Tom Brady and then also Aaron Rodgers. Although, not the best card designs. Not as cool as the basketball Topps Chrome stuff.

After the 2015 football season, Panini was awarded the exclusive license by the NFL for producing football cards. 2016 was the first year that Topps did not produce football cards since 1955. So if Topps is able to get the license to produce basketball and football cards again, and I say that is a big IF, it would be a huge win for collectors to have some sort of different option, assuming Panini would continue to still make those cards. Some sort of different option to be able to collect. If they can start making Topps chrome again, wow can you imagine the interest in basketball, not to say there's not a ton of interest with Prism, it's a great brand as well, but Topps chrome is just iconic in the basketball collecting market.

Now the soccer card market is where I think Topps can really start to separate themselves. Currently they have licensing for the UEFA champions league and also the Bundesliga league. Panini has the license right now for the World Cup cards, and I think Topps can definitely push into this area a little more. They've made some iconic cards already, with Erling Haaland's rookie card, Kylian Mbappe. So they're starting to get a little synonymous with soccer cards, and with the first world cup coming up in 2022 since the soccer card market craze, I guess you could say there's going to be a ton of interest into soccer cards. Now, imagine if a superstar won a World Cup. Imagine what would be going on with their cards. I mean just skyrocketing prices, and also the World Cup is coming to the United States, Mexico, and Canada in 2026, and of course the United States is the market for sports cards. So I can see Topps definitely having a big push into the soccer card market, and they're definitely already invested in it as well, but getting other licenses if possible to make a big push for these upcoming two World Cups. And Topps is a big global brand. They're starting to really expand internationally and to be able to compete with Panini internationally. Panini's a big international brand of course. Obviously starting in Italy, but I think Topps is going to be a big player for some of those soccer cards, and of course getting into the entertainment collectibles which we've already talked about with their connection with Disney.

So while we should see Topps continue to make your standard cardboard cards, the big play here according to Eisner is the digital cards and also the NFTs. Those non-fungible tokens. I just laugh every time I say those. The reason why that they want to get involved in that is they can participate with the NFTs, not just the first sale, but also the second, third, and fourth sale, etc. So different revenue stream for Topps, but that's the main reason why is they get to participate in that area and also according to Eisner they want to get products more available for teenagers.

So big question. Will Topps be able to get the NFL or NBA license again? That's the big question everybody's thinking about. Panini's had the exclusive NBA license since 2009, in the NFL since 2006. So first off you hear this a lot in a lot of these sports card forums and Facebook groups. I think people are just frustrated by Panini sometimes and they start throwing around the term monopoly. Is Panini a monopoly? Well technically no. So before I talk about this, let's define what a monopoly is according to the oxford dictionary.

A monopoly is the exclusive possession or control of the supply or of trade in a commodity or service.

So they did sign an exclusive contract with the NFL and the NBA to produce their trading cards, but that's an agreement between two companies. The NFL and the NBA are free to license their logos to anyone that they choose, but just because you have exclusive rights for something that you won for one and paid for and I’m assuming in an open bid process, it doesn't make you a monopoly just because you have the exclusive right for something. Now if the NBA and the NFL are happy with the payments that they're receiving from Panini, they're happy with the product, which I’m assuming both to be true. Why would you switch companies to Topps? Setting up a whole another contract with them or potentially add a second licensee holder when Panini's exclusive deal ends. That just makes things harder when you're dealing with two licensee holders as opposed to just one. I would not be doing that if I were in the NBA or NFL shoes. It’s way easier just deal with one company, especially if you're happy with the payments you've been receiving and you're happy with the product that's been produced.

So unless Topps comes up with a huge offer, I mean I think it would have to be a huge offer to get the NBA and the NFL to consider switching. I just don't see it and the way Eisner is talking about how they really want to become a digital company. Now, granted, you would need a license to be able to produce all that stuff as well, but I just I just don't see it. I see them focusing on other areas, focusing on the Topps baseball brand, and also on to the other Disney sort of oriented brands like the Garbage Pail kids. They had tremendous success with the NFTs for those.

So how does this Topps deal affect Panini? Well, not so much. I mean Panini is a huge company in their own right. They're definitely a competitor of Topps and Topps is a competitor of Panini, but they are no slouch. It does give Panini something to think about. Any time that a competitor of yours is getting an influx of money, you have to think about, “are they coming after something that we own, what potentially could they be doing with this cash, is there something that we should be looking at that they're going to potentially look at?” So there's definitely some pause for concern there, but I don't think this will be affecting Panini's strategy really all that much.

So what should Topps be doing, now that they are a public company? Well, the sports card market is huge. It's massive. There's plenty of room for multiple companies to grow and compete. So oftentimes rather than just kind of compete for the same licenses, trying to overpay and get those NBA and NFL license, it sometimes makes sense to focus and shift towards other areas that you can maybe dominate. So this is what I would continue to do if I were Topps. I would continue to crush the baseball market. They're doing a great job there. Topps is synonymous with baseball. Bowman is synonymous with baseball. I would look to expand even more into the soccer card market for the reasons that I've already given about the World Cup coming up, and the fact that the soccer card market’s ceiling is just so high. Those guys are such international superstars. Also their connection to Disney. We've already talked about that about, expanding into pretty much everything that Disney can possibly offer them. The NFT market, well it’s above my god given brain power. To fully understand those things it's just not for me. I don't see why anyone would want to own that unless that’s your main goal is to flip it and to make money. I don't claim to be an expert on those by any stretch of the imagination. However, Topps claims to be an expert on that, and they think that is going to be a huge boom in their business. I would trust them in that. They have a great management company, Eisner obviously has proven himself throughout Disney, throughout his entire career, and they have definitely proven it already with the Garbage Pail kids and other NFTs. It shows with their success of going from 6% digital to now 25%. Obviously they see this is kind of the future for them. Yes they're going to continue to produce your traditional sports cards, but the digital cards and the NFTs is what they believe is the future for Topps.

Again, I’m just a huge believer in Topps. They're a great brand, great management company, and definitely something I’m excited to see what they do in 2021. Also, what happens in 2022 and going into 2026 with the soccer market and the licenses in that area, and what pops up in 2025 with the NBA licensing ending there for Panini. What do they do there? Again, I just don't see Topps being able to pick that up. But hey, things could definitely change from here until then