Let The Games Begin

If you have been under a rock for the last week, you might have missed two big stories.  Collectors ‘traded’ Goldin Auctions to eBay for the eBay vault.  Fanatics also announced its first Fanatics Fest, to be held at the Javits Convention Center in New York City August 16-18. 

Let’s start with the swap.  Officially, the parties are treating it more like a venture than a deal.  eBay’s press release states:

“The newly established partnership will combine complementary service offerings from each brand to remove friction from The Hobby and power a sophisticated, integrated program to buy, sell, grade, and store trading cards and collectible card games. The companies remain focused on enabling The Hobby while unlocking economic opportunity for all collectors to enhance their experiences along their collecting journey.”

Collectors’ CEO Nat Turner states:

“This will benefit The Hobby above all else, which is the primary goal of this innovative partnership between eBay and PSA.  We will drastically improve the collector experience by creating a seamless, end-to-end journey. No matter an individual collector’s goals, this partnership will make collecting safer, easier and more fun. We’re excited to combine the scale and trust across eBay's global marketplace with PSA's authentication and grading expertise.”

I don’t buy all the corporate blather.  If they were truly integrating businesses, why bother with Goldin?  It seems redundant for eBay to buy an auctioneer and from a revenue standpoint Goldin is barely a mosquito bite on eBay’s ass.  Let’s ponder it. 

I heard the other day that there are three kinds of acquisitions: defensive acquisitions to pre-empt someone else moving into the space, acquisitions meant to goose the bottom line, and acquisitions to synergistically grow your business.  To that I would add the coda that there are also two sorts of sales: profit-taking and problem dumping.  I suspect synergy and problem dumping drive this deal.  On the synergy side, eBay has failed miserably at every effort to move away from being the world's flea market: eBay live, featured auctions, 'Amazon' style sales, etc.  On the dump side, I also suspect that their vault was a failure given their lack of a good outlet for the items stored and the back office needed to run it.  eBay’s great success was built on being a factor, a middleman between an amateurish seller base and an audience of buyers, not in actually handling merchandise, doing retail sales and fulfilling orders.  Perhaps they saw Goldin as an easy entree into the retail sales area, especially if they could 'trade' the vault to Collectors for Goldin and contract to use the Vault after Fanatics takes over management, which has its own ability to sell, store product and fulfill orders. 

From Collectors’ perspective, the trade probably reflects a failure of Goldin to boost its bottom line as much as hoped and a realistic assessment of the collectibles market post-pandemic.  It is apparent to anyone following things that the group that took Collectors private intended to take it public after (presumably) jacking up its value by growing the business for a few years.  The Goldin acquisition made sense from a vertical integration perspective when it was made: own the card grader, a frictionless storage facility, and the secondary seller too.  Perhaps Collectors learned that the auction biz is a tough, competitive one with small overall margins that are difficult to adjust due to competition and that many owners of the highest value items consider Ken Goldin to be a bit of an assclown and won’t do business with him.  Or perhaps the ‘correction’ in the modern card market simply clobbered the projections for that business and they wanted it off their balance sheet as soon as they can so that it doesn’t drag down their IPO price.  As it is not a public company (yet), we will never know the story, but from that perspective, the deal makes sense for Collectors: why carry a low margin retail business model on your balance sheet when you can outsource it instead, especially if you can integrate making, grading and storing the cards that the retailer will sell for you in a sweetheart deal instead? 

The Fanatics Fest is a fascinating development. According to the company:

“Fanatics Fest NYC will be highlighted by a 2,500-seat main stage that will serve as a backdrop for a range of bespoke content throughout the weekend. The stage will complement a more than 400,000 square foot show floor with activations featuring many preeminent leagues, teams and brands, such as the NFL, NBA, WNBA, MLB, NHL, MLS, UFC, WWE, Fanatics, Topps, Mitchell & Ness, Lids, PWCC, Fanatics Sportsbook and Professional Sports Authenticator (PSA), with many more to be added. Among the additional activities on-site, attendees can expect an all-day “trading pit” for card collectors of all ages - which features “Collecting 101” content for novice collectors - as well as a museum display of some of the world’s rarest cards and sports memorabilia. Additional fan engagements include live-streamed collectibles “breaks” through the Fanatics Live platform, a retail superstore offering a significant assortment of products across hundreds of teams and leagues, exclusive apparel collaborations with top brands, athlete meet and greets, exclusive Topps trading card drops and more.”

Sounds interesting, with something there for everyone in the Hobby.  What is more interesting is the choice of venue and date.  I know a lot of collectors who are skipping the National in Cleveland due to travel and lodging inconveniences.  I am one of them.  As soon as this show was announced, the discussions about alternative travel plans began among the disgruntled non-attendees.  I was planning a trip to New York to visit family; now I have a business reason to choose that week. 

I also think that the venue choice is Fanatics giving a middle finger to the National board.  If you haven’t followed the politics of it, the National board has long taken the position that only second-rate venues in second-rate locations have the space to host a show at a reasonable cost and on a single contiguous floor; that’s why we end up going to Cleveland and Atlantic City but never Las Vegas or New York or Los Angeles.  The 2023 show in Rosemont had 600,000 square feet of floor space and felt cramped (I saw the videos) with all of the breakers, streamers, graders, corporate areas, etc., crammed into it.  I’ve long been a proponent of dispensing with the contiguous single show floor model.  There are so many disparate activities that make up the modern Hobby that there is just no need to have it all on one floor.  The Venn diagram of vintage card collectors and new pack breakers has virtually no overlap, for example, so why cram them into the same space? 

Fanatics apparently has decided to call bullshit on the National board.  You cannot be more first-rate and convenient than the main convention center in mid-town Manhattan.  New York City has one of the largest hospitality bases in the world and the Javits Center is right there coupled with proximity to major transportation hubs; the Port Authority bus terminal and Penn Station are easy walking distance from the Javits Center, and Grand Central Station is a short shuttle train ride away from the Times Square station and a short walk to the show.  The area is packed with hotels, but you can easily stay outside Manhattan and take efficient public transport right to the show if you prefer.  That’s how I usually visit New York City: Air BnB outside the city to keep costs down, easy train ride or ferry in.  The space clearly is a non-issue and it is easy to see why: 400,000 square feet for a show floor is plenty of room if the non-dealer stuff is moved into other rooms, which is what Fanatics is doing. 

I think the choice of venues and dates also represents an effort by Fanatics to take over the regional show market.  Shows are the last field of the Hobby that hasn’t been at least partially integrated into a private equity-backed conglomerate.  Fanatics also has a well-documented reputation for trying to knee-cap anyone it competes with.  According to a profile of Fanatics CEO Michael Rubin in Bloomberg:

“Hijacked contracts. Scuttled public offerings. Stealth acquisitions. The Fanatics CEO famous for his Hamptons white parties has become the most feared dealmaker of his generation.”

I say this because there is a longstanding 500 table show in a New York suburb called the “East Coast National”.  The show has been around forever, takes place in mid-August in White Plains, and just happens to be scheduled for the same weekend this year that Fanatics chose for its first event?  If you believe that is a coincidence and not a flex, I have a lovely bridge for sale cheap, runs from Manhattan to Brooklyn.  Nope, in my view, Fanatics purposely scheduled its Fest to hammer the East Coast National.  Head-to-head and over the long term, there is no way that a card show in White Plains promoted by private money competes with a billion-dollar gorilla’s star-studded, snazzy ‘experience’ show in Manhattan.  I am gonna hit White Plains on Friday and the Fest on Saturday or Sunday. 

More broadly, I suspect that Fanatics is doing something else that has long been a critique of the National and the Hobby overall, namely, the DIY, amateurish quality of the biggest trade shows we have.  Hobbyists have long unfavorably compared the rudimentary National experience with the varied, multi-level experience that ComiCon offers every summer in San Diego.  The Fanatics Fest sounds a lot more like ComiCon than the National.  I am sure that someone at Fanatics is paying attention to what ComiCon has become and what it does now, which is to sponsor a series of regional ComiCons all across the country.  Why not do the same under the Fanatics Fest banner, build an audience and a dealer base, and ultimately have a go at the National itself?  As has long been pointed out, the National is a for-profit endeavor run by a private board and promoters who rely on it for income as a one-off event every year.  If a giant player like Fanatics chooses to compete head-to-head and has a track record of successful regional events that it can use as leverage to peel off dealers, how long does the mom-and-pop National mindset survive, especially if Fanatics offers a first-rate travel experience with its shows instead of a slog to the boonies for a giant flea market?  Mark my words, folks: in five years, I think we are going to see “The National, a Fanatics Fest Event”.

Personal note: I am going to set up at the Pasadena show in May. Come out and play.