The trading card collectibles market saw tremendous growth over the past year. MTG continues to show signs of increasing demand following the recent success of Modern Horizons 2. While noticeable price retracing occurred after Pokémon and Flesh and Blood's rapid growth, MTG prices held steady with minimal pullback.
With indicators pointing to robust demand for MTG into 2022 and beyond, how can sealed product be anything but a wise investment?
Although many out-of-print MTG products increased in price during the past 12 months, Magic is not immune to price drops. Gatecrash booster boxes are one example of product falling in price after release. The estimated value (EV) for Gatecrash booster boxes mostly came from enemy shock land reprints, and Gatecrash was overprinted relative to market demand.
As a result, Gatecrash booster boxes dropped below their initial pricing of $90-100. For years following Gatecrash's release, booster boxes sold closer to the distributor pricing of $70-80.
Over time, the market price of Gatecrash booster boxes gradually increased. Going out of print finally helped Gatecrash booster box prices rise above $100. Even though today's market price for a Gatecrash booster box is $123, the investment return is low after factoring in online seller fees and shipping. Only investors who took a risk buying Gatecrash booster boxes for $70-80 in 2013 are able to a decent return at $123.
Gatecrash's failure to sell booster boxes at expected retail prices is an anomaly compared to Standard sets released in more recent years. Two previous Standard sets with incredible value growth are Aether Revolt and Kaladesh. The current market prices for Aether Revolt and Kaladesh booster boxes are $194 and $390, respectively.
The Masterpiece Series effectively turned Aether Revolt and Kaladesh booster boxes into lottery tickets, and those cards account for a hefty portion of the boxes' EV. Some of the Masterpiece Series: Kaladesh Inventions sell for hundreds of dollars. Wizards of the Coast continues to create Sol Ring variants, but the Masterpiece Series Sol Ring remains arguably the rarest and most beautiful. As long as that's the case, and Commander remains the most popular format in Magic, sealed boxes that might contain the Masterpiece Sol Ring are going to be valuable.
Turning a $100 MTG booster box investment into $194 in under five years is a solid return. Buying a $300 booster box of Fallen Empires in 2019 and selling it for $900 in 2021 is even better. While the allure of turning your hobby into a money-making investment is appealing, it is not without risk.
First and foremost, trading card game collectibles are part of an unregulated market. Multiple investors may coordinate their investment purchases to manipulate market prices. What would happen if all booster boxes of Throne of Eldraine below $200 sold out from online retailers? If you believe the market price would increase close to $200, you are probably correct. Market manipulation can and does occur in collectibles markets, including MTG. It is essential to be aware of buyouts and dramatic price swings that may affect your investment holdings.
A second risk of MTG products is the fact that they are physical items. Investors must store and protect their products from destruction. If products become damaged due to acts of God or accidents, their value could drop to $0. Investors may face added storage costs to protect their product investments appropriately.
Counterfeits and item tampering are problematic for MTG products. You may have heard about the recent issues regarding resealed booster boxes purchased from Amazon. Resealed booster boxes usually contain tampered booster packs, where an individual finds and replaces valuable cards with bulk. The tampered booster packs are resealed inside a booster box and sold to another person. Anyone mistakenly buying a resealed booster box or booster pack is guaranteed to lose money.
One other risk to consider is the illiquidity of MTG products. You have to find a buyer willing to pay your preferred price for a product. In addition, there may be limited buyers who are interested or can afford to purchase an expensive collection. Sellers wanting to unload products quickly may risk losing money due to their illiquidity.
Increasing buyer interest in MTG products and reducing supply helped raise market prices over the past year. Granted, the appeal of investing in MTG products could taper off at any time. An investor could also unload a significant position of a product, thus lowering market prices. Even worse, WotC could crash market prices by reprinting booster boxes from out-of-print sets. While this scenario is unlikely, it is not impossible. There are no laws preventing WotC from reprinting older sets.
Even though there are risks to investing in collectibles, there are some benefits. One is the finite supply established after a set goes out of print. Sealed booster boxes obviously become scarcer as they get opened. The longer you wait, the scarcer sealed products become, and the more they're worth.
Another benefit of sealed products is that there seems to be a floor to their value.
A retailer purchases Draft booster boxes from a distributor for between $70 and $80. The retailer turns around and sells Draft booster boxes to consumers for $90-100. Draft boosters have rarely dropped in value below the distributor pricing, and never in the modern history of the game. Whenever the EV of a set looks really bad, retailers simply stop buying. This puts a cap on how many booster boxes of that set exist, because WotC historically hasn't tried to unload products that they couldn't sell through distributors. This cap on supply eventually leads to higher prices. It's worth noting though that changes in WotC's distributing practices between retail and direct-to-consumer channels (e.g. Secret Lairs) may alter floor prices of MTG products in the future.
Based on current MTG price trends and demand, the MTG collectibles market should maintain stability and growth over the short term. Hasbro reported record-setting MTG releases in Q2 2021 as revenue for the Wizards of the Coast and Digital Gaming division more than doubled over last year. The following management remarks from Hasbro's Q2 2021 earnings report reiterate strong demand for MTG:
Demand for Magic is at all-time highs, including two record releases in the quarter: Strixhaven and Modern Horizons 2. As players begin to return to stores and play communities, we are seeing an uptick in sales on our back-list product as well. The high demand is tempered only by supply chain challenges as the collectible trading card space has seen significant demand for production capacity and materials.
Predicting future demand for MTG beyond 2021 and 2022 is more complicated. Unforeseen factors could help or hinder demand for MTG. Interest in MTG products may change if players shift their attention to other games and opportunities. Hasbro remains focused on expanding the player base and sales growth for MTG, but nobody knows with certainty if demand for MTG will remain strong.
As with investing in general, returns are never guaranteed.