Technology is changing the century-old trading-card market, and it’s a big upgrade from the shoebox under the bed. Today, card boxes are microchipped to enable GPS location monitoring, QR codes are added to the card holders, imaging machines take high-resolution photos for recording purposes and computer-vision software helps researchers quickly identify the card’s year, maker, and edition. That may sound like overkill but prices for high-end collectibles have soared, demand for authentication is skyrocketing, and counterfeiting has become more sophisticated.
Authenticators such as Collectors, Beckett Grading Services, and SGC, have become an indispensable part of the market. It’s not all that different from GIA certifications for diamonds, Moody’s credit ratings for corporate borrowers, or Nielsen’s TV viewership numbers. The goal is to level the playing field with information. For card graders, that has included creating reports and registries to allow collectors to see just how rare their prized items are and price them accordingly.
In a recent interview with Forbes, Nathan Wolfe, Collectors’ vice president for corporate development, refers to the last two years as “a perfect storm” in the authentication business and for those buying and selling trading cards. “Inflation fears, low-interest rates, and uncertainty around the stock and bond markets pushed investors toward alternative and tangible assets, even if they were cardboard rectangles smaller than index cards. Celebrities and influencers like entrepreneur Gary Vaynerchuk, rapper Drake and YouTube star Logan Paul spread the gospel on social media. Cancellations of in-person events forced fans to find other ways to engage with their passions. New categories of collectibles, including sneakers and non-fungible tokens, helped attract a younger demographic.” Turner also attributes the surge in card collecting to young professionals moving back in with their parents during the pandemic and being reintroduced to their childhood obsessions, as he was when he moved back home during the pandemic and his mother had him clean out his bedroom closet filled with artifacts from his childhood, including his own baseball card collection.
If you’ve been following the sports memorabilia and trading card market, then you know values have skyrocketed. According to the Forbes article, a one-of-a-kind Mike Trout rookie card sold for $3.9 million in August 2020, setting a record that was beaten five months later by a $5.2 million Mickey Mantle, and then again, the following August by a $6.6 million Honus Wagner. eBay, one of the largest marketplaces for trading cards, reported that the category grew 142% in 2020 and then said it sold more cards in the first six months of 2021 than in all of 2020!
With demand at an all-time high for authenticating, grading, and processing cards to come to market, customers have become frustrated with the turnaround time on their submissions from authentication companies. With a tight labor market that limited the number of new graders to be found to deal with the additional submissions, ratings companies were left with no choice but to invest in hi-tech.
While competitors have their niches—Beckett with modern cards and SGC in pre-war cards, for instance— Collectors’ PSA is considered by many in the authentication market as the gold standard. Collectors, with a history that dates back to the 1986 founding of Professional Coin Grading Service, more commonly known as PCGS, and the 1991 founding of Professional Sports Authenticator, or PSA, is one company leading the high-tech charge. Both divisions are in the business of verifying that collectibles, whether they’re coins or trading cards or other sports memorabilia, are authentic and unaltered. They also judge physical condition, assigning a 1-through-70 score for coins and a 1-through-10 score for cards. Customers pay a fee, which at PSA ranges from $50 to $12,000 per submitted card, based on the item’s estimated value and whether it includes an autograph.
For an idea of the respect PSA has among collectors, Rob Gough, an actor and entrepreneur who was the buyer in the record-setting Mickey Mantle sale of January 2021, estimates that PSA-graded cards get a 30% premium on the resale market.
PSA and Collectors had plenty of work to do, and they are starting with a significant investment in technology to help them meet the rising demand and customer frustration with lengthy delays. In February 2021, Collectors went private with a group of investors, which secured $100 million in new funding. The money secured was invested in technology to push PSA’s authentication business.
When the take-private deal closed, PSA had a grading capacity of about 22,000 cards per day. Nearly 100,000 were coming in. The company tried to raise its submission fees to deter demand, but word got out that the change was coming, and that just made things worse as collectors tried to get their cards in before prices increased. On a single day in late March 2021, the company received 660,000 cards. “We literally broke the USPS in Southern California,” Turner says. “They called us and said they couldn’t manifest the boxes. I think we rented school buses with security guards and drove to USPS to pick them up.” As the backlog approached 13 million cards, the company had to rent temporary storage space and kick employees out of private offices to make room for the new submissions. Overwhelmed, PSA announced last March 30 that it was suspending service at its lower tiers. That prompted an outcry from collectors, but the company saw the pause as an opportunity not only to catch up but to scale up.
To meet the need for both security and the ability to track and process submissions, Collectors is investing millions of its newly-raised money in the technologies that will meet current and projected market demand, and reimagine the collecting experience.
Collectors’ tech and product teams have been building a software platform they call Card Manager. The idea is that artificial intelligence can supplement the humans in the grading assembly line, quickly identifying cards, pulling up comparison images and running diagnostics—measuring the centering of the image on the card or the card’s dimensions, for instance. The software should even be able to “fingerprint” cards as it looks for unique anomalies in the surface, which will help detect alterations. And it can do that all at once. And card holders will gain new security features. Future products might include an app that would allow a collector to generate a crude grade of their cards at home so they could figure out whether to spend the time and money on a professional grading service. The Collectors team is also considering NFTs—not necessarily to sell them as digital collectibles but to use them to improve the tracking and transacting of real-world items.
Is this type of tech investment worth it for what once was a piece of cardboard in a bubble gum package? When you consider that sports collectibles hold a market size of $4.14 Billion and are expected to grow at a rate of 9.7 % between 2022 and 2032, the answer is a resounding yes!