The biggest hobby news of 2022 broke yesterday, Monday, Jan.3 and it has a good chance to end up being the biggest hobby story of 2022 just three days into the year. Various sources began reporting later in the day that Fanatics has entered into an agreement to purchase from Topps the trading cards and collectables portion of their business for an estimated $500 million.
Typically there are regulatory hoops to jump through in any acquisition and this should be no different. That means this doesn’t actually happen for probably somewhere in the three to six months range depending on the antitrust concerns or lack thereof. In the meantime, and absent any further information, I will take this opportunity to give my opinion and speculate wildly! ***Update - it appears this is now a done deal as the owner of Fanatics announced the acquisition on his twitter feed and Fanatics has issued a press release. Further update that some outlets are speculating that there are potential anti-trust concerns along the lines of Fanduel and Draft Kings merger that got killed because of those concerns. That comparison is more apt if Panini and Topps were merging, but this is a scenario of a company that has yet to produce a single trading card buying a company in the trading card industry. Exclusive licenses with sports entities are also not subject to anti-trust concerns via case law history.
Did Fanatics need to buy Topps (or any existing card manufacturer)?
My answer to this question from day one when news leaked out that Fanatics was acquiring the MLB, NBA, and NFL trading card licenses was always an emphatic “No”. I saw plenty of people in the hobby saying it was inevitable and some saying that they had to do it. In my opinion, Fanatics had the financial might to go it alone and were already distributing Topps and Panini products through their online website to be able to easily replicate this with their own product.
Then why did Fanatics buy Topps?
First, it makes their life “easier”. Fanatics don't have to reinvent the logistics and support wheel. In general, they already have in-house knowledge within Fanatics on how to design, build, and run a consumer products company with a heavy e-commerce focus, even if the head of the Fanatics Trading Card company (Josh Luber) says that they are a “standalone” company. But all of the lessons they would have to learn that are specific to the trading card industry are now in-house and they almost completely eliminate that learning curve.
Second, they get to jump-start their MLB plans. Fanatics obviously has big plans for their MLB, NBA, and NFL licenses. But those were all just engines revving in neutral while waiting for the existing licenses with Topps and Panini to expire. With this acquisition, they can immediately begin to implement Josh Luber’s vision for the Fanatics Trading Card division. And then with the experience and finding out what works and what doesn’t, they can be better armed for their eventual takeover of the NBA and NFL licenses.
Third, they get to keep a huge amount of core collectors “happy”. I saw quite a bit of backlash from various collectors when the Fanatics news was announced back in the summer. Some of it was simple fear of change and this should help allay some of those fears. Other complaints were focused on past poor experiences with Fanatics in the core sports apparel business and the concern with that same experience being transferred into the hobby business. This move should also help to diminish those concerns from all but the true curmudgeons.
Fourth, they get the Topps brands that die hard and casual collectors are familiar with. All of the brands in the Topps portfolio are now part of the Fanatics portfolio. This keeps the MLB collectors happy that Topps Series 1/2/Update, Topps Chrome, Bowman and so on and so forth are still going to be part of their collections for the foreseeable future. Casual collectors will still see the very recognizable Topps “RC” logo on their favorite player’s rookie cards. It’s a win win. And prior to the exclusive license era, Topps had a long and storied history in the NFL and NBA trading card space. To this day, some of the most sought after cards in those sports are Topps cards. LeBron James Topps Chrome rookie card, Kobe Bryant Topps Chrome rookie card, Steph Curry Topps Chrome rookie card, Tom Brady Bowman Chrome rookie card, Aaron Rodgers Topps Chrome rookie card are all examples from just the last 25 years when all the companies were in the game. Go back to when it was almost exclusively Topps doing trading cards and you will find plenty of more examples.
Fifth, they add other valuable trading card licenses and properties. Fanatics went after the big three North American sports organizations with the MLB, NBA, and NFL licenses out of the gate. However, there are plenty of other trading card and collectables opportunities out there spread amongst Topps, Panini, and Upper Deck, for the most part. With Topps, they get one of the fastest growing properties in the last 12 months with Formula 1. The popularity of Formula 1 globally is without question, but it has grown exponentially in the last year in North America, and the Topps-produced trading cards associated with it are some of the most sought after cards in all of the hobby. Another big attraction here is with Topps’ soccer licenses - UEFA and Bundesliga. Some of the best young talent can be found in the Bundesliga and UEFA gets you access to the best teams, and thus the best players, playing across Europe. It’s easy to forget MLS is another soccer license that Topps has, but this can do well at times, as it has recently with rookie cards of Ricardo Pepi from FC Dallas who recently made a big move to the Bundesliga and FC Augsburg.
The Star Wars license is another strong brand and sells very well. With Disney putting the Star Wars content engine at full speed, I don’t see that slowing down any time soon. Similarly, and somewhat surprising to me when I started to hear about it again over the last year, is that Garbage Pail Kids also can move the needle. I loved them when I was kid, so I think there is some of that nostalgia-driven market driving sales here. There are a variety of lesser products that Topps has its hands in as well, but those are the big additional horses that Fanatics is adding to its trading card stable that weren’t part of the equation just a few days ago.
Did Fanatics overpay for the Topps Trading Cards business?
Perhaps, as they likely could have gotten a better deal as the calendar moved closer and closer to Topps losing the MLB deal. But Fanatics has silly money right now, and the juice was likely not worth the squeeze to wait if they did decide to make this move at some point in the future. If they preferred Panini, they probably were looking at a price tag at least 4 to 5 times what they paid for Topps. So that also made sense to go the Topps route. And Upper Deck, while perhaps a cheaper option, probably didn’t offer enough of the benefits that I mentioned previously.
Do I like this move by Fanatics?
I not only like it, I love it. As a primarily baseball card collector, but also a collector of trading cards in general, I am happy to see the Topps brands in the sports and entertainment properties I love continue to live on. Especially Bowman. As a heavy prospect collector, it would have felt the strangest to me to lose that familiar logo on my most desired prospect cards. Also, I have been really impressed with what I have heard from Josh Luber so far. I feel like we could have a lot worse steward for the hobby moving forward.