Price and value of cards on the South African market
By Neil T Stacey
There is a lot of debate about how much we should be paying for single cards in South Africa. In this piece I’ll take a look at some of the market forces that are involved in this complex issue, and leave off with a few of my own thoughts on what sort of approaches to pricing would make the most sense.
The most widely used baseline for selling and trading cards is SCG*12. For the uninitiated, that means that we assign a value in Rands to a card by taking its dollar price on the site StarcityGames.com and multiplying that value by 12. Sometimes a different multiplier will be used, it depends on individual preference to some degree and it generally tracks the exchange rate quite closely.
On the surface this seems fair. SCG are a major supplier of cards, so the value they assign is a reasonable estimate of their market value. As a basic guideline, it is perfectly reasonable to use a multiple of SCG prices. However, it’s open for debate exactly what that multiplier should be, and it turn out that using SCG as a basis is problematic for more detailed evaluation.
The first issue is that of bulk rares, which SCG tends to lump together at a sell price of either one dollar or fifty cents (US). $0.50 seems to be a strict minimum for rares, which I believe is a matter of convenience. No doubt there are stark differences in the actual market values of rares in that bracket, but SCG quite reasonably can’t be bothered with specific pricing when it comes to prices that barely justify handling as it is. They also have a strict minimum of $0.15 for commons and uncommons. This is a bit excessive when you consider that legitimately bad commons have effectively no value. I have to assume that $0.15 is essentially the minimum amount of money that justifies the effort involved in selling a card.
When I’m sitting at a trade table with my binder in front of me, that equation changes. I’m not locating a card in a large warehouse and dispatching it via post. Instead, I’m taking it out of its sleeve and handing it across the table. The hassle and admin that necessitates a minimum price simply isn’t there. Consequently, it’s perfectly fine to value bulk rares much lower than $0.50 that and in many cases it is appropriate to do so.
TCGPlayer.com has far more nuanced valuations of bulk rares so it’s a better option when it comes to trades involving cheap cards. TCGPlayer prices are also driven more directly by market forces, as opposed to decided upon centrally. In general it is likely to be a fairer source of card valuations than is SCG.
Perhaps the bigger question is what multiplier is appropriate. One argument is that sealed product costs almost twice as much here as it does in America and that single cards should, therefore, be valued accordingly.
That wouldn’t work, of course. With that pricing it would be cheaper to simply import singles and market pressures dictate that that is what people would do at that price point. Consequently our local market prices are more or less bound by the necessity of being cheaper than importing, and that’s a solid justification for sticking to SCG (or TCGPlayer) prices.
Importing cards is expensive, however. Delivery is either expensive or slow and occasionally both, and there’s that 20% customs levy. So effectively, a sensible price point would be somewhere in the region of SCG dollar price multiplied by the current exchange rate plus twenty to thirty percent.
And yet, it’s not unusual to use a multiplier slightly below the exchange rate. So what gives?
Supply is more limited here than in America and raw materials costs are higher, so in principle selling price should be higher too.
One major difference is utility. Quite simply, cards are less useful here than they are in America. We don’t have access to the same competitive tournament scene. We don’t have GPs, few of us get to play at the Pro Tour or the World Magic Cup, and there isn’t a regular series of cash events equivalent to the SCG Open Series. I can’t do as much with a card as an American can and so, it doesn’t make sense for me to value it as highly. Average earnings are also lower here, so the same card price represents a bigger chunk of my paycheque than it does for an equivalent American.
So yes, there are some good reasons to be more miserly than our weighty counterparts in the Northern Hemisphere. Another part of the equation is simple perception. We have the idea ingrained that a card has some inherent value equal to its SCG price. That notion is somewhat absurd because of the difficulties involved in actually buying and selling cards at that price and the fact that our actual market pressures are so different. Ultimately, the value of something is what it is worth to you. Adhering too tightly to arbitrary standards is an obstacle to fair and equitable trading and I personally think it’d do us all a lot of good to relax a bit when it comes to demanding value on a trade.
All in all our perceptions of value are kind of weird. We use an arbitrary international standard because we see it as being more credible than our own evaluations, despite the fact that it is driven by a set of market forces entirely separate from our own.
Another big difference between the American and South African card markets is the balance between competitive and casual players. We seem to have a much lower proportion of casual players. The reasons for this can be debated endlessly, but I’m inclined to attribute it to the high price of boosters. “Surely that’s dumb,” I hear you arguing. “High prices will discourage all levels of players equally.”
That sounds reasonable but turns out not to be true. There are reams of historical data showing that increasing the tax on cigarettes and alcohol decreases their consumption by casual users but has little to no effect on addicts. And so it is with us. When prices go up, casual FNM-goers have little problem saying “you know, this is getting a bit too expensive to be worthwhile, I think I’ll take a break.” But us competitive players, we might complain bitterly but we go ahead and sell the necessary organs.
Sometimes, though, no amount of organs is enough. The price of a card becomes somewhat irrelevant when it simply isn’t available for sale and that’s something that happens with a lot of chase rares. It also happens with a lot of important commons and uncommons, particularly for Modern. The reason for this is that there’s no way that stores can open enough product to meet demand for chase cards and still sell enough of the rest to make a profit. The profit margins are just too slim. There’s also no way that our stores can keep enough stock on hand to reliably supply staples.
This is a problem that tends to reinforce itself through card hoarding. Because good cards become so scarce so quickly, we tend to hold onto anything we think we might need at some point in the future, which further restricts supply. Loads of staples from every format are sitting in binders in South Africa, not getting used.
This phenomenon is less prevalent elsewhere. As a matter of fact, many professional Magic players don’t own Magic cards.
I’ll say that again because I realise how absurd it sounds. A lot of professional Magic players do not own Magic cards. Instead, they just borrow what they can for big tournaments and buy the rest, selling them again afterward. Cards have sufficient liquidity in those markets to make that perfectly viable. Here, it’s challenging to put a competitive deck together on short notice, regardless of budget. Try buy a Lightning Bolt or a Slippery Bogle online. These aren’t particularly expensive cards, our stores just can’t profitably open enough stock to keep them available. Individuals are also not that likely to sell or trade them out, partly because of card hoarding but also because their low SCG values make them hardly worth the effort of a transaction. This is another instance of a gross mismatch between SCG pricing and our own market conditions.
We are more or less stuck with this problem of unavailability as a by-product of low profit margins on singles from sealed product and an economy that is distorted by external prices that have nothing to do with our market.
SCG and Channelfireball both retail boxes of new sets at $100. Here, we’re paying about $170. I decided to dig through the dollar values of two recent sets to get some idea of how much value there is in a box.
I looked at Magic Origins as at the 15th June, a few days before its release. I consider this a good measure since a large volume of cards are sold on preorder. I also looked at Dragons of Tarkir to get an indication for the prices once a set has had some time out in the wild and the prices have settled down. I don’t think there is too much merit looking at prices for sets when they are much older than that because sales and trade volume will tend to drop quite low after a while.
I started with just the value of the rare slot, since that’s where the bulk of the value lies. Now, if it were actually possible to flog off all your bulk commons at $0.15 ala SCG pricing then it’d be a different story. There are 360 commons in a booster box, but it’s just about impossible to actually realise $54 value in the commons from a box.
To figure out the average value of a booster’s rare slot, I used the following formula: (2*sum of all rare prices on SCG + sum of all mythic rare prices on SCG)/(2*number of rares+number of mythics).
The reason for this is that Wizards prints sheets with two of each rare and one of each mythic. These sheets are cut up and then randomised and placed in boosters.
For Magic Origins as at 15th July, the average value of the rare slot was $3.86. That makes the average total value of rares in a box $138.86, of which $60.43 comes from mythic rares, $66 comes from rares $2 and above and $12.43 comes from bulk rares below $2. What this means is that if you buy a box at $100 retail, you can sell the mythics and the chase rares then the rest is gravy. In South Africa at $170 retail, if you sell all of the mythics and all of the rares, you’re making a loss unless you manage to get $32 for your pile of uncommon and commons, at which point you break even.
For Dragons of Tarkir as at 15th July, the average value of the rare slot was a paltry $2.35, for an average total value of rares in a box of $84.78, of which $30.60 comes from mythics, $38.47 comes from chase rares and $15.71 comes from bulk rares. So. $170 retail, $85 of rares.
From a pure economic standpoint, opening boosters doesn’t make much sense in South Africa. Of course, that leaves a lot of people saying “well just buy singles it’s much cheaper”. I would like to remind those people that singles come out of boosters.
Now, I’m not involved with the business side of Dracoti.co.za, I just write stuff, so I don’t know what retailers are paying to buy boxes from Blowfish. I don’t believe it’s much less than $130 or so and that makes the idea of price parity with SCG a scary one indeed. SCG can make a profit by selling just the high-end stuff. They can overstock uncommons, commons and bulk rares without batting an eyelid because they do not need to sell any of those at all to come out ahead. If a wholesaler here is paying $130 for a box, they need to sell pretty much everything to turn a profit.
That right there is why chase rares are chronically under-supplied. Actually, any card that gets played at tournaments is bound to be under-supplied. The number of boosters that our store can profitably open is limited by their ability to sell close to 100% of the cards in those boxes. Oh, and they have to sell them fast, too. Looking at that $85 value for the rares in a DTK box, I just cannot come up with a profitable permutation there, no matter how I stretch for one.
These numbers paint a truly ugly picture of South Africa’s MTG economy, particularly when you remember that we are very likely over-valuing bulk rares. Of course, the elephant in the room is the huge price discrepancy for sealed product. Personally, I would dearly love to know how we ended up with a distribution chain so inefficient enough that it can end up cheaper to buy a booster case (6 boxes) at retail in the US and DHL it here (2-day shipping), paying 20% customs, than to buy those same 6 boxes at retail here. However, barring a major shakeup on the distributor side that’s what we’re stuck with.
Now, I’m not saying that the SA card market is in some sort of crisis. We have an active and healthy trading community and a fair number of online vendors, so the basic groundwork is in good shape. What I am saying is that the economics of it are really weird. With the possible exception of gold, I honestly can’t think of any other commodity where local pricing is so totally derived from an international standard that is unrelated to local market pressures.
That kind of controlled pricing inevitably leads to market constraints. That’s the effect that we’re seeing in the form of vendors’ inability to hold large quantities of stock, which in turn pressures card availability. This in turn leads to card hoarding which further pressures availability to the point that it can be infuriatingly difficult to get hold of certain cards, regardless of price.
Again, there is no crisis as such, so there isn’t an urgent need to make big changes. However, there are some pretty straightforward improvements we as individuals can consider implementing and which would move our card economy in a direction that makes a bit more sense and encourages a bit more liquidity of cards.
The first one seems onerous at first. Be willing to pay a little bit more for cards. I will reiterate that I have no financial stake in any card retailer, so I make this observation with no conflict of interest. The costs of sealed product dictates that singles should be priced higher than they are right now, or there will just be no space for our stores to grow. A 5% difference in the price of key cards as singles won’t hurt players too much but it would dramatically boost the profit margins of stores. Worth considering, I think, but of course it’s difficult to implement without engaging in price collusion between stores.
The second improvement is hopefully easier to take on board. Don’t get uptight about getting parity value on transactions based on SCG prices. Those prices are based on market conditions totally different from what we have here. International pricing is a decent guideline but the real decider should always be what the card is actually worth to YOU. It makes no sense for one person to hold onto a card that they want to sell while someone else wants to buy it, just because an arbitrary American website dictates an unreasonable price tag.
The third improvement closely matches something I’ve advocated in the past. Teach people to play, and foster casual Magic. Our stores depend on selling most of the contents of every box for their profit margins so the availability of tier one cards is to some degree governed by the demand for cards with strictly casual appeal. Through a circuitous route, more kitchen table players means more chase cards in circulation.
The last point I will be covering here is a more personal one, which is that I will be taking a bit of a hiatus from Magic. I’m not quitting or anything; far from it. In fact I will still be playing the odd tournament. How could I not, with Serum Visions as the FNM promo next month? Plus, I already paid for my flight to Cape Town for the WMCQ. At this point I’m stretching the definition of ‘hiatus’, but what I will really be changing is how much time I spend thinking about Magic. Ordinarily, it is a LOT. I enjoy the game enough that my idle thoughts very often consist of decklists or card interactions.
For the next few months, unfortunately, my focus must needs be elsewhere. I believe it would be disingenuous to continue writing about a game if I’m devoting significantly less time to it than my readers so I will be bowing out until such time as I can become engrossed in the game again.
Don’t expect content from Dracoti to die out in my absence, however. I’ll be in touch with a few people to ask for contributions and with luck, by the time I return to writing I’ll have to fight for my spot back. A bit of variety and some fresh perspectives will no doubt be welcome.