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Anthony Capece – Rare is the New Uncommon

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I’d like to discuss the rise in price of Modern staples over the past few years and why I believe that more recently printed Modern staples – Deathrite Shaman and Thoughtseize, for example – might actually be traps.

Let’s start here: “Past performance does not indicate future results.”

It’s one of those nuggets of investing wisdom that you’ve heard a thousand times, but how does it apply to Modern cards? What we’re saying here is that the factors that caused an investment to be good or bad in the past (in this case referring to the huge spike in Modern prices) may or may not remain in place going forward. If they do, we can expect similar results. If they don’t, we can’t. So let’s talk about the factors that contributed $130 Tarmogoyfs and the like.

First, take a look at what has happened to the Magic: The Gathering player base over the past several years. Hasbro said in their 2012 annual report that the player base stood at 3.3 million, and that Magic had seen 25%+ annual growth in revenues for four years in a row. We can make a few assumptions here, understanding that these numbers are inexact and only intended to put us in the ballpark. If you run 25% growth backward, here is what the player base would have looked like each year (in millions):

 

Players (mil)

2008

Shards of Alara

1.35

2009

Zendikar

1.69

2010

Scars of Mirrodin

2.11

2011

Innistrad

2.64

2012

Return to Ravnica

3.30

Hasbro has already said that 2013 continued on this trajectory, so today we might be looking at something like 4.1 million Magic players. Think about these numbers for a minute. There are 1.5 million players who have picked up the game since Innistrad, which just left Standard. That was almost the entire player base during Zendikar block! If 2014 continues on this pace, we’ll add a million more – staggering.

The next assumption I’m going to make is that Wizards is scaling their print runs according to these increases. Again, it may not be perfect, but I think it’s reasonable to assume that they are printing at least 25%-30% more cards each year to meet the demand from new players. I certainly haven’t heard about a shortage in booster packs.

The supply implications are that there could be three copies of Snapcaster Mage out there for every two copies of Arid Mesa. There are two Deathrite Shamans for every Marsh Flats. It’s reasonable to think that there will be four copies of Theros Thoughtseize for every one Lorwyn copy! It’s time to rethink rarity.

As for the spike in Modern cards over the last few years – the demand for Modern right now is based on a player base of four million and the supply of fetchlands is based on a printing for 1.69 million players. So, they are expensive. Simple enough. But the supply of Deathrite Shamans is based on a printing for 3.3 million players. Not nearly as expensive. Demand for Magic cards has increased dramatically over the past few years, but so has the supply of new cards. You can’t overlook this if you want to be a successful Magic financier.

Check out this chart to illustrate. Warning – we’re switching to MTGO. I understand that paper is different, but I’m using MTGO to make a point about supply. Looking at mtggoldfish.com, I chose a series of Modern staples – one rare from each block – that all see a similar level of play (dominance ratings of 16-22%) and plotted their prices. These are some of the most played cards in Modern, and the goal here is to fix demand so we can see how supply, on its own, affects price. There is a hole where the Shards staple should be because it doesn’t exist.

chart1

Looks a little bit like the inverse of this graph of the player base, doesn’t it?

chart2

I know some of these cards see play in Legacy and that clouds the picture somewhat, but Legacy has a small effect on MTGO (Stoneforge Mystic is 1.3 tix and Jace, the Mind Sculptor is 25% of his paper price). I used the price of Thoughtseize from just before it was announced in Theros, but all other prices are current. I think the chart illustrates the point very well: Modern staples show a clear downward trend in price online as you move forward in time.

If demand for each of these cards is about the same on MTGO, the differences in price are necessarily caused by supply. There are just way, way more Snapcasters and Deathrites out there than there are Tarmogoyfs (obviously the Modern Masters reprint added very little supply). I think everyone knows that but I don’t think everyone understands the magnitude and what it means going forward.

Modern staples like Tarmogoyf and Modern staples like Deathrite Shaman are just not comparable financially. If you are looking at Deathrite and thinking that it will follow Tarmogoyf’s trajectory because they see similar levels of play in Modern (and Legacy), think again. There could be as many as three Deathrites for each ‘Goyf in existence. We should be comparing Deathrite Shaman to Kitchen Finks instead.

The Modern player base has quickly outgrown the print runs of Zendikar and sets older. It hasn’t outgrown the print runs of newer sets like Innistrad and Return to Ravnica. But will it?

Let’s go back to what I said at the beginning of this article – past performance does not indicate future results. If you think that Snapcaster and Deathrite are going to follow the same trajectory as Tarmogoyf and (pre-reprint) Thoughtseize, that means you think that the player base will keep increasing at 25% per year for several more years. That is what caused the initial climb, and that is what will have to happen again for new cards to climb in the same way.

The bad news is that the growth of the player base is going to level off. It’s not a matter of “if” but “when.” No business can grow at 25% annually forever, and Magic is no exception. I don’t know when it will happen, but stringing together four years of 25% growth is already a great feat. I will not be surprised if it continues for another couple of years. I will not be surprised if it cools off next year. I will be surprised if it continues for many more years. That would bring us to ten million players in four years. It would mean adding 2+ million players between years three and four of that run (2017), which was almost the entire player base during Scars of Mirrodin. That is a lot of Magic players.

When (not if) we enter this cooling-off period, the most recent blocks are going to be in massive supply compared to past sets. The player base will not grow fast enough to make them scarce the way Zendikar fetchlands or Future Sight Tarmogoyfs are scarce today. If you are holding a box of $15 Theros Thoughtseizes that you are holding for when they go back up to $50, just understand that we need to double the number of Magic players on Earth first. Go ask Jason Alt about bagholders – and try to recruit some new players on the way, because we need them.

Magic financiers spend a lot of time trying to understand demand. We research formats, evaluate cards, and on and on. But that’s only half the equation. If you put the same focus on supply, you realize that we are going to be drowning in Theros cards by the end of the block. It’s going to take years of strong growth for demand to get to the point where Thoughtseize can recover. After all, it’s probably about as rare as Inquisition of Kozilek at this point.

There are already hints of the oversupply of more recent sets if you look. Scars of Mirrodin block was printed right in the middle of the player-base explosion. People keep wondering why the Scars fastlands aren’t jumping, even though they see play in Modern. Birthing Pod is one of the most dominant decks in Modern but you can still buy them for $4 on TCG Player. We keep waiting for the spike, but I no longer look at that as a sure thing. Maybe there are enough Birthing Pods to go around. I’ll be watching these cards closely, along with Snapcaster Mage and Deathrite Shaman, when Modern season hits.

To be clear, I’m not saying that growth is slowing. I’m saying that when it does, whatever the recent sets are at the time will be in huge supply. No matter how much those cards are played in Modern, they will never reach the heights that we have seen in the past.

Now, don’t fret. It doesn’t mean there isn’t money to be made. You may have noticed that I’ve mentioned large-set rares almost exclusively. The mythic rarity certainly changes things, as do small sets and core sets, and of course we can always spec on older cards. I’ll go into more detail on this topic in my next article.

Thanks for reading.

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Anthony Capece

Anthony Capece

@acmtg   -    Articles
Anthony is your typical started-during-Revised-then-quit-then-came-back-years-later Magic player.He enjoys the financial aspect of the game the most, mainly because it lets him use his analytical side but also because it makes up for the money he hemorrhages drafting on MTGO.
Anthony Capece

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About the author

Anthony Capece

@acmtg   -    Articles
Anthony is your typical started-during-Revised-then-quit-then-came-back-years-later Magic player. He enjoys the financial aspect of the game the most, mainly because it lets him use his analytical side but also because it makes up for the money he hemorrhages drafting on MTGO.

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  1. Jason Alt

    I don’t know that we should compare Deathrite to Kitchen Finks necessarily. Would you say that given there was a reprinting in the premium foil packs and a judge foil, the number of Deathrite Shamans is pretty close to the number of Noble Hierarch? Finks was a regular card, then an FNM promo, then a reprint in Modern Masters. Those are all small runs, but together couldn’t they way overwhelm the number of Deathrites out there? I am not attacking the premise of the article by any means. I just wonder whether there aren’t too many finks out there.

  2. Anthony Capece

    Good point Jason, I think you are right. I was thinking of the price history of Finks up to the MM reprint. It’s not a good comparison from MM forward .

  3. Bob

    “Stoneforge Mystic is 1.3 tix and Jace, the Mind Sculptor is 25% of his paper price”

    Stoneforge Mystic was printed as a 3x or 4x in a Legacy precon that was available online for cheap and also contained Jitte and a playset of Karakas. Jace was more than double it’s current price before FTV20 was available for MSRP.

    It’s not that you don’t have a point, but these are brutally terrible examples because of the context.

  4. Anthony Capece

    Not sure the extra printings are relevant to the point. Those cards would be much more expensive if Legacy was popular online.

    1. Bob

      Are you seriously suggesting that Jace would be more than the $35 cost of unlimited number of FTV20 recently available from the online store if Legacy was more popular?

      Come on, man. Just find some examples that actually make sense.

      1. Anthony Capece

        Yeah good point there if it’s still available. Thought it was long gone.

        1. Bob

          It is gone, but what do you think would have happened to the price of paper Jace if unlimited FTV20 were available for MSRP for a month? Still $100? I doubt it.

          Bottom line, Jace was over 70 before he was revealed in FTV20 and prices dropped because FTV are available at MSRP when they are released online. It’s just a bad example, stop making poor excuses for making a poor example. The article was good, you just made a poor example in context. I’m sorry that you can’t accept that.

          1. Anthony Capece

            I’m not making excuses. I said it was a good point. You are right, Jace was a bad example.

            1. Jason Alt

              You handled that better than I would have

          2. Erich

            Can we ease up a bit here? The article was really good but a couple examples were off-base due to additional factors present in MTGO. That has been established. There’s no need to get on the author’s case beyond that.

          3. Sup_Stevie

            How about you stuff your face with some girthy dicks. I’m hard.

            There you go Jason, handled for him

      2. demonik187

        Why be a dick about it? You seriously need to chill the fuck out. You seem to know it all, so why don’t you write something then? Fucking douche bag.

  5. Corbin

    This article was awesome.

  6. Emanuel

    I’d say Noble Hierarch qualifies as the Shards block staple.

  7. Anthony Capece

    You would think so but it sees about half as much play as the next least played card on that graph.

    Corbin – thanks! Excited to contribute to the site.

  8. Derek

    Not sure on the numbers in regards to players… according to http://www.nbcnews.com/technology/20-years-magic-gathering-still-going-strong-not-just-middle-8C11044163 magic has over 12 million active players.

  9. Anonymous

    Bizarre MTGO policies aside, WoTC is a pretty intelligent company when it comes to taking care of their product. Is it that far fetched to think that they might print sets in anticipation of expected playerbase growth? Especially if DotP is doing as well as it seems to be as an acquisition vehicle,

  10. James Chillcott

    There is a lot of solid thinking here but also several missing angles. Player growth includes digital product and a ton of that growth is from Duels on tablets, not paper. The thinking that paper set growth mirrors total player growth is likely inaccurate. There is also the possibility that paper supply does not mirror paper player growth. By definition more players means a growing proportion of casual players. As with anything early adopters are more committed. Reflect on the fact that recent tournament growth has been strong but NOT in line with total player growth. The point is that printing more cards does not automatically make the same ratio available for speculation because as with toys, many cards fall into a black hole of closets and basements. If there are 3x deathrite vs old rare but most of the extra printings stay off market, they will not impact price. There’s also the fact that reddit, twitter and mtgfinance as a practice increases speculation far beyond levels pre social sphere. Bottom line: we need more and better data to really call these shots.

  11. dan

    Good article overall, but for the extrapolation of certain ratios it might not be as useful. For example, the growth in revenue does not necessarily mean there is an equal growth in players, but rather revenue power user could have increased along with the growth in player base. Additionally, part of the growth in users could be for the online magic product, which would have no direct impact on paper Magic.

  12. Anthony Capece

    Good points, all, and thanks for the feedback.

    Derek – not sure what to make of that 12 million number. The annual report that the NBC article links is the very same one I used for the 3.3 million number.

    James – you are correct, this is a pretty crude estimate meant to illustrate something specific. Would love to have the data you mention to do a better analysis, but I doubt there will ever be a good way to ballpark “closet copies,” for example. The influence of the MTGfinance community is definitely an interesting subject, something worth writing about.

  13. Julien Lafon

    Please correct me if I’m wrong and by no means is this intended to be disrespectful but should you not take into account that if the game is still growing then the same effect would continue to take place? By that I mean if the player base is still growing at the same rate the larger quantity of rares will still be rares however the older rares become more scarce. The rares today shouldn’t be a any different than any given time before.

  14. J. Graves

    I think that anyone that can critical think and articulate themselves as well as you have deserves the benefit of the doubt. The math is solid.

    Good stuff man.

    I hope to use some of your information in a future article.

    J.

  15. Eric

    Great read and some interesting points. I wonder how accurate the measuring of players really is. I myself know MANY players who are casual and have never been to a tournament but still regularly buy packs and maintain power cards for cubes…I can’t possibly see how this would be tracked, and I imagine there are thousands (millions?) out there like that as well.

    I think the one thing that is truly certain is that legacy will always be a safe place to invest, because there will always be magic players, and those magic players will always grow up and get more money and want to buy the things they couldn’t afford when they were younger. The owners of the legacy cards will not sell below a certain amount in order to protect their investment, others may bid up to do the same on auctions, or a seller may simply not sell below a certain price and choose to keep a card for sentimental value if they don’t reach the price they are looking for.

    I have become an avid collector (and player) and since growing and having money to buy the cards I grew up with (alpha, beta, unlimited etc) I have seen these jump drastically in the past months/years. It will be interesting to see where some of these cards are at in the future.

  16. Chris

    It all boils down to supply and demand. It doesn’t matter how much more is printed as long as it doesn’t outpace customer base. It should be flat regardless of volume if this is the case. Only if the customer base drops sharply, perhaps combined with an overly optomistic print run that prices will drop. Otherwise a rare is still rare relative to demand.

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