A New House of Cards : Innovative Firm Moving to Carlsbad
No longer just a juvenile pastime, baseball-card collecting has become big business. Rare cards fetch tens of thousands of dollars at auction, well-known stars hawk their signatures at conventions and over cable shopping channels and hobbyist publications track the latest sale prices and trends for legions of subscribers.
A major catalyst of the sports collectibles craze is Upper Deck, a fast-growing athletic-card publisher that is moving its entire operation to a new $12-million facility in Carlsbad from Yorba Linda by next month. More than half of the company’s 600 Orange County employees are transferring to the Carlsbad site, with the rest to be replaced locally.
Observers say Upper Deck has “revolutionized” the $1-billion-plus sports collectibles market by creating an entirely new line of high-quality, “upscale” baseball cards that caught the fancy of both hobbyists and investors. By fall, Upper Deck says it will be selling football and basketball cards in addition to baseball and hockey player cards now available, a lineup no other card publisher can match.
In the three years since its founding in 1988, Upper Deck has climbed to No. 2 in the athletic-card industry and is closing fast on Topps, the Brooklyn-based leader. From zero market presence three years ago, Upper Deck cards are now sold in 250,000 retail outlets nationwide. Other card publishers, including Topps, now imitate Upper Deck’s high-quality line.
A closely held company, Upper Deck won’t disclose its sales and market share. But the company clearly is on a major-league roll. Employees have grown from six in late 1988 to the current 600. Its plant has swollen from a small Yorba Linda office to the new 250,000-square-foot publishing plant and headquarters office on Sea Otter Lane in Carlsbad that it will fully occupy next month.
The company’s success recently caught the eye of Inc. magazine which named it Orange County’s 1991 manufacturing entrepreneur of the year.
Upper Deck was founded by Richard McWilliam, Boris Korbel and Paul Sumner, three Orange County businessmen with varied backgrounds but a common interest in baseball-card collecting. They were subsequently joined by a fourth investor, Richard Kughn, who also owns a controlling interest in Michigan-based Lionel, the toy-train manufacturer.
Upper Deck’s innovation was its introduction in March, 1989, of a four-color baseball card with front and back photos and a three-dimensional “security hologram” that is both a novelty and a deterrent to counterfeiters. Holograms are images that seem to move when the card is shifted. Upper Deck’s 15-card pack sell for $1, about twice the price of most competitors’ card packages.
There is more than nostalgia at work in hobbyists’ frenzied interest in sports cards. Demand is fueled by the stratospheric prices that rare cards have fetched in the “after market.” A 1952 Mickey Mantle card, for example, recently sold for $45,000 while a Honus Wagner card printed in the early 1900s went for $450,000, Upper Deck Vice President Don Bodow said Friday.
Those high prices pump the sales of contemporary cards because hobbyists view them as low-cost investments that can pay off handsomely over time. And hobbyist-investors increasingly hedge their bets on which player cards will become valuable by buying complete sets.
Rookie cards of players who later become famous are especially desirable. For example, an Upper Deck card of Ken Griffey Jr. that was published in Griffey’s 1989 rookie year now trades for $40. The high value is correlated to the fact that Seattle Mariners star outfielder Griffey is being talked about as a future Hall of Fame candidate.
But some skeptics think the sports-card market is headed for a fall, noting that some publishers have flooded the market with products. Press runs of individual player cards that once totaled in the hundreds of thousands are now in the millions. And more manufacturers are jumping in. Topps, which was founded in 1950, once had the baseball card
market virtually to itself. Now, “between eight and 10” companies are publishing cards, said Greg Ambrosius, managing editor of Baseball Cards magazine of Iola, Wis.
Upper Deck has tried to differentiate itself from the pack with high quality. In so doing, Upper Deck has “revolutionized the industry (despite) a relatively bad economy,” said Frank Barning, editor and publisher of Baseball Hobby News, a San Diego-based publication.
“Upper Deck is not the leader in how much business it does, but in what the public likes,” Barning said. “They thought the market would buy a more expensive card with better paper stock and reproduction. They perceived that people would not be reluctant to pay more and they were right. As a marketing idea, it was brilliant and now the other companies are following Upper Deck.”
Ambrosius of Baseball Cards magazine said Upper Deck has been smart in appealing to collectors with a card that is difficult, if not impossible, to counterfeit, a growing concern in the market.
“Topps is still the industry leader because they produce the majority of the cards. But collectors love Upper Deck because they don’t flood the market, unlike Topps which has cards at every gas station and convenience store,” Ambrosius said.
McWilliam, the company’s 37-year old chief executive, is a certified public accountant with a strong entrepreneurial bent. His real estate investments helped provide initial capital for Upper Deck. Korbel, 55, and Sumner, 45, were president and vice president, respectively, of Orbis Graphics of Anaheim, a high-quality printing firm that did all the color separations for Architectural Digest, a slick, interior design magazine.
Sumner got the idea for Upper Deck after he visited a baseball card shop and was asked by the proprietor whether a certain card in his inventory was a counterfeit.
“Sumner looked at it and noticed that it was a counterfeit and his mind started working,” said Bodow, who is Upper Deck’s vice president of marketing. The counterfeit cards “looked terrible and he thought there was no reason for a card to be counterfeited,” Bodow said. The idea for a business to publish high quality, uncounterfeitable cards then took on momentum.
Sumner, Korbel and McWilliam got together and in the fall of 1988 applied to major league baseball owners and to the players association for licensing rights. The owners and players, who, combined, get royalties of more than 10% of gross revenue from baseball card sales, agreed and Upper Deck was off and running.
The company shipped its first baseball player cards in March, 1989. Upper Deck’s hockey cards first appeared last year.
Bodow said the company consciously markets itself to the mature sports collectible fan with advertisements in various sports magazines. Upper Deck has also hired player spokesmen to represent it, including National Football League quarterback Joe Montana, hockey star Wayne Gretzky, retired baseball great Reggie Jackson and National Basketball Assn. star Michael Jordan.
About a year ago, with its operations spread over five separate Yorba Linda buildings and anticipating a significant increase in business from its new NFL license, Upper Deck decided to consolidate operations under one roof. The company put out the word to real estate brokers that it was looking to move but specified no destination, other than that the new site not be north of Yorba Linda or out of state, Bodow said. They chose the San Diego County site.
