Losing at Cards

By LESLIE EARNEST

Jan. 7, 1999 12 AM PT

TIMES STAFF WRITER

The NBA lockout isn’t ending any too soon for trading card merchants, who have already lost an estimated $30 million as a result of the standoff between basketball players and owners, according to one industry source.

During the dispute, many fans seem to have staged a little strike of their own, refusing to buy basketball-related products. The pain has radiated throughout an industry that is propped up by small businesses, including many that were already struggling.

“Unfortunately, this season has just had a dismal effect on everybody, from the hobby shops to the manufacturers to the fans,” said Terry Melia, hobby media manager for the Carlsbad-based Upper Deck Co., one of the nation’s top trading card wholesalers.

One industry poll shows that basketball card sales have sunk 70% nationwide compared to last year, when collec

tors scrambled to snap up cards of Laker hotshot Kobe Bryant and megastar Michael Jordan.

The downturn is a new setback for an industry that never fully recovered from another major labor dispute--the 1994 baseball strike--despite the frenzy last year over the Mark McGwire-Sammy Sosa home run derby.

With Wednesday’s agreement between players and owners now breathing some life into the NBA season, some merchants are cautiously optimistic that collectors will resume buying basketball cards, an important part of the winter business. But others don’t hold out much hope, saying their customers are simply fed up with basketball.

“People don’t really care anymore,” said Leon Duarte, store manager at All Star Collectibles at Universal City Walk. “They’re upset and they don’t want to know anything about it anymore.”

Shop owners contacted Wednesday by Sports Card Magazine in Wisconsin generally said they don’t expect a full “welcome back” from fans and collectors, said Scott Kelnhofer, the magazine’s managing editor.

“But at least it’s better than not having any season at all,” he added.

In a business often driven by passion and whim, shop owners fairly shudder at the prospect of a lockout or players strike, which can reverberate for years. On the brighter side, industry observers say many collectors have warmed to football this year, drawn by rookie stars such as Randy Moss, Peyton Manning and Fred Taylor.

“Baseball and football have been going so well for a lot of these dealers that it has really buffered the effects of this lockout,” Kelnhofer said.

While baseball is still the biggest seller, basketball has been gaining ground in recent years. In fact, at All Star Collectibles last year, basketball merchandise edged out all other sports as the Los Angeles Lakers and the Chicago Bulls became the top-selling teams, owner Al Thomas said.

This year, however, sales from basketball-related products are down 50%, Thomas said, pointing to racks that normally hold basketball jerseys but are now filled with football jackets.

Johnny Reyes, 24, an Anaheim bread salesman, stopped in the Baseball Card Baron in Anaheim recently to buy football cards. Normally, he would be collecting basketball cards, he said.

“I haven’t bought any this year,” Reyes said. “If they’re not playing, there’s no way the value can go up.”

The store’s manager, Jack Kidwell, said he simply hasn’t been able to unload basketball cards that were selling briskly before the lockout.

“This stuff was on fire,” Kidwell said, motioning to packs of Topps Chrome basketball cards bearing a $12 price tag. “We literally couldn’t keep it in stock. The lockout hit, and it’s rotting on my shelf.”

Card Sales Topped $1 Billion in 1992

Many industry insiders can’t talk about the basketball lockout without harking back to baseball’s strike, which left a black slash on the industry.

“People literally stopped buying cards almost the day the strike started,” magazine editor Kelnhofer said. “It’s never caught up to the level it was before the strike.”

With the home run race last year revving up interest in baseball cards, many dealers said 1998 was their best year for baseball card sales since 1994.

Insiders say their industry has changed dramatically over the past decade, as card trading built to a frenzy in the early 1990s, bringing a glut of both licensees and products, followed by a downsizing that thinned the ranks.

Card sales hit a peak in 1992, when gross sales for all sports topped $1 billion, including some orders that were later returned, Kelnhofer said. By last year, sales had slumped to about $375 million.

The number of trading card shops has also plummeted. In 1992, as many as 8,000 of these businesses dotted the nation’s cities and suburbs, sometimes two on a block. Today, the number of shops has dwindled to 3,500 to 4,000, Kelnhofer said.

“It’s rough,” said Danny Hansen, owner of Baseball Card Baron in Anaheim, which has lost at least $9,000 in revenue over the past three months due to the lockout. “And when something like this hits, it makes it even tougher.”

Irv Wenger closed his Cypress card shop, ABC Baseball Cards, last year after 14 seasons.

“I was subsidizing it, running it out of my retirement pay, just for a few customers,” he said. “I know of at least a dozen [collectibles] shops that were in Cypress and Buena Park, and they’re all gone.”

Many people point to 1989 as a pivotal year for the industry, a time when leagues and players associations began to cash in on the sports memorabilia market by licensing more companies to make and sell products bearing players’ likenesses and teams’ logos.

With the interest in trading building in the early 1990s, more speculators entered the market.

“People were literally hoarding new releases as they came out and sticking them in garages and attics and closets and everywhere they could stuff them, hoping they would appreciate in value,” Kelnhofer said. But manufacturers kept cranking out the cards, and supply easily met demand.

Meanwhile, trying to differentiate their products from others on the market, licensees designed increasingly eye-catching cards with shimmery fronts and embossed logos. One new trading card has a front made of basketball material.

“It’s not a piece of cardboard anymore,” Melia said. “Everybody’s trying to one-up their neighbor.”

Companies Create ‘Lottery Mentality’

Manufacturers also lure customers with insert cards, more valuable trading cards that are tucked in the occasional pack.

“People know that some of these packs are holding these rare insert cards,” Melia said. “It’s kind of like dangling a carrot.”

Such tactics at times have created a “lottery mentality” in the industry, Kelnhofer said.

But even Upper Deck has been hit by the NBA standoff. The company, which generally releases 15 to 20 basketball sets throughout the year, has canceled three of the products for the current season.

This niche industry faces other challenges as well.

Shop owners are also competing with the Internet and home shopping channels. About half a dozen Internet sites now have collectible auctions, Kelnhofer said. Industry insiders warn that Internet trading has its risks, since shoppers are often dealing with strangers.

“There’s a lot of unscrupulous people,” said Roland Kim, owner of Casey’s Sports Stuff in Seal Beach. “You buy a card from someone in Missouri and you’re not satisfied, you’re not going to Missouri to straighten the deal out.”

But some dealers feel the Internet, by sparking more interest in card collecting, ultimately will help their industry more than hurt it.

Irv Wenger, who closed his Cypress card shop, now sells his cards on the Internet. Financially, he is doing as well or better than when his shop was open, Wenger said.

Traders who are still toughing it out in small shops around the country are now looking to the future, hoping a partial season will finally spark sales of basketball products.

But no one really knows whether fans will be more forgiving now than they were after the baseball strike.

“The big question is,” Kelnhofer said, “how long will it take to rebound?”

* REACTION: NBA deal boosts athletic apparel and shoe company stocks, but will it rouse fans? C5

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Card Count

Estimated new sports card sales have plummeted since rising more than tenfold from 1986 to 1992. Sales in millions:

1986: $90

1988: $250

1990: $800

1992: $1,200

1994: $820

1996: $650