Data Visualization
To examine how Magic’s secondary market might influence Hasbro’s stock prices, we first set the stage with a brief summary of recent events.
Magic: the Gathering in 20221
2022, Magic: the Gathering’s 30th anniversary, started on a strong note. In Hasbro’s earnings report for Q4 2021, subsidiary Wizards of the Coast announced that 2021 had been a record-breaking year in revenue for Magic, topping 2020, the previous high-water mark. In Q1 2022, Wizards released a new Magic: the Gathering set, Kamigawa: Neon Dynasty. This set would go on to be the best selling winter release of all time, the fifth Magic product to generate more than $100 million in revenue, and one of the three best-selling Magic products of all time, according to Hasbro’s Q1 2022 report.
In the earnings call that accompanied this report, Wizards’ president Cynthia Williams announced an 11% price increase on all major Magic: the Gathering products, citing rising costs in production and supply chain challenges. This price change would not go into affect until the summer, but its looming presence was felt throughout the market throughout the year. To add to the chilling effect, the next two set releases were not nearly as well received as Neon Dynasty. From a combination of sub par design choices and mismanaged marketing campaigns, both the spring and summer products were largely panned by the Magic: the Gathering community.
The summer was not a total failure for Wizards, however, thanks to the release of Double Masters, an expensive, premium product that included a number of highly sought-after cards. The second half of 2022 saw an even more aggressive release schedule, with a major product release each month for the last four months of the year. While concrete performance data on these products has not been made available at the time of writing, the general sense is that of the four, only two of them were widely embraced by the Magic community.
This condensed timeline doesn’t include the dozens of non-premier product releases - exclusive print to demand offerings, pre-constructed decks for various game formats such as Commander, Non-Booster products like starter decks, gift sets, cross-over events with franchises like Warhammer 40k and Fortnite and more. But there is one non-premier product that caused more controversy than all of these combined.
In November, Wizards released the Magic 30th Anniversary set, a $999 product that included four packs of some of Magic’s most rare and famous cards. These cards were printed in an alternative format that made them not legal for tournament play, making them exclusively collectors items. Many of the 30th Anniversary cards were reprints from Magic’s “Reserve List,” a subset of decades-old cards. The Reserve List was a promise made by Wizards, assuring collectors they would not reprint those cards, keeping the original cards secondary market value intact. This 30th Anniversary product, both by its predatory price and perception as breaking the Reserve List, infuriated fans. Online communities called for boycotts of Magic and Wizards of the Coast.
The Bank of America Report
Having caught wind of the animosity surrounding the 30th Anniversary product, Bank of America released a research report in which they double-downgraded Hasbro from “Buy” to “Underperform.” The analysts accused Hasbro of “killing their golden goose” by increasing the rate of product releases, driving up short-term revenue at the expenses of the overall health and long-term value of the brand.
The report noted that Magic was responsible for 15% of Hasbro’s revenue and 35% of their EBITDA, or their earnings before interest, taxes, depreciation and amortization, which is used for evaluating a company’s ability to generate cash. This report dropped Hasbro’s stock a comparatively modest 6%, but sent shock-waves throughout financial news outlets, leading Hasbro to soon after hold a “fireside chat” in attempts to quell investor’s growing concerns. Chris Cox, the CEO of Hasbro, along with Wizards president Cynthia Williams, assured investors they saw no evidence of overprinting cards and believed in a bright future for both Hasbro and Magic: the Gathering.
At the time of the report’s publishing, however, seven of the eight most recent Magic releases had dropped in value on the secondary market. Stores and distributors were cited as growing increasingly frustrated, ordering less new product and selling older products for a loss to clear their books. Fans found themselves overwhelmed trying to keep up with all of the new products, both mentally and financially.
Visualizing Magic: the Gathering Product Prices2
Draft Booster Boxes are offered as the primary way to play the “limited” format of Magic: the Gathering, in which players take turns selecting cards from booster packs, build decks from their drafted card pool, and then play against each other with the decks constructed from the contents of a single box.
Set Booster Boxes are offered as the primary way to collect cards from a particular release cycle and “open booster packs for fun.” Often priced between Draft and Collector boxes, they typically include higher chances at rarer or more valuable cards than a Draft box, but don’t contain the same number of premium cards as the Collectors.
Advertised as the “shortcut to the coolest cards,’ Collector Booster Boxes are the premium product for each set release. These boxes are designed for Magic players and collectors who desire variations of cards that feature alternative art, enhanced treatments such as foiling, or styles only found here.
With these trends in mind, it is worth noting that it is not strictly the declining value of these sealed products that are cause for concern, nor are they inherently bad. Some deflation in sealed products is to be expected as new products become the exciting opportunity for novel cards or mechanics. But for many of these products that are still in print, prices typically settle within an expected range and then steadily rise once they are no longer in print and supply becomes more constrained. For the products released in 2022, several fall below this expected threshold for many consecutive weeks.
In an article discussing the 11% price increase introduced in 2022 by Hasbro, TCGPlayer notes that draft boxes, for instance, typically went for between $90-100 before the price increase and were expected to hover closer to $110 on average, with an absolute floor of $90. As depicted above, besides the premium Double Masters (2X2) draft box, only one draft box, Brother’s War (BRO), the most recent release, is selling for more than $100. Only Kamigawa: Neon Dynasty (NEO) is selling comfortably above $90, and it was released prior to the price increase. Dominaria United (DMU), the first draft box impacted by the price hike, hovers in the mid 80s for most of the time its available. We see similar trends in the Set and Collectors boxes as well, with only a few exceptions. Thus, it is not merely the expected decline in value that should potentially have investors worried, but it is the sustained drop of market value below the expected floors, even after a price increase, which suggest a more pressing and lingering issue.
We next turn to the underlying problems cited by the bombastic Bank of America article - the overprinting of Magic cards and the growing frustration among Magic: the Gathering players as a result. While the Bank of America report brought these issues to the forefront, they were hardly the canary in the coalmine. The frustration among Magic players had been swelling for years and grew particularly vocal in 2022. We next examine how the conversation around Magic: the Gathering changed over the course of the year and how investors keyed in on Hasbro’s customers might have seen the Bank of America report coming before the rest of the market.
Magic: the Gathering Product Releases3
As the Bank of America report amplified, an increasingly common complaint among dedicated Magic: the Gathering players has been the deluge of new products released in the last several years. In this graphic, each symbol represents an individual Magic release, some of which can contain up to 300 or more individual cards. Even from a glance, it becomes clear how since 2020, the volume of products has skyrocketed across every category of release.
This increase of production includes both new card designs and reprints of existing cards. New designs create excitement and new ways of playing Magic, but also add to the overall complexity of the game, already considered to be the most complex game of all time. Reprints can also be enticing for players, particularly if desired cards are rare or old and thus demand a high price on the secondary market, but these new variations can have adverse effects on the card’s value if overdone.
It is not only the volume of products, but as alluded to on the Data Sources page, it is also the ever-expanding contents of the products as well. In the last several years, Wizards of the Coast has dramatically expanded the variations of cards presented in each product. Whereas in years past cards would be available in either a non-foil or foil treatment, now many sets come with borderless versions with extended art or set-specific treatments. In a recent and particularly egregious example, the first standard set release of 2023, Phyrexia: All Will Be One, featured a single card with ten different visual styles.
Between the above data visualization and this example from only a few weeks ago, it is clear this trend is not slowing down in the immediate future.
Conclusion
The results of Wizard’s aggressive release and the falling value of sealed products has led to the sentiment that Magic: the Gathering is simultaneously too expensive and too cheap.
For players, keeping up with the hobby has become increasingly cost prohibitive, both in the cost of buying products and the mental demand of keeping up to date with new designs. On the other hand, collectors perceive the unrelenting reprinting of old cards and the overprinting of new cards as eroding the value of their collections and threatening the secondary market’s stability. Of course, many players are somewhere in between these two extremes along a spectrum, wanting the game’s components to be affordable, while also maintaining their value in the secondary market.
This tension and dichotomy has seemingly had a negative effect on Magic: the Gathering products in the secondary market. In the Exploratory Data Analysis process, we take a closer look at Hasbro’s stock with these trends in mind.