Which of you work for BofA?
The Text said:
Hasbro is trying to squeeze extra money out of “Magic: The Gathering” fans in the short term, Bank of America says. That could hurt the long-term business. Analyst Jason Haas downgraded the toy stock to underperform from buy as recent changes to the “Magic” cards brand amount to Hasbro “killing its golden goose.” The analyst also slashed his price target on the stock to $42 from $73. The new target implies downside of 33.8% from Friday’s close. “The primary concern is that Hasbro has been overproducing Magic cards which has propped up Hasbro’s recent results but is destroying the long-term value of the brand,” he said in a note to clients. “Magic: The Gathering” is a trading card business that accounts for about 15% of Hasbro’s revenue and 35% of EBITDA after sales doubled during the pandemic due to financial stimulus. The toy company has tried to capitalize on that demand by upping the number of new releases and production volumes. But Haas said several players are getting increasingly turned off to new releases amid unwelcomed changes from the company. He said the company is increasing releases for short-term financial gain with little care over how the brand will suffer longer term. Players now feel like they can’t keep up with new releases and are instead playing a different version of the card game where older cards can be used, he said. Seven of the last eight releases have declined in value by Bank of America’s count. National retailers have cut the brand or are increasingly focused on moving old inventory, according to a Bank of America check of stores. That comes as retailers turn to promotions for a wide range of products to try to move gluts of inventory as consumers roll back spending on goods coming out of the pandemic. Haas also said he is “concerned” by the company’s decision to release a 30th anniversary set that includes four booster packs for $999. He said that is “excessively” high compared to a normal set pack’s $5 price. Reprints can hurt the secondary-sale market because the packs include cards from the “Reserved List,” which is a group of cards Hasbro previously promised to never reprint. Some have argued its not a true reprint since the anniversary cards cannot be used in tournaments, while others say it doesn’t matter because their existence will still drive down scarcity and, by extension, value. “This set has devalued many high-value cards, and collectors are concerned that Wizards will reprint more,” he said. Businesses and collectors would sometimes purposefully hold packs to sell later at higher price as demand outpaced supply, he said, but that system is now collapsing due to production increases and the unexpected reprints. The aggregate price of Reserved List cards peaked in mid 2021 at more than $250,000, but is now down to around $150,000. He said the changing secondary market could push card collectors to “Pokémon,” “Yu-Gi-Oh!” and “Flesh and Blood” instead. Meanwhile, Haas said Hasbro could improve its outlook if it has a better slate of releases next year. The stock dipped 6.2% in the premarket. It’s down 37.7% this year. Hasbro didn’t immediately respond to CNBC’s request for comment. — CNBC’s Michael Bloom contributed to this report.
I'm frankly a bit alarmed by what was said in this article because if Hasbro actually takes this guy's advice, they would actually
destroy the game. It's become quite obvious in the past year that Magic is insanely overleveraged. Even though the people making new cards are generally doing a good job, it's clear at this point that the crowded release schedule and deluge of supplemental products is just too much for the majority of players. There will be a grand total of 9 booster set releases this year, 7 of which have new cards, and all but one of which have multiple types of pack available. In addition, several preconstructed products, several digital sets, and over 4 dozen secret lair drops have been released since the beginning of 2022. This has resulted in a very good year for Hasbro, despite the fact that things are slowing down a bit in the second half of the year. While I personally enjoy the increased number of Booster products to draft, I end up ignoring the vast majority of other releases. A lot of other Magic can't keep up with all of the sets and supplemental products. Following the Secret Lair schedule is basically impossible for most players from memory alone. Ignoring everything else going on in the game right now: there are just too many products to keep up with them all. Couple that with general dissatisfaction amongst the player base about the state of certain constructed formats, $1000 proxies, and the all-encompassing presence of Commander, and we've got a bit of a crisis on our hands. To me, the solutions seem pretty simple. WOTC needs to make the game more accessible by reprinting key cards to an affordable price point, investing in growing the community instead of squeezing existing players, and cutting back excess sets from the release schedule to make sure all of the important products are hits. They don't necessarily need to get rid of Secret Lair and similar supplementary products, but they shouldn't be printing nearly as many.
The big problem with this article and the analyst's point of view is the contempt for reprints. Although they correctly identify the 30th Anniversary Edition's price point as "excessively high," they seem to spend more time on the fact that the set contains proxies of reserved list cards. Reprints and big print runs are basically the only things keeping magic afloat at this point. Most people playing paper magic these days are playing eternal formats. Cards availability is the number one hindrance on eternal format play. Once you have certain key staples (usually the mana base and premium removal spells, but also key threats), you can play pretty much any deck you want. These larger print runs have kept the prices on new cards low, making them easier to obtain for people who want to play with them. Likewise, reprints have made some older cards more accessible. $100 Scalding Tarns are now only $25, which is perfect for anyone who wants to actually play the game instead of playing stock market with fancy cards. We like to joke about $80 Ragavans and $50 Solitude
s, but the reality is that these cards would be more
expensive if new sets weren't printed a lot. I like to think about how all of the New Capenna tri-lands are only about $7 apiece. Back when I started playing, these cards easily would have been $20 or more. There are still expensive frame treatments for these cards, so it's not like there is no value in new sets, but the base versions are inexpensive for people who need them for decks. This is a good thing. Cutting back on reprints and print runs in of themselves doesn't seem like the solution here unless we want $300 new cards and to go back to $100 fetches. That's not the world I want to live in.
I just hope the lesson of "don't print as many cards per product and don't do reprints" is the lesson Hasbro takes away from this article. The big problem with Magic right now seems to be the lack of emphasis on playerbase growth and the breakneck pace of supplemental releases. Cutting out both pace and
reprints would put us right back in 2017, a time when every format was insanely expensive, all of the new cards were completely worthless, and the only reprints and cards of value came in the bi-yearly overpriced masters set. I like my $7 Jetmir's Garden
, and I don't think we should be sacrificing that just because Wall Street thinks I should have to sell a kidney to afford one.