Sports Collectibles: The Sleeping Giant Has Awoken

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Friends,

In an effort to keep things fresh and showcase additional content, context, and perspective, I try to publish a guest post on a relevant topic at least once every one to two months.

Today, you’re in luck.

Ezra Levine, the CEO of Collectable, a sports trading card & memorabilia fractional share investment platform, has written up a detailed breakdown on the third giant within sports — collectibles.

Enjoy!

The Sleeping Giant Has Awoken

According to DraftKings’ investor day presentation from March 2021, the sports gambling and daily fantasy behemoth estimated the U.S. online sports betting industry to be at least $22 billion at 100% legalization. They also cited ~5 million paid users for their Daily Fantasy product, a slice of the estimated 60 million people who play fantasy sports, according to the Fantasy Sports & Gaming Association. The scale and popularity of the sports gambling and fantasy sports industries are unquestioned.

Yet there’s a third giant in the sports category that is beginning to emerge: sports collectibles. With advances in technology and infrastructure, the previously sleepy and fragmented sports collectibles industry is beginning to boom, offering sports fans a new way to speculate and investors an attractive alternative asset class. For decades, sports collectibles have represented a multi-billion dollar category, with most estimates suggesting it’s a $5 billion to $10 billion industry. But that’s not telling the real story. The market is undergoing a cultural, technological, and financial facelift that could not only dramatically expand the size of the category but catapult collectibles into the tops of minds and portfolios of sports fans all across the world.Many mainstream media outlets have reported recently on rising, record sports card prices. Seven of the ten most expensive sports cards in history were sold in the past eight months, with prominent record-breaking sales for icons like Mickey Mantle and Tom Brady.

But, according to Axios, cards and collectibles also “became the most popular alternative asset class thanks to their liquidity, simplicity and a healthy dose of nostalgia.”

Why now?

Well, we’re witnessing the convergence of two massively bullish tailwinds on a supply-constrained market at the same time.

Tailwind #1: Widespread consumer adoption

Advances in technology, liquidity, and consumer education have put collectibles in the same conversation as fantasy sports and sports gambling. Sports fans can now get instantaneous, non-binary exposure to their favorite teams, athletes, or moments with a few swipes of your finger. Sports collectibles make it possible to get “skin in the game” on the entirety of a player’s career and enduring legacy, not just a single game or season.

As more catch on to the burgeoning sector, demand for participation has begun to massively outweigh the supply of these iconic opportunities. This has caused rising prices across the board. As prices have continued to rise, more and more attention has ensued from mainstream media, athletes, celebrities, and influencers, which has raised collectibles’ profile and prices to screaming heights.

We are witnessing a flywheel effect in real-time at the intersection of passion and profits. It’s a perfect storm - and one that has the underpinnings of a sustainable trend and a massive market opportunity.

Tailwind #2: Financialization of the asset class

In addition to its cultural renaissance, sports collectibles are being actively looked at as a viable and potentially lucrative alternative asset class. Interest rates appear to be staying depressed for a while longer, and there’s A LOT of money in the system. In fact, by some estimates, the amount of money in the US economy is 25% higher than at the start of 2020, eclipsing any pace of money growth seen since the Federal Reserve was established in 1913.

These dynamics have investors re-thinking their portfolio allocations and looking for higher returns than what a traditional 60/40 portfolio can yield.

To that extent, the case for sports collectibles occupying at least a small part of an investor’s portfolio is quite strong. The sector contains a tantalizing mix of the best of the equities markets and the best of the commodities markets. It’s an asset class that, at the upper echelon, has historically produced superior returns compared to the S&P 500 while also acting as an effective hedge against inflation.

Many in the collectibles category fear rising prices will price out the very collectors who are the bedrock of the industry. That’s a valid concern and one that compelled our company, Collectable, to create a fractional ownership exchange for the most iconic sports collectibles on the market. Yet rising prices actually price in institutional investors and larger pools of capital that can finally get meaningful allocations to the space. Should this continue to occur, trillions of dollars of capital could pour into the space.

All this is to say - the paradigm is rapidly shifting. Sports collectibles as both a cultural phenomenon AND an alternative asset class are here to stay. Mix in the fact that it’s sports, it’s easily understandable, it’s passion-driven, and it’s…fun. Well, that’s a killer combination.

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Want To Get Involved?

If you want to learn more about Collectable and start buying fractional shares of the most iconic sports trading cards in the market, make sure to sign up for an account today.

Personally, I’ve been using the product for a few months now and I think it’s fantastic.