Wizards of the Coast & Magic the Gathering – I get FOMO is a thing, but the reality is there is no scarcity, it’s just double the price from scalpers which WotC don’t benefit from. Surely if they’d print more, they’d sell more?
Edit: apologies, I’m referring to the scarcity of sealed product, not the cards individually
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“False” scarcity is still scarcity, in practice. If it’s double the price, then people buy booster packs more eagerly in hopes that they won’t have to go to a scalper.
Not an expert but it might be so the cards retain perceived value for future rereleases. Nintendo released Super Mario 3D All-Stars (a compilation of older games) for the full $60 and for a limited time and may release those same games again in five years for another $60. Disney had a similar strat with their “Disney vault”
Some of the prices cards sell for are in the many hundreds of dollar ranges due to their rarity. This makes collectors want to buy up as many packs as they can for the chance to either resell these expensive cards, or add them to their collection. Scalpers are only taking advantage of this desire
Correct me if I’m wrong but they do not sell individual cards, they sell packs with a small percentage chance of obtaining those cards. By making the “good” cards extremely rare they encourage sales of those packs of cards.
If they were to sell the cards individually they would need to assign inherent values to the cards which would result in them running afoul of of gambling laws in some jurisdictions unless they simultaneously stopped selling packs with randomised content.
Given that a significant portion of their game, culture and business model is built around the scarcity of these cards and building decks from a randomly acquired or traded for selection it seems like it would be a very significant risk to switch to selling individual cards for a set value as their business model.
It depends on your business plan, but in general selling one thing for a large mark-up is better/easier/more desirable than selling many things for small mark ups.
A great modern day example would be fast food. Everyone complains it’s too expensive now, why doesn’t company X make a O’Joyful Meal for $3 and reap the reward of customers flocking to your stores? Because $3 gives you shitty profit. It’s better to sell an O’Joyful Meal for $15, maybe you sell half as many as you would at $3, but you’re earning XXX% more profit per meal.
On the case of WotC you have a few other factors like –
short product lives (people only want the latest MTG set for a few months at best),
massive resale markets (you sell a pack of cards for $10 then someone gets a lucky pull and sells it for $125 – WotC wants to sell that lucky pull for $125 and capture the revenue, not some 3rd party Derek from Pasadino).
no surplus materials – great to sell 100% of your goods and not have stocking or warehousing costs.
word of mouth – when was the last time you saw people talking about Playstation 5s? I can walk into any electronics store and get 5 PS5s if I wanted to. What about that sweet sweet Nintendo buzz though. You can’t find the new switch anywhere, hence people talk about it and you get free publicity.
paper strength – companies aren’t just concerned about profit, they are concerned about profit as a percentage of their revenue. Through the magic of false scarcity WotC gets to spend tons less on manufacturing, transportation, etc. AND they get to sell their goods for a higher initial price! Sure, they could earn the same amount of revenue if they sold more for cheaper, but this way they get a very high percentage of gross profit on their revenue. A lot of business world calculations live by maximizing those percentages, while not so much caring on the magnitude. Think of this way – you can invest in two companies. Company X is showing 15% profits year on year and Company Y is showing 4% profits year on year. With whom are your investing your retirement funds?
They tried printing more. They ended up sending more to the landfill. A few years back WotC got themselves into real trouble by oversaturating their market with more and more cards. Why? WotC is owned by Hasbro and Magic cards have been their cash cow now for some time. Hence the thinking was that more cards would equal more profit. Things did not go the way they planned. Shareholders were not happy.
When I said there were cards sent to the rubbish dumps, I wasn’t kidding. Folks tracked down which dump they were using and they started raiding the place. Whoever Hasbro/WotC got to dump them did the bare minimum meaning they were easy to find and many of these cards wound their way into peoples hands. Well, that was until they started to properly dispose of them making them unrecoverable as people had been pulling fully sealed boxes of cards from the dumps. It was a bit of a scandal a few years ago which I learned from Clownfish. You can find one of their videos on the subject here.
WotC still remembers the lesson that is Fallen Empires.
When the game first debuted they could not print enough to satisfy demand. Print run numbers increased with each subsequent set from alpha beta, unlimited and expansions Arabian nights, antiquities, legends and the dark. Revised came around and got multiple print runs as opposed to just one. Things were looking good at this point.
Then came Fallen Empires. WotC printed so much that they flooded the market – an estimated 350 million cards vs 75 million for previous set The Dark. Compound that with the power reductions happening in the game since revised/the dark and WotC ended up with a disaster on their hands. Nothing in a Fallen Empires pack was worth the value of the pack itself. People didn’t buy the packs…it was years before Fallen Empires started to become scarce.
This is less of an answer to your question than some of the other posts in this thread that speak to the economics, but I felt it worthwhile to provide specific context from Magic’s past. It was an interesting time. There was chatter that the game might be dying, but Ice Age and then Alliances did a lot to right the ship.
after looking at the comments, this is a “You” problem. the rest of us can buy entire boxes on amazon https://www.amazon.com/Magic-Gathering-Tarkir-Dragonstorm-Booster/dp/B0DSQZC4PB at msrp (or less) and have them here by Wednesday.
If I had to guess you are in the UK (you use £ for a lot of prices) in which case that link (switched to co.uk) lists the price at £120 ($160), which is about the 25% markup you have been complaining about. I dont know exactly how it works not being from there, but there does appear to be a 20% VAT with an extra possible %3 customs duty on imports. This seems the likely culprit. Your own countries tax code is jacking up the price, not WotC or Scalpers.
Collecting is a big part of most tcgs, and it’s more fun when you can’t just buy every card from the company for straight cash.
ELI5: Wizards of the Coast makes more money if they hit the sweet spot between scarcity and availability
Their goal is to maximize long-term revenue.
The business model Wizards uses is designed around one of the most addictive behavior patterns a human brain can be subjected to – diminishing positive reinforcement. Humans who engage in this pattern are likely to be excellent long-term customers.
In practical terms what this means is that when a set is new and you start opening booster packs every rare card you see is new (positive reinforcement). But as you open more and more packs, the number of new rare cards you see goes down (diminishing reinforcement). You start to see rare cards you have already seen before. The more packs you open, the less novel the rare cards become. Eventually seeing a new rare card becomes an exotic moment. But when you do see a new rare card the positive reinforcement effect is enhanced. Humans seek novelty and diminishing positive reinforcement delivers it!
By making rare cards you buy as singles tend to cost much more than rare cards you buy as randomized booster pack injections, you are being trained to prefer to buy booster packs rather than singles. The additive cost for all the people in the middle between a booster pack and a single card drives the price up and the higher that price is the more likely you are to buy a booster pack instead. You don’t get any positive reinforcement from buying a rare single other than whatever positive feelings you have from ownership. (Obviously at some point the convenience of just buying the card you want exceeds the combined cost of all the booster packs you might have to open to get it, and so it becomes rational to buy the single card.)
Wizards benefits from this system because it drives the player to purchase booster packs, purchased from retailers, who buy them at whatever price Wizards wants to charge (there’s a wholesaler layer in the middle of that transaction for a lot of stores but we can ignore that since the discounts are stable and Wizards de facto controls the price retailers pay by threatening to withhold product from wholesalers who get out of line).
It helps lengthen the time before a customer “burns out” and ceases purchasing.
Wizards also makes a mountain of money from single card sellers who process millions of booster packs to extract, sort and sell the rare cards in parallel to the boosters being purchased individually. So they’re happy to feed both sides of this market; but they don’t give bulk discounts so those single-card sellers are effectively just very active player/purchasers from the standpoint of Wizards’ sales numbers.
The ratio between cards purchased in booster packs by players to single cards purchased over the counter has to be carefully calculated to maximize long term revenue.
Source: Was a VP at Wizards of the Coast around Y2K, co-created the Legend of the Five Rings CCG and published it and about 8 other collectible products from 1995 on.
Planet Money did a great episode about exactly this
https://www.npr.org/2021/03/31/983110019/the-curse-of-the-black-lotus-update
It’s not false scarity, that’s just how the world works. WotC has a finite number of printers and they are running 24/7. It might take 6 months to print all the cards in a set that they plan to sell. It costs money to warehouse it, so they avoid warehousing. So they sell as they print. They surely cant satisfy all potential buyers on day one, since it takes 6 months of printing to have enough cards to sell to everyone who wants to buy. Someone will get buy the cards first and someone will buy them last. If everyone wants it on day one, some people will be unhappy, and some people will scalp and some people will buy from scalpers.