Magic financiers typically point to the growth of the playerbase as the primary driver of rising card prices in recent years. Rising card prices, in turn, have been the primary driver of Magic finance. Without new money pouring in, speculating on Magic cards would largely be a zero-sum game closer to gambling than investing.

The magnitude of this growth really came to light after the Hasbro Toy Fair Investor Presentation two years ago. They showed us this chart:

The chart shows that Hasbro attributed approximately 75 percent of revenue growth from 2008 to 2012 to “growth from player population” (had to estimate since the bars aren’t labeled) and about 25 percent to “growth in per player spending.” Simply put, new players were the ones mostly responsible for the surge in Magic’s sales.

Now let’s look at a slide from this year’s version of the same presentation, which was released just about two weeks ago.

Interesting how things have changed.

Hasbro is reporting that the active player base grew by only six percent in 2014, but that per-player spending grew by 11 percent. It can be tough to make perfect apples-to-apples comparisons from these presentations because there are small but important differences in the way Hasbro reported the metrics, but I think the overall message is clear.

In 2014, the increase in per-player spending of existing players had a bigger impact on Magic’s revenues than new players did. This is a pretty dramatic reversal from a few years ago.

New Players, Old Players

Take a minute to think about new players and existing players and your experiences with them. Anecdotal as it may be, I think it’s a good way to add context.

My perception of new players is that they mostly buy sealed product. After new players start playing Magic, they go through a phase where they accumulate cards to start a collection and begin building decks. To accomplish this, they buy boosters, fat packs, intro decks, etc. I’m not saying it’s the only thing they buy, but it’s the main thing.

New players do trade for cards, but they need something to trade away first. They might buy some individual cards to fill gaps here or there, but I rarely see brand new players shelling out for expensive singles and I rarely see them putting entire decks together this way. Even if they want to jump right to a fully-built deck, they are more likely to buy a Commander deck or another preconstructed product than to walk into a game store with a deck list and a credit card.

Existing players are mostly the opposite, from what I have seen (and since I am one of these, from what I do). Most of their money goes to singles because they have a better idea of what they need and buying singles is the most cost-efficient way to get those cards (aside from trading). Existing players are much more likely than new players to be playing expensive formats like Modern or Legacy as well, and with few exceptions the cards needed aren’t available in sealed product.

Existing players do buy some sealed product, in my experience. They certainly draft with it, and they might pick up some amount of sealed product each time a set comes out. It could be a booster, a fat pack, or maybe even a box. Still, I think it is typical for existing players to spend more, and sometimes considerably more, on singles than on sealed product. I know this is the case for my playgroup.

Based on this, one would think that the key to Magic’s revenue growth is new players buying sealed product. While existing players do supplement this revenue, a large part of their spending goes into the secondary market and thus does not make it into the coffers at Wizards HQ.

At least that’s what I thought two years ago. Hasbro said in their annual report that year that Magic revenues grew by 30 percent, and if three-quarters of that came from new players (as the graph indicates) we were looking at 22.5 percent growth in the player base. That number dwindled to six percent in 2014.

Here’s the thing about new players: they don’t stay new. By the time Hasbro issues its next annual report, this year’s class of new players gets tossed right in with the existing players. Hasbro is depending on another group of newbies, even bigger than the last, to show up each year.

In 2014, the class of new players was bigger than the year before, but not that much bigger. Don’t get me wrong—six percent growth is still very strong; it’s just not the explosive growth we have become accustomed to. In fact, according to the 2014 slide, the increase in per-player spending outstripped the growth in the player base two to one.

The story of Magic’s growth, it seems, has taken a turn. Today it is less about new players than about existing players spending more on the game than ever before. It’s about you and me opening our wallets even further. We’re getting older, we’re making more money (maybe even because of this website), and we’re spending it on Magic.

What does this mean for Magic finance?

Changing Dynamics

The first thing I want to point out is that existing players haven’t changed their habits too much. The flip-flopping of new and existing players is mostly about the precipitous drop in new player growth. Existing players may have upped their spending marginally, but that spending is now much larger in comparison to new players than it was before. [Quick math: if 22.5 of the 30 percent total growth in 2012 was from new players, 7.5 percent was from per-player spending growth. It’s 11 percent today.]

The second thing is that existing players are probably still spending most of their money in the secondary market, and that still doesn’t show up on Hasbro’s slides. With existing players, think of that 11 percent revenue growth as the part of the iceberg above water; for every dollar that goes to Wizards for sealed product, there are many more going to local and online dealers that we can’t see.

That’s mainly to say that dwindling player growth doesn’t spell an immediate end to Magic finance. I’m still spending my bonus on dual lands for my cube this year just like a lot of you, and that is still going to drive those prices higher regardless of how well Fate Reforged sells.

It certainly does affect the outlook for recently printed cards, though. One of the tenets of Magic finance is that out-of-print cards will climb in value due to growth in the playerbase. For example, Wizards will print enough Khans of Tarkir for the playerbase today, so after a few years of solid growth in the playerbase and no more Khans being printed, there will no longer be enough to go around. Prices climb. We’ve seen it happen over and over.

Now we may be looking at a world where the player base will be only slightly larger next year and the year after. Prepare for the possibility that there will still be plenty of [card]Siege Rhino[/card]s to go around in 2017. Every time you hear the phrase “slow gainer” in 2015, take a drink.

Also consider that cards which formerly held high prices due to low supply (not high demand) and have been reprinted near the height of Magic may be ruined forever. That is to say, the days of “recovering” from a big reprint may be behind us if the card is not a tier-one Modern staple. [card]Stifle[/card], I’m looking for you. There might be enough [card]Stifle[/card]s at under $10 for everyone that wants to play them for a long time.

Wealth and Magic

In the past, we’ve focused on demand created by new players picking up the game and “catching up” on out-of-print cards. I think it is time to start shifting that focus to the demand created by existing players as they accumulate wealth. Why the change? Because this wealth effect is not going way, no matter how weak or strong Hasbro’s sales are next year.

Magic is twenty years old. Those of us who started playing as kids early in the game’s existence are now in our late 20s or early 30s. Most people make a lot more money in their 30s than they did as kids. Guess what? Most people make more money in their 40s or 50s than they did in their 30s, too. Many Magic players are now squarely in their prime wealth-building years.

This is to say that even if you froze the player base at the current size, prices of out-of-print cards could still increase. Wealth triggers demand. Every year, I can afford something I couldn’t afford last year, and every year it gets easier to justify spending more money on my hobbies. Magic players are an intelligent bunch. I imagine that, on average, they are well-educated and successful. That means they are going to make quite a bit of money in their lifetimes.

Not only are players building wealth, but more players are graduating (literally) to this wealth-building period of their lives each year. You know the drill—work hard, graduate college, get a good job, buy power. This wealth-building period of life is long. Unlike the quick transitions from high school to college to the job market, people stay in this phase for decades.

For lack of a better way to say it, many Magic players are becoming rich and these rich Magic players will probably grow in number for years to come.

As we established earlier, experienced Magic players tend toward the secondary market. Nobody is buying ten cases of Khans instead of a Lotus. So what exactly are they buying? Ask yourself that question, because you are very likely an experienced Magic player.

If you had the money to buy any Magic card, what would you buy? The question is becoming relevant to a lot of players and I can tell you that the answer is never [card]Siege Rhino[/card].

In Conclusion

The growth in the playerbase may vary quite a bit in the coming years, and that is going to make Magic finance tricky when it comes to newly printed cards.

One thing you can count on, though, is that entrenched Magic players are accumulating wealth and will continue to spend more and more of it on their hobby. I think this will be the biggest driver of Magic finance in the future, if it isn’t already. Remember, the 11 percent growth in per-player spending last year doesn’t include secondary-market purchases, it’s just the tip of the iceberg.

If new player growth drops to zero, newer Magic sets are going to have a very hard time holding value. But this money from entrenched players is still going to be out there, growing, and chasing high-end Magic cards. The most attractive cards in this environment are those that are highly coveted, in limited supply, and are immune to reprints. Obviously that spells “Reserved List” for most, but there are other unique and rare cards out there that will benefit—promos, old set foils, etc.

That’s all I have for today. Find me on Twitter or Reddit (@acmtg) if you have any questions or comments.

Thanks for reading.