A Bank of America analyst says Hasbro is “destroying the long-term value” of Magic: The Gathering by overprinting cards. The dire warning was accompanied by a double downgrade of Hasbro stock — from “buy” to “underperform” — as its valuation fell more than 5% before trading began on Monday.
“Hasbro is overproducing Magic cards which has propped up recent results,” wrote research analyst Jason Haas. “Card prices are falling, game stores are losing money, collectors are liquidating and large retailers are cutting orders.”
Hasbro has recently touted the performance of its Wizards of the Coast business unit, which includes Magic as well as the Dungeons & Dragons tabletop role-playing game. Haas notes that Magic alone accounts for some 15% of Hasbro’s annual revenue and some 35% of its annual earnings. Sales of the collectible card game nearly doubled over the pandemic, and Hasbro has urged that growth onward with additional new releases throughout 2021 and 2022. But Haas believes that the end of that growth curve is looming on the horizon, in part because “Magic has grown primarily by extracting more revenue from each player rather than by growing its player base.”
For individual retailers, the effect can be seen on store shelves.
“The increased supply has crashed secondary market prices which has caused distributors, collectors and local game stores to lose money on Magic,” Haas wrote. “As a result, we expect they’ll order less product in future releases.”
Haas also called out the Magic 30th Anniversary set as particularly egregious. These $999 bundles include just four packs of cards, which are normally priced around $5 each. But these special collector’s packs include reprints of highly sought after cards such as the Black Lotus. While technically unplayable in some of the game’s most competitive formats, their reintroduction still breaks a vow made to fans decades ago.
“Not only is the price excessively high,” Haas wrote, “but the set also includes Reserved List cards which Hasbro had promised to never reprint. This has created panic among collectors and we’re seeing collections being liquidated now that the scarcity value of Magic is in question.”
Haas concludes that Hasbro needs to cut its print runs going forward in order to allow more of its older product to sell through.
“Local game stores already appear to be selling Magic’s latest expansion set, The Brothers’ War, at a loss on TCGplayer,” Haas wrote. “Brothers’ War draft booster boxes are available now on TCGplayer for $107 and set booster boxes for $112, below a break-even price of $115 and $120 (per our math).”
Haas said that this kind of overproduction could ultimately lead to a loss of dedicated fans.
“While Magic has a dedicated and sticky fanbase, we’re concerned that continued overproduction of cards and declining secondary market values could push players and collectors into other trading card games such as Pokémon, Yu-Gi-Oh! and Flesh and Blood,” Haas concluded.