I have heard a lot of very strange stuff on podcasts and comment boards — and even in articles — recently. Stuff about how cards should be free, and how making people want to buy cards is bad for Wizards and the game, and so forth. Time to review some very basic economics. This is the stuff you should have learned in school, had you been paying attention. Plus, the prerelease.
Let’s start with some real basics: why stuff has value.
I have an offer for you. I have here a pound of soil, mixed with water almost to the point of liquidity. It is, technically, a slurry. What do you think of that? What is that worth?
Err — “cheap as mud?” That’s sort of circular — it is mud.
What’s mud worth? Would you trade it for an equal weight of Moxen? Suppose I told you that this mud was made with not just any dirt, but Antigo Silt Loam? Antigo Silt Loam is the official state soil of Wisconsin. (Seriously. We have a state dirt.)
The point is that mud is not exactly scarce. You can get it anywhere, sometimes whether you want it or not. It has very little value.
Economists talk about supply and demand. The supply of mud is high to extremely high. The cost of producing more is low. The demand is non-existent, since anyone who wants some can general pick some up for free.
High supply and low demand means that the substance has very little value. Econ 101.
On the flip side, something with a very high demand and low supply has value. A Beta Black Lotus, for example, has a very high value. Both demand and supply apply in determining demand. For example, exactly the same number of Black Lotuses (Loti?) and Cyclopean Tombs were printed, but you can get the Tomb for $15.00. Black Lotus is a bit more expensive.
Now I’m sure that some people, reading the paragraphs above, were thinking “wait a minute. If a person was dying of thirst, then mud might be worth a lot.” Overall scarcity is based on overall supply and demand, but both supply and demand can vary by location or time. If the supply is limited, for whatever reason, then the price will increase. This can get pretty extreme. For example, movie theatres can restrict supplies, which is the only reason they can charge $10+ for a cup of soda and a bucket of popcorn. Likewise, a can of soda might cost $0.35 in a store, but $3.50 in a vending machine in a hotel or at an airport.
For the same reason, dealers can charge higher prices at a tournament. Sure, you may be able to get a card more cheaply on eBay, but if the tournament is going to start in an hour, that does not help. In this case, time considerations limit the sources of supply. You pay more because you need the card now.
On the other end of the spectrum, if you want a good deal on Baneslayer Angel, just wait until she rotates out of Standard — and an even better one when she rotates out of Extended. She’ll be about $3.50.
Okay, one more basic economic premise…
Profits Are Not Evil
I keep hearing people saying “Wizards is just doing it for the money.”
Yes, they are. They are a corporation. They have investors. They have, at the most basic level, struck a deal with those investors. The deal is “give us some money, and we will work to make you more money.” That’s what corporations do — they work to make money.
People may have other motivations for doing things — they may enjoy an activity, they may have a sense of obligation, for the glory, for the groupies, whatever. For example, I write partly because I get paid, but partly because I like to teach, partly because I love telling stories, and partly because I am good at it. People do things for all sorts of emotional reasons.
Corporations — not so much. Corporations do things because it is good for the corporation. (Or, in cases where an executive has too much control, because it is good for the executive, but that’s not really relevant here. You can discuss Enron and Bernie Madoff elsewhere.)
However, profits are not simple. Profits require some balancing. A corporation has to balance short-term profits off against long term viability. It has to protect against economic downturns, and have a strategy for sustaining sales during slumps. (For example, you could vault some of your product from this year, and when the economy falters, you could slip in some old stuff as a special bonus, to pump demand in bad times. In theory, of course.)
Corporations also have to balance off the needs of their best customers and their lesser customers. Those buying in huge volumes should get benefits and discounts — but not so much that the smaller customers are squeezed out or turned off. Etc.
Corporations do not sell one product at one price. They could, but that hardly ever maximizes their revenues. The last company to do that in a big way was Ford, with the Model T, roughly a century ago. You could get a Model T in Black, with one set of features. Times change. I am shopping for a truck. Ford now offers several sizes of trucks, with three different cab options, four trim packages and several options for engines, drive packages, etc.
The reason is simple. No matter what a customer wants — and, more importantly, is willing to pay — Ford has a truck that can match that customer’s wants fairly closely. For customers that want a stripped down basic truck for $15,000, Ford has one. For customers that want a super-luxury truck, and can spend over $50,000, Ford has something to sell them. If Ford had just one truck, priced about $18,000, it might be able to sell that truck to both buyers, but because it has both, it picks up all that extra money from the upper end buyer, and does not risk losing the low end buyer to another provider that has a more basic truck.
If it were practical, Ford should offer each customer exactly enough truck to make the customer spend as much money with Ford as they can. However, that level of exactitude would mean hand-crafting each truck (or at least running a custom final assembly), which would lose all the economies of scale and scope of operating a large, modern production plant.
A corporation should aim to provide a product for every customer and segment, provided it can do so profitably. Some customers, however, simply are not profitable to serve. Sometimes, the customer simply does not have the budget for product that they need. (e.g. when I was in high school, I wanted a 427 Shelby Cobra in the worst way. I could afford — well, maybe the hood ornament.) Other customers may have needs too narrow and specialized for a large company to address. (e.g. ambulances and cranes are generally made by specialty companies, although Ford may sell those companies the truck chassis and engine.)
Wizards does the same sort of thing. They have basic booster packs for many customers. They have the mini-boosters for Walmart and the like. They have foil sets and special products for collectors. They have precons. All of these serve different sectors of their customer base. Don’t like precons? Then they probably are not aimed at you.
Wizards also has a number of different “stakeholders” to protect, in addition to the several flavors of retail customers.
Who Are Wizards “Customers”
Wizards has a number of market segments it needs to keep happy. All of these are critical to the company’s continued success.
First off, of course, Wizards has to keep Hasbro, its corporate parent, happy. That also means that it needs to keep the Hasbro shareholders happy. Overall, the secret to doing so is pretty simple: make profits, and don’t do anything embarrassing or otherwise harmful to Hasbro.
Beyond that, Wizards needs to keep a number of different actors happy. These are all critical to the continued success of Magic the Gathering.
The first step in the process is the wholesalers. These are the regional distributors that buy in bulk, and distribute the cards to retailers. It is pretty simple to keep these people happy: just make sure that the boxes of boosters keep flowing. The only thing that can really hurt distributors is when they get stuck with a lot of product that does not move. If that becomes bad enough, Wizards may have to buy the product back, and eat the losses themselves.
The next step is the retailers. These are the games stores around the world that sell booster packs and boxes to customers, plus the mail-order pack sellers like StarCityGames.com. These providers are happiest when they can sell a predictable amount of packs. Having packs sell is good. Having packs sell at a predictable rate is even better. Retailers hate having product they cannot sell, but they also hate having to tell people that they are sold out.
The next major group that Wizards has to keep happy is the singles sellers. StarCityGames.com is the big boy here, but this segment also includes all the people making money buying and selling cards in a large way. These people make Constructed play possible. They are why players can design decks, and then get the cards they need in time for the PTQ. Without sellers, large events like GPs would be impossible. Would you pay $25.00 to attend a PTQ if you could only get 1/3rd of the cards you needed for your combo deck, and had to play fillers for the rest?
The next big group — the biggest — are the players. These include the tournament players, the casual gamers, and the people who buy a couple packs and play Magic as a “beer and pretzels” game. All of these are important. Tournament players bust a ton — many tons — of packs drafting, and they chase rares. Casual players, on the other hand, probably buy more cards and packs. Wizards knows for sure. What is clear is that both segments are critical. Saying that just one matters is ridiculous. They are different, but important.
An analogy: on my truck, the front wheels steer. The back wheels drive the truck. Neither is more important, and it is pretty clear what happens if either vanish — a grinding, screeching crash. Same with casual and tourney players.
Next in line are the tournament organizers. It is extremely clear that the Pro Tour and PTQs, as well as all the other tournaments from FNM up through $5ks and so forth are a huge part of Wizards marketing campaign. It is also clear that the marketing campaign works very well. TOs are necessary for that process to function — but I don’t know if that makes them a Wizards customer segment or not. TOs, like judges and writers, are customers, in some ways, and seem like employees in some ways. We are independent contractors — sort of like the advertising agencies, caterers and so forth hired by a company like Hasbro. TOs, judges, coverage folks, writers, etc. all provide important services, and Wizards needs to keep us happy so that we keep producing, but we are not exactly customers. Whatever — that’s just semantics.
(Speaking of producing — this article is late, again. Sorry, Craig.) [No worries Pete — Craig, amused.]
Let’s look at some recent product offerings and Wizards actions, with an eye at who they serve.
Wizards does not pay judges. We clearly work at events like PT: Austin, but not as employees. If we were employees, that status would trigger all kinds of legal rights and responsibilities. Wizards would have to pay us, possibly paying overtime. They would have to pay unemployment insurance payments to the states, withhold income and social security taxes, and comply with lots of laws regarding citizenship status, age, etc. By not paying us, they avoid a lot of legal and paperwork hassles.
On the other hand, judges typically work 12 hour days, and we work hard. Wizards also needs to make sure that they can attract, and keep, the best judges available. That means that they have to absorb a lot of the costs. They can provide meal stipends, and pick up hotel rooms and airfare at times, but attending a PT costs a lot more than that covers. So Wizards provides judge foils.
Wizards does, indeed, have a money machine. It can print limited edition cards, and those cards have value. Sometimes, like with the original Judge Balance, that value can be significant.
Judge foils are a combination of “thank you” and a partial recompense of the other costs (e.g. taxis, judge uniforms, etc.) that judges, coverage folks and the like incur in working events. They are scarce, because that scarcity is what gives them value. Judges earn them. Coverage folks — well, not so much.
(That’s a joke, folks.)
The Reserve List
The reserve list is a list of old cards that Wizards has promised not to reprint. The reserve list includes most of the rares from old sets, excepting only those that were already reprinted in core sets by the time the reserve list was established. It is the reason that Wizards is not reprinting Black Lotus. Black Lotus is on the reserve list.
The reserve list does not exist to protect or serve players, per se. It exists to protect singles dealers. It says to dealers, like StarCityGames.com, “go ahead and invest in cards. We won’t do anything to suddenly cut the value of that investment.”
StarCityGames.com lists over a dozen Mox Sapphires at the moment. They probably bought them for a significant portion of the retail price — meaning that SCG sunk several thousand dollars into those cards. When you total all the investments in all the cards on the reserve list, that value is many, many thousands of dollars. That type of investment simply will not happen without the promise of the reserve list.
I said that the reserve list does not serve players — that’s wrong. The reserve list is why we have dealers, which is why we have Constructed, which is why Wizards can keep making cards for Constructed, Limited, and casual.
We can argue about whether Lotus Cobra should or should not be a Mythic. The definition of Mythic, as given by Mark Rosewater, is not really precise. You can make a case for LC violating the rule, or not. It’s like defining good chocolate. Ingrid likes 99% super bitter dark chocolate. I prefer milk chocolate. We disagree.
What I do like about Mythics is how they interact with Limited. Imagine if Baneslayer Angel was in an old set, as a rare. Sets like Sixth Edition or Onslaught had 110 rares. With 24 packs being opened in every draft, that means you would see Baneslayer Angel once every four drafts or so. That would get old. With Mythic rarity, we have to face the Baneslayer a little less often. It’s not huge, but it is significant.
Elimination of Tournament Packs
Here’s another trade-off. Judges hated the elimination of tournament packs. Tournament packs made Sealed PTQs so easy. You just had players list the contents of the packs, then stick the cards, including the extra boosters and the decklist back into the tourney pack. The basic lands stayed on the table, so judges did not have to create land stations. The boxes kept the cards together, making it easy to collect and redistribute the cards. Tourney packs were great.
I suspect that retailers and distributors hated the tourney packs. If booster packs are left over after an event, they are easy to sell. Tourney packs — not so much. Holding a Sealed event was always a bit of a risk. If you guess high, you can end up with a bunch of tourney packs no one really wants. That can force a retailer to sell them at cut rates, and lose profits. That’s bad.
I find it notable that tournament packs disappeared immediately after local stores were allowed to do prereleases. Those stores could run prereleases for up to 32 players, if I recall correctly — meaning that each store had to buy 32 tournament packs. If they only got 12 players, that meant they suddenly had 20 tournament packs to try to sell. That would be tough sledding for most stores. The next time a prerelease rolled around, the stores were just buying booster packs — meaning that any leftovers were a synch to sell.
Eliminating boosters have some other advantages — 2/2/2 is a much better mix for late season Sealed events than the old 3/1/1 mix when tourney packs are involved. It’s good for everyone but judges, and we judges are finding work-arounds.
This was an interesting twist. A very few booster packs had real, playable, old cards. It was a special bonus for a very limited number of lucky players.
It pushed product sales. These inserts should provide one more way of moving product, meaning that distributors and retailers are less likely to get stuck with unsold stock. That’s really important in economic downturns. (A note — this decision had to have been made quite a while before the set was released. It was probably made last winter or early spring — and at that time the economy was bad and falling. With hindsight, the boost may have been unnecessary, given how great M10 and Zendikar look, but hindsight is always 20/20.)
Here’s a quote from one of the forums — maybe MTGSalvation. I forgot to list the source.
This would be quite neat. I’m grabbing two boxes, if this is real I hope I can see it.
That’s what it is intended to do.
The other likely outcome was to get people to come to the prerelease. The new broke a day before or so — and the confirmation came about lunchtime, where I am. The result was that I went to the local midnight prerelease, despite having gotten up at 5am on Friday, and having to work all day Saturday. The primary reason I went was because of the “hidden treasures.”
Nice marketing, Wizards.
I went undefeated — but I only played one round. I had double Disfigure, double Gatekeeper of Malakir, and Living Tsunami. Fast, aggressive and evasive — I won fast, including a couple other games played for fun. Then, with half an hour left in the round, I headed for home. Midnight prerelease, after all. The economist in me decided the value of the packs I might win was less than the pain of staying up late, and the risk of falling asleep on the drive home. I had been up for over 20 hours at that point, and I’m not in college anymore.
Which is sad.
From the Vault: Exiled
A few podcasters, and others, have been complaining that Wizards screwed up on this, and that it should have been a lot more widely printed. That way, they argue, everyone could get one.
Bzzt — wrong.
All of these cards are already available, albeit not in foil, and not with the alternative art. These cards are all about being rare, special and hard to get. That’s the whole point. They are aimed at the Vintage players who want to pimp their decks. They are bling.
Sure, Wizards could have printed some foil rares in much greater numbers, so that everyone could have them. That’s exactly what they do with precons — each precon has a foil rare. Those foil rares don’t have all that much value, because the supply is too high.
Some commenters also complain because the price of FtV: Exiled is so much higher than suggested manufacturer’s retail price. That’s deliberate. FtV: Exiled is a gift from Wizards to the retailers. The retailers can buy the product at the normal fraction of MSRP that they pay on all Wizards products, but they can get a much higher markup. That helps the retailers. Remember what I said about Wizards needing to serve all of the stakeholders. It’s like that. (And the pricing is a lot more complex and variable, but this is already really long.)
In fact, I need to wrap this up. I have work to get back to — and maybe a draft later on, if I’m lucky.
“one million words” on MTGO