Darren Rovell on the $3M Babe Ruth card loss and the state of the sports memorabilia market

in performance benchmarks, number one in competitive bakeoffs, number one ranking on G2. Let's bring in our guest from the Reream rating room. Good. Darren, what's going on? Darren, what's up? How are we? Second time on the show. Thank you so much for coming on. I'll let you take this. Sweet. Uh, great to have you back.

Uh, what's happening in your world here? You've been, uh, you've been flipping, uh, flipping pretty hard. So, uh, break it down for us. So, uh, this weekend a 1914 Baltimore Babe Ruth, Baltimore News Babe Ruth sold for, uh, $3 million less than the guy bought it, um, in 2023. Brutal.

Making it the biggest card loss of all time. No way. Now, I thought they I thought they only went up. Yes. So did that. Adam Smith never said that. No, never.

Um, so you know, it's very interesting to me because um I don't like to admit when I don't know something, but when this card when I first heard of this card was when Collectible, which was one of those fractional share companies that went bust, when they said they were buying a piece of it, I think it turned out to be like a 1% piece, okay, for a value of $6 million.

And I had said, "Hm, I've never heard of the 1914 Baltimore News, Babe Ruth. " So, I did a little research. Uh, newspapers. com is probably the best value that I have. I mean, $150 a year for all the newspaper stuff. I mean, wow. I look That's crazy. I don't actually I'm actually not familiar.

This sounds incredible because we're always I mean, we we have a little recurring segment on social. We talk about this day in history. I'm sure we could get a bunch of bunch of alpha. Oh, you can get now.

Hopefully they didn't see this because I've been subscribing for a long time and they're not too good at business cuz I would like 10x more. Yeah. Yeah. Exactly. So anyway, uh I looked and tried to see when the first mention of the 1914 Baltimore newspaper is again because I didn't know and I think I know everything.

Yeah. the 2006 Durham Herald Sun. That was the first mention, at least on what newspapers, and they have a lot of newspapers in there. That was the first mention of the 1914 Baltimore News Babe Ruth. So, I kind of have this theory that people don't think it was a card. Interesting. On the back on the back is a schedule.

So, it's Babe Ruth in the minor leagues the year before his rookie year and it has a schedule of the of who they're playing and it came in a newspaper and it was a 10 card set. Okay. So, one of the reasons one of the reasons why I think this guy lost was because there's only so many people that know this.

A lot of people buy cards and big cards so that they can say they have the big card. And when someone says, "I have the big card. " Oh, what card is that? I don't even I've never heard of it. It's a whole lot different to have a T206 Honus Wagner or a 1952 Mickey Manel than to have the 1914 Baltimore News Babe Ruth.

Uh, and so I think that's why the guy got it handed to him. Okay. And why would Do you think the person that just paid 4 million for it knows that it might not be a real card? No. I'd like to know who it was that that bought it, but I don't think I'm gonna find that out.

Uh, again, it it's a real card by a lot of standards. Uh, so after I I looked at the 2005 2007 Durham Sun, I did more research and people had mentioned it in the early 80s.

So they they'd mention it in passing, but to me it doesn't inspire a whole lot of confidence that something that was beginning in 1914 until 1980, no one talks about it. I I'm just not comfortable. I'm not comfortable. So that's my take. Might not be, but it's my take.

What does it say about uh do you think other people that own you know uh own some of these like flagship cards are a little bit concerned now about the like real market value of whatever they're holding or is this like a one-off like no the market the market is as hot as ever?

Um, I sold 31 things uh this weekend on Heritage Auctions and some of the prices that I got were were amazing. Um, some are are painful in terms of you know really able to do this like you know I just uh it's hard to sell. It's always hard to sell but I got some some really awesome prices too.

So this is the question is you buy did you buy 31 times too to just even it out? Well, you tell the wife you didn't. You say, "I made so much money. " That's how it works. And then, you know, there's a different bank account that then goes out.

Uh it's all [laughter] about trust because in in the end, I mean, I'm married 17 years. It's all about trust. It's all about we are going to win anyway. We're doing it for our family. So, uh I did buy a massive massive massive piece uh about two weeks ago and I had to clear some room. You had to clear some room.

Um, but yeah, this is investing, right? So, we made a lot of money. We're going to invest some of it again. That's how it goes. Talk to me about Yeah, you have. Yeah. Talk to me about Otani on the Dodgers because uh my family I'm not super into baseball, but I do go to the occasional game. I often get Otani bobbleheads.

I was so confused. By the way, I had a I had a I had a Dodgers hat on. Not because I'm a fan of the Dodgers. It's just a green hat and I like New York City. I've always uhve I Wait, what? I was wearing green New York City. They they made a green Dodgers hat. Okay. So, I was wearing a green Dodgers hat.

And it was for the Brooklyn on Saturday. So many people were were telling me we're yelling baseball things. I'm like, I wear this hat all the time. Why is everyone yelling? And then I found out um from the security in my neighborhood that the World Series was happening. That's how I learned the World.

So, we're out of the loop here, but we're That is That is quite You guys have to pay a little bit more attention. Well, no. We we're I'm more interested in the mark I'm more interested in the market than the the just alts market in general than the actual game being played. For sure. Yeah. But my question Yeah.

My question about Otani is that I've been getting bobbleheads when I go to the game, but it feels like there's uh the market like the equilibrium of the market is beating expectations, right? Because if there's really high expectations, a lot of products are produced, right?

And so are where are we on like clearing prices around Otani? Is he blowing out expectations and so market prices are rising or is there a different dynamic? Yeah, absolutely. Everywhere.

So, Fanatics has a deal with Otani and they're buying up all the Babe Ruth Balls because they want to have Otani sign the Babe Ruth Balls and then, you know, sell them. So, if you're What do you What do you think? What do you think about that? Is that Is that not like I don't want it. I I want Babe.

Now, Babe Ruth signed plenty. He signed a tremendous amount. But uh to me, so there's so the the value of Babe Bruce single sign balls are going up because they are buying in in the back room. They're buying as many so that they can put a ton on it. The the bobbleheads, I mean, the bobbleheads since 1997.

I mean, it's amazing the life of the bobbleheads and the lines of the bobbleheads. The Dodgers did a really good job gamifying it. So you have to gify it for the degenerates and the youth. every we live in a degenerate economy. Yes.

And uh so you have to have 10 that are golden and only a couple with the that come with the dog and you know and then that really kind of you know jams up eBay. So the Dodgers have done a good job. But Bob Why does it jam up eBay? You by jamming up you mean just makes it popular. Yes. Yeah.

People people uh you know people really like to go to buy their bobbleheads on on eBay. Uh it's amazing to me that that's been going for for 30 years. Yeah, I'm surprised there's not another thing. I mean, the market is so uh it's so crazy.

I don't know if it's always like this, but when I go to Dodger Stadium and they give me a bobblehead, there will always be someone inside the stadium who paid for a ticket. Who's who offers? And you think about, okay, what is the sunk cost of that ticket? They're not actually watching the game.

They're there just to acquire the actual merchandise. By the way, I got to jump in. I I I I misspoke. I meant the It was a Y is a Green Yankee. I was about to say [laughter] what are you talking about? I'm not going to come on anymore if you guys don't know the difference between a Dodgers and a Yankees.

I do know but I but I have both I have both I have a I have a Yankees hat and a Dodgers hat and I wear them interchangeably. Uh and so I just like to confuse the people in my neighborhood. They don't they don't know. Dodgers were in New York at one point. They were in the Brooklyn.

But uh yeah, you were wearing they were Wait, but then why were people talking to you about the Wait, were you No, I I just was I just was wearing I was wearing a base a baseball hat. Yeah. Yeah. And I didn't know it was a World Series, so I didn't know why people kept yelling like random baseball related things at me.

Like, you know, people were just cheering. The Yankees haven't won the World Series since 2009. So, you should know that. So, we're they're in a in a 16-year drought right now. It's not good. Brutal. Um, what uh Yeah.

So why why would this person that just sold for Do you think this was a forced seller like somebody that just had to get out? Like otherwise you would just sit on it? I think so. I think so for sure. I mean uh I always say that the assets that are in this space are not its they are whats.

And and you know if you there's no absolute here, right? It is it is when do you sell it? Yeah. What is what auction house are you selling it? What's the description in the auction house? Um what's the publicity? What's the marketing? These all play.

It's like when when someone says to me, um, hey, I'm going to invest in Otani because he's playing well. I said, this isn't collecting isn't fantasy. Collecting isn't fantasy baseball. Collecting is a amalgamation of all the factors. Yeah. That go in. Yeah. Right. It's it's how many people collect Otani.

What is the worth of the people who collect Otani? What is their ability when they when it's going down to stay and hold?

And if you're a 35year-old man with money and you collect what people who are 16 to 20 collect, you better know because they don't have the wherewithal to hold on if it goes down and then that affects you. Or you better know if there's a guy who owns 600 of them because again, those are the market factors at play.

It's not as simple as a game of fantasy. Yeah. Do you have any insight into what's going on at GameStop? We had the CEO of GameStop, Ryan Cohen, on the show and he was talking about prize packs. What was it? Power packs. So, let me let me This is This is This is This is a fun one. Yes.

So, rep repacks are like the new thing. There are if digital repacks are even crazier. Now, people who are watching this show, I'm now going to blow your mind. Okay. uh digital repacks. This is how digital repacks work. You open a pack digitally. That card really exists in the company's coffers or vaults. Okay?

You open it, you don't like it. So, you pay $25 for it and it's $8 in value. Then they immediately offer, do you want to exchange it at 80% of the value? And then you're like, okay, I'm comparing this to gambling where they're it's a zero sum game. If I lose, I'm zero. Yeah.

And they're like, "Wow, I can I could I only lose 20%. " And so these companies like Courtyard and Arena Club who do these digital, by the way, then it goes back into the pack, they could sell the same card 30 times a day. Wow. And they [snorts] show you the checklist. They show you Yeah. the checklist.

So So Courtyard did 70 million this past month. Yep. Uh they It is It is going nuts. Anyway, GameStop, what GameStop has done is it has a relationship with PSA, uh, where people can grade their cards.

And a normal company, and since GameStop is always going to be to me a meme stock, uh, a normal company would be very worried about taking submissions from from from people holding the card, and then sending it to PSA, right?

If this was another company that was a a Fortune 100 company, you would be really scared about the liability of this. But I feel like GameStop has a little bit more flexibility than most and so they are the biggest player in this in this game and it is really we've written about it on collect a lot.

It is really interesting. Uh how are how are startups fairing in all of this? You have GameStop playing here, Fanatics, a couple that you just mentioned. You have Heritage. I feel like the big the big auction houses have been surprisingly durable against um you know, Upstarts coming to their markets.

If you look at the automotive industry, uh everyone is like like every industry, uh everyone wants the multiple. So, they're all into tech, you know, that's what they do, right? They they want the SAS model. That's that's what that's what everyone's after.

Um, so, you know, originally there was card scanning where it told you what the price is. A lot of people were coming out of COVID and they're like, I have a bucket full of stuff and no one's going to go through it, so I'm going to have to scan it. Who's the best scanner? And then we had too many scanners.

Um, and so there's there's just a you know, there's a lot of information. There's a lot of people fighting. I don't know who the winner is. Fanatics is all over the place.

It is probably in terms of monopoly they are probably the number one monopoly in any business today in terms of having a stronghold on so many things. So it makes do you think that'll do you think that'll keep do you think that'll keep just compounding? Um it it depends.

It depends uh what teams and leagues whether they you know I mean teams and leagues want to take the bag and they're going to give the biggest bag. Now if you choose to you know build it by yourself then that's a little bit different but as of right now um that's that's what we're looking at.

Um I mean some of the parts of the consulting part of my company is helps teams and leagues and brands get into this and help you know build um by themselves but you know right now Fanatics is is is the 2 million pound gorilla.

Should be interesting to see what they're going to do with gambling because um you know I just think the one and two are FanDuel and DraftKings and I don't even think it pays to be three given how much the business costs and the the the consumer acquisition. Yeah.

What about uh how much attention have you been paying to prediction markets entering uh sports? I mean obviously they've been at it they've been at it for a while but it feels like you mean Poly Market Poly Market Khi it's really really heating up. I'm I'm I'm as someone who was in gambling for a long time.

I'm shocked that Poly Market and Khi got to the place that they did.

Sure, they always had kind of that like we're peer-to-peer, but I I I can't believe that just like prize picks, I can't believe that they got to where they did in their valuation because I always thought that the the the lobby of DraftKings and FanDuel and Fanatics and Caesars and the old casinos.

I always thought that they were going to win the tribes. The tribes. Yeah. I mean, you know, the seminal tribe. I thought the lobbies would win. So, I'm actually shocked.

I always thought that poly [clears throat] market and koshi would be kind of lowerend and never really break through and that has not proven to be the case. What is the secret to fanatic success?

Like it feels like there was a time when every brand, every team and maybe every league had their own kind of merchandising operation. I remember being able to as a kid go and buy an NFL jersey.

Uh, and then at some point Fanatics like finagled the ultimate deal and got everyone in the room together and well they came again they came with the bag of cash you know. Is that what it was?

Is he just is he just a founder just a fantastic deals guy just got all the money and well Michael Rubin has a you know he was a great he's a he has a great story. Yeah.

Um, you know, if you don't know this story, I'll quickly tell it, but you know, he owned GSI Commerce, uh, which was essentially around the turn of the century, around 2000. All these companies were saying, "Oh, we could do a virtual warehouse. We could do our warehouse virtually.

" And Michael said, "I'll do a physical warehouse. I'll get it to you.

I'll get it to your consumer a day faster and I'll take the risk that 7% of the time uh Jeremy Lynn is going to get traded from the Knicks to the Rockets and I'll have 9,000 Jeremy Lynn dolls in a room because if I win every business, it doesn't matter if I have waste.

All these other guys are not taking any sort of risk. They're just opening a virtual warehouse. And so that was his that was his way to get there and he got everyone's business. And then eBay bought it from him for $2. 3 billion.

And then they said, "Oh, but you know, we don't want to compete with our consumers, so we'll give you the sports business. " And then he turned fanatics into a 20 billion business.

So, you know, he he he did he did benefit from uh getting the he did he he did benefit from getting the the the the biggest guys who, you know, some of them overvalued the market, right?

He got big soft bank money, you know, and and and and and that helped because money was money and they took whatever valuation, you know, obviously they had to write down on a lot of businesses, but uh he he got the right money and he has the right connections. You know, he knows he knows the owners well.

He knows he knows everyone so well and so they feel like it's a it's a a good relationship. Makes it really hard to get into the game. Do you think uh it's it's niche enough that he'll never face like anti- monopoly pressure? If he hasn't now he won't. Last question. Blue Jays are do or Dodgers tonight.

Who are you rooting for? Uh I am rooting for uh the stars to be the stars because that's better for my market. So if uh Vlad Guerrero and Bo Bashette and Otani and all those guys are the stars, that's great. What I don't want is I don't want a no-name hitting a home run.

Even though you can say, "Oh, he's going to grow his own market. " Y the I'm more benefited by the big guys getting bigger. So that's what I'm keep winning. Okay. You want to let your winners ride. Uh, thank you for all the context. Uh, I feel like I love being on your show. You guys are very You guys are very curious.

This is very fun. I I really learn a lot. Thank you so much for coming on a lot. Great. Let's do it again soon. We'll talk to you soon. Have a great day. Uh, I clearly need to learn a lot more about sports. I've been spending too much time learning about CRM. I've been learning about AIO customer relationship magic.

Adio is the AI native CRM that builds, scales, and grows your company to the next level. I mean, it is hilariously uh ironic that we always we always make