Downgrading
The card market is down. That fact is undebatable but while the market is far from the heady days of the early pandemic, grading seems to be one area that has been immune from a downturn. Month after month, the market hits new records in terms of grading volume despite the cost of grading remaining substantially higher than it was pre-pandemic.
I’ve been looking at the notion that grading hasn’t been affected by the downturn with more skepticism recently though. In short, I’m worried I’ve been looking at grading volume instead of actual pricing and drawing some incorrect conclusions. Anecdotally, I’ve noticed very low prices for ultra-modern cards compared to what one would expect given the raw prices. I’ve seen numerous posts about people getting steals on graded cards. I’ve gotten gem mint cards for less than twice the raw price. That means it is time to gather a bunch of data and answer the question as to if grading prices have declined even if grading volume hasn’t.
A Comparison
I’ve dug into graded card pricing for the newsletter in the past. It’s been a while though and the last comparable piece I did was back in September of 2022. At that point, PSA 10 cards were getting over 5x their raw counterparts. PSA was by far in the lead, SGC was second, BGS was third, and CGC didn’t have enough sales to adequately evaluate them.
Both times I’ve done this, my goal has been to find auctions or BINs that were similar enough so that any differences would not be attributable to things like seller feedback, listing quality, or the fact that a player had a good game. I did this by matching sales up to similar sales of the same card in terms of date, seller, picture, and overall listing quality. Cards used include lower-priced rookies of Brock Purdy, Juan Soto, Ronald Acuna Jr, Julio Rodriguez, Trae Young, Paolo Banchero, and Cade Cunningham. I tried to keep the cards under $200 to prevent all of the findings being driven by one high-priced card. Where possible, multiple sales of each card are included.
The results are presented here in Table 1. The ranking of the companies is the same, but the multipliers have taken a major hit. It’s as I feared: grading volume paints a picture of a love for grading but the prices show a sharp decline.
Company Old Multiplier New Multiplier
PSA 3.99 5.2
SGC 10 2.67 3.6
BGS 9.5 2.59 3.1
The downturn in graded card pricing is shocking, widespread, and actually might even be worse than it seems. I posit that things might be worse in that the older cards in my sample tended to have higher multipliers. Newer cards are seeing multipliers run even lower than the overall numbers presented here. The days of getting 5x raw card prices for a gem mint card might be long gone in favor of only getting 3x.
The downturn in pricing makes me concerned about the constant record grading numbers. The added supply of graded cards has caused a predictable decline in graded premiums. So, when will we see grading volume drop? Even with the downturn, the premiums are sufficient enough to keep folks grading cards with decent raw values (think over $20). I think that folks will slowly start to realize that their grading orders aren’t yielding the same results as they used to. It might take a while for people to realize the change in the grading economy, but they will eventually. When that happens, I expect volume to drop and for the grading companies to finally get aggressive and competitive with pricing.
How Bad Is It?
New Rate Expected Profits Old Rate Expected Profits
PSA ($1000 worth of $10 cards) $401 $1,293
BGS ($1000 worth of $10 cards) ($523) ($342)
SGC ($1000 worth of $10 cards) ($469) $6
PSA ($1000 worth of $25 cards) $1,301 $2,193
BGS ($1000 worth of $25 cards) $347 $558
SGC ($1000 worth of $25 cards) $432 $894
PSA ($1000 worth of $100 cards) $1,751 $2,643
BGS ($1000 worth of $100 cards) $827 $1,008
SGC ($1000 worth of $100 cards) $882 $1,344
The results are pretty impressive by themselves, but they really become shocking when one uses the new figures to estimate returns on hypothetical grading orders. Table 2 looks at nine such orders. It posits orders of $1000 worth of cards sent to each company (PSA, BGS, SGC) with the order being comprised of all cards worth $10, $25, or $100. Importantly, Table 2 also examines the hypothetical orders placed using the earlier return figures.
To calculate expected profit, I multiplied the cards by the appropriate multipliers and subtracted out grading fees, the initial $1000 in card prices, and eBay fees estimated at 13%. The figures should actually be slightly lower if I included shipping costs. I estimated a very generous gem rate of 80%. All other cards are assumed to be 9s and I valued them at the same price as raws for this exercise. With the high gem rate and lower costs, the figures in this table represent a sort of best-case outcome.
Sending $10 cards to BGS and SGC is a clear losing proposition at this point. In the past, I’ve been comfortable sending $10 cards to PSA but the profits are drying up and if I redid the figures with a 60% gem rate, the expected profit for $1000 worth of $10 cards graded with PSA ends up with a loss of $69. At this point, I think that grading cards $10 and under is overall a risky proposition regardless of the grader.
$25 cards are much safer cards to grade in terms of returns. PSA has a massive advantage here in terms of return but SGC’s fast turnaround time means there are times when they are the preferable company. When trying to capture first-to-market premiums and trying to flip to reinvest, the turnaround speed might be worth accepting the lower return prices.
It’s also worth mentioning that I used a flat $15-a-card price for this exercise. Many of SGC’s cards each month are from their $9-a-card specials. Redoing the calculations with the lower figure will result in more favorable figures for SGC.
Wrap-Up and What’s Making Me Happy in the Hobby this Week
The big takeaway to me though is that collectors need to be cognizant of the “new math” of the grading world. Profits are drying up, but behavior hasn’t changed yet. I don’t expect that to last and I’m anxious to see how the grading companies respond to a downturn after aggressively expanding.
As for what’s making me happy in the hobby this week, it is undeniably the release of Topps Series 1. I busted my lone Jumbo Box and the cards were exceptional looking despite the box being the worst Series 1 rip I’ve seen so far. I was shorted an auto so hopefully Topps will come through with one that will make the break look better. Even with the bad break, I’m excited as I love the base cards and I expected to hate them. The Blueprints cards and Ken Griffey Jr. insert sets were surprisingly nice and I love that Topps makes some great-looking inserts that are easy to hit.