Previously published on SCG Premium on 8/10/2011.
Thus far in this series I have steered away from discussing specific cards in print because I don't want even the remotest implication of manipulating any cards or markets in the process of examining and explaining Magic Online speculation. The purchases I have tweeted about on @NextLevelSpec have thus far had an extraordinarily positive record but the focus of this series is not about that; it's about exploring Magic Online speculation and market dynamics.
To put this another way I have a great job that pays me a bunch of money already—I don't need the extra cash I have been making from speculation. On the other hand treating speculation as a game has made the process really entertaining and encouraged me to write about my findings. Beyond that one of my hobbies is examining markets and figuring out what makes them tick then explaining that to other people who might be interested. I'm not allowed to write about sports betting because of work so I needed to find some other sustenance for my brain to chew on. Luckily for me MODO spec has proven to be extremely lucrative monetarily and intellectually—I don't believe anyone has done a regular series about this type of Magic finance before; there are a ton of elements to explore and you guys have proven to be a very enthusiastic audience.
However to prove I am not above some general manipulation I give you this to put you in the right frame of mind.
Last week I promised to answer the question:
When is the cheapest time to buy a card?
The answer is clearly: When they are either a) not in demand b) have a high supply or c) both.
Obviously answering this question ahead of time about a specific card is nearly impossible because while you know the rarity of the card you won't know how popular it will be among the entire Magic population. However if you factor that element out and keep demand constant the answer becomes straightforward—just cross out A and you have your answer.
All right everybody see you next week!<
Okay fine—it's not quite as simple as all that but it's close. Let's walk through the Magic Online supply cycle (think of it like photosynthesis except more fun) and see what you think after that.
Unlike in the real world where you get pre-orders well before a new set is ever released the market for a new set on Magic Online starts with the Prerelease. While there are no pre-orders to help determine prices ahead of time dealers on MODO already have data and pricing available to guide them. Prerelease queues open product hits the store and everyone floods the bot networks to sell their mythics/rares before the prices drop or to buy the new cards they need for Constructed.
Once the initial wave of buying and selling is over things settle down and continue as normal but prices gradually decrease. The first significant trough comes directly after the release events finish. MODO grinders have been running sealed event after sealed event and have a ton of cards to sell off along with their pack winnings so you get a small flood of supply that goes away as soon as the release events are over. After that prices mostly stabilize as the redemption cycle kicks in.
Redemption is weird because it actually takes cards out of what would otherwise be a closed system and funnels them into the real world. It's like if someone decided to buy up a bunch of cards here in the UK (because they were cheaper) and ship them off to the booming uni-directional Magic market of uh… Abkhazia. Cards redeemed from Magic Online disappear from the online supply never to return. If this were to happen IRL prices on singles might increase until more people cracked sealed product to correct for the lost supply but it's probably not a massive deal because all the world singles markets are loosely tied together. The effect it has on the Magic Online market is far more massive.
To understand this a little better you need to focus on how cards get into each economy. Upon set release in the real world you get massive amounts of cards from people buying entire boxes/cases for themselves or to crack for singles. You also get a bunch of cards at prereleases and release events and finally you get a relatively slow trickle of cards from FNM drafts and the occasional Grand Prix. Prizes IRL can be store credit cash boxes/packs trips or invites to the Pro Tour. This is completely different from what happens online.
Aside from a few dealers who do so right at the start (and then never again) no one cracks packs online. All singles come from draft/sealed opens or winnings that are traded/sold for tix or packs which are then used to play another draft or sealed event. This is one half of the Magic Online life cycle. The other half of this life cycle is formed by Constructed players. These guys buy singles from humans/dealers construct 60-card decks to play and then play to win packs—which they never open—but instead trade back in to dealers/humans for more tickets to play events and/or buy singles for new decks. Finally prizes online come almost exclusively in packs (and occasional invites to the Pro Tour) which means packs—and the pack economy—matters a great deal.
Let's say you do pretty well in local drafts and usually win a couple of packs which you then open and see what spiffy rares might be inside. Let's say you also do pretty well on Magic Online and usually win a couple of packs per draft there too. Do you open those virtual goodies? What are you stupid?!? Of course you don't open them! Those are good for more drafts—if you opened them they'd just be cards on your account!
Real world packs represent mystery singles. Online packs represent potential drafts. Two different mentalities for two entirely different economies.
Except… they are loosely tethered together by set redemption which is secretly extremely important.
What would happen if set redemption did not exist? Well we already know the answer to this one because it has happened before. If there were no set redemption for Magic Online non-Mythic singles prices would crash to being practically worthless dragging down the price of in-print packs in the process and crashing the entire economy. When this happens players eventually play less Magic Online for various reasons not least because they still need to feel like they are playing for something. However by allowing any interested individual to gather up an entire set of cards on Magic Online and turn that into a real world set destroying the MODO set in the process it keeps the MODO economy flowing.
Why are sets redeemed at all? Because as mentioned so much product is opened via drafts and sealed events on Magic Online that prices rapidly drop below what you can sell them at in the real world. For businesses that are connected to both environments there is a heavy incentive to buy at discounted rates on Magic Online redeem the sets and then sell those singles/sets in the real world pocketing the difference in profits.
How often are sets redeemed? Details on this are sketchy but I've heard rumors from reasonable sources that during boom times it's up to 150 sets a week. With normal distributions that is the equivalent of 600 boxes of product. If this is true that is an insane amount of cards generated by the system and a lack of redemption would see massive changes in the supply of cards which would in turn change the prices of singles by a significant amount.
What was the point of this again?
Without redemption the Magic Online economy is inflationary as more and more cards are printed and nothing ever leaves the economy (except a trickle of tickets) thus making what is there worth less and less. Even with redemption supply of available singles gradually increases online while a set is the primary drafting set meaning prices are likely to go down until... a new set comes out online. At that point redemption continues to take some of the supply out of the system while there is a massive decrease in the number of those cards being opened which means singles/set prices should go back up until an equilibrium is hit and the economy stabilizes. In terrible MS Paint visualization it would look something like this:
What this means is that—in general—there are two 'best times' to stock up on current cards online. The first of those times is directly after the release events end for that particular set. This window assumes you either think you have caught a card that will become popular in the future and no one else has latched onto it yet or you need the singles to play Constructed events. This isn't the bottom of the market but it is an early price dip caused by high supply. The second of these times starts about two weeks before a new set drops online and continues into the new set's release events. This is when you will find the biggest glut of cards on the market before redemption gradually causes a price increase.
One further caveat: this is only true for standalone sets (like Rise of the Eldrazi or M12) or ones at the end of a block (like NPH). For sets like Scars or Besieged they continue being drafted regularly until the end of the block and therefore don't quite share the same curve.
What this means is that you should likely be buying any PBS cards you don't have or want to spec on right now since we are currently at or near the market floor for the entire Scars block. This is especially true for any NPH cards you think are good since small sets tend to undergo larger swings once the flow of drafts slows down. This includes cards like Karn Liberated Consecrated Sphinx Birthing Pod and any other cards you think will be Standard staples after Zendikar rides off into the sunset. It does NOT include Dismember because that comes out as a four-of in a pre-con this week which will drop the price.
[Author's Note: Since hard facts about Magic Online are so rare I can only state that this is how the system works to the best of my knowledge based on information gathering and research I have done. It's possible I have things completely wrong (though I doubt it or else I wouldn't write about it) in which case I apologize.]
Where do you think Tezzeret is headed? He's been falling for weeks and I made the mistake to hold on. Sell now or too late?
Well he's not seeing much play and you are at a supply high milestone—there's no good reason to sell him at this point. If I had a bunch of Tezz sitting around I'd wait on it and hope Kibler decided to renew their love affair at some later date so I could hopefully turn a profit then.
When is the best time to buy into M12 Titans? Frost at 3 tix today Inferno just under 6.
September. Those poor Titans so revered in M11 now barely more than bulk mythics in M12.
Medina said the following about Shocklands in his article this week what do you think?
“I have a full set of shocklands that I plan on selling in the next few weeks. You might be asking why wouldn't I wait and try to get more out of them? The reason is that the future is too unpredictable to take the risk. We don't know how many dealers and speculators are holding these cards. One day when the card gets high enough the market is going to get flooded by jokers trying to double up. Then once the market floods the price will drop.”
It's kind of a weird stance since he says nice things about Dark Confidant at $50. If Bob can be a $50 card out of Ravnica why can't the Rav duals out of the small sets increase to $30-35 and hold their value (with fluctuations based on whether it is Modern PTQ season or not)? The population of Magic players has grown a ton since Ravnica so I think even moderate underlying demand would be enough for this to hold its value for the medium term.
As for the risk of being reprinted it's there but I kind of doubt it's going to be in Innistrad. It might make sense for M13 though so if you are thinking about dumping there is your drop dead date.
Now if what Jon meant to say was as a dealer/trader he makes most of his money on turning cards over as quickly as humanly possible instead of speculating and therefore doesn't worry about long-term price predictions then that makes a lot more sense. This other stuff? Notsomuch.
Next week? The Big Spec
Bonus Section—Quotable Quotes August 2011
Pro Tip: For pictures from Twitter read from the bottom up.
Bing Luke: my regina
Bing Luke: is a beautiful regina
KillGoldFish: rich hagon
KillGoldFish: is wearing purple and brown
KillGoldFish: and brown.
@ferretthimself Look. The more elegantly you decorate your bathroom the worse I'm going to feel when I eventually poop there.
Mark Herberholz posted to Paul Rietzl
In what world do I offer you a white weenie deck to play in the Pro Tour and you turn it down for a control deck?
@kellyoxford Toddlers & Tiaras is a prequel to 16 And Pregnant.
Jeph Foster: The guy vacuuming the airport just had the hose to his vacuum detach and get stuck on the crotch of his pants. I wish I got that kind of treatment at work.
@GavinVerhey-Stoneforge is the new fairy godmother. "Aw don't cry about a big bad mulligan I still love you. Here's a Baneslayer!"
@markleggett Which bodybuilding protein powder is better? "Scary Ripped Freak" or "Monstrously Veiny Affront To Nature"? They both sound quite good.
@girldetective I hate to complain about the noise from my neighbors' illegal fireworks display but I just had a 'Nam flashback and I was born in 1983
Knutson: I tend not to play any games online anymore
Knutson: we're old
mrfridays: I'm old
mrfridays: you're ancient
mrfridays: and by ancient I mean "within 6-10 months of my age"
Knutson: tough but fair
Knutson: what's Becker mummified?
Mrfridays: really grouchy dust
Mrfridays: like the kind you find in your shoes after a day at a really dirty beach on the Jersey Shore
@kellyoxford 2yr old "Do frogs talk?" Me "No" 2yr old "Actually they do. They ribbit. That's how frogs talk" LESSON: 2yr old is a bit of an asshole.
@top8games: This American is voting for Anton because he was an awesome player with excellent community contributions to boot.
@mixedknuts: he was very influential in the after-round smoker's community and the move-to-make-mullets-the-official-hairstyle-of-the-Pro-Tour
@griffnvalentine: Binder: The Jonathan Medina Story
Jarvis Yu: so in SCG Cinci
Jarvis Yu: tim was supposed to get a r1 bye for legacy
Jarvis Yu: because he was in the finals
Jarvis Yu: instead after he finished he got paired vs bertoncini
Bing Luke: meaning?
Mixedknut: scg needs to play up the Bertoncini villain aspect more
Bing Luke: you skipped a couple steps in there
Jarvis Yu: i wonder if that'll happen
Jarvis Yu: for gerry here
Jarvis Yu: like their policy on byes has been very inconsistent
Bing Luke: no no
Bing Luke: go back
Bing Luke: expected result: tim was supposed to get a r1 bye
Bing Luke: observed result: he got paired vs bertoncini
Bing Luke: idgi
Bing Luke: Jarvis
Bing Luke: help me here
Bing Luke: i am dying
Jarvis Yu: don't worry about it
Jarvis Yu: i am being dumb
Bing Luke: JARVIS
mixedknut let him diiiiie
Bing Luke: EXPLAIN
Bing Luke: jarvis ops?
+++ Jarvis Yu: has given op to Bing Luke:
+++ Jarvis Yu: has given op to prophone
*** Jarvis Yu: was kicked by Bing Luke: (#goodgamery)
mixedknut ABUSE OF POWER
Bing Luke: didn't expect that to work!
mixedknut also jarvis is a huge sucker
*** Jarvis Yu: joined #goodgamery
Jarvis Yu: you jerk .__.
mixedknut that was the best
Bing Luke: what did you think would happen
Jarvis Yu: idk
Mixedknut: ^5's Bing
Christopher Kyle Sanchez posted to Osyp Lebedowicz
Lifetime Pro Points
1 Kai Budde 500 Hamburg HG Germany
38 Gerard Fabiano 219 Belleville NJ United States
39 Osyp I. Lebedowicz 218 Highland Park NJ United States
Christopher Kyle Sanchez: Time to put the Vonage telephone down and pick up some cards again!
@markleggett MINORITY REPORT: Lots of blacks out there today. Looks like a rap video. Whites with a cool factor less than "Timberlake"; remain indoors.
@kellyoxford I'd pay over $1000000 a year to have Patrick Stewart follow me around and shout "WHAT THE FUCK!?" for me on cue.
@SteveOMS to @maro254 I know my opinion is biased but I'd never vote for Long who threatened to punch me in the face while losing in top8 of PT #mtghof
@mixedknut to @steveoms c'mon now Steve Mike Long couldn't have been the only one. You have a very adorable punchable face. #kidding #noreally
Seth A Burn: well the upside is sex which is nice when you're single and look like Woody Allen