Here's how Professional Sports Authenticator, a Newport Beach, Calif., company, aims to cash in on both the Internet-auction boom and the surging market for sports collectibles.
On the Road
Grading baseball cards may seem bush league to you, but for Professional Sports Authenticator, it's a hot niche. Now, with a little help from Mark McGwire and the Internet, the start-up is aiming to cash in big time
David Hall is no Mark McGwire. He wasn't even much of a Little League slugger. Yet Hall, 51, does have a pretty good eye.
He and his crack team at eight-year-old Professional Sports Authenticator (PSA), based in Newport Beach, Calif., can spot a phony 1991 Topps Sammy Sosa card. They can pick out a doctored 1953 Topps Mickey Mantle #82 by holding a magnifying glass to the card's edges. And they've shown a knack for turning that skill--the grading of collectible sports cards--into a fast-growing enterprise.
Hall chalks up some of PSA's success to the recent wave of sports-card trading on the Internet, which has made the company's card-authentication service all the more popular, because on-line buyers purchase cards sight unseen. Not content with that niche, however, Hall is swinging for more distant fences. PSA and its corporate parent, Collectors Universe, are trying to leverage the PSA brand in bold ventures linked to Internet auctions and, strange as it seems, DNA marking. And they've already scored a marketing coup: tying PSA's name to Mark McGwire and Sammy Sosa, the stars of last year's home-run derby.
The company can afford to think big. Owing to the hoopla surrounding McGwire and Sosa, PSA's card-grading business has been booming. Calls to its 800 number tripled during the home-run mania last August, soaring from 600 to 1,800 in a four-week stretch. Two receptionists quit because they couldn't hack the volume. By year's end, claims Hall, the number of cards the company was grading--it evaluates a card's condition on a scale from one to 10--had increased almost fivefold, to roughly 80,000 cards a month.
"It just kind of exploded," says Hall, who's also chairman of Collectors Universe. Besides PSA, which has 35 employees, Collectors Universe runs a coin-grading service, an Internet company featuring a wide assortment of collectibles-related Web sites, and a music-collectibles business. Hall declines to provide PSA's revenues for past years but projects a total of $30 million in sales this year for all Collectors Universe businesses. However, given that PSA charged an average of $15 for each of the 370,000 cards the company says it graded last year, it's easy to do the math for that portion of the business. The card-grading business (covering football, basketball, hockey, and baseball cards) has apparently been very good to PSA.
Indeed, veteran sports-card dealers say the company has almost single-handedly created widespread demand for neutral third-party grading in the $700-million-a-year trade in collectible sports cards. Now few collectors would think of spending big money on a card that PSA hadn't inspected. "People who call our number, or fax us, or E-mail us, are asking for one thing," says Levi Bleam, the owner of 707 Sports Cards, in Plumsteadville, Pa. "They're asking for PSA-graded cards."
Winning the kind of brand recognition PSA now commands hasn't come easy. A native Californian and a rare-coin nut from an early age, Hall founded Professional Coin Grading Service, one of PSA's sister companies, in 1986, before turning to sports cards. Hall was convinced that just as coin collectors relied on grading experts, sports-card hobbyists needed a way to be sure that the vintage cards they were buying were real and hadn't been recut or reglossed to hide decades of wear and tear. But convincing dealers was a different matter.
PSA president Stephen Rocchi remembers spending many a fruitless weekend at sports-card conventions trying to sell dealers on the need for third-party grading. The vast majority, he says, had zero interest in letting an outsider like PSA inspect--and potentially diminish the selling price of--their wares.
For its first three years, PSA lost an average of $10,000 a month and stayed afloat only through regular capital infusions from Hall's successful coin-grading business. Gradually, though, dealers began submitting their cards for PSA grading as more card buyers demanded it. By 1996 thousands of PSA-graded cards were circulating at sports-card shows, says Rocchi, and PSA was grading almost 10,000 cards a month.
Now, thanks in part to the wave of trading on the Internet, the demand for the company's services has snowballed even more. A sports-card buff jittery about on-line buying may be far less likely to balk if the 1915 "Shoeless" Joe Jackson he wants carries PSA's seal of approval. Consequently, dealers eager to sell on the Internet have first been shipping cards to PSA to grade, in ever increasing numbers.