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The Creation of a Tournament Deck Rental Company

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Article Submitted By: Eric Portney

Have you ever had that moment of inspiration – that Eureka! moment while you're taking a shower where you have a crazy idea, and you wonder "Why hasn't anyone ever thought of this before?" Sanity soon kicks in, and you dismiss the concept as junk, and try to forget about it. But over time, the idea just won't die.

I had such an idea recently. And while I'm not at all convinced of it's viability as a business model, I thought it would be interesting to present it to the Quiet Speculation community, to attempt to crowdsource the concept, consider its possible merits, or to pick it apart and expose its flaws. As I have no means to actually START a business like I am about to propose, this is purely an exercise for you, the reader, to weigh in on what I think would be an interesting Magic business model.

Well Eric, get on with it then. What's this crazy idea?

Ok, ok, it’s coming! But before I lay the idea out though, consider this. Is it better to own a home or rent one? Common sense says own. But is that really true? An editorial in Wired Magazine this month argues the contrary (http://www.wired.com/magazine/2010/11/st_essay_ownership). What about other goods? Do I need to own a car when I can rent one from ZipCar? How about a lawnmower, if I only use it twice a year (ok, I *should* use a lawnmower on my lawn more often than that, but this is reality here), if I can rent one from my neighbor through http://snapgoods.com/. Why would I pay $80 for the complete Buffy the Vampire Slayer series on DVD, a show I’d probably only watch all the way through once, if I can stream it via Netflix in its entirety to my XBOX 360 or Wii for $9 a month?

Interesting questions, but how do they relate to Magic: the Gathering and Finance? It’s quite simple, really. In short, I propose the creation the Netflix of Magic cards, where customers can rent full decks or deck components for a fraction of the cost necessary to own them outright. Crazy! I know! But perhaps it’s not as far fetched as it sounds at first, and I will outline below some of the details I’ve surmised that would be necessary to establish such a business.

However, I’ll need your help. I am not a successful entrepreneur. I have never been to a local SBA meeting, never registered for a business license, and never gone through any of the trials and tribulations of running my own business before, and have no leg of authority upon which to stand.  All I have is an idea – and I ask you all to participate with me by reviewing my proposed business model, and comment on what works, what’s junk, and what needs fleshed out in more detail.

Right, let’s get down to it then!

The Business Concept

The idea is to create a company, let's call it Tier-1 Rentals, whose purpose is to provide a web site where tournament magic players could acquire the cards, or even whole decks, that they need for an upcoming event. The target audience of this is not the LSVs, Zvis or Floreses of the world, but rather the wannabe tournament player looking to emulate the successes of last week's Pro Tour at their next Friday Night Magic, Grand Prix or other local event, but they have neither the time nor the money to afford the full cost of a high caliber deck (with a high-caliber price tag).

Tier-1 Rentals would allow players to select from a menu of recent winning Magic Tier-1 or Tier-2 decks, customize them as desired, or build a deck from scratch. Pre-defined decks, sideboards, or combo packages can be pre-configured for quick selection. Decks would arrive, pre-sleeved, along with a postage-paid return mailing envelope. 

To determine the price to charge per rental, we would assess the low price value of the deck or desired cards based off of a site like magic.tcgplayer.com, www.magiccards.info and/or www.magictraders.com eBay data scrapes, calculate a 20% value price for rental, and then tack on a per deck or per set number of cards shipping/handling fee.

Rental fees would be valid for a 1 week period, and would be mailed out on Tuesdays via 2-3 day priority USPS mail, and include a pre-addressed priority envelope pouch for returns. Returns not postmarked by the following Wednesday would be assessed an additional week rental fee.

All rentals would require a credit card, and the signing of a waiver that cards would be returned in the same condition, or they would be assessed a replacement fee equal to the "High" value, plus a replacement processing fee. This replacement value would be presented to the customer upon checkout.

If the renter wished to purchase the cards, they could do so for 120% of the initially quoted per-card replacement value, with credit applied at a rate of 20% of value per week already rented. In other words, if after 2 weeks they wished to keep the cards, they could pay 80% of the value. If they rented them for 6 weeks, they could keep them for free at that point.

To help promote the business, custom sleeves with licensed or new artwork/designs could be created, with the www.tier1rentals.com address or logo imprinted across the bottom of each sleeve.

The Startup Costs

The initial investment would involve acquiring multiple sets of key cards used in the top tier decks. We would target possessing in inventory sufficient cards to be able to build 5 to 8 of each Tier-1 deck, with two backup playsets of each “fringe” card. This may mean the acquisition of 8x each Standard set, with additional playsets of particular cards in high demand.

Looking at the current eBay sales of complete, non-foil Standard sets, we get the following numbers (rounded to within $5 for simplicity):

  • SOM - $150 (8x = $1200)
  • M11 - $100 (8x = $800)
  • ROE - $100 (8x = $800)
  • WWK - $125 (8x = $1000)
  • ZEN - $90 (8x = $720)

So, 8x all of the current Standard sets comes in at $4520.

Now, lets consider the cost of two supplemental 4x playsets of the Top 10 most in-demand, and expensive, cards in Standard.  By acquiring these singles, we would be able to create at least four of nearly any competitive deck renters may require.

  • Jace the Mind Sculptor - $70.00 (8x = $560.00)
  • Koth of the Hammer - $30.00 (8x = $240.00)
  • Vengevine - $32 (8x = $256.00)
  • Primeval Titan - $33 (8x = $264.00)
  • Venser the Sojourner - $17.00 (8x = $136.00)
  • Elspeth Tirel - $17.00 (8x = $136.00)
  • Mox Opal- $18.00 (8x = $144.00)
  • Molten-Tail Masticore - $12.00 (8x = $96.00)
  • Gideon Jura - $20.50 (8x = $164.00)
  • Baneslayer Angel $15.50 (8x = $124.00)

The cards identified in this Top 10 list were derived from Chris McNutt’s QS Master Sheet 2 BLS (https://www.quietspeculation.com/2010/10/the-nutt-draw-buy-lists/), however, the price per card was acquired from the Nov. 2, 2010 average monthly eBay prices indicated on www.magictraders.com, or, for Scars card, my own sleuthing on Completed eBay sales. I rounded to the closest $0.50, for simplicity.

With this information, 8x of each high-priced, high demand single totals $1984.00.  Let’s round that to an even $2,000, for use in our estimations.

In addition, custom deck sleeves and sleeve artwork would need to be commissioned, and enough sleeves would need to be ordered to accommodate 20 simultaneous deck rentals, and extras for replacement of damaged/lost sleeves (approximately 2400 sleeves would be required initially). Quick price checks on bulk sleeves put this at around $140.

Adding it all up, the estimated price for these startup costs is $6520 for cards, $140 for sleeves, $1000 for marketing (ballpark guess), $1500 for web site/shopping cart creation (another ballpark guess, although using pre-existing free CMS solutions like Drupal, and free shopping cart add-ins like Zen Cart, this may end up being cheaper, especially if we do the labor ourselves), $1,000 for legal fees/business setup fees and registration (another ballpark figure). Total initial startup estimate – just over $12,000.

Risks and Risk Mitigation

Identified risk scenarios

Item loss/degradation – How would we deal with damaged cards, lost/stolen individual cards, cards replaced with different versions, entire deck theft?

Card value fluctuations – Through the cyclic nature of Magic, cards rise and fall in value as cards are initially released, hyped, and validated through use in tournaments. During these swing periods, there may been the need to invest in additional singles for specific deck creation.

Liquidity to acquire new product – How do we ensure that we have sufficient cash available to acquire new sets as they are released, usually in recurring three month intervals?

Inventory availability – If a deck is rented, sent out on a Tuesday, used by the renter, and then returned postmarked by the following Wednesday, then that deck would be unrentable for a week-long span. For cards that have a short useful life span, only being used every other week cuts into the potential monetization of any given card.

Mitigation

Item loss and degradation would be mitigated through the necessity for the renter to provide a credit card to secure the rental, as well as the signing of a consent form that they understand that they will be charged the full replacement value of any lost/damaged cards. The total value of the rental would be identified for the renter at the time of check-out. However, would-be thieves can work around this, providing a credit card with just enough money to pass a balance check, or the credit card itself could be stolen.

To manage this, we could require the renter to provide their DCI number, and the DCI member name must match the name on the securing credit card, and their listed DCI member town must match the town of their credit card’s billing address. Furthermore, we could limit new customer rentals to those who have at least five DCI sanctioned events associated with their number. This would put up an additional hurdle for those who think they could rent a $300 deck for $60 and just disappear. Requiring five sanctioned events may restrict the pool of customers eligible to use our service; however, given fears over theft, it may be justified to employ this method to help ensure that the renter is legitimate. Besides, how many new, non-sanctioned players would even consider using this service? Those players are not our target clients.

Honestly, this issue is by far the largest risk, and I am keen to hear suggestions from the QS readers regarding it. Are the precautions outlined above sufficient? If not, what would you suggest to solve it? Or is this a showstopper that invalidates the entire business model. Make a note of your thoughts, and consider adding to the conversation in the Comments below.

As for card value fluctuations – this risk would be mitigated through the expected heavy rental rotation of whatever are the highest-valued cards at the present time. Higher value cards will be the most-rented cards, as we are offering a service to allow people to use these cards for a fraction of their actual value, and as such we expect these cards to reach Break Even Point quickly, and provide a strong Return on Investment over the life of the Standard tournament season.

Regardless of why cards need to be replaced (need to increase supply, replace damaged or stolen cards), we would also need to establish a quantity of cash to use for reinvestment into new products. For example, when a hard-to-acquire Legacy staple is reprinted (e.g. Chain Lightning), we would need to be able to predict whether or not this would lead to an increase in demand for Legacy decks, and be able to identify other Legacy cards to acquire that would go into these decks.

As sets rotate, perhaps 2-3 months before the normal October rotation, high value cards from the soon-to-be Extended sets can be sold off via eBay, via direct sales to store buylists, or used as trade material for current Standard high value cards.

As far as lost revenue due to inventory availability – this is tricky, and I don’t know the best answer.  It’s easy to say that if a deck or a synergistic set of cards is out of stock, demand is high enough that we’re likely to rent them again as soon as they are available. But it may become necessary to change the returned postmarked dates to earlier in the week (Mondays?) and/or mail out rentals on Wednesdays or Thursdays. That way, cards can be used week after week – but processing becomes not only labor intensive, but time sensitive, as renters would likely need to have the deck in-hand by Fridays for immediate use.

Return On Investment (ROI)

To figure out our ROI, we’ll start conservatively, and assume 4 concurrent complete Tier-1 deck rentals each week.

For ease of comparison, let’s take the low Deck Price of recent high-placing decks at the Star City Games 2010 5K Standard Open in Nashville, representative of the caliber of decks we would offer:

Elf-vine:            $286.06 http://magic.tcgplayer.com/db/deck.asp?deck_id=703962
Rug Ramp:       $551.85 http://magic.tcgplayer.com/db/deck.asp?deck_id=703963
Eldrazi Ramp    $281.99 http://magic.tcgplayer.com/db/deck.asp?deck_id=703975
Koth Red          $408.06 http://magic.tcgplayer.com/db/deck.asp?deck_id=703979

Together, these decks have a low value of $1,527.96. If we rented these decks at 20%, that would be $305.60.

This would generate approximately $4,000 in revenue over a 13-week quarter (or close to $16,000 in a year). Given the estimated $12,000 to acquire sufficient cards, supplies, marketing and business setup costs, as well as an additional $800 to $1,200 every three months when a new set is released, the Break-Even Point would be about one year. After this point, surplus over revenue would be realized at a rate of around $3000 per quarter.

Of course, renters could consistently check out Pyromancer Ascension decks (Low value $72.19 - http://magic.tcgplayer.com/db/deck.asp?deck_id=703992), and tie up key cards like Scalding Tarns from use in more lucrative rentals like Ramp decks. But I’m working these numbers with the assumption that we are providing a service that grants access to more expensive decks at a discounted price, so the typical client wouldn’t be interested in decks they could otherwise purchase outright.

Hopefully though, as the business grows, we’d be able to sustain renting out more than just four decks at a time and the delta between cost and surplus over revenue will increase favorably.

Gotchas

Here’s an area where I need to ask the community for help. What recurring expenses am I not considering? How much needs to be set aside for taxes.  How much are LLCs taxed, versus estimated taxes I would have to withhold were I simply filing as self-employed via a 1099 Form. How much would insurance cost? As the business grows, if I hired part-time or full-time help, what would be my obligations for benefits? Is this business model defined as a service or a product, and would I need to collect sales tax?

In short, what are the gotchas I am ignoring, and how would they impact the bottom line?

Projected Growth Areas

While initially only offering decks built using current Standard sets, we would increase our deck creation abilities to offer older formats, or casual formats.

Tournament support – The goal would be to be able to provide cards for any tournament sanctioned by Wizards of the Coast, or tournaments offered by Star City Games, TCGPlayer, or any other high-profile tournament (e.g. the Vintage championship annually held at GenCon).

Casual formats – Popular EDH cards can be offered, or even whole EDH decks based on a particular General. Planechase, Archenemy or Vanguard cards could be rented as well, or specialized deck sets could be created for Faction, Two-Headed Giant, Emperor, Chaos Magic games, Shards, Tribal decks, etc. Pre-constructed decks for the above formats (without the ability to customize) could also be sold directly.

Augmented/Future Services

Draft packs – create 24 randomized packs from any Magic base set or expansion, allowing renters to recreate block drafts from the past, or create cross-block drafting sets. The contents of the draft would be cataloged, but the cards wouldn’t be individually assessed for value, rather, a flat draft pack fee would be charged. No chase rares with a value beyond that of the rental fee would be included in the draft set. The renter would be provided with a postage-paid flat rate box to return the draft set. Draft set Rentals could have a longer time period if cards used in it are not in high-demand or part of the current Standard sets. Standard cards would only be incorporated should sufficient quantities of complete sets be available to create both draft sets and sustain the normal deck rental system simultaneously.

On-site Deck Rental – We could prepare Tier-1 decks for quick rental on-site at large tournaments. Pro players may decide to call an audible, and switch decks at the last moment. But if they do, they might not have all of the cards necessary to build the deck on-hand.  Unlike dealers charging full price on the cards, renting a deck may be ideal for Pro tour players, as they may only ever want to use the cards for that tournament, and would end up selling the cards back to the vendors at the end of the event. That is a lot of hassle that could simply vanish through on-site rentals.

Now Here’s Where You Come In

Remember, the purpose of writing this article was to put forth a purely academic business model – I have no intention of creating Tier-1 Rentals or any similar company. Rather, I merely thought it was a concept worth exploring, and one which many of you may have ideas on how to improve. I would love to hear everyone else’s thoughts and opinions on this business model. Are all of the risks identified and acknowledged? What other areas of growth are there? Is this concept so much of a hassle, with too long of a break-even point before realizing any return to be worth exploring?

Please add your thoughts to the Comments below, and thanks for reading!

Eric Portney is just a humble Magic player – one with no financial expertise, business expertise, Pro Tour experience, and a substandard 1569 DCI rating after 15 years of enjoying the game. Suffice to say, he is not an expert, and humbled to present this idea to the Quiet Speculation community for open discussion. He can be reached at eportney@yahoo.com, or @Lackey via Twitter.

34 thoughts on “The Creation of a Tournament Deck Rental Company

  1. It's a great concept but there would be all sorts of disputes. a) card condition would be argued a LOT, do you make osmeone pay for the card if its slightly warped, riffle shuffled etc. also, 20% sounds cheap but you look at the cost of the decks and most people I know aren't going to be willing to fork over $100 for a deck, let alone find customers each week. The only time i can Imagine finding consistent buyers is GP's, PT's, Nationals and Worlds, which cuts the number of weeks rented down. I'm not trying to troll, just my observations 😛

    Also great site, keep up the awesome articles

  2. Cybertron makes a great point about demand. Also, IANAL, but an LLC would be better than self-employment, since it shields your personal assets from any litigation.

    Good idea, though. If I had the capital, I would consider it.

  3. I'm not sure this is viable. Do you have any sort of gauge for the demand for this product? Also, a big point in Netflix's favor is free shipping (covered by the monthly fee). Are you willing to eat 2x overnight shipping costs per deck, or would the markup be so much that people will just turn to buying what they need and reselling?

    I also agree about the trouble with the dispute system regarding card quality of the returns. As soon as someone disputes a credit card charge with their credit company on a 4x Jace return, you have to spend a lot of resources just to keep your payment, and if you lose you're out a lot of cash.

    In all, it is an interesting topic and conversation starter. I can see this working at large events on a card-for-rent basis where you get the cards back at the end of the day and can meet your customers in person, but I would need a much more solid plan before buying into this.

    1. juggernaut1002, you do make a good point about the cost of shipping, and that we'd be paying a premium rate 2x for each rental, and if that was not already incorporated into the rental fee, people would balk.

      However, one of the ways Netflix is able to make money despite paying for shipping is that not every Netflix customer returns discs in a timely fashion, or consistently makes use of the full value of the rental fee month after month. It's much easier for people to accept and justify an automatically charged recurring nominal fee each month than it is to pay per rental — even if they only have 1 or 2 DVDs mailed to them each month.

      Perhaps this model would work better if it also was an automatically recurring monthly charge — check out any 75 cards at a time for a flat monthly fee. Return some or all of them to allow you to check out new cards to bring you back to your 75 (or 100, if EDH is the chosen rental option).

      That way, the rental wouldn't be quite so time-sensitive, and it would be changing the target audience from the Open Series players to the more casual crowd who want to try out new ideas at FNMs, without the hassle of being on a deadline to return promptly.

  4. I think the biggest flaw in this plan is that customers can already "rent" decks simply by buying or trading for cards, then selling or trading them back. Granted, if dealing exclusively with dealers, it would probably cost more than 20% of the card's value, but also, the price for "renting" more than one week is equivalent to renting for one. I think a much easier business model would be just to be a dealer with some pre-made constructed decks ready for purchase, and a special buylist that will be buy back those same decks for more than dealers normally pay for cards.

  5. You realize people might want a list one day, but want to have it changed to get to the tournament site. You are trying to offer a service for something that is so fluid that it is almost impossible to get the customer's order exactly right.

    Also, I honestly feel this is something that shouldn't be an LLC. Your costs aren't really high enough to need that kind of protection.

    And unless you can get a dealer table at a GP, I am pretty sure on-site deck rentals will piss over each vendor there.

    1. You do make a good point, and I agree, if we offered rentals at a GP, it would have to be done as a legitimate dealer who paid for table space. The costs for this though would have to be included in profit viability evaluations.

      As for on-site collateral — rentals may necessitate securing the rental with a credit card only. No straight cash rentals, as the cards would most definitely walk.

      Regarding the fluidity of people's needs — that's tricky to handle, and does point to a problem in the overall concept feasibility. Perhaps if any portion of this concept is to be salvaged, it might only be on-site rentals, and not mail-order.

  6. The dispute with condition is pretty big but another huge problem would be the following situation:

    I am a GP/SCG open junkie. I rent one of your decks for retail value of $300 – $400 bucks. If I, or someone else, does well and breaks the format causing the cards in my deck to skyrocket to approxiately $500 to $600 bucks, what stops me from just keeping the deck and reselling the deck's contents for a $200 profit? Since the rental fee is taken from the price of the deck, there is absolutely no downside.

    1. Well, Haro, the exact same could be said for the reverse situation. It's basically a cost of doing this type of business.

      I think the idea is good, but the execution is difficult, the demand is not necessarily there, and overall maybe too much work/not enough gain.

      As people have mentioned, at a certain point, especially for standard, a lot of decks can be fully rented/borrowed from friends. 20% isn't expensive, but neither is it cheap, especially for MTG players, where a few bucks is actually a cut-off point for utility.

      I just think you can do something similar in a different market, for less work.

      Finally, how would you deal with collateral? I have tried this idea out, and collateral is always the main issue. What's to stop somebody from just taking your deck and running?

      Thanks

    2. With getting a DCI number you would know the person. Would there be any way that the DCI could help on a thieft of cards?

      Compare this to ebay for a moment. If you bought an item and was shipped to you without any confirmation or signature required, the seller will never know you recieved the item. E-bay does not lose out on this deal.

      How about being the middleman in the same way E-Bay does? you match people who are willing to rent out a deck and people wanting to rent a deck. you process the payment, with all the other stuff mentioned above, credit card DCI ect. The people involved would be paying for the rest. In case of thieft or degradation of cards, you could have a statement for the person renting the deck out, stating that you will do what you can to obtain up to the value of the deck, and that quality of the cards do not matter unless they are non-playable due to the condition. Pictures of before and after would help.

      But then again accountability comes into play. Take a picture of your Mint jace, send it out, when it comes back take a pic of your played jace. Try to get comped for it. Sounds like it would be a magic-traders style refrences… mostly heresay.

      I would definatly want to rent a deck or a few cards for some MTGO tourneys, Big money cards are expencive for a reason. The only issue I see with some people talking about renting out on MTGO is if I had the tickets to begin with, I'd buy the deck, but I don't so it's not going to work. If I had the tickets, I'd buy the money cards off a bot and sell back to a bot, and you can shop around for the cheapest bot to buy from and the best to sell to. I know people who have made money buying promo lands 20/TIX and sell to other bots at .5 TIX per land. While there is no dedicated renting for decks there is the same in a form if you are willing to spend time looking at different bots.

  7. it sounds like a good idea but it seems to sort of take something out of the game. especially with the "on site rental" part, you can just show up to a tournament with 100 bucks (imagine ~$20) pay the entry fee, rent a $400 deck and reliably beat people who just invested the full 400 in their deck or spent weeks acquiring their decks. it just seems a bit weird to me.

    also one thing to consider is many people have networks of friends to borrow from. anything i cant aquire on my own, i borrow from friend. would there really be enough demand for this?

    1. How extensive are people's friend networks? I know that I myself don't have friends I can call up and say "Hey! I need your 4 Titans, 4 Jaces and 12 fetch lands for this weekend!"

      As someone with a full-time job who only gets to play at an FNM every other week, I don't have that same entrenched network of friends I can tap.

      I think I wrote this article in part because I envisioned that, in my social situation, I would envision *myself* as a client of a business such as this. But it's hard for me, with my small sample set, to properly gauge if demand for this service truly exists.

      If the typical Magic player is in their early 20s, has disposable income to buy cards outright, and has a network of friends to supplement cards they needs for decks, then yes, this idea is a non-starter.

      But I think we're all in some ways blinded by our own personal experiences and our own social circle of Magic players with whom we interact. The need for this service might be huge! Or it might be minuscule. Without actually creating a business like this, I find it hard to be able to tell if it would work. And thus, we are in a Catch-22.

  8. All in all, thank you very much for taking the time to read my concept, and provide comments. Keep them coming! I'm thoroughly enjoying the dialogue, and once again, thank you to QS for allowing me to present the idea to all of you.

  9. When most people invest in tournament decks, they don't really see the whole cost the way they would when buying a car or a TV. Chances are they'll already have half the cards from drafting/trading, then the might trade for a few more, borrow a few more, and then buy the rest, which is probably less than $100.

    At the end, they'll have their own deck, which has value.

    The only people who would want to pay your prices for a tournament deck rental are those who don't care about owning/having cards and decks. They're the Spikiest of spikes grinding the PTQ circuit. Most of the people I know who do this have an extensive network of friends, all of who borrow cards from each other so they can play the decks they need.

    Think about it this way: do you ever see someone buy a whole tier-1 deck all at once? I've never seen that happen.

    In short, I just don't think the demand is there. And what happens if you don't rent your deck every weekend? Your razor-thin margins are looking much worse as those cards get closer to rotation.

  10. Your best bet would be charging a deck rental fee which has nothing to do with the actual price of the cards. You could charge a lower rate for rogue or cheaper decks, and the deck to beat could be more, but this way your margins are not known, therefore the customer won't complain about pricing. This also makes the renter able to comfortably ignore the rest of the secondary market.

    You also need a program for common renters to gain credits or rewards.

    You also probably want to start with a single rental service, so people can rent only the portion of the deck they don't own at a higher profit margin. Cheaper for both parties = win.

  11. I actually do this on a local scale. However, my services do not include Standard for the most part. I find it too costly to acquire staple Standard cards and try to turn a profit renting them before they rotate. If I had more disposable income, I might try to support Standard. Legacy is by-far my biggest money-maker as Legacy staples do not tend to plummet in price unless they get banned.

    There are a few local players who frequently rent from me, they tend to come to me first when they need something. I also make myself know on local forums, offering to rent cards whenever a new constructed event is posted. I get about a dozen inquires per regional constructed event (PTQ, States, etc.).

    As a judge, I run most of the events that I attend, which renting cards becomes much easier. I am able to keep track of who has my cards and where they are. I normally charge about 5% of the card's value or 10% of the card's if the player finishes within the prize bracket (Of course, I would certainly charge more if I was renting as a formal business).

    The demand to rent cards exists. I'm not sure that it is enough to sustain a ZipCar-style business but your article is still very thought provoking. Good stuff!

  12. The demand for this definitely exists, and your business model is impressive, but definitely needs to be tweaked to make it at all profitable. In your examples, you were dealing exclusively with Standard, which is probably where you'd make the least amount of money (as others have commented before me). New sets are released quarterly, so you have roughly 13 weeks to make back your investment on each individual card before something in the new set potentially "breaks the format" and the resulting paradigm shift forces you to invest in several playsets of the next set's staple cards.

    If your shipping schedule causes a one-week processing gap between rentals while you wait for cards to ship back and forth, then you need to keep that in mind when approximating your gross profit per quarter (which you approximated in your ROI section without taking these shipping delays into consideration). If you're charging 20% of actual value per card on rentals, then assuming that you paid something close to the average calculated value of any given card over the span of a quarter (which is hard to project, given the fluctuating value of cards), your break-even point PER CARD is five rentals. Assuming that renters are in fact renting a deck for a specific event (as per your projected target demographic), rental periods will always be the minimum of one week, which gives you 6-7 potential rental periods per quarter (because of the shipping/processing delay discussed above).

    So, assuming 7 rental periods per quarter, and assuming that the vast majority of cards are only relevant for one quarter, you need your entire inventory of these cards to be rented out a minimum of 70% of the time, just to break even on them. In a quarter with six rental periods (and keep in mind that by "quarters" here we've been referring to the amount of time that passes between Magic set releases, which can vary from 8-18 weeks in reality, and we've been using 13 weeks as an average), any given card would need to be rented out 100% of the time for you to see a net profit on it.

    Granted some cards, like most planeswalkers and the fetchlands, will be relevant in Standard from the day they release until the day they cycle out, giving you 1-2 years to make money off of them. But keep in mind that this means that you'll need a supply to match their demand. The weekend of a GP, you might need to have 32 JaceTMS to rent out, but the rest of the year you may only need 16. So these cards will present you with a choice: Does it make more sense to invest in the extra 16 Jaces, and hope that there are 5 weekends between now and when they cycle out of Standard when you'd be renting out all 32 of them, to break even on those extra 16, so they're not eating into your profit margin for the original 16 that you're renting out every week? Or does it make more sense to not take that risk, only have 16 Jaces, and on busy weekends lose business and lose customers, from having to turn away renters whose orders you cannot fulfill?

    In short, it's a great idea, but the key to making it profitable is volume. To make it marketable to the largest demographic of potential renters, you need to have an inventory on hand of absolutely everything, which means that on most cards, you're going to either break even, or lose money just by having them. But then on cards like JaceTMS, you'll keep them rented out 100% of the time, and make hundreds of dollars in net profit each year, per card. Which, again, depending on the volume you're doing, has the potential to turn into a huge profit.

  13. I think it is also important to realize that you would need to rent out each card 5 times to equal it's cost. I don't know how much you plan on mailing, driving, or w/e but those costs need to be included as well. Knowing that some of the cards won't be rented out at all, also increases your expenses. I'm not kidding when I say this, but when all said and done, I would bet you would need to rent out each card around 10 times to make a small profit. Too me, this sounds like way more work then potential return. Also, your competition is really, really tough. You have dealers and playgroups to out compete. You can probably beat the dealers, thought they will not be too happy with you, but you won't beat friends sharing cards, which is very common at a tourny scene.

    Personally, I don't see this working, and myself would not invest in such a business. That being said, I could be totally wrong, and would accept that if it were the case.

  14. Seems like a difficult company to do because there's a lot of legal issues and trust that has to be built. DVD's are cheap, but everything involved with a deck will be a huge amount of money. The idea may be better for a local group from a local shop, but even then has legal issues, and what will stop the person from selling/trading or doing something with the deck and canceling the credit card they sign up with? And too many restrictions will make it very difficult to get a lot of business.

    However an idea i had to make free cash in magic is host cube drafts. Once again depending on the cube i'd worry about damage or theft of cards in the draft, but i guess if you don' foil it out, use low end versions of cards, and don't include crazy vintage/legacy staples in your cube that are worth over $50 you'd probably be fine. Hopefully because it's free money, charging $5 will recoup any losses you'd have and you can ban the person either from those events or the place it's hosted in general for theft. In the end though if you charge 5 bucks, and offer a pack a head, you're making at least $2-3 per person at no additional expense.

  15. I think this idea is better for an already existing store.

    – They already have the stock to support this idea.

    – They could sell cards at a reduced price after they reached a certain condition.

    – Their employees are already experienced with determining a card's condition and value.

    – They are already at tournament sites for their normal reasons.

    – If the idea doesn't work out, they aren't left with a bunch of stock they can't do anything with.

    Attempting to form a business solely around this one idea is too risky. Historically, mail-based/online rental services deal with products that are already proved to be viable with brick-and-mortar companies.

  16. One thing that concerns me with your business plan is the idea of the sleeves. If I rent one of your decks and get disqualified from a tournament due to your sleeves what happens? DO you owe me the prize money I should have won? One highly publicized incident could destroy your company. Will you send extra sleeves in case I break one while shuffling? Will you charge me if I lose one?

    1. This is a very good point. While my thought was to use sleeves as a marketing tool. perhaps it would be better to send a packet of 80 sleeves with the rental, and allow the player to sleeve the cards themselves. This would allow us to state that it is the player's responsibility to inspect the condition of sleeves and be held accountable themselves for any potential disqualification should they choose to use them.

  17. I've had a couple people inquire why I didn't mention Magic Online as a user base to tap into. There are good and bad sides to this: Good that card condition would never be an issue, shipping wouldn't cost anything nor delay a card's rentability. Bad that the anonymity afforded by MTGO would lead to a higher theft rate.

    If some sort of collateral system could be implemented, like, say, they need to provide 100% of the card value in Tickets, but get 90% refunded upon card return, then all of your bases would be covered.

    Thoughts from the peanut gallery?

  18. I've actually thought of this and run the math numbers on it. It sounds great until you start thinking about your market.

    Joe gamer gets your deck on a loaner ($700) and then has your cards. (Cards are pretty finite unlike DVD's).

    Joe goes over his 3 week period and disapears. You go to charge his credit card the $700 he owes you, but it declines (Since Joe is a college student and only has a $1000 limit).

    Now what? You try a couple more months, smaller intervals, pretty much anything you can to get some of your money back. Still nothing?

    3 months later the cards rotate from Standard and lookie there the cards are in your box, except this time it's only worth $300 and they are kind of played.

    Depending on how the contract was worded you guys might be done since he technically returned the deck. Or you can keep trying his now canceled credit card (or if you did manage to get something he called the bank and charged it back to you).

    So you use a collection company and then sell his debt off to a debt buyer for $0.05 on the dollar.

    The idea is great, the market for this type of service is wrong (mostly because the amount being lent out is too high and the customer quality is lower).

    I could see local stores doing it with some type of collateral, but that to me seems as far as this goes.

    RE:MTGO If you had a way to enforce getting the cards back, then it would work out well. Unfortunately only Wizards has the power to swipe cards from collections.

    What you are basically saying is that any cards I buy from you, you will buy back at a pre-determined price. Please please please 🙂

    I really want to borrow your cards at 15 trade them off for stuff that's going up buy them back a week later for 3 tix and sell them back to you for the 'rental' rate of 13 tix.

    1. [quote]RE:MTGO If you had a way to enforce getting the cards back, then it would work out well. Unfortunately only Wizards has the power to swipe cards from collections.

      What you are basically saying is that any cards I buy from you, you will buy back at a pre-determined price. Please please please

      I really want to borrow your cards at 15 trade them off for stuff that’s going up buy them back a week later for 3 tix and sell them back to you for the ‘rental’ rate of 13 tix.[/quote]

      Well, in that example, as the renter, I don't think I'd be all that upset. Yes, you made a ticket off of my generosity, but I made 2 tickets.

      Sure, depreciation on MTGO singles can happen over the course of hours, or at the whim of a well-timed Twitter or tournament result, but that's the risk of locking in your return at the time of rental. Was there a higher margin to be made? Perhaps. But this could function via a customized Bot that automates the return process. Obviously this would require custom programming, and I'm not discounting the non-trivial nature of its would-be creation, but over time, with a sufficient number of micro-transaction rentals, it could be a viable profit model. Especially if the guaranteed Ticket return the rentee receives for returning your cards is higher than the Buy prices offered by traditional Bots.

      It would take a lot of time, diligent observation of market fluctuations, but I think the potential is there.

  19. I've thought about doing this with MTGO since it removes the issue of damaged cards, shipping costs, and shipping delay. Plus there's little need to ship an entire deck when all you really need are the valuable tournament staples. Decklists can be downloaded then checked for missing cards and then you can just rent those ones. Also the entire system can be run with bots.

    In this way you could stockpile cards like big Jace. Then you "sell" the card at full price (plus margin) with the caveat that you will buy it back for the same price -1 ticket times the number of weeks it's gone +1.

    Then you have your profit up front. If they decide to return it they can take as long as they like, because you're making tickets the longer they have it. Many people would probably just rent it for the tournament, and return it immediately, resulting in an instant, though nominal, profit.

    Still, even with a small margin, the system would be automated and require nothing beyond the initial investment in the technology, and card library.

    This would also open up a whole new market for card speculators who could now, "short" cards by renting them, selling them, then waiting for the price to fall, buying them back, and returning them. This is great for them because it makes them a profit while simultaneously letting you skim profit off of their work. The only way to lose out is if they take a card, prices shoot up more than the price you sold it + margin, and they decide to keep it. Even then, you've made a healthy profit that you can reinvest in more stock for your collection.

    Had I a little more ambition, I'd consider setting one of these up myself.

    1. There is one other caveat… At the end of the cycle when card prices begin to plummet, you'll be left trying to liquidate your stock or end up with a stockpile of cards that are now worth a fraction of what you paid for them. However, with careful planning and some trading skill, I bet you can mitigate this risk by putting the time into managing your inventory properly.

  20. While no where near the scope or breadth of this article, I myself for a while used to do something similar in my local shop. There was a few players who would come up for FNM that typically wouldn't have a standard deck ready for an event, and I would loan out my decks with the payout being a prize split. If a player won any prize support, they would provide me with half for enabling them to do so.

    The only issue of course is the supply and demand aspect, and making sure the decks you have are of a good caliber, which is why I no longer provide such a service, as my decks are now subpar for the standard environment.

  21. Is the problem with mtgo that you don't want to sue people in their home state? If you are willing to do this, you can have people sign contracts (under 18, have parents co-sign).

    The contract should have a damages clause where you get paid for any expenses related to collection of amounts owed including travel and court costs.

    Let them do chargebacks, you get a free trip to their state!

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