So I talked with the guys from CGG on Sunday...

[lighthouse]

Religion and sex are power plays

Manipulate the people for the money they pay

Selling skin, selling God

The numbers look the same on their credit cards

 

We're an underground revolution working overtime...

 

I remember now...

[mrwoogieman]

Sweeeet dreams......you Bast.ard!

[RandomSidekick001-migratio]

I don't think CGG and 3PG have any chance of surviving in the marketplace because they haven't established any barriers to entry. If it only costs a new competitor $1200 to replicate your results that means any [!@#%^&^] with $1200 can try to take away your business...

 

No. This is a case of a couple free-thinkers jumping on the 3rd-party grading bandwagon, and cashing in while the getting's good. A legitimate competitor would need to advertise in the trade journals in advance of product release, and have some established names backing them (both in terms of the company, like PSA, and in terms of the personnel, like the Hughes brothers).

 

 

Those quotes were from Lighthouse and drbanner, respectively, in another thread discussing the future of CGG and 3PG. That thread died out a few days ago in the Marketplace forum, but I thought I'd resurrect the quotes here, since they're related. Here's the link to the old thread, if anyone's interested:

 

3PG and CGG....Will They Last?

 

My follow up question to these comments is: What did CGC have going for it at the beginning that CGG and 3PG don't in terms of big-name support and barriers to entry? I wasn't around comics at the time they came into being (1999/2000, right?), so I'm wondering if they appeared legit from the start, and if so, why. Was it just that they were the first in the biz?

 

- SK

[chrisco37]

That's probably part of it. But I would guess it had more to do with the fact that they were an off-shoot of an already successful company, and that they hired people that were at the forefront of the collecting community. Guys like Steve and Mark were already well known and respected in the community. They also consulted a large amount of high grade dealers and experts to come up with their (still secret) grading guidelines.

 

Chris

[lighthouse]

I don't claim to speak for drbanner, but I am happy to respond...

 

CGC established fairly significant barriers to entry when they started up, and as time has passed the barriers have gotten much stronger. It would be far more difficult for a legitimate competitior to arise now than it would have been 4 years ago, because in addition to needing to offer a comparable product, a new company would also need to compete with CGC's track record and market share.

 

We can talk all we want here about books that CGC has misgraded, and problems we have with the services they provide. But the fact is their track record is outstanding in the marketplace. Tom Brulato lamented in a feature article about his collection that soon after CGC began grading, he passed on a 9.4 copy of FF1 that was available for 25K. He estimated that if the copy was in the marketplace today it would easily fetch 100K+. That copy wouldn't fetch 100K because CGC has been around longer than the other companies. That copy would fetch 100K because a sizable portion of high grade collectors are willing to back their belief in CGC's grading with their pocketbooks.

 

You can gain marketshare just by being open. Walk into any comic shop and you will see proof of that. But to establish a barrier to entry that keeps competitors away, you have to do more than just be open for business...

 

The barriers to entry that CGC has established are numerous but here are a few.

[*]They advertise agressively in industry publications. A competitor would have to do the same or they will be swept under the rug with the RC Cola... If you are trying to capture marketshare from the industry leader you have to have the resources to advertise aggresively. A superior product just won't cut it. No one will ever break the hold Pepsi and Coke have on the marketplace because no company can afford the advertising costs it would take to do so... And to take on CGC, a company has to be willing to make a significant commitment to advertising right from the start.

[*]CGC has nationally-known and well-respected graders. Hiring the guy you knew in elementary school won't cut it if you plan to compete here. You don't necessarily have to have graders that are quite as well-known. But you have to have personnel that command enough respect to avoid instant dismissal by the marketplace. There are a half-dozen people here on this forum who could be head grader at a 2nd-tier grading company and would avoid being the butt of jokes doing so... But Dan Patterson is not such a name...

[*]CGC's holder is extremely well-designed. Yes, there are flaws in it. And yes there are things that could be better. But to compete with CGC, you would have to have a comparable holder, and I doubt the process could be set up for less than $20K. The current competitors' holders I could replicate with $500 and a weekend of boring football games...

[*]CGC has developed a culture among collectors. Don't underestimate the power of that. These forums are marketing genius for CGC. Why do you think these boards are here? They are here for the same reason you will find boards discussing video games, television shows, movies, music, and escort services. The people selling those products and services know that if they get their customers talking to each other about the product, their loyalty to the product will grow. And it gives them a perfect opportunity for feedback to serve their customers better.

 

There are lots of ways to compete with CGC. You could be the company with the cheaper prices. Or the company with the more detailed label. Or the company with the faster turn times. Or the company with the more inclusive submission standards. But in order to be any of those companies, you also have to be at least somewhat competitive at some of the other things CGC does well. Otherwise no one will want your service in the first place. 3rd-party authentication is a value-added service. If your service isn't adding value to the goods, why would anyone use it? And if the marketplace doesn't accept your product, there is no value added. They may as well sell the book raw. "Here's a scan, and Eddie in accounting says it's a VG+..."

 

Greggy and I could beat everything CGG is doing with less than $2000 and a few hours of set-up work. We still wouldn't be a legitimate competitor for CGC, but that should tell you whether CGG qualifies or not...

[aardvark88]

CGC also needed to raise at least $2 mil of start up capital to set up their business. Staff, rent, big ads, travelling to comicons, equipment, webpage, etc.

CGC was accepted early on b/c there was no other competition. There appeared to be acceptance of CGC in the later Greg Manning comic book auctions by JP the Mint & the usual suspects. The big $$$$ had arrived.

[sckao]

 

I don't claim to speak for drbanner, but I am happy to respond...

 

Excellent articulation of the barriers to entry and the reason why a "first to market" player like CGC can actually hold onto its marketshare. (eBay is a great example.)

 

Traditionally, a lot of "First to Market" players end up getting swallowed by the companies that get formed later.

 

 

 

 

 

 

[RandomSidekick001-migratio]

Wow, great info guys. Thanks for filling me in. I have a couple more follow-up questions, if you don't mind:

 

Lighthouse and Chrisco, you guys mentioned that CGC "hired" recognized people like Steve and Mark. I thought they were the founders of CGC? Are the people listed on the CGC website employees, rather than owners, and if so, who are the actual owners? And Odin, you mentioned a $2 million start-up figure. Are you guesstimating that, or is it a known quantity?

 

Disclaimer: Lest anyone think I'm a spy for CGG or 3PG, rest assured I'm not. I'm actually a spy for PSA.

 

- SK

[Darthdiesel]

I'm actually a spy for PSA.

 

- SK

 

Public Service Announcements?

[RandomSidekick001-migratio]

Public Service Announcements?

 

I guess I should be glad my post at least made you think of public service announcements instead of prostate exams!

 

I was referring to the sports-card company though, of course.

[lighthouse]

Wow, great info guys. Thanks for filling me in. I have a couple more follow-up questions, if you don't mind:

 

Lighthouse and Chrisco, you guys mentioned that CGC "hired" recognized people like Steve and Mark. I thought they were the founders of CGC? Are the people listed on the CGC website employees, rather than owners, and if so, who are the actual owners? And Odin, you mentioned a $2 million start-up figure. Are you guesstimating that, or is it a known quantity?

 

Disclaimer: Lest anyone think I'm a spy for CGG or 3PG, rest assured I'm not. I'm actually a spy for PSA.

 

- SK

 

Actually, Joanna and I own CGC... And I use the "lighthouse" persona to throw the CGG dogs off our tail...

[lighthouse]

I don't claim to speak for drbanner, but I am happy to respond...

 

Excellent articulation of the barriers to entry and the reason why a "first to market" player like CGC can actually hold onto its marketshare. (eBay is a great example.)

 

Shhh... I work hard to keep up my "raving buffoon" image... Don't go telling the folks I have lots of articulation! They'll all want to see if my arms will bend all the way backwards behind my head while I stand on one leg...

[fantastic_four]

Lighthouse and Chrisco, you guys mentioned that CGC "hired" recognized people like Steve and Mark. I thought they were the founders of CGC? Are the people listed on the CGC website employees, rather than owners, and if so, who are the actual owners?

 

CGC was started by the coin certification company NGC.

 

Back before I knew comic-keys was Dupcak, I used to talk to him via e-mail a bunch. He's not a reliable source, but he is fascinating to listen to, so here's his rumor/hypothesis with more detail about CGC supposedly started (I posted this a few months ago also):

 

 

I don't know if you're aware of it, but approx. 15 years ago someone already came up with the idea of comic grading/encapsulation. Ernst Gerber. He started 'slabbing' books with grading certificates as a way of jutifying his overgrades in his auctions. To give them respectability. For that reason it never caught on. Until Jay Parrino showed up. Jay prices his books like that because he really doesn't care if they sell or not. What he has on his site is 10% of what he has. For a look at some other Jay Parrino books, just go to any Manning auction and 90% of the books in them are JP's books. CGC slabs, if you'll notice from Jay's site, are directly copied from collectible currencey slabs. Jay's long suit is currencey. He grosses an estimated 75 million per year in currencey sales alone! Of the 1.3 million dollars in auction sales that Manning's auction before the last one took in, 1.1 million of it was from Jay. Chicken feed for him, but enough to make a huge impact in comics. You know how whenever you log into a website of a dealer and you take interest in that Flash 1 CGC 5.5 or Marvel 2 CGC 8.0 that they list, and then you call them and they say, "Sorry, Just sold it", and you're thinking, "[!@#%^&^]" or whatever? They're telling the truth. They might have had a book in stock for 10 years and couldn't move it, but as soon as they sent it to CGC, Jay BOUGHT it. All these mega-dollar sales you keep hearing of that dealers are making; you';re thinking to yourself.."wow, this hobby is on fire, EVERYTHING's SELLING from GOLD to SLVER". Yes it is...to JAY mostly. What's happened lately on Ebay since Manning isn't actively bidding on every CGC 9.0 and up? Are they moving like they were 3-6 months ago? No they are NOT! What's Waterwalker doing on Ebay selling a 9.0 AF15 for 25,000 when the Manning auction just supposedly got $40,000 for a 9.0 AF15? Waterwalker IS MANNING'S AUCTIONEER, BUYER, AND SELLER. That's ROBERT HUGHES! Why didn't Manning want it at 25,000 if his sell is 40,000 for the same grade??!!??

 

About a year ago, Jay visited CGC with the Hughes' (Manning's auction buyers and sellers). Jay asked CGC, "how much to control and take over the comic market". They scratched their heads and posited, "We guess at least a few million, maybe as high as 5 million". Jay laughed and said, "I thought you were going to say 20 to 50 million, Let's do it". Take a look at Jay's site again. Everybody's books that have finally sold after long stints in their stock is there! Most haven't even been deleted from the original source's web pages as of yet! Take a look: Marvel Mystery 2 CGC 8.0, and Flash 1 CGC 5.0 from Metropolis (they had them online for over 2 years), PCE's Flash 1CGC 5.5, Tec 33, Ed Jaster's ugly Captain America 1 CGC 6.5 with the horrible erasure of pen in the name (why isn't this book graded restored with HEAVY erasures?), and on and on. The recent 'boon' in the industry is NOT because 50,000 new buyers with $1,000 each came into the marketplace to spend like drunken sailors, but because one person came in with 50 million to spend like a drunken sailor if these dealers would send they're stale books to CGC and have them slabbed. Jay IS a smart man. he figured, the hidden money here is NOT in comic collectors (compared to the people he knows and hangs with in his circles, comic people are very financially challenged by comparison), as I'm sure Jay is financially not in the same league as a George Steinbrenner or Oprah Winfrey, who themselves is financially challenged compared to Bill Gates. Jay figured, the only way to sell these books for MEGA bucks, Action 1's for a million dollars, etc. to his CURRENCEY clients as investment fodder, was to certify them as was all his currencey and coins (a necessity for credibility).

[CGCMINT]

Fan. 4,

 

Do you have any more? It's interesting to read what goes on in his mind.

 

John

 

[Illiterati-migration]

There are so many bad jokes I could go with here... but since Khaos isn't around to laugh at them I'll let this one slide...

 

A wombat is a free-standing display, usually an A-frame made from wood beams or pipe, with adjustable horizontal shelves running across to display comics. Most can be broken down to about the size of bag of golf clubs (albeit a bit longer)... Most often found with additional pieces of string running across to keep books from committing suicide...

 

[PovertyRow]

Don't go telling the folks I have lots of articulation! They'll all want to see if my arms will bend all the way backwards behind my head

 

Now you see you have to RESIST these impulses to clever puns and double-entendre or you will make yourself a dead giveaway! Man!

[RandomSidekick001-migratio]

Interesting theory FF! Dupcak is that guy who was accused of fraud or something right? Heh. I guess it takes a scam artist to spot a potential scam. I doubt his theory is accurate, as that would probably constitute some kind of crime, but it's neat to think about.

[fantastic_four]

Do you have any more? It's interesting to read what goes on in his mind.

 

A few dozen more. It's a shame he chose to be a Victor Von Doom instead of a Reed Richards.

[fantastic_four]

Interesting theory FF! Dupcak is that guy who was accused of fraud or something right? Heh. I guess it takes a scam artist to spot a potential scam. I doubt his theory is accurate, as that would probably constitute some kind of crime, but it's neat to think about.

 

It's all unverifiable, and even if it were, it seems debatable as to whether it's illegal, although it would obviously be unethical. Dupcak typically takes the truth and jazzes it up, twists it, and extends it a bit with conjecture; I'm skeptical that at least part of it isn't true. I just don't know which parts. I verified back in 2000 that the part about Parrino's inventory making up the lion's share of the first few Manning auctions was true...he didn't take it off of his site until many months after they had already sold in the Manning auctions.