The Economics of Action Figures Part I: Value
Note: This piece was written in 2013 and originally published December 13, 2015 at Frags and Beer. Reused by permission of the author, as he will be publishing part II Friday here at Ordinary-Times.
Action figures, being an avid collector, have always interested me on a fundamental level. I got my first action figures at the ripe old age of three and a half years old, during the summer before I started pre-school. I was born at the best time for action figures, 1990. Of course, my parents first bought me Teenage Mutant Ninja Turtles action figures. At this point, TMNT figures were actually on the outs, as were some of my other first action figures, the five-inch G.I. Joes. The years 1993-1995 would see the explosion of two forces that forever changed the action figure landscape: Toy Biz and Power Rangers.
Toy Biz, of course, had the contract to make all the Marvel Comics figures, several of which are currently in my line of sight (eBay is a wonderful thing.) The most popular line from Toy Biz ended up being the X-Men figures, and, boy, did Toy Biz go overboard in that department. (For example, an awesome looking character that was in no more than two comics of the X-Men 2099 storyline got a figure. Said character, The Shadow Dancer, is so insubstantial in the Marvel Comics mythos that most of the Google Image search results will be of the action figure.) The success of these toys would eventually lead to the Marvel Legends line which continues to this day. Toy Biz, unfortunately, eventually lost the contract to Hasbro for reasons I still do not adequately understand.
What seems to confuse many is that I have never been a big fan of comics in general. Sure, I’ve read Watchmen and love me some manga, but most of my comics knowledge stems not from reading actual comics but spending insomniac nights reading Wikipedia and sites such as the Marvel Comics Database. I love the stories, powers, and ideas. I even write science fiction and fantasy stories in my spare time. But enough of that.
The Mighty Morphin’ Power Rangers was one of my favorite shows as a child (oddly enough, I don’t think I ever really watched much of the animated TMNT or G.I. Joe shows.) And no rational person will say that that theme song did not rock. But, watching the episodes as an adult makes me think “This show was garbage!” In short, Power Rangers was a 22-minute Godzilla episode with ninjas in a giant mech fighting the monster du jour. The show was designed to keep young boys’ attention and spark imaginations (oh, the playground Power Ranger “fights,” good times.) The people at Bandai knew what they were doing and merchandized the ever loving crap out of every villain that ever graced an episode. Since this was the time before I understood the concept of “plastic can actually break,” most of those figures are either broken, covered in goop of some kind (making the inner mechanics unworkable,) and/or lost in my parents’ basement somewhere chillin’ with the spiders and my dad’s old Playboys (I don’t live at my parents’ anymore.) I will probably end up finding them when my parents die or move out and the inevitable “Let’s get all this crap out of the basement so this house can actually be sold” happens.
But enough about my nostalgia. (More on that later.)
To make a long story short (too late,) action figures are an important part of my life to this day. I have since graduated from college with a degree in Marketing. Even though I took several economics courses, I never learned a damn thing about economics in any classroom (I will probably write about that at some point.) I self-taught myself centuries of economic theory by reading books and articles and listening to lectures by economists both current and dead. Didn’t take long for me to discover the great F. A. Hayek, who I would call my intellectual hero. He was one of the main members of the Austrian School of Economics and its most prominent member. Margaret Thatcher and Ronald Reagan could both count him as an economic adviser. He has the distinction of predicting the fall of the Soviet Union for the precise reason it fell back in 1944 (nearly 50 years before it happened) and lived just long enough to see it happen. I imagine him just dropping a microphone and walking away.
Now, I doubt anybody reading this (other than you, yes, you, in the back there) has heard of Hayek. Most economics professors despise him and modern libertarians do him no justice by invoking his name as support for their insanity. I’m talking about you, Ron Paul. I never heard about Hayek in the classroom, even though he’s the founder of modern microeconomic thought. This is easily explained by the fact that most academics are fanboys (that’s the best word for it) of Hayek’s ideological rival, founder of modern macroeconomic thought John Maynard Keynes. Now, that’s a name a lot more of you should have heard of. Keynesianism and Neo-Keynesianism are both current and popular (not to mention wrong) schools of economic thought. Former Enron adviser and current New York Times opinion writer Paul Krugman is perhaps the most “prominent” (read: notorious) Neo-Keynesian. He’s the idiot who suggested the U.S. government fake an alien invasion in order to stimulate the economy with the vast defense build-up this would necessitate. Really. And said with a straight face that the events of 9/11/2001 would be a great boon to the economy because of all the construction that would now be necessary. Really really. The dude is a walking, talking Broken Window Fallacy.
Now, where was I?
Unlike DVDs or books (the only two things I have more of,) action figures have relatively little base value in them. Action figures themselves don’t cost much to make once the molds are formed. This means little variable cost outside of the fluctuating price of plastic. Plastic, being a byproduct of petroleum, tends to shoot up in price when oil prices spike. The oil spikes of the middle part of the last decade are the only answer I have for “What happened to Toy Biz?” but that’s neither here nor there. Now, movies and books require an extensive effort to film or write. Action figures are solely merchandise items to compliment some already established property for the most part. If an alien came to this planet, it would see no difference between a limited edition The Flaming Carrot action figure and a blob of melted DVD boxes.
The action figure market is one of the best case studies in the economic concept of value. Value, as Hayek and many others taught, is inherently an individual and subjective beast. For example, you might want to pay over $100 for that DC Direct Larfleeze action figure. You see $100 as a worthwhile trade for that figure. I realize that price is insane and value the figure much below that. I decide to buy the DC Universe Classics Larfleeze for around thirty bucks with shipping. In short, we both just made a subjective and voluntary choice to engage in commerce at a level that was comfortable for us both. The market price of some goods can be predicted with some accuracy due to the inherent established value of said goods. Gold, for example. Or oil. But an action figure’s value over time, in the bowels of eBay and the Amazon Marketplace, is largely determined by pure demand at any snapshot in time. It’s why I was able to get like every awesome looking 1993 Toy Biz X-Men figure I wanted for under $50 in totality (like fifteen to twenty figures, excluding shipping) in about two months time. Demand for them was very low.
Now, some of you are probably thinking, “Wait, there’s another part of the whole ‘laws of economics’ thing” I’m forgetting. Yes, supply. X-Men figures in the early ‘90s were marketed primarily to young kids and, as such, a bajillion of ‘em were made. This does help explain why X-Men figures from twenty years ago are now under $5 mint in box, but not why there are still so many of them still in their boxes instead of broken in your parents’ basement. The demand just ain’t there. The figures themselves are not much in the way of collector’s items today. They are awesome to play with and pose but, like most of the early TMNT figures, are pretty shabby looking compared to anything sculpted by Four Horsemen Studios (seriously, those dudes are amazing.) Supply only explains the small part, the potential X of any action figure that is still in its box. (I tend to only buy action figures in the box even though I intend to open them because I don’t want a used figure with potentially missing parts and accessories.)
Even demand explains little. Action figures with no real demand will stay at obscene prices forever. Considering some weirdo has been holding onto the figure for sometimes decades before trying to sell it, this dog don’t hunt. eBay and the Amazon Marketplace allow sellers to coalesce around an “established” (but subject to change at any time) market price.
This is where value comes in. Action figures that had a huge supply and epic demand at launch will later lead to relatively few remaining mint in box only a couple of years later which leads to a notorious phenomenon seen in every market: The speculator. These are the aforementioned weirdos who decide to buy action figures as a long-term investment. (I buy action figures off these guys all the time, but I still think it’s weird.) They will hold onto an action figure (or buy multiples of the same action figure) and put it on the market when enough time has passed since it came out or demand starts to creep up again. Now, that’s the smart and prescient speculators. Most just cut their losses and sell the figure for far less than what they paid for it (which means even less due to ever increasing inflation) when they (read: parents/girlfriends/wives) just want the damn things out of the house. I benefit heavily from this type of speculator. When I get the action figure in the mail with the K B Toys (good times, good times) price tag still on it, I laugh when it is less than what I paid for it with shipping.
Future value can rarely be predicted for an action figure. This is why merchandise speculators are usually out of their minds to think they can make more than a few bucks per figure on average. Sure, buy a rare, less-than-a-thousand-made exclusive action figure at San Diego Comic Con and immediately put it up for sale on eBay at double what you paid for it. You might get lucky and get a quick 100% return on investment. But that formula has many value-added components to it. It is almost designed to make money for the smart. Nerds with money rarely need much reason to waste it on overpriced toys.
No, I’m talking about the TMNT figures that just came out. Some of those figures, somehow, are already selling at $20-30 on Amazon. This is insanity, seeing as more will definitely be made (they sell like hotcakes everywhere.) Oh, and they’re priced under $9 at Wal-Mart. Speculators want such an immediate return on investment, they’ve corrupted the practice. They quickly realize which action figures are clearly awesome looking and/or limited per shipment case. They then buy all of said figures they can find and immediately turn around to flip them on eBay at up to five times what they just paid for ‘em. It’s sickening. Now, the good thing is that this dies down quickly when the speculators are getting few buyers at such an inflated price for toys primarily targeted to children during stagnant economic growth (idiots…) I tend to wait a month or two before biting the bullet on such action figures. Although, the “adult collector” figures like the DC Infinite Earths line typically need to be bought immediately (at least the awesome ones) or it can take six months or more for the action figures to reach a sane price level again.
In short, the value of an action figure is determined by the sellers’ belief of what the future price will be intersected by what a sane person will pay for a certain piece of molded plastic, all over time.