Professional Sports Authenticator (PSA) provides authentication and grading services for trading cards, and itis owned Collectors Universe (CU).
CU is divided into Professional Coin Grading Service (PCGS), PSA, and PSA/DNA which authenticates autographs and memorabilia.
Joe Orland was President of PSA and PSA/DNA from 2002 until 2017 when he was named CEO of CU. He is famous for his motto: “Never get cheated!” It has since become the ethos of the entire company.
Collectors Universe is traded publicly on the NASDAQ. As of 2014, Collectors Universe had 283 employees, and as of 2018 CU had $68.46 million in revenue. The market value of Collectors Universe is estimated to be over 1 billion.
Most of the revenue comes from PCGS, some from other sources (subscriptions, trade shows, etc.), and about a third ($21 million) comes from PSA and PSA/DNA combined. While revenue for authenticating coins has remained flat for five years, revenue for PSA and PSA/DNA has grown 50% in the same time period.
PSA has authenticated 33 million items (cards and unopened boxes/packs) since its founding in 1991. Since autographs on cards are a sell, this article will briefly look at PSA/DNA.
PSA is the largest third party authenticator/grader for sports cards in the world. Regardless of recent controversy, PSA is undoubtedly either the most trusted service or only second to Beckett Grading Services. It has been responsible for handling over a billion dollars’ worth of cards since its beginning.
Early History of PSA
1991, the founding year of PSA, was at the heart of a boom in sports cards. Prices were fluctuating wildly, new brands were popping up, and the values of older cards were soaring. Counterfeits and forgeries were everywhere. Even more so, fake autographs and memorabilia were flooding the market, so PSA/DNA was founded in 1998.
The major grade that put PSA on the map was grading Wayne Gretzky’s T206 Honus Wagner as NM-MT 8 in 1991. PSA gained a swathe of publicity over the controversial card since there were doubts of its originality. This card will be mentioned later.
Put simply, there was a massive desire for a reputable third party like PSA to objectively provide a grading/authenticating service. It has become a major authoritative force for hobbyists, dealers, and auctions.
PSA has grown and developed over the years. It has outposts all over the country, and most recently, this includes expansion into an office in Tokyo.
Although PSA will put on multiple shows per year and has developed a presence on the internet, the bread and butter of the company comes from customers mailing in cards to be looked at. The cards are run through tests in order to determine authenticity and quality. Quality is scored on a 1-10 scale.
Keep in mind, these decisions can have massive effects on pricing. For a hyperbolic example, a 1952 Mickey Mantle #311 graded at an 8 has an estimated value $415,000. Meanwhile, the same card at one grade higher of a PSA 9 is estimated at $2.5 million. The differences in quality between an 8 and 9 are very small from the perspective of someone outside the hobby.
PSA is under pressure to be consistently right. Millions of dollars depend upon their judgment.
Complaints, some valid, litter the internet. On the website for the Better Business Bureau, PSA keeps up with the angry customers. Many are routine with anger over not having received their items during the 40 day guarantee. Many others are more complicated. PSA strives to keep up with them because their business is reputation oriented.
Maintaining this reputation is no easy task. The tools used for authentication especially are not an exact science.
The best example comes from authenticating autographs. The PSA specialists analyze the ink: its permeation, its use by the player, the etching from acid, and more. They look at the paper: the brittility, the time period that the paper was produced, and how the mildew may interact with the ink. The analysts pour over every detail of the signature from the starts, stops, to the flow.
Technology at PSA
Then, there’s the advanced technology. Color Spectral Deconvolution uses a color algorithm that helps to separate the signature from the background, allowing for a better analysis. The Video Spectral Comparator Analysis works on erasures, types of ink, and damaged signatures.
Yet, after all of this, it is quite common for a collector to have received an autograph in person, only to have it declared fake by any authenticator, including PSA/DNA. A legitimate course of action is to have another authenticator look at it. A reputable authenticator may reverse the decision.
The difference in authentication can strongly change the value of a sports card. Imagine a PSA 9 1968 Nolan Ryan rookie with his autograph. A collector submits it for authentication by PSA/DNA. If they approve, the value may increase. If PSA/DNA denies the authenticity, that beautiful 1968 card has scribbles all over it.
(As a side note, autographs on cards is desirable to some, but heresy to purists. The debate will surely continue.)
While autographs are much harder to authenticate than trading cards, the point still stands. If this were an easy and straightforward job that any hobbyist could do, CU would be nonexistent.
PSA reportedly rejects thousands attempts at scams per year. They are constantly adding new technology to compete with scamming attempts, and they often must reach out to enforcement agencies. Out of millions of cards per year, a few that get through the cracks can severely damage their reputation.
This is serious business. Remember that “Gretzky Wagner” that PSA graded in 1991? Well, reports of fraud had been following it since Bill Mastro bought in 1985. After this report and that report, including a photo which shows doctoring, Mastro was indicted in 2012 for fraud. Mastro eventually pled guilty, admitting that he had altered the card in the 1980s. He served 20 months in federal prison.
The fact that PSA authenticated this Gretzky Wagner in 1991 caused some trouble for PSA. This is nothing compared to the controversies of June 2019.
PSA Card Grading Controversies
The recent issues revolve around PSA grading cards with trimmed edges without PSA recognizing the fraud. Occasionally, cards have been trimmed in the past in order to fit into a cover. Today, trimming is mostly an attempt to sharpen the edges in order to receive a higher grade.
If a scammer can boost the card by a grade or two, the faked value can skyrocket. Of course, a card found to be trimmed loses significant value.
Facts were uncovered by internet detective work. Blowout cards opened it up, and a plethora of cards have been trimmed. Many of these cards were trimmed, and then they were graded incorrectly by PSA.
The website worthpoint.com has brought amateur detective work to a new level. Collectors can analyze cards over the web as they travel across different owners. Many major eBay sellers are in the web of deception.
All this doubt has brought on a bit of a panic. If grading services are nearly null, then there is no authority. Without any authority, there is almost anarchy.
These illicit collectors and dealers may have been able to find the tiny fraction of give that producers allow when originally cutting the cards. If that is true, it may be impossible to differentiate a cut card from an original. Thus, scammers may have discovered ways to circumvent the protections put forth by PSA.
Not only does this jeopardize PSA’s authority, but it also brings into doubt the entire hobby. Trading cards may fall into the realm of autographs in which one authenticator says yes, while the other says no. Without third party authentication, the originality trading cards come into doubt, particularly on the high end.
It is all about originality in this hobby. In response to these issues with the PSA, the New York Times released an article titled, “Retouching the Mona Lisa Is Restoration, but a Mickey Mantle? Collectors Cry Fraud.” It is the whole culture of the industry that cards ought never be touched up. It is a foundational principle of the value of trading cards.
Again, this is serious business. The Washington Post is also in the reporting mix with the article, “Baseball Card Collectors Suspected Rampant Fraud in Their Hobby. Now the FBI is investigating.” With millions of dollars of fraudulent merchandise crossing state lines, of course the FBI is involved.
Considering that the major source of revenue growth for Collectors Universe is PSA, CU’s stock prices are important to look at. On the year, the company’s stock has doubled from 11 in January to 22 in May. With the recent controversies, the stock took a hit down from $22 to $17.81 on June 6th. Yet, by July 10th, it hit a new year high of $23.44. As hobbyists everywhere are reeling, investors do not seem to mind.
While investors seem somewhat secure, there is room for concern. Grading services, including PSA, are a major part of the trading card hobby. They provide authority to the quality of cards. Without them, cheats, scams, and frauds would run free unchecked, rampant, and hurting hobbyists.
However, there is a strong need for them to improve. PSA is in an industry where there is little room for error. Realistically, out of the millions of graded cards, PSA has missed a tiny percentage of frauds. PSA still needs to work to improve year in and year out because nobody wants trading card grading to go the way of autograph authentication.
As a result of the advancements in trimming, the hobby stands at a turning point. If PSA becomes unreliable, pricing will be harder to determine, internet sales will be more difficult, and uncertainty will reign.
Yet, trading cards thrived for decades before PSA started in 1991. Regardless of the future of professionally graded cards, trading cards will continue to survive.