Phonecards On-Line© is Published by Alan Cohen

October 3, 1999

Issue #180

Current Circulation: 3,400+

4th Anniversary of POL

This past year has been an especially difficult one for phonecards. Moneycard collector folded up shop about a year ago, and the US market has been on the decline. A number of dealers have simply gone out of business or disappeared, and I am unsure if there are any more full time phonecard dealers left in the US. Along with Moneycard collector went a price guide, which while it was never very accurate, it was there. The latest price guide there is to look to is the 1997 catalog, soon to be three years old. Its unlikely that any of the phonecards are worth more than the published price, just about all cards are lower than they were in 1997.

What has hurt the US hobby? There are a few big factors. The first is non-regulation of cards. This has been a problem since the beginning, with companies like Telemax going out of business early, leaving many collectors with cards that could not be used. Over the past couple of years, companies like Destiny, STS and Amerivox have joined their ranks, leaving many more people with cards that do not work. Almost anyone could create their own phonecard. I produced several different ones over the past few years.

Another problem is the expiration date. Produce a nice card, charge $20 for it, and collectors did buy the cards. The time expired, and the catalog said the card was worth at least $20, possibly more. This was great, it seemed that every card was worth more than the issue price, so why bother using the time. If the time did not expire, then there would always be value associated with that card. True, there isnt anybody who could have predicted how low phone time would become. A company is not competitive if their price is above 10 cents a minute, but I remember when 50 cents per minute was a good deal. When a collector tried to sell that card, there werent many takers. It was an expired card, just a pretty piece of plastic. The price guide says $22, but it probably wouldnt sell for $2.

Finally, issuers who had expired cards would place them on the market after the time expired for a fraction of their face value. There has been a debate over the years whether this is right or not. I dont think that this is a problem you can pin on dealers, as I am sure many out there might believe that. If something makes it to the marketplace, the dealer should purchase and sell it. It doesnt make sense not to, since there will always be someone out there that will. Dumping cards in my opinion is a blame that should be put on the issuer. Many issuers did not pay for phone time up front, they paid only for whatever time was used. Once the cards expired, it isnt like the time that was lost was prepaid for, it most likely wasnt. This was a way to get extra profit out of the cards.

The problem is, prices spiraled downward. This isnt a terrible thing in itself, many collectibles markets work like this. The problem is that in the near future, it seems unlikely for there to be a rebound. An example of price jumping is a box of 1989 Donruss baseball cards. When issued, this costs about $12 retail. It probably jumped to about $15 on the secondary market through 1991, and then the sportscard industry crashed. As recently as a couple of years ago, it was possible to purchase this for as low as $2 per box. Today, that box is worth over $20. Stamps, coins, they have all gone through similar cycles of up and down. Is there hope for phonecards to rebound? I believe so, and certainly hope so. I believe that one day we will look back and see this as a period of change. The old market certainly is dead, and prices will not go anywhere for a while. Here are some reasons to be optimistic about the future of phonecards

1) Use of phonecards. When this hobby first started in the US, almost nobody knew what a phonecard was. Today, that is just the opposite, very few people do not know what a phonecard is. They are everywhere. While they may not be as nice looking as the ones produced for the marketplace, they are phonecards and they are being used. Are they being collected? I am unsure. The retail use of phonecards has skyrocketed. I compare this to the stamp hobby at the beginning of this century. Everyone used stamps, but most people never thought of them as collectibles. Then, in the 1920s and 1930s, that changed, and a hobby was born. Same for sportscards, it was a kids hobby until the late 1970s. The problem with phonecards was that it became a hobby before people were really interested in collecting them. Stamps and coins are utilitarian items, that people happened to collect from use. I believe the same thing will happen with phonecards.

2) All markets have their ups and downs. This is certainly a down time for phonecards, but there are plenty of good buy opportunities out there. Ive never suggested that anyone purchase phonecards for investment (which is fortunate, it would have been a poor investment choice) but for the collector, there are a lot of bargains out there. Some of the retail prices right now are a fraction of what they once were. The people who purchased those boxes of cards for $2 that are now worth $20 are probably very happy. I think such issues as the Baby Bells (NYNEX, Bell Atlantic, Ameritech) are probably worth acquiring at low prices. With the current prices, there isnt much risk of the prices going down, probably for the future now much chance of the prices going up, but in the long term who knows. If the hobby makes a comeback, many of us will wish we purchased more. In 1980, a Mickey Mantle rookie card startled a small and scattered collecting community for breaking the $1000 price range. Today, that card sells for many times that price.

3) Quantities - There are a lot of issues out there that are numbered in the hundreds, or thousands. Right now, that is more than the market can absorb. Maybe in the future, that will still be more than the market can absorb, but perhaps not. This is especially true with items of a topical nature. Take for instance, Disney phonecards. I can not imagine there not being a demand for Disney items. Many phonecards have been absorbed into Disney collections that will never again be available to the phonecard market. Over time, more and more items of that nature will simply not be available.

4) There are still collectors. While this newsletter has not expanded as much as it did in the early days, the number of subscribers has not decreased either. A few hundred have been added over the past year. Considering the number of unsubscribes due to cancelled e-mail accounts, Easily a thousand new people are here that werent here last year. The current total is over 3,400. Additionally, this is a worldwide hobby, with many collectors around the globe. As long as people are still collecting, there is still a hobby. The outlook may not be so good with dealers and revenue, it certainly is less than it was when this newsletter first started. Back then, we were simply overwhelmed with new collector issues. Today, there are very few. Also, promotions were everywhere, today they are scattered here and there. Collectors are still collecting, they just arent purchasing at a level that they once were.

To the question of what can be done about the hobby to improve it, I am without answers. I suppose that we just have to let it take its course, and hope that it rebounds. I dont think there is anything that dealers or collectors can do to artificially make it improve. The answer is easy, we need more collectors, we need a print magazine and price guide, we need a fluid market. A fluid market is where a collector can purchase an item, and realize there is a way to sell the item if they need to. Thats something that has existed for other collectibles, but not really for phonecards.

While the answer may be easy, the path to getting there is not. As far as the future of this newsletter, I am still here, I am still collecting and selling. This summer has seen a significant reduction in the number of issues being produced. In the first 3 d years, I rarely missed a week, usually only when on vacation, moving across the country or have a child being born. I am unsure if I will make it a weekly again. There simply is not enough news to warrant that. There are few press releases, fewer issues available through promotion, and not as much news due to decreased retail activity. I am also involved with other collectibles newsletter for coins and currency, and one for stamps. I will probably produce this newsletter every one to four weeks. Ill produce more when there is news, and less when there is no news. Commentary has been down due to a decrease in the amount of spare time I have, and due to lack of issues to comment on.

Before I close this anniversary issue, I would like to hear from collectors and dealers about their feeling on the hobby. I would like to publish this in a future issue, so you can e-mail me and let me know if you wish your comments to be attributed. You can be published anonymously on this one.

Until Next Time,< /P>

Alan

Distribution

Phonecards On-Line© is published by Alan Cohen. It is a weekly newsletter devoted to phonecards - Current news, viewpoints, and reviews of new issues.

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