What You Should Know About Magic Card Leaks

Happy Wednesday, readers! Today’s issue of Modern Times delves into a more delicate–and by some opinions, taboo–topic: leaks. No, not “leeks,” but rather “leaks.” 

With seemingly more leaks than official previews early into the preview season for Modern Horizons 3, several questions and concerns may come to the minds of Modern players and Magic finance enthusiasts. Firstly, what implications do leaks have for market volatility? Secondly, how much stock should the average speculator put into leaked material? Thirdly, who is at a disadvantage financially as the result of a leak, the speculator, or the seller? These three questions I will do my best to address in-turn, and hopefully provide some insights and information useful to the Magic community at-large, who are being inundated with leaks day-after-day for Modern Horizons 3, which is primed to be the most financially successful set since Lord of the Rings: Tales of Middle Earth. 

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Think of this article as a broad-stroke opinion piece on leaks. In recent days, Wizards of the Coast has verified and validated most leaks that have been cascading (no pun intended) site-to-site for the past couple of weeks. 

What is a Leak?

While we take the word “leak” for granted, it does have a practical meaning in the context of MTG: 

Leak (Noun): An unofficial, and unverified preview of a Magic: the Gathering trading card from an upcoming set.

Yes, I absolutely made this up, but it’s important to contextualize what a leak actually is, so as to understand its gravity and broader market implications. The two key words in the above definition are “unofficial” and “unverified.” Unofficial in the sense that Wizards of the Coast (WotC) was not the officiating source of the preview–which is to say that neither WotC, nor someone WotC has given express permission to is the “spoiler” of the card in question. Unverified means that the validity of the leak itself is not retroactively authenticated by an official source. In theory, WotC could give immediate credibility to any leak post-hoc by simply acknowledging that the card in question is real, despite their objections to the process by which it was revealed to the market. 

How Do Leaks Happen?

This more ontological question is purely speculation, but it’s a question most individuals would be curious about. When leaks are compiled on Reddit, where do they actually come from? Here is an extensive, but not exhaustive take on this question:

• Pilferage: WotC does not physically print cards, rather they hire a third party who specializes in printing trading cards or similar products to do so. Employees or other individuals with access to the printing space may pilfer product as it’s printed, and then leak said product to a broader audience

• Spillage: En route from manufacturer to distributor (the printing press to the warehouses that serve your local game stores), there’s always a chance that some item on a freight forwarder’s manifest is entered incorrectly, leading to a case of product or some stock of product to be supplied in excess of what is actually demanded. This “spillage” represents stock shipped from the manufacturer that is effectively “lost” in the sense that the manufacturer cannot account for its whereabouts, but this “lost” product along the value chain can be taken or fall into the hands of an unwitting participant in this process, leading to, you guessed it, leakage

• Security Breach: This is not as extravagant as you might think. But a very real risk that WotC faces is proprietary company information making its way onto unsecure servers or devices. If an employee who is on the R&D team for MH3 emails themselves some files from their secure work device to an unsecure personal device to work on at home, there’s a risk that the data transferred could be jeopardized and proliferated inadvertently to a broader audience, representing a leak

• Early Birds: What this means is that individuals who have rightfully been given the ability to preview a card do so too early or before the date and time they are permitted to (usually during the normal preview season). Sometimes this is accidental, sometimes intentional, but nevertheless creates an opportunity for cards to make their way to the public eye ahead of time

Ultimately, there’s no way to make these sound better than they do. They are either actions that are deliberately criminal or negligent. By the same token, however, WotC inherently takes a risk whenever they work on a new product that it may, through some channel or another, make its way to the public before its intended announcement date.

Why Are Leaks Good or Bad?

This is admittedly a touchy subject. On the one hand, if a leak turns out to be real, it provides early information to market participants that can mitigate some volatility of the product or related products that would ordinarily occur closer to release. This is because the “hype” or excitement has more time to taper off relative to a near-release preview, where the market has little time to digest the information relative to when it comes time to make a consumption decision. 

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In a sense, leaks can provide market participants more information ahead of time about products they may be otherwise uncertain about investing in. If I have two months to digest new cards rather than two weeks, I can come to a more informed decision about whether this product is right for me. This is the same argument for having Secret Lairs follow a print-to-demand product design, as opposed to a limited print-run. As consumers have more time to digest product information, they can arrive at a more confident decision that minimizes potential waste, while mitigating the risk of impulsively buying a product they’re less certain about. 

Leaks feel somewhat rebellious in nature. Individuals who are leaking products don’t get anything out of it. In fact, if the leaked product is in fact a real card, then doing so can carry legitimate legal consequences if anonymity is not retained. Therefore, the only reason to leak cards anonymously is either for the thrill of doing so (like eating the forbidden fruit, so to speak) or because doing so benefits a collectively larger group of people.

So what are the consequences of leaks? Outside of the legal dimensions of this issue, let’s start with a smaller-scale, though still relevant issue. Oftentimes, previews are “rewards” allocated to highly influential content creators, writers, and champions of the game itself to a broader audience. Many creators grind in hopes that one day they can be dignified or validated with an official preview, however small or large. Leaks fundamentally take opportunities away from these contributors to the game’s community and atmosphere. Thus, leaks generate a significant negative externality for other agents in the game’s community. In theory, this can be rectified by providing that agent an opportunity farther down the line or by allocating them a preview card different from what they may have originally been allocated. Again, this is a comparatively small issue that affects a minority of stakeholders, but it’s unfortunate all the same.

The larger issue that leaks pose is that they can be market-distorting. If individuals involved in the market for single Magic cards make financial decisions based on a leak, there’s a risk that the leak does not materialize to a real card or is invalidated after the fact by WotC. Individuals who make decisions based on the leaks then face real financial losses. Now in all fairness, especially in recent years, most leaks do tend to be legitimized by WotC during the normal preview season, although there are some exceptions to this rule. 

Even if a leak turns out to be legitimate in time, the timing of leaks outside of a traditional release cycle can cause expectations surrounding future price movements to vary inordinately. Leaks can risk market manipulation if sellers see an opportunity to capitalize on existing cards that are well-complemented by leaked cards, thereby allowing them to collect rents from uninformed or vulnerable consumers (excess income exceeding what the market would otherwise prefer). If a leak turns out to be false or doesn’t manifest itself as a real card, then real income is potentially lost by consumers who speculated on that card’s legitimacy.

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In essence, if you’re a consumer that speculates based on a “leak,” you’re taking a gamble on a gamble. Obviously, if a consumer speculates on a legitimate preview, they’re investing in a card they believe has high potential knowing full well that it may not. Speculating on a leak, however, carries double the risk in the sense that as a speculator, you’re betting on the probability that the leak is a legitimate card, and then conditioned on that, you’re betting on the probability that said card will also be useful or in-demand. 

As mentioned earlier, while leaks can mitigate some price volatility as a set nears release and leaks begin to materialize as legitimate cards, that volatility can be displaced temporally to earlier periods preceding the preview season, risking unnecessary movements in related cards that ultimately hurt unsuspecting consumers. 

How Are These Risks Mitigated?

As WotC has shown through their rather comical use of the Pinkerton Agency, real legal consequences can be enforced if WotC can reliably track down the source of any given leak. The use of the Pinkerton Agency by WotC is more performative than anything. It’s their way of signaling that they’re willing to take strong action against those ultimately pirating their product. Having said that, the cost associated with tracking down each leak case-by-case is infeasible for every single leak, but every now and again, some use of legal force to punish leakers may be enough to deter a good chunk of that behavior. 

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Outside of legal actions, many online sellers don’t give legitimacy to leaked cards in order to protect both themselves and the consumer. For example, if you go to TCGPlayer and look at what MH3 cards you can currently preorder, you would find only the cards officially previewed at MagicCon Chicago or in WotC’s recent article discussing MH3 leaks (also linked earlier). In the absence of legitimacy, sellers would otherwise risk fraud by taking preorders for cards that don’t really exist. This doesn’t however risk sellers from raising prices of related cards to the leaks and collecting excess from vulnerable consumers or investors. 

So firms and leakers are subject to some scrutiny, but what about consumers themselves? The best advice regarding how to treat leaks is to take them incredibly cautiously. While the probability of their legitimacy may be high or near-certain, the fact that even a small probability exists that such leaks may be fake poses a real risk to investment decisions you make under the assumption of legitimacy. As such, the best practice is to avoid making investment decisions until the leaks are officially verified by WotC or WotC-approved channels. Anything short of that carries an inherent, and unnecessary risk. 

As more leaks likely roll their way into the preview season, stay safe, exercise caution, and remember that official preview channels are the safest when speculating. 

Further Reading:

How to Deal with Volatility in the Magic Card Market