The Winds of Change

We’re in the middle of the retail apocalypse. Or, perhaps worse, we’re at its beginning. You all know the list of the big ones. It includes J.C. Penney, Sears, Toys R Us, Macys, Sports Authority, Radio Shack, Borders.

Retail debt is piling up and going unpaid. Fewer people are going out to stores. Amazon is eating everyone’s lunch on-line, while Walmart squashes the brick-and-mortars.

And even Walmart is closing stores.

Change happens. Nostalgia never wins. The cold, hard reality of business always wins, and that’s prompted by what the consumers wants. If not enough of them are spending enough money, the business model fails.

Change the model or give up the business.

The entertainment industry is filled with well-known examples of this. These are lessons other industries learned the hard way.

You don’t need me to run them all down, but look at the worlds of books, television, movies, and music. Not one of those hasn’t had its entire business model upended in the last twenty years. They’ve all changed to provide easy access at any time to a larger catalog of titles at a more reasonable price.

Easy access. Instant access. Vast catalog. Reasonable price.

I’m sorry, but that’s not the Direct Market.

The Inevitable Death of the Direct Market

Business models change. Businesses change. It’s inevitable.

Comic books started as a magazine business distributed on newsstands until that distribution model failed to support it. Then, it moved to the Direct Market, a smaller collection of hobby shops where the books had a lower profile but a built-in market willing to keep it going.

Over the course of the last 30 or 40 years, we’ve seen that built-in audience shrink in size drastically.

Is the business model for comics about to change again?

In the internet age, everything speeds up. It’s difficult to keep up with the changes, but if you don’t, you will surely die.

Industries may survive, but often at the cost of large chunks of infrastructure. You can still buy a movie or an album or a book, but the way you get it today — and the way you WANT to get it today — is vastly different from what it was 10 or 20 years ago.

What makes you think the comic book industry is immune to this? Why does the Direct Market deserve to live?

It’s inevitable. It won’t be this year. It might take another five or ten years. But why do we all pretend otherwise?

The Direct Market as it exists today is doomed. Just look around.

Where’s the Money?

Comic publishing is not a profitable venture. The most optimistic version of that sentence is “Comic publishing is not a profitable enough venture.” You can make a few bucks publishing comics, but your return on investment will be demoralizing. No company survives on publishing alone.

Hollywood bankrolls 90% or more of the comics industry. Marvel is owned by Disney, and DC by Warner Brothers. Boom! (who already absorbed Archaia) is owned by FOX now. Dark Horse is half movie producer, half comics company, and losing licenses at an alarming rate. Valiant is owned by a Chinese company that only wants it for the IP to make movies with The Rock. Image is a collection of creators putting properties out in hopes of a paycheck from a Hollywood company so they can afford to keep making comics. And once they’re successful enough at that, they turn into mini-production companies that make deals with the Amazons and the Netflixes of the world. (I can’t blame them for that. That’s the power of creator ownership. But please note the payday disparity between Netflix and the Direct Market.)

IDW (who absorbed Top Shelf) is mostly Hollywood licenses, but is also owned by a telecomm company, IDT, who put all its IDW assets into a company called “CTM Media Holdings,” pairing it with a brochure printing company they also own.

Yeah, don’t ask me to explain that one.

There is not a great amount of money in Direct Market comics. It’s all bankrolled by Hollywood. And all Hollywood wants to own is the intellectual property so it can exploit it for the bigger bucks via every method in the world that’s isn’t print publication.

Nobody is getting into print media these days. Newspapers are dying. eBooks outsell print books. (Print is making a comeback, though. Or is it?) Comic Shops are closing left and right, and sales are down year over year.

People thought Netflix was going to create a comic book company to print Millarworld titles. Are they nuts?

How long do you think Hollywood will continue to bankroll the minuscule profits of their publishing divisions/partners?

The Foundation of the Direct Market is Broken

The big draw of the Direct Market at its inception was that retailers got a fatter profit margin on the comics they bought, in return for not returning any of those comics. Were retailers of that time so smart that they ordered perfectly every time and never lost a penny?

Of course not. But the overages still had value.

Any book that didn’t sell would go into the back issue bins, many of which would increase in value with age. If you order too many books in today’s day and age, you’re lucky to sell those extra copies in a quarter bin at Christmas time…

The back issue bin is dead in today’s market. Between the rise of the trade paperback market and the creation of digital comics, back issue bins are mostly over.

The Plan B of the Direct Market is dead.

But that’s OK, you might say. Manga came up and the trade paperback economy replaced those profits. Retailers got rid of the bins and replaced them with bookshelves, filled with books-with-spines at higher prices that led to bigger profits per piece. Manga books are closer to $10 apiece, and collected editions go anywhere from that to $150 or more.

But Amazon offers substantial discounts on all of those books (30% – 40%), with free home delivery. More than half of internet-enabled America has an Amazon Prime account. I wonder what the percentage of Americans within 15 minutes of a comic shop is.

So what’s the unique selling proposition of the Direct Market? It’s a great social clubhouse, but how much are people willing to spend on that, in a world where everything else is so heavily discounted, and half the world can subscribe to a Facebook group in ten seconds to get their social fix? (Though given current events, we might be moving back to message boards soon…)

Too Little Money, Too Many Middlemen

There’s too little profit in selling $2.99 or $3.99 comics, and too few buyers who want to pay that much for a monthly comic. With those razor thin margins, who’s getting paid?

The retailers, who get nearly half of the money from every comic sold, but still can’t sell enough to stay alive?

The distributor who, if it wasn’t effectively a monopoly and didn’t ship “The Walking Dead” trades, might as well be dead already?

The publishers, who have fancy big city offices in expensive real estate markets and have come to rely on blockbuster publishing stunts and short term insanity like variant covers to artificially boost sales numbers to keep their quarterly earnings looking good for their parent companies?

Image Comics is your best deal, as a creator, because they only take a flat fee. You’re still losing 60% of the cover price to the combination of the distributors (really, just Diamond) and the retailers. Print costs soak up another quarter of the price of a comic.

So let’s all hold hands, sing kum-ba-yah, and talk about what a great partnership this is for everyone…

…As another comic shop closes every week.

…And another creator leaves comics to go to animation or book publishing or video games.

…And another GoFundMe starts up to help someone who can’t afford the basic necessities of life because they thought, for some reason, that creating comics was a better life decision than employment-with-benefits.

Kum. Ba. &*^%ing yah.

The Direct Market is Not a Panacea

40 years ago, the Direct Market saved comics. It did so at the cost of wider distribution. Sales figures plummeted, but back issue sales were lucrative, and the bigger profit margin made it a workable system.

At first, the typical Marvel or DC title sold hundreds of thousands of units a month.

“The profit margins weren’t great, but we made up for it in volume!”

Today, there’s no volume.

Now what?

All those lost readers! Whether it’s from the increased competition of videos games and home theaters and cable television, or the ridiculous prices of comics scaring people away — it doesn’t matter. They’re gone. They’re not coming back in mass quantities.

No “Got Milk?” style campaign is going to save it. No 7-11 newsstand distribution deal will save comics.

We have the biggest movies in the history of Hollywood making over a billion dollars that are based on comics and yet sales are still sliding. You can’t ask for better advertising than that. And what does it get us? How many people have heard, “Oh, they still make comics?” from someone in light of a recent superhero movie blockbuster?

Retail space isn’t getting any cheaper, sales aren’t going any higher, new readers aren’t coming into stores, back issue bins are all but dead, you can’t possibly raise the prices any higher without completely pricing your extant fans out of the market, and people can buy the higher margin items incredibly cheaper on-line.

Remind me again — what is the upside to the Direct Market for either the industry that exploits it for short term profits or the readers who don’t need it?

Evolution of an Industry

Businesses change. That’s just the truth. I’m not being doom and gloom here. The writing’s been on the wall for years.

The Direct Market was an awesome idea that did save comics. The only reason it’s held on for as long as it has is two-fold.

First, comics collectors are natural nostalgics, and they want to collect paper goods. (Along with that, habits are hard to break.)

Second, comic book stores offer an experience, when done right. They offer a clubhouse, a friendly place for the exclusive few who still care, and a natural community.

That won’t save them forever. The current customer may think they want a comic shop clubhouse, but there’s just not enough buyers to keep the stores alive. It’s not sustainable.

In a podcast interview recently, I heard one guest say they thought of buying their comics at the local comic shop as the tax they pay to keep the industry alive.

The Direct Market is doomed when that’s what’s keeping it alive.

Comic Book Retailers

This is not a dig against comic book retailers, by the way. Yes, there are plenty of them that do lots of things wrong, but there are just as many if not more than do lots of things right. Their backs are against the wall and they have to do what they can to survive from month to month.

I would argue that every retailer can do everything right in their stores, and the Direct Market is still doomed.

It’s not the retailer, it’s the system. It’s the customers (or lack thereof), and it’s the reality of modern life.

Where Do Things Go From Here?

Digital comics so far have been an add-on for the comics industry. It’s often credited for bringing lapsed readers back, but also in selling to new audiences who aren’t near a comic shop or who have no interest in buying more paper goods.

The upside potential is great, though. Done right, the digital distributor replaces the distributor, the publisher, and the retailer. Suddenly, you as the creator can go from three middle men to one. Even if you pool your efforts or go through a third party who acts as a publisher, you’re still losing one middle man. I also bet that the new publisher model can exist on a margin far smaller than what the print publisher today takes.

You save tremendous amounts of money from never printing anything on paper and never shipping anything across the country or across the world.

It also aligns interests, as suddenly there are two people at play in every transaction: The consumer and the creator. The distributor in the middle is a pass-through that still takes a bit off the top, but not as much as today. No longer does the publisher have to convince a retailer to sell one of their books. There will be some kind of minimum threshold of competence, of course, but there’s no fighting for shelf space.

There’s also no turnover. The library of offerings from the on-line retailer/distributor combination is unlimited. Let the long tail roll!

The Tipping Point?

There’s an inevitable tipping point at some moment in the future. It’ll be when printing and shipping costs get so high that the cover prices become unbearable to the masses of buyers. One could easily argue that we’re on the cusp of that now. (I don’t think self-driving tractor trailers will get here fast enough to lower shipping costs to the degree that comics suddenly become relatively cheap to move around the country.)

$3.99 for a comic that only has 20 pages and 1/6th of a story? That’s insane, any way you cut it.

Digital comics needs to adjust its business model in a way that the masses of readers will be ready to move to digital. I think comic book readers like reading comic books. They might prefer the floppy or squarebound objects, but given the right economic model, they could switch in a heartbeat. I don’t know if that’s a subscription model, or a dramatically lower monthly price across the board. Maybe it’s something we haven’t thought of yet. Maybe Marvel is testing the waters with its recent day and date 99 cent trades.

Eventually, the ease and cost effectiveness of reading comics digitally will be so great that going to the store every Wednesday will seem like a remarkably silly idea.

Everything in life today is moving towards a world where we have fewer gatekeepers. Hate to say it, but comic book stores — the Direct Market — are the ultimate gate keepers.

That will be the death of the Direct Market, once and for all. The Direct Market cannot hope to compete. No amount of “Buy a physical copy, get the digital for free” coupons or on-line reserve systems will save it.

Every comic shop owner can do everything right, and it won’t matter. There’s just not enough money in the system to keep it running.

Yes, It Will Be a Sad Day

Nobody wants to see all those people lose their jobs and their livelihoods. Nobody wants to lose their local clubhouse. Lots of people would prefer to own dead wood versions of their favorite comics. That includes me.

But life moves on. The customer base moves on. Industries change. C’est la vie.

Or, in terms Spider-Man fans might find familiar: Evolve or die.

What might replace this mess? I have an idea, but I’m over 2000 words already. Here’s a hint: Print specializes, digital delivers, and the Franco-Belgian model sits in-between.

Either that, or it’s all digital with a small print niche for the superfans, as comics goes the way of vinyl.

Give me some more time to think about all of that next…

Update and Further Reading

ComicsBeat.com picked up this article, so I thought I’d link you back to them for further discussion.

But I also wanted to pick up on another article that published there earlier in the week. Brian Hibbs did his annual look at the BookScan numbers. There’s some great number crunching in there which might help explain what kind of shape the Direct Market is in as compared to the outside world.

And John Jackson Miller at Comichron has some thoughts on everything, too. The most important one there being that comic shops aren’t really comic shops anymore, in many cases. His local one is also a sandwich shop. I’d laugh at that, but my first comic shop back in 1991 or so was a retro 1950s ice cream parlor/comics shop.

I also appeared on The Rorschach Test podcast to discuss the article with Chris Marshall (also of the Collected Comics Library podcast) and Andy Tom.

This article also provided the material for the third episode of the Pipeline Comics Podcast. Listen here: