A Comics Journal History of the Direct Market, Part One

Posted by on February 15th, 2010 at 8:13 AM

 


As the Direct Market became more professional, distributors like Diamond began holding educational seminars for retailer. Detail from a 1989 flyer.

 

In those days, there was no uniform day of the week on which all the nation’s new comics hit the stands at once. It was catch as catch can, and those retailers who got their comics through Seuling’s nonreturnable distribution quickly benefited from Sea Gate’s more efficient reach. “Initially, Phil would drop-ship comics from Spartan to you, and it would take as long as it took,” according to Plant. That was not nearly as long as it took for newsstand wholesalers to get around to delivering their products, and the result was that Seuling’s network of shops were able to offer new comics about a week before traditional returnable outlets got them. And shops that doubled as subdistributors for Seuling got the fastest delivery and lowest discounts of all.

Rozanski had opened his first store in Denver at the age of 19. He had an excellent relationship with a newsstand distributor named Emil Clausen who was willing to sell comics to Rozanski’s shop at a higher discount than he sold to other retailers, but ultimately Seuling’s combination of low discount and fast delivery convinced Rozanski that if he couldn’t beat Seuling, he’d better join him. Rozanski applied to be one of Seuling’s subdistributors in 1978, but to his great exasperation, Seuling turned him down, saying he already had a subdistributor for Rozanski’s area. That left Rozanski in the position of having to get his comics from a newsstand distributor or Seuling’s subdistributor, who was also a competing comics retailer in the area, either option leaving Rozanski at a distinct disadvantage. Rozanski was unusual among the first generation of comics-shop proprietors in that he, then 23, had a few years of business and finance classes from the University of Colorado under his belt, and based on what he’d learned, he felt he had a good case against Seuling for violation of antitrust regulations. To bring such a suit against Seuling, however, would cost something in the neighborhood of $50,000, lawyers told him. As it turned out, no suit was necessary, because, according to Rozanski, when Seuling got word that Rozanski was considering legal action, he changed his mind and welcomed Rozanski into his fold of subdistributors.

Rozanski remained dissatisfied, however, seeing more potential to the nonreturnable market than was being realized under Seuling’s reign. The biggest problem, as he saw it, was that Seuling’s clients were expected to pay for everything at the time they placed their orders — 60 days before the books actually shipped to their stores. According to Schanes, “It was a cash-flow nightmare for retailers.” Just when they needed to be ordering for the busy summer or Christmas season, their cash-flow would be at low-ebb due to slack spring or fall sales.

It was all the more frustrating, according to Rozanski, because Seuling himself had 60 days from the time books were shipped to pay publishers, “so he had 120 days float with the money he got from retailers.” Rozanski reasoned that retailers would be able to order more books for when demand was greatest if they weren’t forced to prepay. Within a year after becoming a Seuling subdistributor, Rozanski made that argument to Marvel in a long, angry letter that said in part, “[If not for the required advance payments] I would have spent another $1,000, this month alone, on your products. Multiply my business by the hundreds of independent retailers, large and small, across the nation, and you come up with a staggering sum that is being wasted.”

Rozanski didn’t realize it, but the deal between Seuling and the various comics publishers, including Marvel, was already being attacked on another front. While Rozanski had contemplated an antitrust suit against Seuling, another distributor, Irjax Enterprises, and its Chief Operating Officer, Irwin Schuster, had actually filed one in November of 1978 against Seuling and every publisher with which he was doing business, including Marvel’s parent company Cadence Industries and magazine-publishing partner Magazine Management Company, DC Comics and its parent company Warner Communications, Warren Publishing Company, Starlog publisher O’Quinn Studios and Sea Gate subdistributor and Maryland Funnybook Shop proprietor Mark Feldman. The suit charged that the defendants had “engaged in a combination and conspiracy in restraint of interstate trade and commerce of the United States in the distribution and sale of comic books and related items to collectors shops.” Seuling and his suppliers were accused of forming a monopoly distribution operation as defined by the Sherman antitrust act and of “selling such products in commerce to certain purchasers for use, consumption or resale within the United States or the District of Columbia at prices less than the prices for such products of like grade and quality sold by them to other purchasers (including Irjax).” In addition, the suit charged that Seuling’s distribution agreement with publishers violated the Clayton Act by offering various services and facilities, “economic incentives, allowances, special payments, discounts and other blandishments” to Seuling and not to other distributors. Irjax also took offense at a direct-mail announcement sent to retailers by Seuling, in which Seuling asserted that “an off-the-wall pseudo-‘distributor’ on the middle of the East Coast has been telling everyone that ‘Seuling is out, he won’t be able to deliver books any more.’ This nut has also suggested returning unsold books (bought from him) through the local distributor as ‘returns,’ a policy which would automatically get you cut off from all supplies of books from all publishers.” Seuling also claimed the “sickie” had made “harassing phone calls” and “used the mails fraudulently.” Irjax argued that this constituted libel and asked the court for a judgment against Seuling for $200,000 in compensatory damages ($100,000 apiece to Irjax and Schuster) and $1 million in punitive damages. The suit also asked for the awarding of trebled damages of $1 million for the defendants’ alleged antitrust violations.

All of the defendants responded by denying the allegations, but Seuling took it a step further, filing his own counter-claims of antitrust violations and unfair competition against Irjax, as well as cross-claims against his fellow defendants DC, Cadence and Magazine Management. He also filed a cross-claim against Big Rapids, a distributor that dealt mostly with returnable accounts and had not previously been involved in the suit. Seuling claimed that Irjax, Big Rapids, DC, Cadence and Magazine Management had had their own privileged arrangements that gave Irjax and Big Rapids an unfair advantage over other distributors and constituted a violation of the Sherman Act. He accused Irjax and Schuster of “falsely, willfully and maliciously reporting to various individuals throughout the comic book and comic magazine industry including customers of Seuling and Sea Gate… that Seuling and Sea Gate were going out of business.”

Over the next year, the suit dissolved into a series of settlements, as one defendant after another reached private agreements with Irjax, but in opening a legal snakepit of cross-accusations, Schuster had succeeded in driving a wedge between Seuling and his suppliers.

That was the background against which Rozanski’s letter of complaint was received by Marvel. Rozanski had also circulated the letter among 300 other retailers and publishers, asking them to back him up in his demands for change. He estimated that 100 complied, sending their own letters to Marvel supporting Rozanski’s position. Rozanski said he awaited Marvel’s response with some trepidation, but instead of a cold shoulder or repudiation, he received an invitation to come to New York and talk with Ed Shukin and Marvel President Jim Galton. The Irjax suit had made the publisher’s exclusive deal with Seuling legally problematic, while Rozanski and his chorus of retailers were making a persuasive case that Marvel had everything to gain by opening the nonreturnable deal that Seuling had forged to anybody who wanted a piece of the action.

One of the first Sea Gate subdistributors to take advantage of Marvel’s new policy was Glenwood Distribution. Mangiaracina, who was one of Glenwood’s clients in 1979, said, “I was 13 at the time, and Glenwood put a note in his monthly newsletter saying, “How would you like to get up to 55 percent off on your new comics? That was unheard of at the time. The maximum discount for retailers then had been 40 percent off. So I wrote back saying I would like to know how to do that. He called me back and said I’d have to order at least 10,000. I was then doing 250 books and I could basically handle 250, so I knew I could never make 10,000. Then they asked me, ‘Well, what could you do?’ And I said I could maybe do 3,000. I made a deal with another store and with a guy who was buying about 100 books a month. But you know, it grew. The Direct Market grew by at least double digits every year from the time it started until 1995.” It wasn’t long before Mangiaracina was able to bypass Glenwood and become a direct distributor himself, joining a crowd that, at its peak, included 19 companies.

After Irjax succeeded in opening up the Direct Market to itself and other direct distributors, it aggressively pursued comics-shop accounts, eventually outgrowing Sea Gate. In the process, however, it overextended itself, offering impossible-to-maintain discounts as a way of increasing its market share. In 1982, the debt-ridden company was sold to Steve Geppi, who grew Diamond Comic Distributors from its ashes.

 

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One Response to “A Comics Journal History of the Direct Market, Part One”

  1. patford says:

    Great story, I’m looking forward to the rest.
    One thing I’d point out is there was no, “Marvel-led resurgence of the 1960s.”
    The fact is if you ignore total sales (Marvel was restricted because they were distributed by the DC owned Independent News), and focus only on the best selling individual titles, Marvel’s best selling comic book Spider-Man didn’t break the top ten until the last two years of the decade, and even then was far from the top.
    For almost the entire decade Spider-Man was being out sold not just by Superman, and Archie, but by Tarzan, Lois Lane, Superboy, even books like the Metal Men.
    Where Marvel stood apart from the other comic book companies in the 60’s was their sales were increasing year by year (until 1968) while the sales of DC, Dell/Gold Key, and Archie were in decline, but Marvel’s best selling books never reached the top, and only Spider-Man ever made the top ten. By the time Spider-Man cracked the top ten in 1968 it’s own sales had peaked, and begun to erode.