A Comics Journal History of the Direct Market, Part Three

Posted by on February 17th, 2010 at 5:20 AM

 


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With Marvel and DC now signed to exclusive deals for distribution, the situation for the other distributors took a turn for the desperate. Canadian distributor Andromeda Distributing Ltd. had already filed for bankruptcy on April 13th, leaving any number of unpaid creditors in its wake. Facing the loss of over 60 percent of their comic-book sales, both Capital and Friendly Frank’s began pursuing exclusive arrangements with a number of other publishers, with Image and Dark Horse being the key prizes left on the playing field. If either distributor could sign Image and a significant number of smaller publishers, they would have the retailer clout necessary to weather the war between distributors. Without such deals, the prospects for other distributors looked dismal.

On July 21, both Image and Dark Horse were announced as having signed exclusive to Diamond.

Capital announced shortly thereafter that it had signed Kitchen Sink and Viz Comics in “strategic alliances,” but for many the writing seemed to be on the wall. Capital maintained negotiations with a number of smaller publishers as well, but ultimately only Tokyo-based Tohan, Spanish art-print company 1000 Editions and Coppervale Press, the imprint under which James Owens self-published his series Starchild, ever took the bait. Fantagraphics publisher Gary Groth, negotiating on behalf of Drawn and Quarterly and Black Eye Press as well as The Comics Journal‘s parent company, noted his doubts as to whether Capital could remain a viable distributor without distributing any of the top five publishers in the industry, comprising some 80 percent of the market. Publishers NBM, Antarctic and WaRP Graphics also dallied with Capital before turning down proffered deals.

By October, Capital had shut down 18 of its 20 regional service centers, while engaged in ultimately fruitless talks with Marvel in the use of its facilities and staff to augment Heroes World’s woefully inadequate services. Diamond, meanwhile, was negotiating with smaller publishers in hopes of signing exclusivity deals. For Capital, the oxygen supply was slowly being cut.

Lost in all of this exclusivity madness were the retailers, who for the most part had no choice but to follow along as best they could. Attempting to assess their next move, NBM surveyed various American retailers to find out how they would react. The company’s owner, Terry Nantier, spoke to the Journal about the results (TCJ #181):

With regard to the responses NBM received, Nantier said: “…we were a little surprised at some of the animosity. It’s understandable, of course, that the retailers are not particularly happy about how things have been going. But, the animosity is kind of spilling over against distributors as well as publishers and that’s been disconcerting and discouraging.” How do retailers feel about NBM and other alternative publishers going exclusive? “[With] companies like ourselves, in general, they don’t like it,” Nantier explained, “but most would go along. [Still,] there was a fair percentage fighting very strongly and show[ing] a fair amount of animosity against any further exclusives.”

Retailers had any number of complaints. Heroes World in particular was singled out for incompetence, but all distributors were castigated for general lateness in filling both orders and re-orders, for the increase in expenses due to UPS shipping, for lower discounts, for increases in the costs of preview catalogs — you name it.

The effects of the two consecutive crises — the second speculator crash and the distributor wars — had taken a dreadful toll on the comics business. The direct distribution network now stood at around 4,500 retail outlets; just over half, had vanished in the space of three years. Midway through 1996, Diamond had roughly 87 percent of the market share, compared with just 12 percent for Capital City.

For the rest of the industry, the damage finally began to level off to some meager level of stability, but this still left all involved in very unhappy positions; the retailers still left standing had been bled dry by the twin economic massacres, and had little left in the way of capital resources with which to absorb further damage. Virtually every publisher signed to an exclusivity deal was unhappy with it. Viz Comics, for example, watched sales on some of its titles drop by 25-30 percent after signing with Capital. Publishers saw a drop in sales commensurate with the drop in retailer locations. An obscenity charge filed against one of Friendly Frank’s retailer locations in Illinois delivered the final blow to the company, already staggered by injuries inflicted by the distribution conflict.

Marvel’s efforts to control the market soon began floundering as well, as the company hemorrhaged from industry ill will and Ron Perelman’s accumulated junk-bond debt. 275 employees were fired from Marvel and its various divisions on January 4, 1996 — 16 percent of the company’s total workforce. Malibu Comics was all but shuttered, with just two titles remaining and only its coloring and film-output departments spared from redundancies. In the space of a decade, Marvel Comics’ share of the Direct-Market pie had dropped from 70 to 32 percent of sales, according to the February 1996 edition of Internal Correspondence. Writing for that same issue, Capital City’s Milton Griepp described his thoughts as he attended a meeting of a retailer organization known as the Direct Line Group:

I was struck by the comparison to January 1995. The comparable event last year was the meeting of the International Association of Direct Distributors. Marvel had just announced their purchase of Heroes World and said that they were considering changes in their distribution. Only a year later, the organization that hosted that meeting is winding down its activities, with most of its members gone and those that remain radically different companies from what they were twelve months ago. The number of distribution warehouses is probably 50 less in 1996 than in 1995. Distribution truck fleets have been sharply reduced, with more transportation and delivery services now outsourced. And of course the most radical change of all at the distribution level has been in product lines, with each distributor now representing only a portion of all the titles available and concentrating on its lines in new and different ways.

A month later, Griepp again took to the pages of Internal Correspondence to try and describe what he saw as the primary reasons for the attrition. Sales were down. “According to our research,” Griepp noted, “the two largest product categories in stores selling direct comics are comics and cards. Both have experienced approximately 50% declines in consumer demand over the last few years, and this has pressured stores to cut expenses or find new lines rapidly.” The convulsions among distributors and the end of one-stop shopping for retailers, meanwhile, had reduced the available credit for comics shops already struggling under the new marketplace reality. As Griepp put it:

Because most of the retailers in the comics business are small mom-and-pop operators, the way they’ve gotten credit for inventory and other uses has been by building a track record with a distributor. Since July 1, 1995, all retailers have experienced a reduction in the size of their relationship with their old full-line distributor and have been forced to form new distribution relationships. These new relationships have, in general, provided shorted credit terms than the relationship with the distributor with whom the retailer had a track record and a consequent reduction in the overall credit available to the retailer.

According to Griepp, the need to order from multiple distributors also guaranteed that retailers’ cover-price discounts were also smaller, since they could no longer order their comics in bulk from a single source. Higher paper prices, increased freight costs, increased costs at the distributor level passed along to retailers, the sudden inability to reorder sold-out comics from Marvel: With this many strikes against them, it’s a wonder that more retailers didn’t fold in the ensuing economic collapse than actually did.

 

On July 26, 1996, Diamond Distributors bought Capital City — around the same time that Ross Rojek’s lawsuit against Marvel was dismissed. Marvel Comics filed for Chapter 11 bankruptcy on December 11, and on February 7, 1997, Diamond announced that it would again be distributing their comics. Heroes World was history; for the next few years, Marvel would be far too busy fighting a messy and protracted battle with competing shareholders to be operating its own distributor. It was as though the American comic-book industry had transformed in short order from a game of Monopoly to a desperate round of Russian roulette, only with three or four bullets in the gun rather than one. Depending upon the estimates offered at the time, somewhere between half and two-thirds of the Direct Market had been obliterated in the space of just three years.

The American comic-book industry has been crawling slowly from the wreckage ever since.

 

This essay originally appeared (in less-edited form) in Deppey’s weblog, ¡Journalista!

 

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2 Responses to “A Comics Journal History of the Direct Market, Part Three”

  1. Tim Tylor says:

    Much thanks for reposting these – it’s been a fascinating read. Is there any chance of a Part Four in the future? There must be something worth saying about the last ten years, even if they haven’t had as much drama. How have graphic novels and bookstore competition affected the DM? Has the internet changed things seriously?

  2. Mint City says:

    Thanks for the interesting story. Having lived through these dual nightmares (speculator crash and distributor wars) I can attest to the difficulties retail stores had in trying to survive day-to-day much less try to look forward to the future. This was about the time I realized that there wasn’t a future in comics retailing and obtained a teaching certification. From about 1997 on (I sold the shop in 2002) I had less than a focused attitude on the shop, thus did sales fall on top of the BS you described in your story. What is interesting is that I did supplement my sales with Magic cards, toys, and other material that kept the store alive; regulars maintained that I “sold out” yet the shop remained open so that they could still make their weekly purchases. I still have all of my Heroes World invoices from the transition and the “newsletters” make for some interesting reading today! Thanks for the travel down memory lane, as distressing as it was to live it at the time.