By Brian Hibbs
I nearly died the first week of August. I had a clogged artery in my heart and went into cardiac arrest; they had to shock me three times to keep me going, and my body literally flew in the air from the shocks.
DCeased #1 variant cover by Ben Oliver
I don’t bring this up for sympathy (honestly, thanks to a massive change in diet and exercise I’m quite likely already in much better shape than I was in July), but more to explain how I have let months go by without any commentary on the radical changes in comics distribution since June. While I assume full responsibility for the state of my health, there’s certainly a part of me that thinks that the stress and drama of the last few months added in some fashion to my condition.
As any reader of The Beat should be well aware, on June 5th, 2020, DC comics suddenly announced that they were going to stop distributing through Diamond comics, and instead would use new “distributors” Lunar and UCS. I put that word in scare quotes because Lunar is actually mail-order retailer DCBS, and UCS is (was?) Midtown comics. In other words, DC’s move was to take their #1 and #2 customer, and force all Direct Market stores to buy from their largest competitor. This is a pretty offensively egregious action for the average local comic shop.
At the time DC said “DC has been analyzing its Direct Market distribution for some time, long before COVID, specifically in light of sustained stagnant market growth. The timing of the decision to move on from Diamond was ultimately dictated by the fact that DC‘s contract with Diamond has expired, but incidentally, the disruption by COVID to the market has required DC to forge ahead with its larger growth strategies that will benefit both the Direct Market and DC.” Direct and repeated questions about what these “growth strategies” could possibly be were met by pointed silence (and have still not ever been mentioned again, to this very day)
At the same time they announced leaving Diamond, DC also announced that they were unilaterally changing release date for their products to Tuesdays, rather than the traditional Wednesday, which had the net impact of causing the DM to lose a week’s worth of sales window on trade paperbacks and graphic novels, and to cause a number of other downstream problems like a shortening of the window for Final Order Cutoff on their periodicals. We’ll discuss the ramifications of that a bit later.
On August 10th, the first wave of DC layoffs happened with something like a third of their editorial team (including Editor-in-Chief Bob Harras) being laid off, but more critical from a Direct Market point-of-view, the elimination of major DM-related staff including VPs Jim Sokolowki (“Ski”) and Jonah Weiland, and absolute key-man Vince Letterio. And since that red day, the cuts struck again this week, getting rid of Adam Phillips, Stuart Shreck and Fletcher Chu-Fong. As I now understand that Albert Ching has been transferred over to digital, there is likely no one I’ve ever met other than Nancy Spears who now has any interface or interaction with the Direct Market.
[This might be a reasonable place to mention that, from what we can see from BookScan and Diamond sales data in 2019 show that the Book Market sold about $33.4 million of DC material, while the Direct Market sold approximately $162.8 million – nearly five times more material than the book stores. As for digital, well, there’s no hard number, but Comichron estimates the total for digital across all publishers for 2019 as being $90m, so logically DC’s share of that is going to be well below $30m. We’ll come back to this, but just remember the numbers appear to show that DC generates significantly more money from the DM than all other sources of publishing combined]
The jaw-dropping horror of this (besides a lot of good people – Good friends! – being shown the door in a global pandemic) is the staggering loss of institutional and market knowledge that’s being thrown out. Between Ski, Jonah, Vince, Stuart, Adam and Fletcher, there’s probably a hundred and twenty years of work and information that’s going to be into the wind. And despite DC’s attempt to upjump a mail-order joint into a distributor, that knowledge loss simply can’t be made up laterally: DCBS operates entirely differently than the majority of the approximately 3100 accounts who buy comics worldwide. For example, Series Code data, absolutely critical to the methods the overwhelming majority of stores do to handle subscription orders, has been a jangled, scrambled mess for the last several months; DCBS does not appear to use Series Code data for their customers.
Oh, dang, I didn’t even mention that a mere six months after starting to distribute DC comics, UCS (Midtown) suddenly dropped out from continuing to do so. While there’s not any strong reporting on the subject (and there’s genuinely a lot of really terrible sourcing out there!), it sounds to me that UCS dropped DC, not the other way around. Distribution is a hard game in the first place, with razor thin margins, and it seems strongly unlikely to me that Midtown could afford to pay New York City’s rents, or Minimum Wage of $15/hour and remain profitable on the fraction of sales of the #2 comic publisher, especially when neither Lunar nor UCS had any meaningful percentage of DC TPs in stock at any time, meaning they’re working nearly exclusively from sales of periodical comics alone.
Honestly, given the upgrades that have to be made in packing material, staffing, storage, etc, I’m not even sure how DCBS (Lunar) is making it work on Fort Wayne Indiana’s $7.25 MW, but at least the math is a smidge more tolerable there from the cost of living/facilities. The $500 monthly minimum order that DCBS is now implementing now that they’re the monopoly DC periodical distributor probably helps too.
Anyway, it’s been a lot of changes – damn, can you imagine having to change distribution sources for a single product line up to three times in a nine-month period? – and none of them of any meaningful benefit to the average working retailer. I can personally think of literally scores of stores that have publicly announced they’re cutting back or even cutting out DC comics because of these changes, and even those of us who are fighting it through are extremely hamstrung by awkward and unfriendly ordering and reordering tools. Many retailers are complaining that backend paperwork isn’t being handled, or are being handled incorrectly. And many of us simply don’t want to put any additional penny into the coffers of our #1 competitor in the market, and genuinely and passionately resent every time we’re being asked to spend with them. All of this uncertainly and chaos is directly and clearly costing sales at every level of the industry.
But how could it not have ended up like this? History couldn’t possibly have been clearer.
A Quick Aside to discuss Comics History:
They say that those who do not study history are doomed to repeat it, so we need to go back twenty five years to 1995 where the Ron Perelman-ran Marvel Entertainment Group decided to try and vertically integrate and bring distribution in-house by purchasing small regional distributor the year before, and then trying to get Heroes World to nationally distribute all Marvel comics.
Back then there were a lot of comics distributors, and a lot of comic distribution warehouses across the country (Diamond and Capital City alone had around twenty each as I recall), but removing the Jenga piece of Marvel suddenly made the whole stack collapse because losing a third or more of your income overnight is hard for any business to survive, and distribution was very shakily financed back then.
Worse still, Heroes World couldn’t handle the job! They went from a very respected, but very regional small distributor, to trying to doing National (and International?) distribution essentially overnight. Systems that worked when you were servicing a small percentage of stores suddenly didn’t scale well (or at all!) and they simply couldn’t handle the requirements of the job as it escalated. Orders wouldn’t fill correctly, billing was a sad joke, they couldn’t keep up on demand, etc etc. Stores started going out of business because HW was doing such a terrible job. The added expenses of shipping from New Jersey, and the time sink that HW now became shrank store’s margins dramatically, and it didn’t help that the 1995 Marvel lineup was a bit of a clunker as well.
DC at this moment, saw how shaky most of the distributors were, and decided it needed to pick a single source to work through: Diamond Comics – in fact, at the time DC’s contract even included an option to purchase Diamond in a number of circumstances, as a hedge.
Naturally, DC’s picking Diamond just accelerated the death of other distributors – they’d already lost a third of their business from Marvel and Heroes World, and here went another quarter. Ow. A few folks tried to stick it out, Capital City made it nearly a year, but eventually even they fell. Diamond was now the effective monopoly in the distribution of periodical comics.
If DC had simply opted not to act, the problem would have resolved itself quickly, because HW folded, and Marvel returned to now-the-only-choice-left of Diamond in 1997.
Ironically, the DC of 2020, apparently not being interested in their own history was suddenly really concerned about having a sole source being their distributor…. but the entire reason that this was the state of affairs was because of DC’s decision in 1995!
Here’s the thing, even if the potential COVID-shutdown bottleneck for DC periodicals today was a good enough reason to throw away a relationship over a quarter-century long (and the downstream relationships between DC and retailers that occurred from that), DC has left themselves in a position perilously close to the HW one – reports are hot that DCBS/Lunar is having a really hard time scaling up now that Midtown/UCS walked away from the table, and, even in the most charitable read, Lunar is providing a fraction of the services that Diamond was able to. Due to multiple sources, shipping costs are up substantially for many, and worse still, it’s caused a lot of retailers to fall out of the “hundred weight” category they used to be shipped to under Diamond, so that shipping has gone up as well. Diamond has invested millions of dollars to make Olive Branch a State-of-the-Art warehouse – it’s hard to see Lunar/DCBS even being a fraction of that.
And, since UCS/Midtown dropped out, DC is now left with an even worse potential shutdown bottleneck – at least Diamond had more than one warehouse, Lunar/DCBS only has one that I can see, and Indiana is looking to me as not doing great with COVID.
Let’s put that aside, though, and return to the mechanics of publishing, of which DC comics is at least a $226 million dollar annual business: $162.8 million in Direct Market Sales, $33.4 million in bookstore sales, and something well south of $30m in digital. There’s a ton of sales that aren’t reflected in those numbers, of course: while it will include the TPs and GNs sold through WalMart, et al (because they report to BookScan), it doesn’t appear to include any of the periodical comics sold there, nor will it have the bulk of educational sales, since those sales aren’t being sourced through retailers (generally speaking). It’s also really unlikely to consider any sales through direct-to-consumer sources like, off the top of my head, Scholastic Book Fairs run at schools. It won’t have any “custom publishing” in in – like where they make a deal with, dunno, Snickers or something, to make promotional comics. [Editors note: these numbers also do not include sales to libraries, which are way down in COVID times.] There’s a few smaller buckets here and there it is missing as well, but overall, I would suggest that money from publishing alone might around $300 million annually? Again: the vast bulk of that comes from the Direct Market.
However, this is a “rounding error” for Warner Bros, when a single film like “The Joker” grossed well over a billion dollars.
I honestly don’t know what licensing brings in (Batman on t-shirts or Wonder Woman Underoos or whatever), though I would generally expect it’s a reasonable multiple of publishing itself, maybe triple-ish? – nor do I know how such revenues are booked today, whether against DC’s books or Warner Bros – but back in the day at least, based on conversations with ex-executives, publishing had to be self-sufficient in and of itself.
On the other hand, AT&T, the parent company of DC and WB, is carrying almost $169 billion (with a “B”!) in debt
DC is currently run by Pam Lifford, whose title is “President of Global Brands and Experiences”. This title should give a reasonable clue as to how Ms. Lifford thinks of DC: as a “brand and experiences”, rather than as a publisher. The things one does to manage a “brand and experiences” are pretty utterly foreign to what one needs to do to successfully be a publisher of content, and a lot of the expressed thinking appears to be based on logics that sound great in business school, but don’t actually match the on-ground reality of how and why people buy books and comics.
There’s not really much direct-from-the horse’s mouth statements about how DC plans to position themselves, the closest thing is Jim Lee’s interview at the Hollywood Reporter in August: “You’ll definitely see more international content. You’re going to see more digital content. When you talk about growing our business, both physical and digital, to me the opportunities are global. That’s what we’ll be focusing on.” And certainly, the punditry thinks that DC’s plan is 1) more digital-first/only, 2) greater push for book format material (Original Graphic Novels, and so on), and 3) looking for more paths to the “newsstand” – slash – “Mass Market”, all of that coming with a dramatically smaller focus on the Direct Market (which drives the largest portion of their sales please never forget)
This here is where I need to make an observation that I am shocked I have to: markets and market forces follow logical and traceable patterns, and just wanting a thing to happen usually won’t make it happen without absurdly hard work. Or, perhaps, to phrase it a more poetic way:
Gravity is a Law, not merely a Friendly Suggestion
Let’s go through those bullet-pointed markets one at a time to make sure you understand the counter-factuals here, and let’s start with “Digital”.
Digital comics are, economically, a joke. And not even a particularly funny one at that. For well more than ten years virtually every publisher has really really really tried to make digital a “thing”, but every piece of evidence says that while you can get people to look at digital comics, you simply can not get a meaningful number of people who are interested in paying for them in a regular and dependable fashion. Comichron and ICv2 peg digital comics, all digital comics from all publishers, at roughly $90 million in annual sales – and that number hasn’t changing meaningfully whatsoever in multiple years of tracking.
I’ve yet to find any comic book publisher who says that digital sales alone are enough to keep new content being produced, and even the books that are touted as great successes in digital (DC’s “Injustice” might be one) became financially viable only after the print numbers are added in.
On a philosophical level I think there are both internal and external reasons for this. For example, I think that the value proposition of paying for a digital good that you do not own, or even control, is very low. “All you can eat” plans (think Netflix or Spotify?) are more rational, but no one wants to pay almost anything for individual pieces of work in anything other than physical media, because it can all be taken away from you with a few clicks of a mouse. I also think the mechanical aspects of reading comics on the most common devices are extremely poor. Exceedingly few people have access to full-size screens in the same aspect ratios as comics, and reading long-form work on, say, your phone, is simply an awful experience. If you have several hundred dollars to invest in a large reader then it becomes less heinous, but people who are willing to do that for comics appear to be only a tiny subset of folks.
I also firmly and emphatically believe that while comics may be, as Scott McCloud put it “juxtaposed pictorial and other images in deliberate sequence, intended to convey information and/or to produce an aesthetic response in the viewer”, that the actual thing that makes comics what they are is not, in fact, the individual panels/images that make up the comic, but the gutters between the panels instead, because that’s where the audience lives and interacts. The informational content of a PAGE of comics is as important, if not more so, than the individual PANELS contained within, so that when you’re not receiving the entire page as a whole (which is nearly impossible on a phone-size interface), you’re not actually receiving comics as such.
Obviously, there is a contingent of folks who will disagree – folks who have edge case issues (say vision issues, or storage space issues, or even just “I had enough money to sink into this to buy that 20 inch screen just to read comics” folks), but the numbers say they’re in the vast minority of people – and a number that, most importantly, is not large enough to support the creation of material all on their own in a way that pays any creator for their time.
I’ll add one more wrinkle on digital, one that mostly applies to DC and Marvel, and it is that I have come to the conclusion over the years that people don’t like “superheroes” in and of and for themselves alone – rather, what people truly enjoy about the Marvel and DC universes is the soap opera nature of it. They like that Spider-Man and Iron Man and Captain America all “live in the same world”, and they like the continuity that can be built up between those individual stories to create a greater whole than the individual parts. And one of the ways people ascertain the value they receive from these stories, is that the stories “count”, that the continuity matters and adds up to something. And that’s one of the major reasons that what we’d call the “mainstream of continuity” in comics sells really terribly for Marvel and DC while it’s the “off brand” material (like, say, “Injustice”) that tends to do much better in digital formats. That is to say, unless it is released in a physical form as its primary release, it isn’t “true”. And while that works just fine for “non-continuity” stories like “Injustice”, if a Batman comic isn’t released first into the physical collector’s market, it simply doesn’t “count” and will only sell a tiny fraction to the hardcore base that is buying the majority of periodicals released.
All of these things together show why, as a general rule, digital comics tend to sell single-digit percentages of what their print counterparts can do. And why any kind of “digital first” strategy is almost certainly doomed to fail before it even gets out of the gate: only a subset of the subset of the subset of people who read comics (or read for pleasure at all!) are going to buy into the format whatsoever.
But what about the book market? You’ve read many headlines stating that book sales are climbing, and the book stores are posed to be a bigger and bigger and bigger slice of the pie, etc, right? I’ve literally been advancing the importance of book format material and “GNs in the bookstore” longer than the average career of a DC executive these days, and I’ve written the annual survey of BookScan for almost two decades now, and please take my word when I say that bookstores and graphic novels are an incredibly important market, but that the math isn’t saying what the headlines seem to imply.
First and foremost, the single-stream revenue from an “original graphic novel” (non serialized) can be enormous (especially if you are a Raina Telgemeier or Dav Pilkey), but that the overwhelming majority of such books are unlikely to earn their creators any more income then their advance. I’m not even thoroughly convinced that most OGN makers are even earning back their advance in the first place. And, most importantly, without page rates like “traditional” comics publishers pay, there’s a super-great chance that your average GN maker is making less than minimum wage to make that book.
One of the most fantastic things that periodical comics do is that they amortize costs and generate multiple revenue streams in order to perpetuate themselves. To give you the clearest version of this that I can, let’s take “the most popular” DC superhero, Batman, and look at 2019 BookScan sales. There were forty different books released in 2019 with “Batman” as the first word in the title in BookScan figures this year. The single best-seller was “Batman: Damned” which sold all of 14,156 copies into the book market. The second best seller was the ninth volume of Tom King’s run, which sold, ugh, 3,426 copies. The average sale for these forty selections is all of 1220 copies. And this is their most popular character.
Conversely ICv2 says “Batman: Damned” #2 sold 144k copies into the Direct Market. Tom King’s run on the monthly averaged north of 100k each.
Almost certainly, “Batman: Damned” would not be profitable solely as an OGN released to the bookstores. Tom King’s run would have been a steadfast money loser. And, again, this is the most popular character, with some of their most popular creators.
“But But!” someone is starting to yell, “I Heard that ‘Raven’ OGN did amazing in the bookstores!” – and, sure thing, it sold nearly 43k copies, which for sure made money… but the next best-selling Zoom or Ink book sold a bare 8200 copies, and the one after that? Below 5k. In fact, taking it as an average, the average Zoom or Ink OGN sold 4622 copies, and is you don’t include “Raven” in there, that number drops to a likely unprofitable 2700 copies.
A thing I have learned in decades of watching the bookstore numbers: that market isn’t looking to buy forty different “Batman” books each year – they don’t even want forty “superhero” books each year. They want maybe five or six at the most. But in order to be a publisher, you pretty much must produce forty in order to pay your staff, your rent, your overhead.
The sad and hard truth about publishing is that most books (include prose in this too!) never make any money whatsoever – it’s a handful of titles at the top of the frontlist that generate the majority of your overhead, and everything else, you’re just hoping to not lose too much.
This is the actual and genuine wonder of the Direct Market: a functioning market for periodicals and serialization that pays its own way, lets creators make an actual living from production of work, and supports an international network of independent stores at the same time! There’s no other market like this in America, and, to the best of my ability to ascertain, both DC and Marvel are entirely profitable in this pursuit just from the production of periodicals themselves – the books are gravy.
This market is extremely unlikely to ever be “replaced” by digital, because it is the nature of the weekly release schedule and the nature of the comics store as “dedicated product showcase” that is driving the sales more than the content itself.
Giving that dedicated market up for the no-evidence, no-success premise that you can replace it somehow with a thing built in entirely different ways seems like a real “Underpants Gnome” thinking. Step one: steal the underpants, step two: ???, step three: Profit! just doesn’t work, because for Pete’s sake, Gravity Is A Law, Not Merely a Friendly Suggestion!
It’s that third bullet point, that somehow we’re going to get periodical comics back on the newsstand, into the mass market, which is the most laughable notion of all. First and foremost, the newsstand doesn’t exist in any practical sense any longer – the thousands of independent grocery stores and pharmacies that drove that are mostly all out of business, replaced by giant chains. These giant chains care solely and exclusively about profit-per-square-foot. Decades ago they long ago calculated they could make more money selling Anything But Comics in that same space. Every attempt at changing this over the years has appeared to work far below the expectations these chains have: The DC/Walmart pact for periodicals was stopped by WalMart, I’m told, not DC. WalMart was apparently thrilled by the sales of the first issues, but soured fast when the later issues tanked out – it seems the sales of the first issues were actually driven by speculators on the Direct Market side, ooops.
Look, I’m the first to tell you the DM has problems (It’s called “Tilting at Windmills” for a reason, folks!), but it’s crystal clear that when you treat the participants in this market properly (by not, say, dramatically overproducing) and produce good content, the DM is a profitable machine that allows you to amortize your costs and easily reach out to and build wider markets. The DM is not really sexy, and actually it’s kind of janky in places, but the math appears to say that throwing out your single-best sales channel is totally crazy pants, at best.
I can’t see any path that doesn’t cripple DC with these changes to distribution and staffing for the DM – sales are absolutely off on the “bread and butter” of DC’s line in a way that is largely disguised by “Joker War”, “Death Metal” and “Three Jokers” all hitting at the exact same time – and I am 100% certain that these hits were substantially smaller hits than they could have been had DC not tried to force retailers to buy from their largest competitors. But those hits were long-gestating, and are unlikely to be repeated into 2021 based upon what we know of DC’s plans. The first launch of ’21, “Future State”, appears from the outside to be pure commercial death, and DC seems to be suggesting that they’re consciously moving away from continuity this year – the thing that’s actually the “secret sauce” that keeps their production ticking along.
Much like Heroes World and Marvel in 1995, it’s nearly impossible to see how this plan could tick along for more than two years or so, and the hollowing out of staff and services at DC would seem to me to guarantee that DC will be nothing but weaker at the end of this inning. My firmest expectation is that DC will no longer personally be selling comics by January of 2022, and instead will move to licensing them out to another publisher. I suppose it’s conceptually possible they could maybe generate the same profit by going that route, but the math looks poor from my side of the table – instead I will project that thousands of people’s livelihoods and passions will be crushed because people with no desire to figure out how publishing actually works will build pipe dream scenarios which are going to come crashing down around them.
Because at the end of the day, Marie Javins could be the single best Editor-in-Chief in DC history, but if you don’t have a sales and marketing team there to support you in your single largest market, it’s like asking someone to drive in the Indianapolis 500 without having a pit crew.
I sincerely hope that the other market participants, my fellow retailers, and Diamond itself, are making strong plans for a future without DC comics. I can’t see how any other result is likely.
Brian Hibbs has owned and operated Comix Experience in San Francisco since 1989, was a founding member of the Board of Directors of ComicsPRO, has sat on the Board of the Comic Book Legal Defense Fund, and has been an Eisner Award judge. Feel free to e-mail him with any comments. You can purchase two collections of the first Tilting at Windmills (originally serialized in Comics Retailer magazine) published by IDW Publishing, as well as find an archive of pre-CBR installments right here. Brian is also available to consult for your publishing or retailing program.