Supes bites the dust

(Note: Like Alan Moore, I am a huge fan of comic books, but I hate the industry. The reason? The comic book industry is one of the few industries that treats its loyal consumers with utter disdain. In this article, I will justify that statement, and also, try to explain why it is so, and why they have been getting away with it for so long. Much of my rant has been covered in my previous article here, but I would still urge you to take a look at it, just to refresh your memory, it will come in useful later in the article. This article will also cover basic distribution concepts, Modern Retail concepts and various other topics of no small interest)

Usually, one of the first things that someone says to me when I tell them that I am a fan of comic books is “Really? when will you grow up? Its all kid’s stuff!” At this point, I control my homicidal urges by imagining the said person being lowered into a vat full of boiling oil by Spider Jerusalem and Tetsuo, with John Constantine throwing trade paperbacks of “Deadly Habits” at him/her (and if any of these names don’t make any sense, google them, you’ll thank me later).

Spider Jerusalem

However, in all honesty, I don’t blame them for thinking the way they do. Comic books do tend to be inane and childish at times, and unfortunately, its got less to do with the medium and the creativity of the people involved, and more to do with market forces.

Here is something that I’d like you to do. Close your eyes, free your mind, and think comic books. Chances are, the first thing that came to your mind was a super-hero. There is a reason for that. That reason is called “a monopoly”. But how can the US comic book industry be a monopoly, you might ask, aren’t there two major comic book firms, DC and Marvel, and aren’t they bitter rivals locked in a bloody spiral of eternal conflict and editorial sarcasm? Yes little one, that is indeed the case, however, things aren’t as simple as that. In my previous article, I described how the comic book industry went through a recession in the 1990s, and how that resulted in nine out of ten comic book distributors going out of business. Well, if you didn’t take the trouble of reading the last article, let me highlight the key points here:-

1) Publisher sells to distributor, distributor to retailer, retailer to consumer (your standard distribution chain)

2) Retailer is usually short of cash, and therefore, can only buy limited copies, and therefore, has to make a choice based on a catalogue sent by the distributor and pre-order next month’s comics based on this month’s demand.

3) Speculators buy multiple copies of some comics which promises Earth-Shattering Change, forcing the retailer to pre-order more copies of that particular comics for next month, meaning he has lesser amount of money to spend on the rest of the catalogue, meaning his inventory loses diversity,and becomes more risk-prone.

4) The Earth-Shattering Change falls flat on its face (see previous article for examples). The comic books that the speculators bet upon falls flat. It is worthless in the long run, and has cost the speculator the better part of his yearly wage. However, things are even worse for the retailer, who now has an inventory consisting of multiple issues of the comics that the speculators bet upon (which no one wants now), and more importantly, doesn’t have some titles that people DID want, and is basically screwed.

5) The pain and anguish pass up the distribution chain, till it reaches the publisher, who may be forced to declare bankruptcy (as Marvel did)

The best(?) part is that you can substitute certain key-words, and get a recession in the industry of your choice.

Right, so its the fag end of 1990s, the industry is in a downward spiral, and Marvel is on the verge of bankruptcy. Two interesting incidents happen which we shall take one by one.

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The Distribution Mess (and the dangers of modern retail):

During the recession, there were ten major comic book distributors in the US. For some reason, Marvel listened to a random consultant they had hired, and happily announced that from now on, all Marvel books will be available only through one distributor (Heroes World) and retailer chain. What this meant was that if you wanted to sell Marvel Comics, you could only go to the designated distributor. This gave Marvel and Heroes World unprecedented power over the consumers and the industry.

At least it should have, in theory.

DC responded by entering into talks with the other major comic publishers, Image and Dark Horse, and announced Diamond Distributors as their sole distributor. This combine represented nearly two thirds of the comic books sold via this distribution chain. Soon, nine out of the major ten distributors went out of business (including Heroes World), and Marvel was forced to do business with Diamond. What this essentially meant was that Diamond distributions suddenly found themselves sitting on a gold mine as the sole distributor of comic books in the US. What this also meant was that suddenly, Diamond could treat publishers whichever way it liked, which it then proceeded to do.

(And herein lies the danger inherent in Modern Retail. To draw an analogy, in Australia, there are only two players in modern retail, Woolworths and Coles. I don’t mean that these are the major players, these are the ONLY players. All the firms that wish to sell their products are at the mercy of Woolworths and Coles. A firm cannot afford to make a deal with only one of them, it HAS to make a deal with both of them, otherwise its reach is cut down into half. Both the players know this, and hence, can make the demands that they like. Distributors in unorganized sectors usually go for margins of 30-40%, and rarely, more than 50%. The modern retail players, however, can demand margins of upto 60%. They can also set up arbitrary rules and regulations, that can force bit players to bow out.)

Diamond has been increasingly making life miserable for the smaller publishers, by refusing to carry titles that it deems “unprofitable”. It seems like good business sense, right? I mean, why would you want to stock something that doesn’t perform as well as other alternatives? Well, here is the flip side. Diamond has a cozy deal with the Big Four (DC, Marvel, Image, dark Horse), wherby, Diamond basically agrees to blatantly promote any book that they publish, quality and popularity be dammed, and in return, Diamond gets nicer cuts from the books that do make money. So, essentially, independent publishers have an arbitrary constraint placed on them, while no such constraint is placed on the Big Four. This essentially means that all independent publishers are at the mercy of Diamond, and have to suffer their books being pushed out by the piles of unreadable mess that the Big Four churn out. In essence, Diamond is a monopoly, except that legally, it is not, due to some technicality that no one even remembers anymore. Diamond can do whatever it pleases, and the small publishers have no legal recourse.

Warlord of IO, a humorous indie book cancelled by Diamond

The sad part is that these smaller publishers generally focus on a wider range of genres, such as comedy, sci-fi, horror, chick-lit etc. and the potential for all these genres in comic books is being stifled because of the unethical business practices being used by the major powers. The only other way for small publishers to sell their stuff is either through the internet, or through comic book conventions (comic-cons). However, Diamond has expressed their displeasure over this small mercy as well, and in a recent press release, described the selling of books by smaller publishers at conventions as “detrimental to the industry and the spirit of ethical business”. The unfortunate part is that Diamond and the Big Four exercise a lot of influence at conventions as well, and might actually bring in regulations that stop people from buying or selling books at conventions.

Hi, I'm the PR manager from Diamond, I'll take your questions now

Thankfully, the last recourse for the small publishers is free of hurdles, and just might prove to be the turning point for the underdogs. The net is vast and infinite.

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MBAs, Focus Groups and Marvel Comics:

In the late 1990s, Marvel comics was forced to file for bankruptcy. The new board, most of them Wall St Execs, sat down and decided that massive change was needed in the way Marvel did business. The board was true to its words, and Massive Change was effected. However, this massive change was not directed at editorial policies and creative content. This massive change was not directed towards better relations with fans and allowing greater freedom and credit to the creative brains. The massive changes were directed at Marvel’s revenue streams. Since the late 1990s, Marvel stopped being a comic book publishing house, and became a licensing firm. Marvel’s policy changed from promoting ground breaking characters and story lines to promoting merchandise and adaptations of their characters in other media, such as movies.

Why movies and merchandising? Well, the Lion King had been a huge success for Disney, and everyone wanted to copy that success. Unfortunately, this meant that decision makers threw art and creativity out of the window, and relied on the tried and tested “focus group” methods and their general superiority in terms of business acumen (I’m an MBA for chrissake! I can run this company better than some writer and editor with twenty years of experience in the industry, but thats another story altogether). Suffice to say that studio bosses decided to follow the first cash stream they saw.

This makes me better than you

Now, movies based on comic books generally tend to suck. This is because most movie houses feel that comic book writers are talentless hacks, and any half paid script-monkey can do a better job, with some direction provided with a focus group or two. So, they put together a focus-group or two, and feed the results to half paid script-monkeys, who “improve” the script keeping in mind the requirements of the movie bosses. This usually results in a mess like Batman and Robin, Daredevil, that Catwoman movie, or League of Extra-ordinary Gentlemen. Sometimes they get it right, for example, with Road to Perdition. However, these are just flashes in the pan. I’ll do an entire post on this phenomena later. Suffice to say for now that movies based on comic books generally suck, and hits are exceptions, rather than the rule.

Who the hell thought that this could work?

In light of this, Marvel’s new strategy had mixed results. Spider-Man 1&2 did well, while 3 was merely profitable. All three X-Men installments did well (not counting Wolverine), while the original Hulk, Electra and Daredevil bombed miserable, and Spawn and Punisher are hardly mentioned. In fact, salvation for Marvel came in the form of an alcoholic technocrat, Iron Man. Till date, Marvel has had a track record of about 50:50 with their movie attempts, which is way ahead of what DC could manage. (more on that in another post)

Getting back to the matter at hand, Marvel decided that the path to profit lay not through quality stories, but through gimmicks and licensing. It initially worked, giving DC the incentive to follow suit. However, because of this, storylines and sales figures suffered. Marvel, especially, saw a slide in the quality of its stories, but that didn’t matter. Sales figures were going south, but that didn’t matter, because the money was in the merchandising. Now, repeat the same story with DC, whose only saving grace has been Geoff Johns and the team that he works with.

Akira - One of the best Mangas ever

This also left the comic book industry vulnerable to the invasion of Manga, and just like their counterparts in the auto industry, the Yankees are feeling the heat of the super-efficient businessmen from the Land of the Rising Sun. Manga does not rely on traditional comic book distribution chain since it is published in the form of magazines, and therefore, may be sold in common book-shops, grocery stores and petrol pumps. This gave Manga an advantage in terms of reach, as well as a greater audience. More women read manga than traditional American comic books in the US, simply because Manga offers more genres, rather than just super heroes (pretty similar to the situation in India, despite Raj comics trying every trick in the book, Amar Chitra Katha still retains the number one comic book brand in India). Essentially, this closed business policy left the entire industry open to an outflanking movement by a competitor, and Manga has delivered that blow. Not allowing enough diversity within their own industry has meant that there were lots of unsatisfied consumer segments that switched to the better alternative as soon as it presented itself. The excessive focus on superheroes by the Big Four made them susceptible to attack. Within the next few years, the situation for the US firms will become critical, and they might have to have a rethink on their policies.

In essence, the major comic book firms (guided by businessmen who had no understanding of the complexities of the industry) found alternate revenue streams, which meant that they no longer had to give a damm about the quality of their core offerings. In an ideal market condition, everything would have sorted itself out, as the low-quality behemoth would have been replaced by a high-quality new comer.

Right?

Remember that entire deal with Diamond distributions? It has come to pass that Marvel and DC can publish any trash they feel like, and they still don’t have to feel the heat from the other publishers. Just because Batman and Wolverine make money, Diamond along with DC and Marvel can afford to force down a Final Crisis: Aftermath, or Ultimate Avengers down the throat of the consumers, simply because there is no other choice available. This is the perfect example of a free market monopoly, where the entry barriers are so high that inefficient firms can still retain their leads.

This also stifles the market, since it ensures that only one kind of product is on offer. Remember that Coles and Woolworth’s example? Now suppose Colgate-Palmolive makes a deal with both, whereby they will stock the Colgate-Palmolive shaving creams (which don’t sell that much) in high quantities, so that they get to stock higher quantities of Colgate-Palmolive toothpastes (that sell rather well) at better cuts. This ensures that the competition for the shaving creams is pushed off the shelf and the distributors make better money out of the better selling product. Now, this sort of setup is usually possible only in either a monopoly or a duopoly, but when it comes into play, it translates into consumers getting inferior products, smaller firms with better products losing money, and an overall loss of value for the industry, but is completely legitimate because of the market dynamics, and the people who suffer can’t do anything about it.

This was just one single example of the perils associated with Modern Retail. There are many more. That, in a nutshell, is why mediocre super-hero comics flood the shelves while independent publishers with better comics and stories go out of business. That is why comic books are still seen as kids stuff. That is why there aren’t more comics like From Hell or History of Violence, and that is why I hate the comic book industry.

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(PS: Through this article, I hope you guys got a broader understanding of the market forces at play in the US comic book industry, and more importantly, how Modern Retail functions, and can lead to monopolies and unethical business practices.)

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