Diamond CEO Steve Geppi returned for another industry chat, this time with Dark Horse publisher Mike Richardson, Fantagaphics publisher Gary Groth, IDW’s creative director Dirk Wood and Boom publisher Ross Richie in conversation. (Mark Waid had technical issues and was a no-show.) The focus was on what the industry could do to support retailers —with news that last week’s first FOC since the plague had been stronger than expected. Everyone was expecting some back and forth between Geppi and Groth and there waere some hard questions. It didn’t escape notice that while Diamond had shut down, both IDW and Fantagraphics (and presumably Boom and Dark Horse) were all being paid by their bookstore distributors, which had helped them a lot.
This talk is harder to bullet point but if you don’t want to watch it above or wade into a 3000-word summary, here are a few:
• The first FOC was more than Diamond had expected, and Boom’s Richie confirmed it was more than they had hoped. The pipeline is moving!
• Diamond is planning some secret things, including fundraising efforts for the industry and “something exciting.”
• None of the publishers were thrilled when Diamond told them they wouldn’t be paid, but all could see it coming down the pike with the COVID-19 disruption. Groth was a little pricklier here, noting that they had survived without Diamond’s money for now, but the next six months will be rough.
• Geppi continued to talk about back issue sales, so I guess that is a thing that is happening at Diamond, while insisting that the industry will come out of this stronger, as it capitalizes on pent up consumer demand.
• He admits he had not been at the switch for a while, and missed some things, but he’s back full time now.
• Geppi called Marvel’s Ike Perlmutter personally and assured him that they would get all their money.
• Dark Horse applied for a PPP loan and got it.
• When Diamond called individual publishers to tell them about the shutdown in money, the news quickly leaked to a website, which is how many learned of it. After that, Diamond learned to be better at communication.
• Marvel’s David Gabriel and DC’s Hank Kanalz were invited on but could not commit, due to scheduling and, perhaps, approvals.
• Eric Stephenson will be a future guest on Comic Book News.
Anyway, to the summary, Robin:
Moderator Dan Shahin kicked things off with questions for Geppi. I’ll paraphrase the answers for the most part. Quotes may not be exact but I’ve endeavored to retain the spirit of the answers.
ON THE INDUSTRY MOVING FORWARD:
Sticking with his generally positive outlook, Geppi reiterated that he feels comics are in a good place overall in these general uncertain times. “We can make choices — we can lament and do nothing or we can look for new opportunities. I see it as a restart for the whole industry. We’ve always had an industry that was the Rodney Dangerfield of pop culture, but in recent years we had gained tremendous respect as movies paved the way to show comics to the world.
“Everyone else is having problems and if they are asleep at the switch, they are going to be at a loss. I don’t want to be looking at what we need to do to survive, I want to look at things we should be anticipating down the road.”
Geppi’s cheerful theme was to take advantage of coming back and make sure consumers are excited about the comeback by making comics a big deal. “The world at large will see that these movies have a [place the come from] and they should be looking into it.”
Geppi once again slammed “misinformation” that was being spread (not from The Beat!) and said people should pay close attention and call Diamond to clarify. “Retailers need to be very careful that they get accurate information” but also need to talk to consumers. “Communication is the bottom line and the key to everything.”
ON ADVICE TO PUBLISHERS:
Boom’s Ross Richie was then called into the spotlight (sporting a very fancy brocade jacket) and asked what advice Diamond would give to publishers. Geppi suggested people needed to “stay in their lane. Keep us as informed as you can. You are getting a lot of messages that we don’t see. We might be doing something we think you want but in reality might be the opposite of what customers say they want. Stay in close contact with us and your brand managers.”
Geppi noted that he’s back in the game after a time when he wasn’t. “I haven’t been as much at the switch as I should have been in recent years, but now I can make it happen a little faster.” He suggested that while Diamond would keep confidences, they would also advise publishers of the overall picture that they might not be aware of. “We can give you an idea of what the flow is. We need to get an idea of what you retrying to accomplish. With me back at the switch, we can give a quicker answer. No disrespect to my team, but I’m loving the access I’m having with some of my old friends.” He noted that many newer publishers and retailers didn’t have as close a relationship with him as veterans, and he wasn’t getting more involved for ego but “because it’s needed. The response has been very rewarding and gratifying. I’m hearing things I could have paid more attention to and done sooner.” He noted it was a team effort and then, in the day’s most shocking moment, quoted Hillary Clinton. “It takes a village and this is a good village to start with.” ***
ON THE INDUSTRY CHANGING
IDW’s maven of marketing Dirk Wood then soothed us all with his husky tones, and admitted he didn’t have a lot of questions because Diamond had been great to work with but he was glad to hear Geppi was back in the game. However, “one thing this has done is laid bare the supply chain and how things work. It has made very apparent how important Diamond is to everybody.” But then he unleashed the question on everyone’s mind: “In terms of how this is going to work, once we start coming out of it, do you see any large changes already taking place? Things you will implement in the warehouses or throughout the chain?”
Things are going to change, Geppi acknowledged. “I don’t see things going back to ‘normal’. If people said it was okay to go back to the baseball game again, with the virus they might be a little reluctant — so it’s going to be a slower recovery.
“I think the industry is going to see a lot of change,” he continued. “And I think it can be be for the good. Now that the stage has been reset, what are some things we couldn’t heretofore consider but now we can? There will be changes at every level, down to the consumer level. Going forward, Diamond is going to learn lot from this, and we’re treating it like we’re the new kid on the block. We’re going to look at things that were said before that weren’t considered at the level they needed to be considered at. And we’re going to be open-minded.”
Wood noted that easing back into the supply chain, they had realized that it all came back to the consumer. “Even as we come out of this, a lot customers are going to be unemployed. I’m glad to hear you are going to be involved in keeping that going all the way down the chain.”
Citing the need for “realistic but positive messages,” Geppi once again referred to lost business with the his restaurant metaphor. Some lost comics business can be recaptured, unlike meals never to be consumed. Although some people are unemployed, some are saving money at home and there was a chance to get some of those savings to be spent on comics related product. “When you are stuck in your house as a rule you tend to spend less money. It’s a chance to recapture some of the inadvertent savings people are accruing.” Perhaps this was a way to spotlight great books of the past that people may not have had a chance to buy before, he suggested.
ON THE HISTORY OF DIAMOND
COVID-19 survivor Gary Groth then took the mike, and while everyone was expecting some conflict, he started out with a Benoit Blanc-like line of questioning about the past and Diamond’s history. (These two go way back: Geppi recalled meeting Groth when he was a teen and both are from the Maryland area.) This led to a very long recollection by Geppi about the early days of distribution, that was doubtless fascinating to a lot of people (myself included) involving New Media Irjax and so on, but I’lll leave it out for now. Moderator Shahin, perhaps sensing that a history lesson wasn’t necessarily the most riveting thing for most viewers, then interrupted and got things a little back on track.
But in a foreshadowing of a multi-distributor world, Geppi noted that “in 1993 at the peak of Superman’s death when all the speculators came in, and bogusly inflated the market, Diamond did $222 million with 44% of the market.” After Diamond became the sole distributor, they were only doing $168 million, due to the shrinkage of the market. While Diamond might be the 800 lb gorilla in comics, in other markets like toys and game, “we’re tiny fish in the ocean.” As for the monopoly, it was unlikely that Diamond sat behind the scenes thinking hot to destroy publishers or retailers, as that would destroy their own business.
ON HOW THE FIRST FOC POST-CLOSURE WENT
Dark Horse’ Mike Richardson then came in from a really beautiful office – and these two also go wayyyyy back. Richardson charted his own history as first a shop owner, then a publisher, touching on the great Black and White crash of the ’80s (a colorful moment in comics history that is interesting to talk about some day). They were once dealing with 19 distributors but when it came down to it “we watched them disappear. When people asked why did we go exclusive with Diamond we looked around and said where will we get paid? We got stuck many times with distributors disappearing on us. We wanted to be able to pay our creators and went somewhere strong and that was Diamond. We watched it go from 19 down to 1.”
Turning to questions, Richardson proved himself a pretty good journalist with a sharp one: “I’m curious how the FOC went on Monday and if you were satisfied with that and if you have thoughts on the strength of the retailers out there.” With the thin margins, “How are the retailers going to get through this standard attrition.” He also wondered how many had applied for PPP loans, which was once thought of as the way to rescue many shops.
Geppi wisely said that “I don’t want to overstate or understate the financial condition of retailers. It varies.” He didn’t have any knowledge of how many shops got PPP, but as we all know, it’s been hard to get through. He noted once again Diamond’s place as “the bank of the industry to the extent we can afford to be.” Even though not paying Diamond promptly might be a problem for a retailer, Geppi said there had been many times they let things slide because it was better to have a shop that was open then one that was closed. “To me an account that has paid me for a long time then gets in trouble, [sometimes] we can help them get through it. And we have had tremendous happy endings over the years where others might have pulled the plug but we’re happy they survived.”
As for those crucial FOCS (final order cut off — final orders for shops.) “The FOCs have been coming in better numbers than we thought. We budgeted very carefully with lower cash flow based on percentages of last year’s week to week and happily numbers are coming in stronger.
“I am going to predict to you right now that in addition to our conservative FOC adjustments we’re going to see those books sell out and maybe go back for more,” he said. This seemed to back up the pent up demand theory from consumers, but he also suggested that having pull list orders from consumers made this easier to judge. The walk in off the rack sales might be harder to recapture. And in a recurring message he urged retailers to be creative. “If a retailer believes he is going to have a tough time and acts like he is, it will be self fulfilling prophecy. But if a person is creative — and we have many entrepreneurs here — I can give you reasonable reassurance that I think we’re in good shape.”
There was some cross talk here about preorders but I think that deserves its own post for various reasons, because consumers who DON’T pick up their pull lists are the bane of the industry. Having an actual preorder system like (oh say) ComicHub or PullBox is the way to go here.
PUBLISHERS TALK ABOUT NOT GETTING PAID
Shahin then turned to the publishers, and asked a pretty blunt question: How did they feel when Diamond told them they were going to stop paying them?
Gary Groth flashed some of the classic sarcasm that we know and love. “We’re always happy when distributors say they are going to stop paying us!” but added “I had mixed feelings. I understood why — I presumed why Diamond was doing it doing was that it they had their own cash flow issues. Luckily our book distributor, WW Norton, was still functioning and paying us 100%. I looked at it knowing that we could still get through this with Diamond’s payment plan. If we couldn’t get through it, it would have been serious.”
Richie had similar sentiments. “It’s painful but at the same time I know retailers are hurting and it stands to reason Diamond is hurting so we are all hurting. It’s a difficult situation. We want Diamond to be solvent and get through this crisis and ship product to retailers. It’s not fun but you have to deal with it. I’m excited — we just had the first FOC after the crisis for shipping 5/20 and when we looked at our orders, they were up from orders before COVID-19. To any retailers watching who supported us, we want to say thank you. It’s miraculous and incredible.”
Wood agreed with everything Groth and Richie said. “We are in a similar situation. Our book distribution PRH has been paying us. We had a nice bubble with Locke and Key that hit before – it might have hit us more going forward.” He did note that the communication from Diamond had been rough out of the gate. “Much like everyone, though within a few weeks of this mess starting we starting trying to figure out where this was going. As the weeks went on, and got the first FOC going, we’ll be able to weather this as well as our retailer partners are.”
Richardson struck a similar tone. “Like Gary, we weren’t excited about it, but we were watching the rest of the world have supply chain disruptions and figured Diamond was hit as well. It is what it is.” He said that Dark Horse’s diversification had helped. (He didn’t specifically mention that they are also distributed by PRH, but I’m sure that was part of it.) Although they had to close their retail stores, “we do have an internet presence, and we have direct to consumer sales that saw a bump. Our film business continues to go on, so we were able to survive it. And we jumped on the PPP. Over the short term with Diamond we half expected [this to happen], and everybody is being hit in the same way. We’ve seen things happen before that impacted the entire industry and we got through them, and we’ll get through this one.”
ON WHY DIAMOND DID WHAT THEY DID AND TALKING TO IKE PERLMUTTER
Groth agreed that communication with Diamond had been bad at first, but once he reached someone at Diamond, he was able to get his questions answered. But “publishers need reassurances from Diamond as well.” Groth’s old journalistic instinct then flared up and he asked Geppi something we’ve all been wondering: “Why did you have to do this?”
Geppi acknowledged that there had been a lack of information. “I never dreamed when I was a nine-year-old reading a comic book that I would be the guy who shut the industry down.” When he knew they would have to stop shipping, he tried to think about what it would mean. When they knew they would have to tell publishers, Geppi said they had been calling individual publishers, but gossip being gossip, it had gotten out on the internet before he finished his call list.
When it came to making a payment plan, “First of all ,we talked to our bank; most importantly, we had to make sure what we promised, we could fulfill. I had to know that our banking arrangement was going to be supportive of whatever we did. They would see our collateral going down because we’re not invoicing. The money comes in to pay down the debt, but there are no new invoices coming in to collateralize.” Chase, Diamond’s bank (and The Beat’s!) is the world’s largest and worked with them.
“We found that within our existing line of credit, the plan we presented to all of our publishers equally, would be affordable within the confines of our existing [loan]. We would not have to ask [Chase] for a dollar but we would have to tell them that because they would see it happening. That was not anticipating any PPP money. [Which Diamond got.] We took a worst-case scenario. When it came to telling vendors, we had to make sure everybody could live with this. It was harder for some than others. I remember talking on the phone with Ike Perlmutter, and you know Ike can be tough. The first words out of my mouth were ‘Ike we are going to be able to pay you in full.'”
The letter that went out assured publishers that they would be paid in full, but “here is what we need to make that happen. No one was dancing a jig, but what made that work and made people agree to it — although you might argue you had no choice — was our track record.” Diamond has always paid its bills, but we’re in a world where even Chase had to take on a $65 billion write-down. Everyone has problems.
But the bottom line: “We believe in the industry and we believe in our partners and we’re going to get through this together.”
To reinforce the concept of the industry’s close working conditions, Geppi recalled a time when Diamond had to subsidize a publisher to be able to pay the printer for a big project. But now “I’m here to say thank you to the publishers who had to swallow that unfortunate pill. But it’s coming in and it’s going to be fulfilled. There are bumps but thank you for helping us get through it. No one is going to be happy without Diamond.”
Throwing things open to questions, Groth noted that while he wasn’t intimately familiar with how retail stores functioned, Diamond seemed to be relying on pre-sales. (I guess he meant pull lists?) This led to a rather long answer and Geppi mentioned a project that is coming that “is going to be very exciting to generate camaraderie that ties in to not only getting the sales we lost but some we never had before. We are going to try to be the resurrection of our industry with an even playing field. It is a chance for the comics industry to scream to the rest of the world ‘while you were on sabbatical from your other hobbies, guess what is really hot and exciting now!'”
Groth appreciated the positive message but reiterated that retailers operated on slim margins, and a 20-30% drop in business could be a disaster.
This led to a rather curious exchange from Geppi about back issues. “Don’t underestimate the retailer’s survival instinct. Many of them are subsidizing their lack of new product with back issues and stuff like that.” I guess he meant…graphic novels too, but never mentioned them. Diamond is only 40% of the product at some stores, and they are really pop culture stores. Geppi then mentioned consignment as an option, and “making more product visible.” Geppi wished to have an app where if someone came in and asked for something, the retailer could just look on the app and see it. I know I am editorializing here, but Diamond’s own Pullbox software might be that direction or some other retailing software could be. If only there were an app for that.
Shahin then asked Groth what he was doing to help retailers, and Groth noted “It’s awfully hard for us to help anybody when our cash flow is hurting and we are barely staying alive.”
Geppi also mentioned a larger charity effort that is underway and mentioned Kickstarter, although Groth pointed out they are laying off half their staff. Geppi said if people could help, they would, but Diamond would continue to try to help all levels of the business as best they could.
As things wound down Richardson noted that, like many publishers, Dark Horse books are only ordered by about 50% of comics shops. “We’re willing to help and looking for ways to help retailers. We’ve done consignments in the past, trying to get people to try books they have’t tried before. Our Nintendo art book had a $39.99 cover price and solid 1 million copies, but very few in the comics market. I think retailers could make money off a $39.99 book and bring in new customers. There is going to have to be creative thinking for retailers and publishers to get market back and I don’t know if we can just expect that all the comic book people are going come back.”
Richie, who had some tech problems, finally got a chance to say that Boom has been the leader in returnability for quite a while. (I’m surprised no one talked more about returnability but I guess that is a small tool in the arsenal right now) and Wood said they were looking at a number of things to help retailers in this uncertain age. Among them, as pencils go up again, they are concentrating on evergreen, reliable content like Ninja Turtles.
Shahin, the moderator, made some rather curious choices in this chat, including a sudden reprimand to a troll while talking to five of the industry’s most powerful and respected figures. But overall, this was as close to an industry summit as we’re like to get in these uncertain times.