If all you do is read the headline and the excerpt, I want you to remember this phrase:
“Digital is the new Direct Market.”
Not “digital is the new newsstand”. Direct Market.
Let me explain with some history.
Since the creation of comic books in the early 1930s, comic books have been distributed via newsstands and news agents. Comic books are magazines, and generally were only found where magazines were sold. There might be a specialized spinner rack, but until 1972, the only way to buy new comics was to either visit a newsstand (which included comics shops) or subscribe by mail.
Publishers printed the comics, shipped the comics to distributors, who sent them to the various outlets. Newsstands would sell the comics (if they wanted, sometimes they would be marginalized or never unpacked). When the next issue was published, the newsstand would take any unsold copies, strip off the cover and send it back for credit, and toss the rest of the comicbook in the trash. This system still exists, although now, because of ecological pressure, the entire magazine is returned to the distributor and usually recycled.
This was not the best system for publishers. Generally, a publisher expected to sell one copy of every three copies published. Publishers generally did not get sales figures until three months later (which is why it took Marvel six months to print Amazing Spider-Man #1 after the success of Amazing Fantasy #15). Exact data, such as which titles sold best in certain markets, was almost non-existent.
This changed in 1972, when Phil Seuling created the business model known as the Direct Market. In this model, comics shops and other businesses order product from a distributor. The items are bought on a non-returnable basis at a discount higher than that offered by newsstand distributors. Orders are placed before the titles are published, allowing publishers to print quantities to known orders, not estimates. There are no returns, so there is no risk to the publisher, so long as a profit is made.
Of course, the risk is placed on the comics shops. As with any business, unsold merchandise must be moved to make space for new merchandise. In the past, stores could sell older unsold comics via the back-issue bins, as publishers rarely collected or reprinted stories. Many stores also had “quarter bins”, where less popular older issues would be sold for $0.25, or even cheaper. However, with graphic novel collections, online warehouse retailers, and digital copies available on the Internet, the back-issue market is not as successful as it once was. Many comics shops have replaced their bins with shelving that sells more lucrative product. Where once shops ordered copies for the back-issue market, now many are more conservative, as that one unsold copy could negate the profit made from the sales of three or four copies.
So, now we’ve got the Internet. It’s always open, and just around the corner (from whatever room you’re in). The cost is usually cheaper, either in digital or paper editions. Paper copies can take as little as one to two days for delivery (and a week at worst). The reading experience of a digital comics is close enough to paper that a reader is not inconvenienced. (Much like watching a Hollywood blockbuster on a 12-inch analog television set.) With cheap (or free) comics available online, how do comics shops compete, and avoid the Trail of Tears already created by music stores and independent book shops?
Diamond Digital has announced a new initiative for comics shops. Stores can sell the comic book for cover price. Or they can sell the digital copy for $1.99. Or they can sell both as a bundle, with the digital copy costing $0.99 extra. The stores also get a 30-day exclusive; the digital comics will not be on sale anywhere else for thirty days.
With the widespread influence of the Internet, publishers and retailers salivate at the opportunity to sell to the general public which is unaware of comics shops. Many in the comics industry consider the Internet to be the “new newsstand”, a marketplace which replicates the ubiquity of news agents in postwar America.
Unfortunately, I see a different possibility:
Digital comics are the new Direct Market.
1981 was when the Direct Market matured. That year, Marvel Comics released Dazzler #1 only to comics shops, selling an estimated 400,000 copies. Looking at circulation figures, Marvel realized that Ka-Zar, Moon Knight, and Micronauts were not selling well via newsstands, but could be viable if sold exclusively via subscriptions and the Direct Market of comics shops. By the end of the decade, Marvel, DC, and most publishers distributed more titles via the more lucrative Direct Market than to newsstands.
Now, let’s picture a comics shop in 2012, after the Diamond Digital initiative has become common-place. A customer walks into a comics shop. He looks at the new titles on the shelf, and sees a few titles which look interesting. He then takes these comics to the cashier, and purchases the cheaper digital file, not the paper copy. Maybe he has a tight budget. Maybe he doesn’t want to clutter his apartment with paper copies. Maybe he’ll buy the trade paperback later if he really enjoys it. Whatever the reason, that paper copy on the shelf does not get sold.
Now, the comics retailer will notice this when processing the next month’s orders. Looking at sales data, she’ll make note of what is selling, and what is not, and order accordingly. Perhaps some titles aren’t worth an order. So she’ll print a copy of the cover from the Diamond website, tag it with the digital reference number, laminate it, place it on the shelf, and perhaps offer to sell that issue at the $0.99 price point. Why?
- no unsold inventory
- less product shipped and thus lower shipping costs
- fewer man-hours required to unpack that shipment, rack those titles, and shift older copies to the back-issue bins
Lots of savings for the retailer, and a better profit margin for the store. The digital copy stays in print forever, reorders are instantaneous, and require only a computer and desk to sell the copies. Diamond Digital becomes a de facto back issue bin
So stores order fewer copies of already marginal titles. Publishers notice this, as well as the number of digital copies sold (as well as subscriptions, which can be lucrative for children’s titles). So, like Marvel in 1981, they realize that printing paper copies is no longer profitable, and only distribute the issue as a digital file. Perhaps the publisher charges $2.99. Perhaps $1.99. Maybe these “Digital Direct” titles feature journeymen talent which work at lower rates. Or maybe the publisher sells a cheap version with ads, and a more expensive edition without. Maybe later they collect the digital copies into a trade paperback. (Quite possibly as a print-on-demand edition!)
Here’s where the Direct Market becomes the Newsstand: digital files can just as easily be sold online by comics shops. Just as a comics fan can order comics from Direct Market mail order comics shops, so too can they order them online. Some comics shops have robust e-commerce sites, offering a warehouse of merchandise, usually at discounted prices.
In the past, fans had to journey miles from newsstand to newsstand to find all of the comics they enjoyed. Later, they could find everything under one roof at a comics shop. Now, instead of driving miles (and sometimes hours) to a comics shop, a fan can sit in front of a computer and purchase a Diamond Digital comic online. They do not have to set foot in a comics shop.
Don’t think that’s likely? Look at the e-book market. Amazon reports that e-books outsell hardcover and trade paperbacks. Amazon is an online retailer. It has no physical storefronts. And yet, of everything their bookstore offers, e-books outsell regular books.
Think a store can still be successful if a customer visits? Consider this scenario, one which happened daily when I worked at the Barnes & Noble near Lincoln Center. (This store had five storeys; expert staff selling books, DVDs, and CDs; a packed cafe; and author events which attracted national press.) A customer comes in with a vague request. (“I saw it on a table a few weeks ago… It had a blue cover, and was about vampires.”) An employee accesses databases and product knowledge, and after five minutes of exhaustive searching, successfully finds the book for the customer! The customer is happy, but finds the book too expensive. “Thanks. I’ll get it online.” The bookseller offers to order the book from the company’s website, charging the online price, even waving the shipping. It just takes a few minutes at a nearby computer. Again, the customer declines, leaving the store without purchasing anything. (If you don’t think that would affect a store located in a high-tourist high-income neighborhood, owned by a big corporation, read this.)
So print comics seemed doomed, marginalized like vinyl LPs. What can comics shops do to remain successful? Read my next post for suggestions.