There’s always been a lot of chatter about “why isn’t there an alternative to Comixology?” There’s even more of it since Amazon decided to terminate the Comixology staff. It should go without saying, but such a thing is extraordinarily hard to set up. Let’s have a look at the multiple, interlocking barriers that have to be overcome to have a true Comixology alternative. I’ve tried to minimize the trade jargon for the comics aficionado, but be warned, the startup realm has a lot of quirks.
Barrier #1 – Software
The first thing a digital comics company needs to have is software. Something to read the comics on. Yes, you’d think this would be the easiest part, but there are enough bad examples out there to prove otherwise. I recently got an earful about how unusable Google’s comic reading setup was. Different people will prefer different reading software, but it just underscores how building the reader isn’t really a milk run.
Some the things a startup will have to figure out:
- How are double-page spreads handled?
- Are we supporting reading on smart phones and if so, in what format?
- Will there be web-based reading or just an app?
- What is the UIX and sorting for both the catalog and the user’s library? (We will pause here for Comixology users to let loose a blue streak at the Kindle library UIX. Let it out, folks.)
- Are you just selling the comics or are you going to have a Netflix/Marvel Unlimited style subscription for some or all of them?
If you want to sell comics from top 10 publishers, you WILL need DRM. Why? Because most of the top selling comics out there are owned by a corporation that demands it as an anti-piracy measure. Disney, Warner Bros. Discovery, Hasbro and so forth.
Is DRM holding back sales, the way it did for music? Absolutely! But when you’re a startup, the first thing is just to lay hands on some viable content and publisher meetings will end quickly if you don’t have DRM. And if you want to have people reading in a web browser, expect publishers to put a microscope on how you’re protecting the content.
You probably aren’t going to get very far meeting with publishers if you don’t have the software to show them. Publishers want to see how their comics are going to be displayed and have some confidence that readers will have a good experience. Especially if the publishers haven’t interacted with you before.
When a startup is building their software, there’s no revenue, there’s nothing to sell yet. Depending on how many things are being built (Apps for different platforms, website, etc.) and how complex they are, you could be looking at a few months of burning through your funds just to get to a point you can pitch publishers for content. This is where it really helps to have technical co-founders who can start the programming in the background with “sweat equity.”
Can you arrange for content without having a demo model of your software or app available? That depends who you are. If you’re not an insider, you better have a demo or a least one doozy of a mock up.
Barrier #2: Getting Content
Let’s say a startup has built a good and usable browser. Doesn’t do a lot of good without content and acquiring the content is not a quick and simple task.
The first problem you’re going to run into is exclusivity. Right now, the big exclusive contract is Marvel keeping their single issues exclusive to Amazon. Oh, you might be able to get the collected editions, but not single issues. This creates what I’ve always called the “Tower of Babel Problem.” If readers read multiple publishers, including Marvel, are they really going to want to use multiple apps to read their comics? It also creates a potential cashflow problem. Revenue wonks absolutely love the idea of customers who come back each week for a digital shopping cart full of new goods. That’s what made Comixology the darling of the iTunes Store back in the day.
The argument against worrying about readers using multiple apps for different publishers is “what about Marvel Unlimited and DC Infinite,” but those might be special cases that work against the premise of your service.
It’s worth noting: DC is not exclusive, but has not recently been known to open their sales availability up much past the Big Tech stores like Apple Books or Google Play. It doesn’t mean a startup shouldn’t be inquiring, but that’s traditionally been a hard get.
Where does this leave the startup? If we go back and look at the Comichron numbers from back when sales charts were still issued every month, Marvel was around 40% of the market and DC was around 30%. The numbers move around a little, but let’s be very clear that most startups are looking at best-case scenario of not having access to 60-70% of what sells in the print market if DC and Marvel are not available to them. The startup founders will have to explain this to investors. (Hold on to that thought, we’ll come back to it.)
This means meeting with publishers and attempting to secure content for your app. Founders who’ve only worked in the tech sphere probably don’t realize that the publishing world works at a different speed. It is not uncommon to have a year’s worth of meetings before you can get a deal in place, particularly if you haven’t worked with a publisher before. IP is not given out freely. I will say that these conversations sometimes move a little faster these days, since publishers are not happy at the thought of only having one viable vendor. (Yes, I’ve been hearing variations on “I don’t want to get stuck with another Diamond situation” from publishers since before Amazon purchased Comixology – something everyone with their eyes open realized was a possibility.) But it will probably take at least 6 months of talking to publishers before you have anything vaguely resembling a content selection you can launch with.
And then there’s whether you have to pay upfront for that content. There are a certain number of publishers that will give a little bit of content to whoever walks in the door, just to see if a new company has any juice. Look around at any of the comics app. You’re going to see a LOT of overlapping content. Most of it is considered B-list or worse.
To get the A-list material, or ANY material from some publishers, the publisher may want a guaranteed minimum. Something along the lines of “I need an advance of $100,000 against royalties to let you sell my comics.” The amounts change, and will 100% be larger if you’re attempting a Netflix/Marvel Unlimited-style play, but this is a common thing to hear. You’ll notice that even Amazon was offering something similar to a guaranteed minimum as they try and entice publishers into the Kindle Unlimited for Magazines program. That’s just how the industry works.
Part of this arrangement is “we’ve seen too many companies unable to generate more than pennies for us. Prove that you’re serious.” Another part of it is the hope that if you can afford a guaranteed minimum, you have deep enough pockets to be around awhile, although the way venture capital works, that’s not always the case. (We’ll come back to that, too.)
At this point, you might be asking yourself, “why pay publishers? Can’t you launch with user generated content? Isn’t that what webcomics do?”
You can try, but nobody’s been successful leading with user generated or indie content not tied to a print product for with paid downloads. (i.e. buying a digital copy of Batman) It’s worked with other mediums. For example, Threadless, over in the t-shirt world, is a model that’s frequently cited and hasn’t yet proved adaptable to comics. User-generated content achieves more popularity in the free to view webcomics format. The trouble here is that the two enterprise-level webcomics companies dominating the market (Webtoons and Tapas) make Korean manhwa the backbone of their launches and that was licensed material. If somebody makes that work for comic books, that would be great for the market, but it hasn’t happened yet. If you want to cite Substack’s comics experiment, let’s remember they were throwing around $500K at various A-list creators. That’s a different model entirely.
Additionally, this far into the digital age, publishers are used to stereotypical tech bros scheduling meetings and talking a lot of smack about how great their offering will be.
Founders with no background in publishing get really worked up trying to shave some time off the normal business development cycle and I’ve seen deals fall apart because of it. You’ve heard the phrase “it’s better to ask for forgiveness?” Well, publishing is possibly the sector where that phrase is most toxic. You’ll see entitled tech bros make a sample out of someone’s comic and then put it up on their website. The publisher will consider this IP theft and kill a deal dead 99% of the time if you do that. How common is this? I’ve gotten a phone call in an airport from a panicked startup CEO (and this one was no twentysomething kid) who’d put enough DC material on his site for me to do an article about it, right here at The Beat. Would you believe DC wasn’t happy? There was another time I went on a job interview and inquired how wide a license the company had with Marvel, since there was a Spider-Man comic on their website. It came out that they didn’t have a license (and it wasn’t the only lie I caught them in, either). Would you believe they never got one? It’s a thing. And there have probably been some otherwise workable deals scuttled by a sense of entitlement from the startup. Publishing does not work the same way as other sectors.
You hear a lot about gatekeeping in comics. This can be one of those areas. A lot of publishers prefer to have someone involved in the company who has experience in the comics industry or at least has enough street cred to be considered “of comics.” It’s a comfort thing.
Too often, you either see tech bros who don’t understand how publisher and/or comics work or comics fans who don’t quite understand how tech works. Publishers may have a little fatigue from both options.
Barrier #3 – Investors
You’re starting to get the picture about how it can take a long time just to get up and running. The people working at a startup need to eat while it’s being built and if that company is going to launch with a significant amount of content, there are probably going to be some minimum guarantees paid out that add up to real money.
This is where investors come in.
Venture Capital is a strange space if you’re coming from the outside. VC is a lot more risk averse right now than it was 5-10 years ago. VC Ben Parr (who you might remember from Mashable, back in the day), recently posted this over on Linkedin.
Not good: A pre-seed founder asking for $2m at $10m valuation. A seed founder with $5k MRR asking for $5m at a $25m valuation. The amount you raise needs to be aligned with the market and what milestones you’ve achieved. Pre-seed startups should raise $1m or less at $5m or less. Seed shouldn’t raise until there’s meaningful revenue that demonstrates traction ($20k+ MRR). Exceptions: deep tech startup, fast-growing consumer app, seasoned founder with VC-backed exits. And give investors enough skin in the game to make it interesting. Saying you’re raising $1m at a $20m will raise lots of red flags.
Let me translate that into English for non-startup folks. First off, no digital comics startup in the Comixology mold has been considered “fast-growing” since Comixology, so don’t assume that applies here unless there’s a truly staggering advertising budget. Startups usually raise a small amount of money in a “friends and family” round or a slightly larger amount from an “Angel” investor or two to get a proof of concept up and running. “Minimum Viable Product” is one of the terms here and it means the most bare bones prototype that you can generate revenue and have a customer spend money on. Seed funding is along the lines of “you’ve got a product, now let’s launch it and see what the reaction is” and then you start going into the A round / B round / C round until you have an exit.
Exit is key and yet another reason comics projects are hard to fund. An angel investor may or may not be OK with a company existing profitably without what they call a liquidity event (an IPO or the company being bought are the two most common). The liquidity event is where the investor gets their money back, and theoretically their profit. Usually during a seed round, and definitely during an A round, you start taking money from larger firm that is investing money from funds. The VC firms 100% need an liquidity event to close their internal fund and give the profits to their investors. If a startup doesn’t look like it has potential to grow very large and return 3x to 10x of the investment, it’s denigrated as a “lifestyle company” and you’re not going to be getting any money from the VC class of investor, which usually ends the startup. And in the current environment, startups may have a harder time answering the question “who’s going to acquire you.” Not only is big tech laying off instead of buying startups these days, there are more monopoly and breakup questions floating around the political world. More uncertainty, as they say.
And all this can get a start into a serious “which came first, the chicken or the egg” situation.
Can you raise enough funds to get the content you need or do you need the content before you can get the funding?
Can everyone involved afford to work for potentially 6-12+ months to assemble the software and get the content together in order to get that seed funding?
And there’s a catch to that seed funding. Seed funding is enough to get the ball rolling, but it’s generally 6-12 months worth of money. When you get seed money, you need to show user and/or revenue growth (depending what the VC values more in a given year) before you get to advance to a more substantial “A round” and have a little more time to build properly.
And on top of all this, when you’re competing with Amazon and Apple and Google, “Minimum Viable Content” is a full suite of content. Trying to launch with a small content selection does not impress the comics buying audience. We have seen this too many times to even argue about that.
Barrier #4 – The Growth Problem
How do you grow a consumer product? You’d like to say “word of mouth,” but when was the last time you saw a comics app catch fire because of some PR, to the extent that large investment funds were chasing it around? Been awhile, hasn’t it? PR will likely not get the job done to the magnitude you need after a seed round.
That probably means advertising. And guess what? Not only is advertising expensive, you may have heard some stories that the startup’s old stand-by – Facebook Ads – do not work quite as well as it used to. I personally don’t know anyone who doesn’t think Facebook Ads has taken a hit.
Spending large sums of money on ads to grow your reader base is not unlike being trapped on a hamster wheel. Ideally, at some point you’ve established an audience large enough to sustain the company, back off the ads a little, and start showing a profit. But even if you can do that, there’s the question of whether the audience is large enough for an exit that will satisfy the investors. It’s a go big or go home (OK, have the company broken up and sold) market.
Summing it up
I’ve always said, give me $50M, so I have time to build the product and 2 years to properly market it and see where it goes, and I can build you a fine comics marketplace. That’s just not how it works these days.
What you have is a game of incremental growth that is an extremely hard maze to navigate.
When I look at digital comics startup, I want to know three things up front:
- What level of investment does the company have?
- Which publishers are on the platform?
- How many months runway does the company have?
Nobody’s going to tell me #3 (and be sure the publishers will be trying to figure that out), but #1 and #2 will tell you a lot about whether it’s going to work. And here’s the thing about investments – if a startup is quiet about how much they’ve raised, it almost always means they haven’t raised very much.
What would make things easier? Look, Marvel being exclusive to Amazon is an obstacle to digital comics startups getting investment money, but if more publishers would make current issues available, that would go a long way towards leveling the playing field.
All doom and gloom? Maybe and maybe not.
The folks behind the as-yet-unlaunched Omnibus app tweeted that they’ll have Image comics on board. That’s a big acquisition from a publisher not every app has had. Do they have more to go with and what’s their runway looking like? That’s no guarantee of viability, but it’s a step in the right direction.
More to go with? Yes, many. Our runway? Good.
So many people were burned by Amazon, I doubt there will ever be a replacement for Comixology. I’m content with DC’s subscription service, and I’ve stopped buying other publishers since I don’t read enough Marvel to make its service worthwhile.
Kindle works fine. We never had access to Comixology premium in the UK anyway. But there are alternatives for indies. Comic Haus and Globalcomix for example. The latter has a huge library.
Great article Todd. Well reasoned out. But I would say that some of the premises
may not apply, depending on what the founders are looking to do.
Are they looking to appeal to print comic book buyers? Not necessarily. Too small of a total addressable market (TAM) to get VC funding, even with Marvel and DC. You need a TAM of millions.
Do you need Marvel and DC? If you’re attempting to appeal to the current market, yes.
You did an outstanding job on laying out VC fundraising. But you also needed to add the problem of dilution for founders. Here’s an excellent breakdown from VC Mark Suster:
There’s also the possible issue of getting fired from your own company if your board doesn’t think that you can handle scaling the company to the liquidity event you laid out.
If they’re not looking to exit, VC funding is off the table, anyway. If they are, then good luck.
Content wise, founders also need to be wary of having too much content at once. Curation and discoverability are important, as is being able to pay your creators a living wage. Hard to do with thousands of titles. In my view, commoditization of content has become an issue on a number of platforms.
Finally, you’re absolutely right about time to launch. It takes years, if you’re going to do it right.
Again, great article. I look forward to reading more from you. I’ve still got my original printing of “Economics of Digital Comics”. :D Cheers!
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