Gaining a Firm Control on the Direct Market

In last week's column, I related how DC managed to gain control of Marvel's distribution on the newsstands in 1957, and used that power to prevent Marvel from publishing more than eight monthly titles. Marvel ultimately only managed to escape DC's clutches by buying their own newsstand distribution company in 1969. This background information is crucial to the understanding of how the major publishers viewed the emergence of the new distribution system that was developed to service the comics shops that constituted the bulk of the Direct Market. While both Marvel and DC were more than willing to give Phil Seuling a semi-exclusive contract to sell to comics shops when he first approached them in 1973, by the time of the Irjax lawsuit in 1979, it had become clear to many at DC that the comics shop market was becoming much more significant than anyone had originally realized. This led to radically differing approaches on the part of Marvel and DC in how they wanted to proceed in growing their new distribution relationships.

Tying history together a bit, in a column I wrote a few months ago, I related how the release of the first Star Wars film, in 1977, helped revive the fortunes of many struggling comics shops. The million-copy sales of the first issue of the spin-off Star Wars comic book from Marvel also proved to all the comics publishers that, despite the steadily declining newsstand sales of the previous decade, that there was still a potentially huge audience for their products. While that book, and the subsequent issues of the Star Wars title, did wonders for Marvel's bottom line in 1977, the other publishers did not experience a similar uptick in sales. Ironically, this changed for DC the following summer (1978), with the release of the first Superman film. The irony I perceive in this event derives from the fact that DC management was forced by the powers-that-be at parent company Warner Communications to drastically prune their comics line in the summer of 1978, just as the bonanza of licensing revenues began streaming in from the Superman movie. Given the very odd timing of the decision to "implode" the DC line of titles. I shudder to think what might have happened if the Superman film had not been a hit...

Since the Superman movie was a huge success, however, DC was in an entirely different financial position than Marvel when the Irjax anti-trust lawsuit hit. They also had the tremendous benefit of having the Warner legal team to defend them against the Irjax claims. Unlike Marvel, and many of the other publishers named in the Irjax lawsuit, DC was in no particular hurry to settle. Following the cautious strategy that has served DC well for many decades, management of the company chose to simply wait and see how things would shake out during that volatile period. While they did eventually reach a settlement with Irjax, DC made no moves to open up the distribution of their comics in the Direct Market during 1979 and 1980 beyond those distributors who had already been sanctioned prior to the Irjax lawsuit. In part this was a financial consideration, as DC has always wanted to avoid any credit losses (they look very bad on the annual financial statement they have to prepare for the Warner auditors...). I do believe, however, that the institutional memory at DC also played a role in how they viewed the emergence of this entirely new distribution system.

I cannot stress how important DC managerial continuity is to the overall history of the Direct Market. Institutional memory being passed on from the old generation of DC managers to their successors is one major factor that has allowed DC to survive and prosper during the past few decades. Marvel experienced an almost complete turnover in staff between 1969-1979, as many of the old team assembled by Stan Lee and Martin Goodman either left the company, or (as in the case of Stan...) withdrew from day-to-day operations. The new managers brought in by Marvel parent company Cadence Industries were good businessmen, but their knowledge of what had transpired in the comics industry prior to their arrival was almost nil. This factor goes a long way toward explaining why over the past 30 years Marvel has managed to regularly win the war for market share within the comics market, but has also frequently squandered that success with costly and ill-timed decisions. That unfortunate situation continues to this day.

During that same period of time, DC has exemplified the "Tortoise" to Marvel's "Hare," moving slowly, and only making decisions when they're completely satisfied that they have chosen the right course of action. In the case of the Direct market, DC management chose in 1979 to let Marvel take all the financial risks in building the Direct Market distribution system, and then worked assiduously over the next ten years to slowly dominate and control what Marvel had built. That strategy worked brilliantly for them in 1957, and I firmly believe that the institutional memory of that first triumph over Marvel colored many of the decisions that DC ultimately made in determining how to approach this entirely new form of distribution of their products. Selling comics was important to DC's management during the 1980's, but ultimately gaining a firm control on the Direct Market distribution system was even more important.

To be continued...

Mile High Comics, Inc.
Attn: Chuck Rozanski
2151 W. 56th Ave.
Denver, CO 80221