Entrepreneurship is a
Over the past couple of years, I have become a fan of reading the New York Times online edition. In part this is because I travel so much, but also because it is free. This current lack of cost for what is arguably the best news service in the world is a very important point (as we shall see later in this column), as it is reflective of just one of the many changes that the advent of the Internet has wrought. In point of fact, our world has changed so much in the 15 years since the Internet first began entering the mainstream that it I find it difficult to even remember what life was like before instant access. Which leads me directly into the topic of today's column: adapting to change.
I'll begin by referring back to the New York Times. A highly popular article that appeared in the business section a couple of weeks ago reflected upon the perils of entrepreneurship. Many chilling statistics were quoted about the high rate of failure of start-up companies, and the personal pain (both mental anguish and financial ruin) that oftentimes accompanies a typical small business failure. The devastating experiences of the owner of one company, in particular, were cited, whose company failed recently after 20 years in electrical business. The owner had been booking jobs as accounts receivable before they were completed, and when he ran out of operating cash to actually finish those individual contracts, the company became instantly insolvent. As a result, his family lost almost everything they owned, and went, quite suddenly, from a very comfortable upper middle class lifestyle, to needing to survive on the charity of others.
This news story really struck home with me, as I could have found myself in the same position as that unfortunate man at several times in the past. During every decade of my 40 years in the comics business, I have experienced moments that can best be described as "crunchy." Regardless of how well you plot, scheme, and plan, there are always events that arise in any business that are completely unexpected. Just ask the (former) owners of the Rocky Mountain News. After 150 years of continuous publication, the owners of this once highly popular Denver daily suddenly found themselves with a disintegrating readership base. With former subscribers (such as myself...) now reading their daily news online for free, the Rocky's advertisers fled. In the end, the Rocky Mountain News went from being a great success, to complete failure, in a remarkably short period of time. Sadly, the same is happening to other newspapers all around the country. Even the New York Times is now struggling to cope with losses, as their online advertising revenues have not come close to replacing what they have lost in their printed edition.
Putting the experience of the owners of the Rocky Mountain News into perspective, I view entrepreneurship as an exercise in avoiding probabilities, the greatest of which is the probability of failure. Simply put, human beings are in constant competition for resources. All of us want the best for ourselves and our children, so whether it be in business, in office politics, or just battling over who gets the closest parking space at the mall, we strive with all of our being on a daily basis to supersede the efforts of those around us. As most clearly defined in sports, however, for every winner, there have to be losers. The same is true in business. If you gain market share, someone else loses. If you find a way to build a better mousetrap, the guy with the old mousetrap design is suddenly in big trouble. We strive for success with the best of intentions, seldom realizing that, no matter how enlightened our world view, that our hoped-for success might well cause the ruination of some else. Simply put, business (as well as life, itself...), can oftentimes be ethically messy.
Which brings us to the subject of the 2009 San Diego Comic-Con International. The good news is that some of the changes that I advocated for in this column before the 2008 San Diego show seem to be in place. We have been told that palleted loads being brought by comics retailers no longer have to be off-loaded onto the blisteringly hot tarmac behind the convention center. We are now going to be allowed to sit in line on Tuesday morning with our trucks (as we did in the past) to offload on to one of the convention center docks. The convention staff has also pledged additional focus on comics, and comics dealers, at the 2009 convention. That's all that I was really asking for, so I am cautiously optimistic that this year's convention will be far more comics dealer-friendly than was the case over the past couple of years.
What is not-so-good-news is that the comics world is (once again) teetering on the edge of collapse. Ike Perlmutter's recent decision to unilaterally jack up Marvel's cover prices for standard new comics to $3.99 (in the middle of a !@#$%^&* recession!) pretty much put the final nail in the coffin of Marvel's new comics sales. A well-respected comics creator reported to me just the other day that a new project he just created featuring some of Marvel's most popular characters sold under 40,000 copies. That's less than 800 copies per state. That same creator also told me that no Marvel title broke 100,000 copies in sales for June. If true, that's an astonishing decline for a company that routinely cancelled titles selling less than 100,000 copies per month just two decades ago. By those earlier standards, all of Marvel, and most of DC's titles, would be under water right now. Thanks to those higher cover prices, licensing revenues, and trade paperback sales, however, the major comics publishers are still profitable. But I wonder, for how long? Declining unit sales of new comics inevitably means less customer traffic in comics shops. It has come as no surprise, therefore, that word has been reaching me recently of several comics shop failures. With seriously declining unit volume, even Diamond Distributing has been forced into cutbacks. In a nutshell, things are pretty bad in the comics world right now, and getting worse. Given the state of the general economy, however, that's really not all that unexpected. The real question for all of us is: when is this wretched economic situation finally going to improve?
All this leads me back to our preparations for the 2009 San Diego convention. How do you prepare for the largest comics and media show in the middle of a savage recession, when consumer demand for comics is shifting wildly? We've had moderate success at San Diego for the past five years by creating the largest selection of new comics trade paperbacks and hardbacks available anywhere in the exhibit hall. Books are expensive, however, and I have serious doubts as to whether this year's consumer demand for new comics trades and hardbacks will come anywhere close to what it has been for the past several years. While they have no booths at the convention, online bookseller Amazon.com also plays a huge role, as they have done their absolute best over the past several years to create and fuel the perception that all books should be sold at steep discounts from cover price. As the 800-lb. gorilla in the book marketplace, Amazon has managed to grab such a large market share that almost all independent and chain booksellers remaining in America have now been driven to the edge of bankruptcy. We do sell our new books at moderate discounts from cover price at San Diego, but we simply cannot match up with Amazon. If we did, there would be no way that we could cover our $13,000 booth rental and $10,000+ in other expenses. If we don't discount steeply, however, with consumers becoming increasingly cost-conscious as the recession drags on, will we sell any books at all? Welcome to my nightmare.
With those thoughts in mind, my strategy for this year's show is to cut back on our staff and travel expenses, and to minimize new book purchases from Diamond. Instead, we are stocking our 7 booths much more heavily with out-of-print trade paperback and hardback titles, counting on the higher margins from these harder-to-find books to offset anticipated declining overall revenues. Will this strategy work? It beats the heck out of me. Even after 40 years of selling comics (including 37 consecutive years of exhibiting in San Diego), I have not a clue as to how this will all turn out. As I mentioned earlier, entrepreneurship is a continual exercise in avoiding doom. There will be some companies that succeed at this year's San Diego Comic-Con International, and others that will fail. In the end, it will come down to who manages to best adapt in a retailing world that has become savagely competitive. As innumerable little fish over the eons can attest, any time that your puddle begins drying up, finding survival strategies that work gets harder by the day...
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