Evolution of the Direct Market Part I

At this same time last week, I was laying on my side in the local emergency room, gritting my teeth as a doctor tried (4 times...) to stick a hollow needle into my spine. I came to be in that position because I have ended up being one of the 300 unlucky people in Colorado who have contracted West Nile Fever, a mosquito-borne illness that can quickly evolve into menengitious. Blessedly, my results of my spinal tap revealed no menengitious in my spinal fluid. My case has turned out to be fairly routine, with my primary symptoms being extreme fatigue and mental fuzziness. The doctors tell me these symptoms should wane over the next six weeks, as long as I take it very easy.

I mention this illness because it became the catalyst for me deciding that I would give my interpretation of the events that have transpired in the evolution of the Direct Market over the past 25 years. This is a story that I have hesitated to tell because most of the heroes and villains of this story are still in the comics world today. Some are now in positions of great power. As with most businesses, the winners of past power struggles within the comics industry would prefer that the means that were required in order for them to achieve their current ends would not be revealed. Not everything that occurred was very nice. The fact remains, however, that the history of comics as an industry has led us to where we are today. I believe that we will only be able to change the current situation of malaise and decline within the world of new comics publishing if we reconsider some of the poor decisions that were made in the past. This will require, however, contemplating upsetting the existing status quo. That thought might make many powerful people quite unhappy. That's why it took the advent of a life-threatening illness for me to decide to tell my interpretation of the history of the Direct Market. If not now, when?

As most of you already know, I have been involved with selling comics for over 30 years. From the moment that I opened my first comics retail store in 1974, I became acutely aware that the efficient delivery of new comics product into the fledgling world of comics specialty shops was critical to their survival. In those early days we were competing primarily with newsstands and convenience shops. Discounts were dreadful, with most ID wholesalers only offering a 30% discount rate. On a comic book with a 20 cent cover price, you earned a whopping six cents per copy for each issue sold. In fact, the only reason I sold new comics in those early days was because they were critical for generating the weekly foot traffic that would allow me to sell back issues.

By the time my first store opened, I estimate there were approximately 30 other comics shops in the US and Canada. There were also about 100 other stores who sold primarily other products (used books, records, etc.) but also carried a line of new comics. While some of these retail outlets purchased through local ID wholesalers, many were beginning to avail themselves of a new service from Phil Seuling's Seagate Distribution, the first wholesale company specifically created to sell new comics to comics specialty stores.

Phil began Seagate in 1972, long before selling to comics shops was economically viable. He was a schoolteacher at the time, and was well known in the New York area not only as a dealer in comics and original artwork, but also as the operator of the huge 4th of July convention in NYC. As I've heard the story told, Phil brazenly walked into DC, Marvel, Warren, Harvey, and Archie in 1972 and convinced them that their future lay in selling comics directly to comics specialty shops. He also convinced them to give him a special deal by which they would pay the costs of packaging and shipping all of the books ordered by his accounts. In exchange, he promised them that he would purchase all books from them on a non-returnable basis.

Returns had become a very big deal in the early 1970's, as comics were no longer selling in the percentages of previous decades. During World War II, when comics were very popular, it was not unusual for sell-through percentages to be in the high 60% range. A few comics were reported to have even sold entirely out of stock. This is a critical number, because comics are a unit driven business. What I mean by this is that the majority of the cost of publishing any given comic book is in the editorial production (i.e. plot, pencils, inks, colors, and editorial staff costs). Once you've paid for the cost of creating the comic, the cost of printing/paper/ink per issue is negligible. This is why it was economically viable for the publishers to flood the newsstands with far more copies than they could realistically sell of any given issue. Even if half of the copies remained unsold after 30 days, and subsequently had their covers stripped off, the effort was still worth while. With low unit production costs, the critical marketing issue for the comics publishers was maximizing the total unit sale by putting as many books out on the newsstand as possible.

By the early 1970's, however, the numbers were beginning to turn against newsstand sales. One important factor was the overall decline in the number of outlets willing to carry comics. Another critical factor was the decline in reading among America's youth, with television dragging away a larger and larger percentage of potential readers. The comics publishers starting seeing their overall sales numbers plummet, and sell-through figures started becoming dismal. That was the period when comics seemed to increase in price every year, with the price quickly escalating from 12 cents, to 25 cents, in just four years.

It was within the context of this early stage in the disintegration of the newsstand market that Phil pitched his idea of a new distribution system to the publishers. Even though his initial order numbers were tiny, everyone was happy with Phil's new arrangement, as it at least provided a possible alternative to newsstand distribution. Little did they know at the time that this new system would ultimately revolutionize the entire marketing of comic books within just ten years.

To be continued...

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