Comics and Micropayments: An Interview with Todd Allen

Yesterday, I ran an outtake from Convergence Culture which centered around the efforts of Scott McCloud to build public interet in micropayments as a means of supporting digitally distributed comics. Like McCloud, I believed that micropayments offered perhaps the best way to provide a commercial infrastructure which would preserve the diversification of content that currently characterizes the web while at the same time allowing artists to make a living off of their work. When McCloud spoke at MIT last week, he told me that Reinventing Comicswas designed to be a book about the future when it was published more than five years ago and it was still a book about the future now. We are just moving towards the future at a slower rate than any of us might have imagined. The success of iTunes suggests that people are willing to pay small amounts of money online to consume content they want (and thus suggests that some micropayments model might still make sense). At the same time, they are doing so through a central distribution channel which could easily become a gatekeeper locking lots of content producer out.

I have not been paying as much attention as I should lately to developments in the debates around micropayments and other ways of paying for online content. A few years ago, I served as a member of a thesis committee for Todd Allen, a student at New York University’s Gallatin School, who was doing a project focused on business models for digital comics producers. He has since self-published the thesis as a printed book and made it available online Allen is now a Chicago-based consultant and author on matters related to digital media and its business applications. He teaches E-Business for the Arts, Entertainment & Media Management Department at Columbia College Chicago. Allen’s writing on technology has been seen in the Chicago Tribune and Iconocast. Allen has worked with a diverse group of companies including the American Medical Association, National Parent Teacher Association, Modem Media and the Marketing Store. Outside of technology, Allen spent two seasons covering the New York Knicks for New York Resident, a Manhattan weekly paper, where he also penned a humor column. He once appeared on MTV in a futile attempt to explain computer science to Pauly Shore.

Todd is someone who follows digital comics very closely and so I decided to check in with him this week to see if he could bring us up to date about developments in that area.


You investigated alternative ways of funding digital comics through your thesis research. What models offered the greatest promise and why?

If I had to point to one, I’d point to merchandising. T-shirts, posters, printed collected editions (graphic novels, if you prefer)… selling things seemed to be the highest revenue generator when viewing the area from a high level.

That said, the more popular web comics – your PVPs and Penny Arcades – do quite well with advertising. In these cases you have high page view counts and higher than average CPM rates for the advertising, owing to a desirable demographic, particularly to gaming companies.

Ultimately, different revenue streams will work for different web comics. There will be differences in audience demographics and merchandising options from property to property that cause variations in the productivity of a revenue model. There’s no reason not to mix the models until one clearly overtakes the other. Initially, merchandising will be a better option for more web comics. Advertising becomes a more viable option as your strip’s traffic grows.

I would also caution against the use of contextual advertising for web comics. Contextual advertising is based on the _text_ elements of a web page, not the graphic elements. While theoretically, you could structure the text of the page to sync with the individual strip, I haven’t heard a lot of success stories about cartoonists striking it rich with AdWords. Feel free to correct me on that one if a few instances have popped up.

What did you learn about the effectiveness of micropayments? What has happened in this space since Scott McCloud launched his experiment with BitPass?

You really don’t hear much about Bit Pass these days. There seem to have been two nails in the coffin:

1) The Goats.com boys tried a download experiment last year with BitPass. They weren’t happy with the response they got, which didn’t translate into a lot of money (owing to the nature of micropayments requires a lot of transactions to start adding up to significant money). They also found their normal merchandising sales took a significant hit. It wasn’t immediately apparent whether this was due to a focusing of attention on download distracting attention away from the t-shirts or whether people bought the low-margin download, instead of the higher margin merchandise, but the experiment did not go well and Goats.com is a site that’s serious about its income, so people paid attention.

2) PayPal now lets you do micropayments with a credit card. This speaks to what, in my mind, is the biggest problem with BitPass – namely you’re dumping $3.00 into a glorified bus pass to spend on their system. What if, like me, the only thing you want to get off their merchant system is Scott McCloud’s “The Right Number” web comic? Then you’ve spent fifty cents on the first two parts and you have $2.50 in an account just sitting there, gathering dust. Having to open a separate account is a deterrent to sales. Having to open that account and drop in 12x the amount you intend on actually spending is silly. The power of their network wasn’t strong enough to overcome the barriers… and I’m still waiting for the final part of “The Right Number” to come out, for that matter.

But we should back up and talk about micropayments in a more braod sense. People define micropayments a few different ways. Could be a payment under $3. Under $2. Under $1. Under $0.50.

By and large, iTunes and their $0.99 downloads are considered proof that micropayments work. Downloading the pilot for Aquaman at a $1.99 price point may or may not be considered a micropayment, depending on who you talk to.

There has not been a great deal of micropayment experimentation done in comics, past BitPass and I would argue that having that bus pass/minimum deposit system does not make BitPass a valid test.

In a very recent development (as in, within the last two weeks) Slave Labor Graphics has started offering some of their titles as digital download for $0.69 cents a pop. That price not only qualifies as a micropayment, you can also use it as a punchline.

What have been some of the more interesting recent efforts to provide support for the production and distribution of comics?

A few things. Web comics, traditionally, have followed the comic strip model, more than the comic book model.

On the strip side, the syndicates are expending a bit more energy to talk you into buying a subscription to their content. You can get the strips in an e-mail. You can access a deep archive. You have access to a few strips that are web only, including reprints of classic, discontinued strips.

It was a long time coming, but the syndicates are experimenting with what they can do online… after all, if the newspapers are having problems, then the syndicates are having problems.

The most interesting thing on the comic book side of web comics would be the migration of independent comics away from print and onto the web.

I should probably preface this with a thumbnail recap of the foibles of the direct market for comic books.

Most comic books are bought in specialty stores these days, and somewhere in the neighborhood of 90% of direct market sales is controlled by a single distributor – Diamond Comics. Diamond has a catalog which features a handful of the larger publisher (who they have special contractual relationships with) in individual sections in the from of said catalog. Everyone else is mixed in the back of the catalog, alphabetical by publisher name. It makes it very hard to stand out in the catalog, and since there’s a lot of crap (and I’m being nice when I say crap… trust me, I’ve seen the catalog) in that amalgamated section, many retailers don’t even bother to read through it, making it even harder for a book to stand out. Sound like a mess for a small publisher? It is.

So when you add the retailer apathy towards independent/small product lines that exists in any industry to the problems with catalog placement in such a centralized distribution market, you can see where your independent artists who publish there own material might get squeezed out.

Well, Diamond recently put some minimum sales requirements on their catalog. This scared some people and we’re seeing a migration to web of a few critically acclaimed books that didn’t sell well in single issues, but did just fine in trade paperback editions (collected editions, graphic novels, pick your term of preference).

Phil Foglio was the pioneer for this trend _prior_ to Diamond throwing down the sales minimum with http://www.girlgeniusonline.com/ , a continuation of his Girl Genius comic.

This has been followed by Carla Speed McNeil’s “Aboriginal SF” feature Finder at http://www.lightspeedpress.com/ and Batton Lash’s self-explanatory Supernatural Law at http://www.webcomicsnation.com/supernaturallaw/. There will, doubtless, be more to come.

Foglio is more aggressive with embracing non-collected edition merchandising (t-shirts, pins, etc), but over-all, what we’re seeing is a shift away from small-print-run monthly comics to web publications aiming for a graphic novel as the end product. Placing material online, one page at a time, and offering an archive offers an infinitely wider distribution network than depending on the owners of an already-small network of comic book shops to stock your product.

Anecdotal evidence is that it helps the sales of the collected editions and the artists haven’t felt an additional pinch for not having the traditional comic book’s income. (In fairness, the income off the “monthly” editions for a series selling under 3000 copies would likely be minimal and there’s a great deal of production and solicitation work that goes away in the straight-to-web scenario).

Do you believe Chris Anderson’s Long Tail theory applies to comics? Why or why not?

Absolutely.

At the most basic level, you have the very existence of the collected edition. That’s someone buying a book that’s really 4 – 12 issues of OLD MATERIAL.

Kick it up a level, and look at Sin City or V for Vendetta. They’ve been around for years, selling a decent amount of books each year. Then they have films come out, based on the originals, and suddenly you’re selling a LOT of Sin City and V for Vendetta. In bookstores, too.

Old properties sitting around and suddenly find an audience? That’s the Long Tail in full force.

Back issue sales in print comics could be construed to be the Long Tail, although the collectors market makes it a bit different.

As fiction, and usually serial fiction at that, comics fit into the Long Tail model much better than news periodicals. New readers will seek out the backstory. And with web comics, since the back issues are, essentially, an on-demand feature for most strips, the Long Tail is built in.

Have DC and Marvel backed off of web-based distribution of their content altogether? Does the web have more to offer smaller publishers or independent artists than major companies?

DC offers little more than a few pages of previews. One occasionally hears rumblings, but DC seems to be a little on the web-phobic side, to look at their actions.

Marvel continues to waffle. They stepped back from their web comics, then returned to them with a strategy geared more towards promotion of upcoming collected editions. Their initiative of late have been establishing a wiki and instituting some editorial blogs. On the other hand, Marvel also issued a survey about attitudes towards digital downloads, including questions on how much the consumer would be willing to pay for one. So with Marvel, they’re definitely thinking about it, if not jumping to action.

As to what the web offers to whom, that would depend on the context. If you were just looking at the world of people who go to comic shops, the web has a lot more to offer the independents. After all, most of them have trouble getting good physical distribution. This is a no-brainer.

If you look at the whole world, the web opens up possibilities to all, but more to DC and Marvel. Why? Because DC and Marvel are recognizable brands. You will have a magnitude more people seeking out Batman and Spider-Man online, than you will something like Fear Agent or Queen & Country. Your smaller publishers will need to do more marketing to catch up, when using brands that are, effectively, unknown to the mass market. That’s not to say that something like Fear Agent couldn’t become popular with the mass market, similar to how the Sin City film turned people onto the comics, but its a longer and harder road.

On the flip side, independent comics have more non-super hero fare, and could potentially play to a wider audience. Or at least so goes one line of thinking.

The web does not appear to be a zero sum market for comics at this point.

You’ve been doing some experiments lately with comics as download. What were the results?

Promising. Again, this is a story that needs some framing, particularly since your blog will have some people far removed from the comics scene.

Rich Johnston is a London (UK)-based ad man who writes copy for radio advertisements by day and also does a gossip column about the comic book industry ( http://comicbookresources.com/columns/?column=13 ). Every year or two, Rich will produce a comic, usually as the writer. While the do alright for small press titles, these aren’t books that set the sales charts on fire. After all, Rich is known as a journalist, not a comics scripter, in these circles.

This year, Rich wrote a comic called The Flying Friar. A mild satire of the Superman legend co-mingled with the history of an actual Catholic saint, the book received an unusual amount of publicity in Europe, prior to publication. And when I say unusual, I’m referring to the BBC and the London Times.

It was obvious this book would sell out quickly in a fair number of venues and the publicity would definitely reach areas it wasn’t stocked, so it was decided we would offer a PDF download of the book for sale.

As there was a copy on the store shelves, we decided to offer the download for cover price, as not to be undercutting the shelf copies (which would be unethical to do without first announcing the cheaper online version during the solicitation period). We also gave the book a few days on the shelves before announcing the online offering (on Super Bowl Sunday, actually).

Net effect was we’ve sold a bit over 2% of the initial print orders. The raw number isn’t all that amazing, but when taken in context of a small press book, 2% is definitely significant. This was also a month AFTER the media mentions in Europe.

More interestingly, links coming in from comic book websites converted to purchase at a 2% rate. Ask anyone in web retailing, 2% is a healthy conversion percentage. People who came to the site, came with their wallet open. For an eBook, essentially. 20-25% of the audience was from Europe.

As a proof-of-concept piece, this suggests that there is an audience for online comics, and one willing to pay full cover price for an item they can’t find locally (or just prefer to have in a digital edition).

It goes without saying that there are no print costs or distributor fees with digital downloads, so the margin is superior to the print version.

This was all accomplished with a slightly known, if not unknown creative team. One wonders what the percentages would be like with a known brand or “name” creative team. The only marketing done was shotgunning some press releases. Again, one wonders what would be possible with a marketing budget. The concept played out soundly.

(Interested parties can view the book at www.richjohnston.com.)

If you were to predict the future of digital comics distribution five years from now, what changes do you expect to see and which present models will have disappeared?

The ball is definitely moving and more people are talking. No two ways about that.

The micropayment “networks” like BitPass will be gone.

PayPal will have forced other credit card processors to adopt micropayment-friendly policies.

At least 50% of monthly comics will have a digital download available. The question here being whether the publishers handle it themselves or farm it out to stores, ala iTunes.

Comic book stores will become more firmly entrenched as a collector-specific market, not a medium-specific market. (That is to say, right now, if you want to read comics, you have to go to a comic shop. In the future, if you want to _collect_ the print editions, the monthlies, you’ll need to go to a shop, as will casual readers who have a strong preference to print. Casual readers without the strong preference for print will start migrating to online, where its easier to find the material.)

You will see more creator-owned properties starting out as web properties and migrating to print, much like PVP has, but starting out this way with the expressed intent of following that path.

You will see the web and print industries actually admit that they’re both in a market aimed at collected editions/graphic novels as the enduring product.

The wild card here is what happens with the newspaper market and the traditional syndicates.

Comments

  1. N says:

    “We are just moving towards the future at a slower rate than any of us might have imagined.”

    I like to think the reason our pace seems to have slowed is because we are climbing the next step.

    Imagine technological and scientific progress being somewhat like water filling a sink.

    The level rises slowly over minutes until it reaches the brim. At this point the water spills over the countertop in seconds.

    I feel that the industrial revolution was the water of the renaissance spilling over the first edge.

    I hope that what we are experiencing something simply akin to another renaissance.

  2. Ned Coker says:

    Digital downloads for comics? The iTunes approach? voila!

    http://www.drivethrucomics.com

    After 3 successful years as eBook sellers of digital downloads for roleplaying games (www.drivethrurpg.com), the DriveThru family is headed to the graphic fiction realm with publishers big and small–including the aforementioned Phil Foglio!

    A timely article considering we announced our site to the public this past Tuesday, Sept. 19th!

  3. Robert Nagle says:

    One thing not mentioned here is the potentially disruptive effect of e-ink reading devices on the comic book world. Although the devices due out soon are rather expensive ($300 or so), prices could easily fall because the technology is being made available to OEMs. These devices are perfectly capable of rendering grayscale comics, have long battery lives and can be encrypted and sold.

    Ebooks have a low price point too, but at least what the reader is buying comes closer to a book in the traditional sense.

  4. Robert Nagle says:

    Talking about timelines: The Sony Reader is due out in a month. The Hanlin V2 and the Amazon Kindle are due out probably early next year. chart comparing the devices . Now, it’s a waiting game.

  5. Joel says:

    one thing which was not mentioned is the proliferation of comics being illigially distributed, online using the .cbr format. the reader for these files is excellent, and if a distribution system like itunes comes about, I would be more than happy to buy my monthly books online, instead of having to make time to go to the comic shop (one thing to note, I like buying trades, and I do quite frequently, but to be able to download the monthlies at a rate less than the print version and then maybe be able to purchase the trade for a slight discount, would be an excellent deal)

  6. Jose Alvear says:

    Surprised no one mentioned Modern Tales in this interview since it’s been around a long time and has seen some good success with subscriptions.

  7. Ray Radlein says:

    On the other hand, for all that success with subscriptions, Modern Tales and its affiliated sites seem to be moving more and more away from their subscription model.

  8. chuck says:

    On contextual ads:

    Megagamerz (a spinoff of goats) actually does caption all its comics into text, including descriptions. Still, with today’s comic having a punchline of “Angina makes me hot”, I’m not sure the contextual ads would exactly fit the material, dig?

    It’s pretty simple, you just do what all other advertisers do: target the demographic. It doesn’t take a “Long Web Cluetrain 2.0 Tail” to figure that out. Sometimes the old ways really do work.

  9. David Vaters says:

    Your observations regarding micro payments are interesting however the future is now and there is one system that will truely solve the problems stated in your article. The system I speak of is CREDITZ digital currency and the submicro payment capabilities are inherit to the system which provides business intelligence and loyalty applications as well.

    We expect that soon artist, musicians and any content provider will be selling thier creations at whatever the market will bare. From 99 cents down to 1 cent and the fees to do so will be affordable to the seller at just 2.98% of the sale. So, a 50 cent transaction will cost just 1.5 cents and not 30 plus cents from all the other payment methods.

    Not to dissapoint anyone who thought they had a chance to solve the problem but, there is now a payment system that is designed for the 21st century utilizing any and all devices to faciliate transactions securely and affordably.

    So, we have climbed to the next step and well beyond with CREDITZ digital currency. Live long and prosper! Check us out!

    David Vaters

    Chairman

    CEO America Inc.

    Trading Symbol: CEOA

  10. Steve Jordan says:

    Micropayments… DRM… and reading devices. I think these represent the Holy Trinity of all digital document distribution systems. PayPal has us proceeding in the right direction with micropayments, but DRM still has the publishers scared to death (the real reason, I’m sure, that Marvel and DC are being slow to introduce digital comics, just like book publishers). DRM is the real wild card here.

    E-readers will make things interesting, especially if they are reasonably portable and convenient to use, and get new material for. We’ll have to wait and see on that.

    Personally, I think the future of e-publishing is going to happen… but there are still some serious hurdles to clear.

  11. Simon says:

    ITunes style software for reading and collecting digital comics is already here! Check out ComicBookLover for Mac OS X. You might like it! A lot of users mention this, so I should mention it here, but one thing missing is a comic store embedded in the app :-)

  12. Marc Nathan says:

    I agree that micropayments will help the digital comics industry, but I also think that retailers play an important role in adopting the change in the print industry. Local retailers are the closest to the end customer and what they decide to stock shapes the opinions of comic readers – for better or worse. On the micorpayments side, instead of thinking about individual book sales – what about thinking in terms of series runs, with a printed TPB as the tangible payoff at the end of an arc. There are also other trusted micropayment systems that work for digital goods such as the virtual economies in games like Worlds of Warcraft and more importantly – SecondLife.