Is There a Way for Comics to Move Forward During COVID-19? (1 of 2) Todd Allen
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Todd Allen
Setting the Stage
The problem with most public discussions of how the comic book industry will function during and after the COVID-19 pandemic is that of perspective. It’s usually “all about me.” The retailers need one thing, the publishers another and no one has really bothered to ask the reader what they want. And as this happens we hear more rumors than facts. Alas, so far even the craziest rumors have seemed to contain at least a grain of truth.
Publishers
The publishers are at the top of the food chain. They have two primary needs:
Keep the cash flow moving
Keep the talent from bolting to a different career.
And if the publisher is owned by a larger entity, particularly a publicly traded entity, you can add:
What does my parent company need me to do so we’re not all fired or outsourced?
In an ideal world, all this is balanced out by a need to preserve the existing marketplace. Unfortunately, we’re not in an ideal marketplace and the perception of AT&T-owned DC Comics and Disney-owned Marvel Comics has been that they really didn’t give a tinker’s damn about preserving the market until the retailers started an uprising. Was that because of DC and Marvel leadership being concerned about cash flow and prevent talent flight or was it orders from upstairs? Nobody seems to be certain about that, but it seems to be where we are. It’s fair to say any changes they’ve made have been quickly stepping backwards after discovering that retailers were extremely angry about things that would obviously make Direct Market retailers extremely angry.
At some point, publishers are going to need cash flow just to keep their doors open. The smaller publishers may well have smaller reserves and face a choice of publishing new material (if anyone has a way to buy it) or going under quicker than a larger publisher, but let’s not dismiss the overhead costs of a larger organization out of hand and let’s also remember that AT&T/Warner and Disney are both hobbled by the lack of movie theaters and theme parks during quarantine. A lot of money is being borrowed to keep the boats afloat, so let’s not automatically assume DC and Marvel are sitting on huge reserves of cash.
At some point, if the creators employed by the various publishers have been told to go “pens down” and pause, they may need to get a different job. Creator-owned series that don’t typically ship 12 issues in a year can keep on working and perhaps release more issues in a row without a break (or, dare we say, simply meet their deadlines in some cases), but if this pause interferes with when they get their royalties, then they’re in the same boat – time to get a new job.
Retailers
The retailers are on an uneven playing field. You have a handful of shops that are theoretically still open and a handful of primarily mail order operations. In these, instances, if you’re able to do business, it’s natural to want a steady flow of new material.
One step down the quarantine ladder, you have the stores that are doing curbside pickup, delivery and a *little bit* of mail order. Let’s be real – these retailers are primarily servicing their in-store subscribers. They’re happy to have SOME cash flow, but they’re likely not even close to covering their bills during a lockdown. They might be happen to have some new product, but it probably needs to be subscribers-only for inventory control purposes. There’s not a whole lot of point in having shelf copies if nobody can come in and look at the shelf. In practical terms, buying for the shelves is negative cash flow. Especially when it’s not certain when the stores will be open for browsing. We should remember that it currently appears likely not all regions will come out of lockdown at the same time, too.
And then you have a number of stores that are simply closed for the duration. No cash flow this month and no cash flow until they reopen, whenever that is. What’s the point in getting and paying for new product that you can’t sell?
Readers
The readers are the big question mark and it’s not clear to me that everyone is taking the uncertainty with readers seriously enough, up and down the food chain.
How many readers cannot currently afford to buy comics because they’ve lost their job?
How many of those readers will be able to return to their jobs after quarantine lifts and how many will still be unemployed?
How many readers are going to break their weekly habit and fall out of comics?
How many readers are going to try digital while the shops are shuttered and switch reading formats permanently?
How quickly will readers catch up on issues they missed while the shops were closed? (Or for that matter how quickly can they afford to?)
Will multiple months away from single issue comics cause more readers to switch to collected editions permanently?
There are a lot of unanswered questions about what will happen to the readers and how they might return. How many people leave comics after the interruption and whether a percentage of readers switch formats to either books or digital will effect both the publishers and the retailers. Perhaps a profound effect.
Are bookstores part of the equation? Sure. But bookstores aren’t as uniquely vulnerable as the Direct Market retailers, due to diversification of product and suppliers. Bookstores also aren’t going to rescue the single issue comics if things take a turn for the worst, but we’ll get to that in a bit.
The Distributor Problem
Single point of failure is a business concept where if one unit of a system fails, then the entire system fails. The comic book industry is getting a demonstration in single point of failure during COVID-19.
The primary distributor for single issue comics, many would say a functional monopoly is Diamond Comics. Diamond ceased accepting new comics into their warehouses on the week of March 23rd, 2020. Billy was mentioning Tony Panaccio’s comments, originally made in 2004. Since then Diamond has tightened their grip on publisher exclusives for the single issue market, but there are many ways to get graphic novels through bookstore distribution channels – and many retailers do. There are still publishers that are exclusively Diamond for single issues, books and bookstore distribution of those books… just not as many as there were in the past.
On the one hand, retailers whose stores were shuttered for lockdown or reduced to curbside pickup may have found this to be a blessing in disguise. It prevented them for having to pay for shelf stock they’d be sitting on for several weeks, if not months, without a realistic chance of selling it. Diamond shutting down their warehouses may well have prevented several retailers from having to declare bankruptcy over shipments made during lockdown. In certain contexts, you can look at it as a temporary solution as much as a problem.
On the other hand, many of the major publishers lost their exclusive distributor, so single issue cash flow just went out the window, save any digital monies… but we’ll come back to digital in a bit.
This doesn’t mean that all print cash flow ceased. If a publisher had a different distributor for books, retailers have been able to order trade paperbacks and graphic novels through the bookstore distributors. For now, at least. However, should a publisher be exclusive to Diamond in both single issue and the bookstore market, that single point of failure shuts them down for print.
Further, Diamond initially suspended payments to vendors and then announced a repayment plan. While it’s better for publishers to have a payment plan in place and not be standing in line as an unsecured creditor at a bankruptcy hearing, that’s not good for cash flow. It’s even worse for cash flow if you’re exclusive to them and your only cash flow channel is now digital.
Rumors abound now about how healthy Diamond’s own cash flow is. Are they taking an extra conservative stance to ensure they have funds to wait out an extended quarantine period or is their own cash flow suspect? No one seems to know and that there’s even any question of their health is a disturbing development for the comic book industry.
Even more rumors abound about comic book publishers sending out feelers for alternate distribution methods, possibly attempting to enlist bookstore distributors to distribute single issue comics. I’ve personally spoken with someone (not a publisher) working to put together an alternate distribution platform for some of the remaining non-Diamond exclusive material that’s out there. While having some redundancies in distribution is a good thing, there’s more than a little question of how quickly such a scheme could be implemented, what kind of material will ship and all this brings the market back around to the question of whether enough retailers are in a position to accept orders in a fiscally responsible way.
The Ways It Could Fall Apart
The Direct Market seems to be in as fragile a position as it’s ever been in and there are a LOT of ways that it could go wrong and the flaws in the market and some of the publisher programs are in danger of getting fatally exposed.
(i) Death by inventory
There are too many ways that excess inventory could kill the comic book industry. Diamond’s shut down prevented retailers from having to purchase inventory while still under lockdown, so that form of this crisis is likely averted, but that doesn’t mean the danger is over.
When Diamond resumes shipments, or perhaps when one of the rumored alternate distribution schemes is implemented, will publishers drop too many delayed books too quickly? Will there be 3 issues of Batman on the first week? 10 X-titles? Worse, could a reader not return until the third week of resumed shipping and get hit with 15+ X-titles?
If there’s too much, too soon and the readers aren’t all swimming in cash after the quarantine, they may be making decisions about which titles to drop a little sooner than anticipated. Or walking away in frustration.
If shipping resumes before all regions of the country are out of quarantine, then some retailers will have some serious calculations to do about how many issues they can order at once… and that’s assuming everything is still available to order by the time their doors open.
If retailers are taking an understandably conservative approach to ordering for the shelf for the first month or two after reopening, walk-in readers may conceivably get frustrated with the lack of shelf copies in the series they read and drop out. It’s common for a store to have more walk-in business than subscriber business. Will retailers be able to re-order if they’re not stocking the shelves deeply? That really depends on how the publishers feel about over-printing after being without cash flow and I think we’ve all heard retailers complaining about lack of over-printing for the X-Men relaunch, so it’s a real open question.
(ii) Death by Speculator
If shipping starts up before the entire country is out of lockdown, this is a potential gold rush for speculators. For the sake of argument, buy out the local store in Mississippi and flip it on ebay to desperate fans in California. You know there are speculators drooling over this. I’d even expect some opportunistic retailers with shuttered shops to take their deliveries at home and try their hand at it.
While the limited availability of such things can drive sales, much like the frenzy around DC’s Walmart titles on eBay when they first came out, speculator booms always turn into speculator busts and might just drive off readers in states still under quarantine out of sheer frustration (or drive them to the collected editions), to say nothing of the added headaches for their retailers.
(iii) Death by Broken Reader Habits
The Direct Market is predicated on the idea of loyal readers making a weekly trek to the shop to pick up this week’s comics. It doesn’t always work that way in practice, but the idea is that the purchases become a habit or ritual. Momentum exists and if the reflex is to pick up this week’s issue of <insert superhero here>, then it may take several issues of the reader being disappointed in the title before they get around to dropping it. Longer sales patterns. Weekly cash flow. It’s a good system and most stores in the United States will likely be closed for somewhere between 4-16 weeks. The habit is broken and it remains to be seen if it will be re-established. If your business is predicated on the cash flow of weekly purchases and the customers aren’t coming in as frequently, this could be a deadly readjustment period. The worst case scenario is readers breaking the weekly habit and checking out, be it for financial reasons or re-examining their reading habit.
(iv) Death by Retail Attrition
No one knows how many direct market retailers are going to close before their area comes out of quarantine. There have been reports of stores closing already, before anyone has had a chance to gauge how quickly the readers will return. At a certain point, this could push the market over the edge. Rent may be delayed, but more stores will eventually need to pay it regardless of whether they were open. Not everyone has an understanding landlord.
The recent leak of Diamond’s Marvel orders by individual store/account proved that the 80-20 rule applies to comics and the bulk of orders really do come from the top 20% of retailers, if not the top 10%. Still, the death of 1000 cuts could start here in the following ways:
Conventional wisdom says the bulk of indie comics sales come from 250-350 stores. Indie publisher could feel minimal to no impact from a wave of store closings if the stores going under are almost exclusively DC/Marvel, but 25 stores closing in that golden group could clip 10% of their market overnight. A few strategic closings and indie publishers could be in real trouble. And interruptions in the weekly buying habit could hit indies just as hard as the big boys.
If you’ve seen DC and Marvel’s Diamond sales estimates lately, the vast expanse of the lower end of their line isn’t setting the world on fire. While a low-to-mid-range shop likely isn’t ordering a high number of those individual titles, how long before the death of 1000 cuts starts to effect the viability of the lower third to half of their lines, at minimum, and require either re-staffing or a change in attitude towards single issues?
A shift in reading habits could disrupt the retail system. If 10-20% of readers shifted from print to digital and stuck with it after the quarantine lifted, that could be enough to shutter a swath of barely profitable retailers. Similarly, an extended period away from single issue comics opens a window for the reader to switch to the book format. An unseemly number of retailers still seem to regard the collected edition as an invalid format and seem ill equipped to transition from a newsstand business model to a bookstore business model, if that’s where the market is moving. If there is a second quarantine period in the Fall and a second interruption of single issues, it could be even harder on this segment of retailers.
If Diamond’s suspension of vendor payments and subsequent repayment plan really is an indication of shallow reserves there, it becomes a serious question how many accounts Diamond can afford to lose and remain cash flow positive. And that’s before unpaid bills as some shops will inevitably close. If EVERY publisher doesn’t have an alternative distribution scheme, Diamond going under could be a cascading failure as the previously surviving retailers look for new product.
The longer quarantines remain in place nationally, the greater the risk of the Direct Market being damaged enough that it experiences a partial collapse.
Does this mean that comics would go away?
Of course not, but it might mean a shift towards digital and book format, which we’ll get into the next installment.
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Todd Allen is the author of Economics of Digital Comics. He covered the comic book industry for over a decade reporting for Publishers Weekly, Chicago Tribune, The Beat and Comic Book Resources. As a contributing editor to The Beat, his work has been nominated for an Eisner and named to TIME’s Top 25 blogs of 2015. He was admitted to the Mystery Writers of America for the Division and Rush webcomic. He taught eBusiness in the Arts, Entertainment & Media Management department of Columbia College Chicago and has consulting on digital topics for organizations like American Medical Association, National PTA, McDonald’s, Sears, TransUnion and Navistar.
