Returning to the Topic of
Returning to the topic of my 1979 visit to the Marvel offices, there was an interesting sidebar story to my original success in convincing Marvel to refocus their marketing efforts on the newly emerging comics specialty store market. As you may recall, I mentioned in an earlier column in this series that my company, Mile High Comics, became the first new Marvel distributor under the trade terms offered in June of 1979. What most people don't know, however, is that Mile High also became the first distributor to have its distribution relationship with Marvel severed. In fact, Mile High Comics was a Marvel distributor for only three months.
The reason Mile High was forced out as a Marvel distributor can be summed up in one person: Phil Seuling. When Irjax filed their lawsuit against the publishers for giving Phil a sweetheart deal in distribution, they also sued Phil, and his company, Seagate Distributing.. Since it was clear to everyone involved that Irjax had an anti-trust case that would probably prevail in the courts, I know of no real effort made to prove the Irjax suit invalid. Instead, each of the parties subject to the lawsuit seemed to work privately (and separately) to resolve their part of the problem. In Marvel's case, as far as I know, Phil was pretty much in the dark about what they were planning to do until shortly before the new Marvel trade terms were announced. Since these new trade terms, with only a $3,000 minimum purchase requirement to become a Marvel distributor, essentially induced all of Phil's sub-distributors to stop purchasing from his company, Phil felt completely betrayed by Marvel.
Because there was nothing Phil could do to Marvel, however, he had to find another outlet for his rage. That's where I came in handy. Since I made no secret of the fact that I had met with Marvel, and that I had actively participated in the discussions leading to their decision to offer the new trade terms, Phil viewed me as one of the primary instigators of his downfall. This ignores the fact that everyone was already being sued, and that Marvel had to do something in any event to satisfy Irjax, but when someone is angry logic doesn't always enter the picture.
The net result of Phil's extreme antipathy toward me is that he had his lawyers call Marvel's Marketing Vice President, Ed Shukin, and threaten to file another lawsuit. In this case the grounds would be predatory pricing, with Marvel being accused of stealing Phil's retail accounts by offering them his same wholesale rates, without requiring them to be actual distributors. Phil's attorneys said the merits of their case were most clearly evident in the example of Mile High Comics, since I was almost exclusively a retailer, utilizing the enhanced discounts purely for my own benefit, rather than trying to fund a distribution business.
In reality, the argument being made by Phil's attorneys was meaningless. While Mile High benefited greatly from the 60% discount that accrued from being a Marvel distributor, the same was true for at least a dozen other of the newbie distributors who had previously been Seagate sub-distributors. While this great new discount was a wonderful benefit to our own retailing operations, what the Seagate attorneys chose to ignore is that all the new distributors simultaneously had to scramble to meet that $3,000 per month wholesale minimum. That meant that most of the new distributors were frantically trying to induce every comics retail store in their area to switch their Marvel business over to them, from Seagate. This was a slow process, however, because you can't simply become a distributor overnight. It takes a while to gain the trust of your potential clients, and even longer to build the infrastructure to efficiently service them.
At the point in time when Phil's attorneys called Ed Shukin, I was already working hard to turn Mile High into a bona fide distributor. In the greater Colorado region, however, this is quite difficult due to a very low population. Imagine for a moment that Denver is an island containing 2 million people, with the other cities and towns in the 500 miles around Denver being smaller islands containing (perhaps) a total of another 3 million residents. The entire state of Wyoming, for example, has less population than at least half a dozen cities in Ohio. Said another way, in 1979 there were only about two dozen potential comics wholesale accounts in the 250,000 square miles surrounding Denver! Even if I convinced every single comics store within a 500 mile radius of Denver to switch over to my new Mile High Comics distributing company, my distribution volume would never exceed the internal purchases (fueled primarily by our mail order sales...) made by Mile High Comics.
Ed's original solution to this problem posed a real dilemma for me. He offered to continue to ship me Marvel books at a 50% discount, and the make up the 10% wholesale difference through a variety of side benefits. This quiet arrangement between us would keep Marvel out of another lawsuit, while still providing me with the full 60% discount of being a wholesaler. Rather than accept this under-the-table deal, I instead proposed that I sell the wholesale part of my business to my wife, Nanette. Because we both had substantial assets at the time we married, we had set up a separate property agreement in advance of our nuptials. This allowed her to legally establish a corporation in which I would have absolutely no ownership interest. Ed ran my proposal by the Marvel attorneys, and they agreed that this change in ownership of the distributing company should preclude any lawsuit by Seagate. Phil must have agreed, as he dropped the issue after Nanette's new company, Alternate Realities Distributing, Inc. was formed.
The irony of this entire situation is that this separation of the two companies saved Mile High Comics from bankruptcy. While the entire history of Alternate Realities is a sad and bitter story for another day, suffice it to say for now that Nanette was forced out of the distribution business in 1987. Had I have still retained an ownership interest in the distribution company, I would have been forced to liquidate Mile High to cover Nanette's distribution liabilities. It was only because of Phil Seuling's momentary fit of pique in 1979 that I dodged a bullet that would have most likely have been fatal to my company. I think this clearly proves that what you think is a great negative at one point in time can ultimately turn out to be your salvation. In effect, Phil Seuling is the reason why Mile High Comics is still in business today.
To be continued.
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