DC Comics Took Advantage of
Marvel's Strategic Blunder

In last week's column, I provided you with a brief history of the wretchedly poor decision by Marvel Comics to self-distribute their own books during the late-1990's. I also made the point that I believe that the management at DC Comics took advantage of Marvel's strategic blunder to cement a very close relationship with Diamond Comic Distributors.

When the public announcement that was made that DC was granting Diamond an exclusive license to distribute its products in the Direct Market, rumors immediately started circulating to the effect that, as requirement of getting the exclusive right to distribute DC Comics, Diamond Comics President Steve Geppi granted DC Comics an option to purchase Diamond Comic Distributors at some point in the future. Not having been personally privy to these discussions, or having ever read an original of the DC/Diamond contract, I have no concrete way of confirming whether this purchase option ever really existed. There was, however, a reputed internal DC document published in THE COMICS JOURNAL soon after the agreement was made which purported to prove the existence of this rumored purchase option. Since neither Diamond or DC ever confirmed, or denied, the validity of the document published in TCJ, I have no way of knowing whether it was actually true.

In reality, however, I don't believe that it makes any real difference as to whether DC had, or still has, a purchase option to buy Diamond. While I have frequently observed that DC acts as if they own Diamond, and that the Diamond staff acts as though they work for DC, I do not see that cozy relationship as being a problem. When Marvel put the entire Diamond organization at risk, DC stepped in with the exclusive distributing arrangement that saved everyone's jobs at Diamond. Whether the staff at Diamond now has a warm relationship with the DC staff because DC has a purchase option, or whether it results from simple gratitude, is immaterial. What does matter to me, however, is that DC has interjected a clause into their contract that has placed a permanent stranglehold on any possible change in the future of Direct Market distribution. Without wanting to overstate my case, I believe this clause to one of the primary causes of the current downward spiral of the entire comics industry.

The specific pernicious clause I am referring to is the prohibition against anyone reselling DC comics that they have purchased from Diamond to another comics retailer. This clause effectively slams shut the door on any potential alternative to Diamond ever arising. To illustrate my point, I would ask you to recall some of my earliest installments in this series. I began my history of the distribution of comics into comics shops (The Direct Market) by outlining how the distribution monopoly of Phil Seuling's Seagate Distributing Company was broken up by Marvel, in 1979. In effect, breaking up Seagate's business was remarkably simple. Phil had approximately 20 regional subdistributors. Each of these subdistributors purchased comics from Phil at 50% off, and then resold them to local stores at 40% off. When Marvel offered to sell comics directly to Phil's subdistributors at 60% off, they all bolted away from Seagate in a matter of only three months. While this didn't immediately spell the end for Seagate, it did allow twenty new rivals to compete for Phil's accounts.

Today, the math is even more compelling for the potential establishment of regional subdistributors. The largest wholesale comics accounts currently purchase Marvel and DC comics from Diamond at 57% off. Smaller accounts are only allowed 40%-50% off by Diamond, plus they frequently have to pay shipping costs. In many high-density population centers I believe that more than a few subdistributors could make a decent living by purchasing at Diamond's wholesale discounts, and then reselling comics to local stores. It was exactly this type of operational dynamic which led to the blossoming of the entire Direct Market during the early 1980's. Not only did the regional sub-distributors service existing comics accounts, but they were quite aggressive in extending credit and operational assistance to potential new comics retailers. While Phil Seuling's business suffered as a result of Marvel opening their distribution channels, the comics industry rebounded from the brink of death directly as a result of the efforts of the subdistributors to bring new retailers into the comics field.

Sadly, I believe that the comics world is in just as much peril today as it was in 1979. It is no secret that print runs continue to decline on the vast majority of comics titles. It is only through the mechanism of ever-increasing cover prices that publishers have managed to stay afloat. Those cover price increases, however, only perpetuate the vicious cycle of sales declines. Frankly, after having spent my entire adult life working to promote comics as a viable popular culture art form, I now see us as being in an end game. It is no longer a question to me of whether the comics market as we know it is going to implode, but rather one of when this dreadful event is going to transpire. The one ray of optimism that I have managed to retain is that perhaps the day will come when those who have the power to save the Direct Market may wake up, and finally realize that the self-serving structural constraints that they have built into the current comics distribution system are strangling the Golden Goose.

To be continued

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