Diamond Ended Up With 50%
of the Comics Market

In my last column, I presented a passionate argument as to why I believe that DC Comics needs to end their current prohibition against Direct Market purchasers of their comics reselling them to other comics retailers. I firmly feel that it is this blanket prohibition against reselling new DC comics that is why Diamond Comic Distributors is the only full service new comics distributor currently in existence. In the absence of DC's restrictive resale clause, I see the potential for a new comics world in which regional sub-distributors could service many new comics retailer accounts, while also providing existing comics retailers with an alternative to purchasing their new comics directly from Diamond.

Oddly enough, I was a proponent of the original DC/Diamond link-up. When the management at Marvel made their remarkably ill-advised decision to self-distribute their comics through Heroes World in the late-1990's, that left all of the surviving Direct Market distributors (distributors who sell primarily to comics specialty stores) in a real financial bind. Depending on the company, Marvel at that time was 35%-40% of the entire market for new comics. Having that much of their business torn away from them meant that all of the Direct Market distributors suddenly were trying to cover 100% of their operating costs with only 60%-65% of their original sales volume. In most instances, that simply didn't compute into a survivable situation. That's why, when Steve Geppi (owner of Diamond) approached me with his idea of asking DC for the right to exclusively distribute their comics in the Direct Market, I voiced no opposition. As much as I detest monopolies, I saw no way out of the ugly dilemma created by Marvel than to protect the two distributors who could survive with exclusive sales agreements.

I want to emphasize that, at this point in time, that the assumption I was operating under was that Capital City Distributing would also survive the implosion of the new comics distribution world. While regional distributors had also managed to survive into the late 1990's, Capital City was the only other Direct Market distributor that had a nationwide network of distribution facilities. After the public announcement was made about the DC/Diamond partnership, I waited to hear the announcement that Dark Horse, Image, and Valiant would partner with DC. While the combined market totals of those three companies would only equal about 15%-20% of the new comics business, the leaders of Capital City already had a solid working relationship with the majority of small Independent comics publishers. That being the case, I envisioned a resulting competitive distribution environment in which Marvel/Heroes World would control about 40% of the Market, with Diamond at 35%, and Capital City at 25%. While that would certainly have been a significant decrease in overall market share for both Diamond and Capital City, I felt those market shares would allow them both to survive.

So what went wrong? Once again, I wasn't privy to the actual negotiations, but the people who spoke to me after the fact from Dark Horse and Image expressed dismay that Capital City's management tried to browbeat them into accepting contract terms that were less that what Diamond was offering them. After weighing the two distributor's proposals, they felt they had no choice but to accept Diamond's offer. At the end of the day, Diamond ended up with 50% of the market, with Capital City only managing to retain only about 10%. Capital City managed to hold on for over a year with only exclusive distribution agreements with a few small publishers, but in the end, they were also forced out of the new comics distribution business.

So did Dark Horse and Image make a huge mistake in choosing to go with Diamond? Absolutely. The management team at Capital City was totally correct in making the argument that if all the publishers went with Diamond that the doors would slam shut on those publishers ever being able to viably negotiate a renewal contract with Diamond. I had representatives of both Image and Dark Horse bitterly complain to me during the recent 5-year renewal contract discussions with Diamond that Diamond was threatening them with loss of covers and interior pages in DIAMOND PREVIEWS if they didn't agree to Diamond's exclusive terms not just on comics, but also on trade paperbacks. Since that Diamond-produced magazine is the primary mechanism now being used by publishers to promote their new comics, both Dark Horse and Image realistically had no choice but to capitulate to whatever exclusive terms Diamond was seeking. That being the case, Diamond will retain its monopoly on Direct Market distribution of new comics for at least the next three years. Considering current new comics market conditions, that may be just about all the time we have left.

To be continued...

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