Update June 12, 1999

Mile High Comics Seeking Federal Intervention
in Comics Distribution

Good news! Thanks to my being a part of the Overstreet Comic Book Price Guide advisory committee, Steve Geppi and I are once again in discussions on how to resolve the conflict of interest that exists as a result of his current ownership of a majority interest in comics retailer anotheruniverse.com. For those of you who are new to this issue, Steve Geppi is the owner of Diamond Comic Distributors, Inc., the sole-source supplier to all specialty comics retailers of publications from Marvel, DC, Dark Horse, and Image comics (82% of all new comics published). In late September of last year, he assumed ownership of anotheruniverse.com when they were unable to meet their financial obligations. In doing so, he put himself in a position of competing directly with comics retailers who rely upon him to be their wholesale supplier of new comics. I objected very vociferously to this move on his part, going so far as to file a letter of complaint with the United States Department of Justice Anti-trust Division, and publicizing my objections throughout the world of comics.

In response to my aggressively negative actions you would think that both Steve Geppi, and the staff at Diamond, would have borne me a great deal of ill will. While I certainly can't read minds (which is probably good...), I can state for the record that there have been no overt negative ramifications to my public protest from anyone at Diamond. In fact, Steve Geppi invited me personally to attend a conference at Diamond's home office. This conference, for the Overstreet Comic Book Price Guide (which Steve also owns), is a gathering of about 40 comics experts who debate such issues as grading standards, and why Underground Comix are not included in the guide. I've attended one previous conference, and found it to be a quite valuable and educational experience. I've always believed that there's plenty more to learn about comics (even after 29 years as a comics retailer), and who better to learn from than such a wonderful group of comics professionals? Thus, when Steve sent me a letter of invitation, I eagerly agreed to attend.

Coincidentally, I had just been in discussions with Peter Mucchetti (the attorney handling the Diamond case for the Department of Justice) about my visiting DOJ offices in Washington to answer questions about the comics industry. I called Mr. Mucchetti back, and arranged to visit his offices the day prior to the Overstreet conference. Mr. Mucchetti informed me at that time that he was leaving DOJ for private practice, but that the new attorney assigned to the case would call me the following week. To make a long story short, no new attorney has yet to be assigned to the case (as of 6/2/99). I did meet on 5/20/99 with Susan Edelheit, the section chief of the Anti-trust division, and Jason Ewart, Mr. Mucchetti's former assistant. They questioned me for about an hour about Steve Geppi's activities in regard to comics retailing, and expressed to me that much of the information I had provided them presented areas of exploration that previously had not existed. Ms. Edelheit could not promise, however, that any further action would be undertaken by DOJ. What she did promise was that she would bring the retailing issues up with her staff, and that they would discuss potentially expanding the investigation. At the close of this meeting I informed Ms. Edelheit and Jason Ewart that I would probably be meeting with Steve Geppi the next evening, and that I would be seeking a pragmatic solution to the current conflicts with Steve. They both thought that was a good idea.

The Overstreet conference began with a reception for all the advisors in the Diamond Gallery, Steve Geppi's showcase for super-rare Golden Age comics, and original comics art. Steve went out of his way at the reception to welcome me to the conference, and promised that we would have private time together to discuss our differences. Surprisingly, I was quietly approached during the reception by a number of other attendees (most of whom have no involvement with new comics retailing) to express their support for me in my battle with Steve. What made this so surprising to me was the number of retailers who have signed up for our e-mail mailing list just to keep up with the news. I never cease to be amazed at the power of instant communication that is presented by the Internet. Dealers I'd known for years, but with whom I hadn't had a conversation in half a decade, were completely aware of even the smallest details and nuances of my efforts to have Steve Geppi withdraw form retailing of new comics.

The following evening Steve Geppi and I had a semi-private dinner at the restaurant chosen for the advisor's dinner meeting. We ate together at the bar, while the rest of our rather large party ate at tables across the room. During this meal Steve was extremely forthcoming about his willingness and desire to divest himself of anotheruniverse.com. He expressed to me in no uncertain terms that he wished that he had never gotten involved with AU, and that he would gladly divest himself of AU if a buyer could be found. The problem with divesting himself of AU, however, was the huge investment he had already made in rescuing AU from bankruptcy. Without going into any specific detail, I can tell you that AU required an immediate infusion of capital from Steve that was well over one million dollars, and has since cost him even more. Steve has discovered (as I could have told him...) that building a fully-operational e-commerce company is the financial equivalent of opening a vein. Unless you're very careful, you can bleed to death very quickly. Even with a very successful operation such as ours, the costs of building a competitive site has far exceeded the operating earnings. I'm currently being forced to liquidate inventory I've owned for many years at bargain prices in order to pay for the ongoing building costs of milehighcomics.com. With a company like AU, which obviously had management deficiencies, the negative cash flow can be appalling.

Please bear in mind, however, that this does not mean that AU has no value. Quite the opposite, in fact, is true. For the right buyer, AU's current operations are very attractive. With a mailing list of 400,000 current consumers, and revenues of well over $10 million a year, AU is potentially a very lucrative company. It will, however, take a buyer with deep pockets, and long-term commitment, to bring AU's potential to fruition. For Steve Geppi to get out of comics retailing without taking a total loss, however, a buyer has to be found who can absorb the costs of bringing AU to profitability. Finding that buyer for anotheruniverse.com is now my mutual goal with Steve Geppi. Despite the fact that such a buyer would immediately become a significant competitor to Mile High Comics. Ending Steve Geppi's involvement in comics retailing is that important to me.

Steve and I have talked three times since that original dinner, and continue to explore options. One company that Steve says is definitely out of the running for buying AU, however, is NextPlanetOver.com, the Internet company that Steve granted the exclusive right for shipping from Diamond's Sparta warehouse for the next two years. Resolving the problem of that exclusive deal is yet another big issue we have to iron out between us. While Steve owns 'less than 5%' of NPO's stock, his providing them with complete shipping services from Diamond's huge Sparta warehouse (in exchange for substantial fees), while denying any other of his 3,000 wholesale accounts that same benefit, has enraged a large number of retailers. This may become moot, however, if NPO doesn't succeed. To this point they haven't done much, although their official 'Launch' of their website isn't scheduled until this year's San Diego Comic Con (August 10th). We'll just have to wait and see...

One question that I've been asked by more than a couple observers of this whole affair is 'why don't you buy anotheruniverse.com?' Well, quite honestly, I can't afford it. With my own rapidly growing website I already have a very hungry mouth to feed. I simply can't afford to take on another company that needs a huge amount of working capital. I just haven't got the money to spare. What I might be willing to do (under the right circumstances) is to merge some of AU's comics operations into ours. This might become necessary if a potential buyer for AU was interested primarily in their media merchandising (Star Wars toys, etc.), which is actually a very large part of their overall gross sales, but was averse to getting involved in selling new comics. Merging AU's comics operations into ours wouldn't be easy, as they operate with an entirely different program than N.I.C.E., but I think it could be done without too much trouble and expense. Especially since N.I.C.E. is fundamentally a superior option for comics fans. But we'll cross that bridge when, and if, we get to it... All I really care about for now is that we get AU out of Steve Geppi's hands, and into the hands of an independent company. Whatever it takes to make that happen, that's what I'll do.

[Mile High Comics Seeking Federal Internvention in Coimcs Distribution]

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