|
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]
|