Evolution of the Direct Market Part IX

In last week's column, I reprinted a scathing letter which I sent to Marvel's Robert Maiello in May of 1979. At the same time as I sent my comments to Marvel, I also sent the letter out to 200-300 retailers and publishers in the comics field, asking for their support. To my amazement, over 100 letters were sent to Marvel as a result of my mass mailing. These letters came in from a very broad spectrum of individuals, with the one unifying trait being that they agreed with some, or all, of the positions I expounded in my letter to Marvel. This led to my receiving a call shortly thereafter from Marvel's Vice president of Marketing, Ed Shukin, inviting me to come to New York to meet with him.

If it surprises you that my letter had such a profound effect, it is important that you understand the context of the times. First of all, publisher interaction with comics fans and comics retailers was limited to letters columns, and occasional office tours for a lucky few. DC had collaborated with Phil Seuling on a DC convention in 1978 (?), but that was a one time affair. While the flow of creators to comics shows was beginning to pick up quite a bit, and there were even in-store signings beginning to happen on a regular basis, the level of dialog between the business leaders of the publishing industry and comics retailers was practically nil. The "consultant" sent out by Marvel in 1978 was the very first person I had ever met who represented the business side of the company, and it frustrated me to no end that (despite numerous vociferous promises...) he never bothered to get back to me. The call from Ed Shukin was thus very much like receiving a bolt of lightning from Mt. Olympus. It most certainly got my full attention.

So why did Ed call me? My letter certainly was not so profound as to normally elicit such an immediate and positive response. I'm reasonably certain that recent Marvel President Bill Jemas received at least one letter or e-mail per day from agitated comics retailers castigating both him, and the company as a whole, for perceived idiocies. Based on my conversations with other comics executives, I know that additional letters of comment and/or criticism are now sent regularly to each and every comics publisher. In my old age, I now realize that the normal policy at most companies is to either ignore such irate letters, or to simply give lip service to the writers of the letters until they go away. It is a very rare letter that is seminal to any real change of direction. Simply put, most companies (not just limited to comics publishers) are quite insular, and vastly prefer to derive new ideas from within their own structure, rather than from outside parties. To be frank, the only reason why Ed called me was that he was terrified.

Ed's fear had nothing to do with my letter. Simply put, he was at great risk of losing his job. Just prior to my letter being written, Marvel had been sued. I couldn't find my copy of the lawsuit yesterday in a day-long search of my files, but the gist of the suit was an attack on all the publishers by a company called Irjax for anti-trust violations. What Irjax objected to in particular was that the publishers had one set of trade terms for Phil Seuling, and another set of terms for everyone else. Specifically, as I mentioned a couple of columns ago, Phil had the incredibly wonderful benefit that the publishers would sell books to him at top discount (60% off?), and then also pay Spartan Publishing to combine all of their shipments to Phil's customers into a single box. A comics retailer could thus receive his comics from Marvel, DC, Warren, Harvey, Archie, and Whitman/Gold Key in a single box, with no freight charge!

I strongly emphasized the free freight aspect of Phil's deal with the publishers because it eventually proved to be his undoing. When Phil's company, Seagate Distributing, began to grow vigorously during the late-1970's, he began to attract competitors. I don't know the names of all the companies that eventually were able to purchase directly from the publishers prior to early 1979, but Pacific Comics and Big Rapids Distributing immediately spring to mind. There was a huge difference in the terms these newcomers were able to receive from the publishers, however, as they got nowhere near as sweet a deal as Phil. As I recall, they had to purchase their comics in case lot increments (usually 300 issues), and have the books shipped at their own expense to a warehouse of their choice. They then had to break down the weekly shipments themselves, pull and pick their customers orders, and then charge the customers for the costs of shipping the books to their stores.

As a result of Phil's special deal, for most comics retailers there was no option but to purchase from Seagate. Not only was purchasing from other distributors more expensive due to shipping costs, but there was also the question of timing. Because Phil's books were being combined into individual store shipments at the printing plant, they were also being pulled and mailed quite quickly. This meant that other comics distributors, who had to wait for their own shipments to arrive by truck freight, were at a severe timing disadvantage relative to Seagate. The only time that this process worked effectively was in densely populated regions (such as Los Angeles or Chicago) where there were enough comics shops to justify a regional distributor setting up a delivery route. Even then, the margins of these alternative distributors were being squeezed by their having costs to absorb that Phil completely avoided due to his sweetheart deal.

Returning to Ed Shukin's dilemma, the Irjax lawsuit was potentially catastrophic to the comics publishers. Clearly, they were giving Phil a special deal. It was also quite clear that all the publishers had had to all agree to this deal in advance, or else Spartan would not have had the authority to combine their books into a single shipment for Phil. I also believe that the publishers were splitting the cost of providing this service for Phil. Talk about leaving a clear trail of evidence... This was just about as cut-and-dried a case of "Conspiracy in Restraint of Trade" as you could ever find. Once he read the lawsuit, Ed Shukin knew damn good and well that they were going to lose this one, and that as VP of Marketing, he was almost certain to be fired. Worse yet, given the already severely weakened state of the comics sales, the consequences of this dreadful litigation might very well bring down not only Marvel, but also the entire comics industry.

To be continued...

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