CREATORS' ROYALTIES DID NOT KILL THE DIRECT MARKET

This is a postcript to the preceding blog entry on royalties. Before any smart-mouthing comes to fore, let it be stressed that the grant of a royalty incentive scheme in 1981 to mainstream comics creators in the U.S. did not kill its direct market.

Rather, such an innovation in the U.S. mainstream comics publishing business brought back and inspired many creators to create their best work for DC and Marvel in the 1980s.

And because their best work was finally brought out, Marvel and DC (especially Marvel) were able to put out the kind of quality and more mature comics product for the direct market. The direct market thereafter, thrived during the 1980s with the entry of the big two mainstream comics companies into its fray.

There were however, two events that resulted in the present contraction of this direct market. The first is the comics-buying speculative boom of 1992 that resulted in the big bust in 1994. The second is the monopolistic ploy of Marvel to control the direct market thought its purchase of a regional distributor: "Heroes World", that eventually led to the closure of all other direct market comics distributors, including Heroes World, with only one monopoly distributor remaining: Diamond Distribution.

All the speculation, overpricing, overvaluation of issues of comic books climaxed in 1994 when the public realized that they were stuck with millions of copies of worthless “collectors’ items” such as those of Image Comics and DC’s “Death of Superman”. The result was that many lost money on their speculative investments consequently shunning the comics shops. 1994 for the U.S. mainstream direct market was the year the bubble burst. It was a time when the mainstream comics industry of the U.S. suffered a 77% decline in unit sales volume over a four-year period (1991 to 1994) which made it difficult for even the strongest participants in that market to stay solvent. (Source: Chuck Rozanski, “Banking on Reinvention”, Comics Buyers Guide, Kraus Publications, No. 1627, April, 2007 issue)

Mike Tierney, a direct market comics retailer in the U.S. recounts how such an implosion severely reduced the distribution aspect of the comics industry from an approximately $500 million a year industry in 1991, to $220 million a year in 2006:

“The distribution arm of comics compacted from something like seven or more distributors, down to three: At first Marvel with Heroes World, DC exclusive with Diamond, and Capital City floating for a short time by signing as many publishers as possible to its own exclusive distribution contracts.

As a result, retailers were looking at three times the previous paperwork. And, with my having two stores, that made for a heck of a lot of paperwork.

But I don’t think it was declining sales that sank Heroes World. Marvel CEO Terry Stewart’s plan to take a regional distribution company and make it into a worldwide entity was a monumental failure. Heroes World management seemed to not be up to the challenge. A lot of rumors were flying around that I won’t repeat. But I can say that, from what I saw as a retailer, those distribution staffers were amazingly incompetent. It’s probably a matter of trying to grow too fast in too short a period of time.

I forget exactly when Capital City went under, but by the time Marvel stopped the red ink hemorrahaging from the debacle known as Heroes World, Diamond was left as the last distributor standing.

I feel I should add a clarifier to that statement, because I’ve heard a lot of people trying to vilify Diamond CEO Steve Geppi for being the sole survivor. Geppi bought out the failing companies that he could have just let fall, but Steve stated that he felt that doing that would have caused damage to the industry—which it certainly would have done. So, by accepting the debt and liabilities of those failing distributors, Geppi also kept a lot of publishers afloat who would have otherwise declared bankruptcy.” (Source: Michael Tierney, "Market 10 Years Later", Comics Buyers Guide,Kraus Publications, No. 1627, April, 2007 issue)

What is the effect of only one American comics distributor? Independents are ignored and low print-runs of comics.

“The double whammy that this whole distributor collapse had on the industry was that it definitely reduced print runs. Instead of several distributors buying extra stock to fill orders, you only had one. And Diamond was now operating more as a fulfillment service, not as a distributor, which meant that it was serving the publisher, not the retailer. And, if the publisher decided not to print extra—well, tough luck if you sold out. “(Source: Michael Tierney, “Market 10 Years Later”, Comics Buyers Guide, Kraus Publications, No. 1627, April, 2007 issue)

Why won’t mainstream publishers print more if retailers are demanding more copies? Mainly because of an all too real fear of a repeat of what had happened before: retailers speculating and overstocking on comics issues so as to artificially or falsely misrepresent their worth; actively hyping that their monetary value and reader demand will increase.

Just because retailers order certain quantities, it doesn’t mean that those copies are actually selling to readers. Most of the information being disseminated about the numbers of mainstream U.S. comics bought and sold do NOT reflect their actual purchase at point of sale by readers but of the middleman comics retailers.

The downside here is that very real retailer demands for a particular issue are adversely affected. Most mainstream comics retailers therefore do not stock extra copies in storage as was done ten years ago aggravated by the fact that this has conditioned the direct market comics shops buyers NOT to buy a copy but instead opt to WAIT for the re-packaged, compiled or collected version to be sold in the bookstores; compilations and collections that are now dubiously elevated to the same level as an original “graphic novel”.

With a reduced direct market, reduced number of comics specialty shops, lorded over and serviced by only one comics distributor that is partial to the mainstream comics publishers (i.e., Marvel, DC, Dark Horse, and Image), the number of independent and innovative comics that flourished in the 1980s are now gone, bereft of the former venue for their works.

The mainstream U.S. comics companies, realizing that with a severely reduced direct market (of which they are largely to blame), they have to expand somewhere else. That new place is the U.S. bookstore chain where they dump their compiled or collected “graphic novels”. But no matter what they do, the Japanese manga still commands large shelf space in the U.S. bookstores as observed by Bill Aguiar, CBG columnist and owner of a gaming company:

“Meanwhile, bookstores have a limited amount of space, which they have been giving over more and more to the manga section. In less than five years, the manga section has gone from being crammed between role-playing-game books and a half-dozen graphic novels (mostly Sandman and V for Vendetta trades) to being far larger than both put together—and growing. Xxx the graphic novel in bookstores is what is introducing new people to comics: There is little newsstand presence left for monthlies, and comic shops are specialty stores in which primarily the true believers shop.

Bookstores, at least the major chains, serve as a Darwinian testing ground for titles and genres. Using the most advanced sales modeling available, bookstores try to maximize shelf space for saleable products. The ever-increasing space given to manga and graphic novels means that the money they bring into stores is at least proportional to the amount of space dedicated to the product. While you can see that fact borne out in statistics, the reality of the growing shelf space speaks for itself.

At several conventions this year I was told that there was a growing fight over bookstore shelf space. While there is growth in shelf space in bookstores, most of it is going to manga companies’ output. Neither Marvel nor DC has products poised to fully take advantage of that shelf space, but that is changing.

DC has its CMX manga line, but it has run into editing problems. Xxx But now DC is using a different strategy in taking some of that shelf space away from the manga companies. Its teen-girl-focused original graphic novel line called MINX is created by Americans. On a couple of online forums, creators have said that they were first approached about working on this line more than two years ago, so, while MINX has been in the works for a long time, it seems to be coming to fruition just in time to start challenging for shelf space.

Marvel on the other hand, seems focused on repackaging a select number of its titles in the manga-sized format, such as “Runaways”. It has several upcoming titles that will probably fit, such as “White Tiger” by popular young-adult author Tamara Pierce and the new “Dark Tower” series by Stephen King. But Marvel doesn’t seem to be creating any titles to directly target that self space.

Nevertheless, since one could argue that Marvel’s overall strategy is creating comics in order to maintain and field-test concepts for films and other merchandising, its leaving that space unchallenged may not mean much.“ (Source: Bill Aguiar, “The Battle for Shelf Space” from his CBG column Manga for the Mainstream, Comics Buyers Guide, Kraus Publications, No. 1627, April, 2007 issue)

Bill Aguiar further reports that the Japanese Manga meanwhile are expanding and introducing more genres to dominate bookstore shelf space. He reports on the third largest book retailer, Books-a-Million, bringing in mature manga titles such as YAOI and YURI (manga focusing on homosexual male to male and female to female relationships respectively) and that more adult manga are coming in. He speculates on whether DC’s Vertigo and Marvel’s Max line have titles that could match this maneuver considering the big two mainstream companies are not that aggressive in creating a truly adult line of comics.

Neil Gaiman, the co-creator and writer of DC Vertigo’s SANDMAN, was correct in observing that today, most mainstream American comics are better illustrated and better written, with more diversity, more maturity and more inventiveness than ever before. To this, I have to add that this is largely due to the fact of royalties being granted by the big two U.S. mainstream comics publishers to comics creators.

Without that significant modification in the legal and business relationship no amount of creativity under the work-made-for-hire system, would have produced an Alan Moore Watchman, Swamp Thing, and Frank Miller Dark Knight. Simply insisting that one only has to make “good” comics stories and art in order to have a flourishing industry is either blissfully naïve or totally daft.

It is that marked changed in the business relationship, of giving the comics creator his due through a fair and rewarding royalty payment scheme, that led to the explosion of creativity and prosperity for mainstream U.S. comics in the 1980s. The big two were compelled by circumstances of the times to re-examine and amend their business policy towards its comics creators, and it saved them. There is much to be thanked for during this lucid interval.

What brought it all down was a relapse to the monopolistic tendencies of the mainstream comics companies to unduly dominate or control the free forces of the market. The same scenario is now being played out, albeit in a newer, far more challenging field: the U.S. bookstore chains where the regular patrons are not comic geeks and hardcore superhero comic nerds but REAL people with diverse interests. The Japanese manga is presently winning this battle by meeting the kind of diversity and maturity that reader marketplace of the U.S. bookstore demands. Will another flooding of the market by way of re-packaged “graphic novels” take place? Have those two nincompoop mainstream comics companies learned their lesson? Only time will tell.

Things aren't going well in Japan either. To recall, prior to 1997, manga comprised 40% of all printed matter in Japan. When the 1997 regional financial crisis came plunging Japan into an economic recession that saw it recovering in 2003, the Japanese manga is now at 20% of all printed matter. The Japanese have not been buying newly released and expensive manga either but rather, have been patronizing the back issue discount bins and manga reading rooms to save on costs. Stuck with unsold surplus and confronted with a cost-conscious reading public, Japanese manga publishers have been aggressively exporting their surplus product abroad particularly in Europe and the U.S. where both countries just couldn't keep up with the sheer volume being dumped on their shores. The same thing is happening in our country.

With the present attempt however to revive our country's moribund komiks industry by correctly focusing on the low income, newsstand distribution system, we are given an opening of countering the intrusion of both American and Japanese comics reading cultures into our shores. Will such a revival succeed? Will it abandon its old ways of doing business? Will it forego its old and exploitative sweatshop system? Will it induce a flowering of creativity and prosperity through the introduction of a royalty incentive scheme for comics creators?

Only time will tell, and that, sadly, is not what we have plenty of at the moment.