Comic Book Stores (and Game Stores) – The Problems of Inventory Buildup and Low Goss Margins – Part 5 of a Series

Recently, I have noticed that comic book stores seem to have somewhat lower gross margins than they use to have in the past. In the past, the typical gross margin for items was on the order of 50% but recently I have seen some items being sold with margins as low as 15%. While 15% may ‘sound’ ok to anyone not running a store, it becomes almost impossible to keep a retail store open on margins that low.

While there was always a problem of inventory build up for all stores when the owner made a mistake on what they thought would sell and orders things that no one wanted, the low gross margins adds to this problem. As an example; in a podcast episode of ‘My Comic Shop History’ they recount how they thought the Ape series of comics would be a good seller so the store orders 150 copies. As it turned out, no one wanted it at all, and none of the copies sold. While an extreme case, it shows how hard it is to get ordering exactly right, and how bad things can go when that happens. While there is not much one can do about problems like that; since how can anyone always be right about all ordering, there is the additional problem of gross margins going down over time. The result of this seems to be that a lot of the reported profit (for those stores that are reporting any profit) from a store is getting ‘stuck’ in inventory; inventory that will not sell at any price and ends up sitting in stores for years or even decades.

One example of an item where there were lots of inventory all over the place, and this was a very successful item, was the 1976 pinup poster of Farrah Fawcett. I remember the first time I saw that poster in years was as part of the background on the TV sitcom, “The 70s Show”. I remember thinking, “wow, I can’t believe they (show creators) were able to find something like that”. I thought there was no way it could be an original from those original print runs and had to be a copy of the poster created special (printed up) just for their use within the show. As it turns out, there are still lots of these posters still around and the price is only around for $15 to $20 per poster. As an example of how many of these posters are still around, one ebay seller listed a few hundred of these posters for sale recently, still in the original shipping tubes with a note that they got them from a failed distributor. My impression is that there still thousands of these poster from the 1970s print runs of them. Another interesting fact surrounding this poster is that the company that originally put this poster out, Pro Arts Inc, went bankrupt. This happened even though they sold something like several million of these posters along with their other posters. My impression is that for some reason they printed millions of extra of these posters that did not sell, which are still turning up in inventories of various distributors and shops as they liquidate after all of these years. Pro Arts Inc itself has a somewhat interesting history since they had some kind of lawsuit on another poster and won, but spent more on legal fees than they won, and eventually went bankrupt with the two owners’ homes as part of the bankruptcy. There was also a book written by one of the owners where he basically accuses everyone, including judges, of ‘being in on the fix’ to take the company apart. I have not been able to find a copy of that book in any form but expect it will be an interesting read of how the company failed even though they put out what was the best selling poster of all time.

Now, comics and games are not the only thins that this problem happens to, but it is an industry where there are stores all over the place in the same industry, across the county, and we see this inventory buildup everywhere. Stuff does not sell, and seems to sit there forever, taking up space and costing money in rent, inventory taxes, etc to keep stored. Plus the money, or profit, of the store is tied up in these items, which may never sell.

While better ordering can fix part of this problem, it is impossible for any store to just order what will sell, since inevitable that owners will order things that will not sell and get stuck with them.

What would help this problem is if the gross margin on items was better, something like on the items of 10% or 20% improvement. That would help all stores so that even though items may not sell, at least the store will make more on what does and it will help to cover the losses on the inevitable mistakes made on ordering.

Good Luck and Take Care,

Louis J. Desy Jr. – Sunday, October 06, 2019

LouisDesyjr@gmail.com

Please follow and like us:
error0

Is the future for radio stations online streaming over the internet?

Is the future for radio stations online streaming over the internet or is there still a place for over the air waves broadcasting?

One of the interesting questions related to advertising for media companies is if the future for radio stations broadcasting over the internet or the traditional business model of broadcasting over the airwaves or a mix of both.

Until the rise of the Internet with broadband connections, all radio stations were over the airwaves with all revenue from advertising spots sold, usually as part of a radio program or specific times of day, in an effort to target specific listeners as potential customers.

Prior to the more recent decades, radio broadcasts were all usually specific broadcast programs with the schedules published in newspapers. As television took market share from radio stations, and listeners, as the television networks really expanded in the 1950s, more and more radio stations turned their business model into a ‘music jukebox’ format and away from set programs or broadcasts.

In the current era, most radio stations are doing one specific format; news radio, talk radio, religious station, music jukebox of a specific genre of music, community radio station, non profit PBS station, etc. On top of all of that, most radio stations are now part of a corporate conglomerate where the programs are all feed to it from a central HQ location. This results in the radio station itself is really nothing more than a transmitter being used for its bandwidth in a specific area and the offices of said radio station mostly vacant of any staff except for an engineer or two to make sure the transmitter is working.

One of the ways to expand the reach of any radio station is to do over the internet broadcasting. This change would allow a radio station to reach anywhere there is an internet connection. The problem for all radio stations in the past for competition for listeners was limited to the transmission range of the radio transmitters. Today, as radio over internet gains in popularity the potential for competitors for all radio stations is any station anywhere in the world that has streaming audio over the internet. With much of the content somewhat generic, there may be little to no differentiation for advertisers except for expected market and reach. i.e. Advertisers will look to pay the least amount per potential realistic customer for their product or service. So a local ice cream shop may get no benefit from one million listeners that are so far away that they would never go to the shop where as a manufacturer that has a web site and ships worldwide could care about such potential customers, could benefit from such listeners and be willing to pay to advertise and reach those potential customers.

One of the interesting mix of both ways to get radio is Emmis Communications Corporation NextRadio app. NextRadio App ). All smart phones can get radio over the internet through specific apps from the station, or internet web site links setup for streaming audio to listeners. NextRadio adds an interesting feature to most smartphones in that the chips within most smart phones have the ability to receive over the airwaves radio broadcasts and the NextRadio app allows one to tune them in.

One important note on Apple iPhones is that many Apple iPhones are not able to do this because, at the moment, Apple has deliberately blocked the receiving of FM signals on the phones. Some people speculate that part of the reason for this deliberate ‘crippling’ of iPhones is that Apple has agreed with the phone carriers to force people to get radio broadcasts on iPhones only by using internet broadband. This boasts peoples usage of data, thereby forcing people to pay more each month for the data plans on their smart phone service.

Over time any media that is available on the internet will need to do or make something so it is not generic with all other media it is competing with, otherwise, eventually, its business model will probably fail.

As an example, let us say I setup a radio station, WLOU, and my business model is to go the broadcast over the internet route. I don’t have any content but I find out how to license and legally play music over station WLOU, and then start to sell advertising. Now, my content is nothing special and anyone else that can get the same music is a competitor that is exactly the same as my station. There is nothing special to differentiate WLOU from any other station. Since WLOU has nothing to differentiate it from any other internet radio station, I can probably only compete by pricing my ad spots as low as possible.

Now let us say things go on like that for a few months, and then I decided to start adding my own commentary or editorials for 10 or 15 minutes every hour, in segments of a few minutes at a time. Now WLOU has something that no one else has, me talking. While it may not be a big draw for listeners, it is SOMETHING that no one else has and no other station can get unless I make an arrangement with them. If people want to listen to my commentary, they have to listen to WLOU, and advertisers may now be willing to ‘pay up’ to advertise on WLOU.

That is the challenge for all media companies; what can my company do that differentiates it from other companies that I compete with, so I get listeners, which then bring advertisers and advertising revenue?

The ‘base of’ any of this problem is listeners; if a media company has listeners, advertisers will follow as long as the pricing is right. If a media company is having problems with revenue then there are two things that need to be done: 1: Unique content or market area that will get listeners/readers/viewers/subscribers 2: Lower the advertising rates to more be in line with the amount and type of listeners/readers/viewers/subscribers the company is getting. As an example, if a radio station can’t sell a 30 second advertising spot at $500 to an advertiser, lower the price and see if that will sell. Some revenue is better than none. Once the time for a radio spot passes and nothing was paid for it in that spot, that revenue is gone forever since one can not go back in time.

Hopefully, all media will be able to find their special nitch market and unique content that will allow everyone to make a profit and serve the general public in the best way possible.

Good Luck and Take Care,

Louis J. Desy Jr
LouisDesyjr@gmail.com
Sunday, November 25, 2018

Please follow and like us:
error0

Can Newspapers Be Saved?

Recently I had been looking around the Internet plus had many discussions with my friend Bob about newspapers and the newspaper business plus media in general. One of the ‘great shocks’ to me is how a number of newspaper and media companies seem to be having all kinds of problems staying profitable or even going out of business. I still find it amazing that there are a number of cities and towns in the United States that have no local newspaper!

As an example of problems newspapers are having, the local paper in my city, The Worcester Telegram, over the years has gone from where they use to have a Washington bureau, to now where the only outlying reporters are within the county and based out of the distribution offices in the towns around Worcester. Where the paper use to have its own printing presses in the main T&G building on Franklin Street, which the company no longer owns or is even based out of anymore, I am told the paper is now printed at presses located far outside of the city. Where the paper used to have its own process and systems for creating the paper, now most of the layout work is all done through a remote computer and software system that The Telegram does not own or even have on site in its offices. Where in the past the paper was completely contained in its main T&G building at 20 Franklin Street, now the paper is just a few floors in an office building after having sold off the 20 Franklin Street building years ago.

The older typical business model for a newspaper was that subscriptions were priced to typically cover the cost of delivery of the paper and the main profit for the operation was the selling of advertisements in the paper. This business model made a lot of sense since the advertising rates would be a function of how many subscribers the paper had; so by pricing subscriptions just high enough to cover the cost of delivery would get a newspaper as many subscriptions as possible. Doing that got the subscriber numbers as large as possible, then the advertising rate would be able to command the highest possible rate since the rate for advertisers would be based off of the number of subscribers.

In recent years this whole model seems to have broken down. I think part of the problem is that people are able to get news online for free, making it hard for newspapers to charge for subscriptions; a declining subscriber base would cause advertising rates to decline which would then cause more problems for any newspaper.

Another part of the problem is competition from other forms of advertising. In the past the media competing for advertising dollars were newspapers, magazines, radio, television and direct mail. Today, advertising over the Internet has taken a large part of the overall advertising market and caused all kinds of problems for all of the old line media companies.

The question today for any newspaper is this; is it possible to somehow stay with the old business model, or maybe transfer to a digital only business model where there is no more print edition of the newspaper but instead an online distribution only? While at first look an online only model would seem to work because of the lower costs of distribution but my observation over the years with magazines and other print publications that went from print editions to online only is that without a printed copy to distribute is that people simply seem to ‘forget’ that the publication is out there, subscribers drop off, and at some point the publication simply ceases to exist.

At the moment it looks like the current still surviving print publications are mostly, if not all, part of large conglomerates that look like they are trying to bring some kind of economies of scale to making and distributing print copies of newspapers and magazines. Hopefully time will tell if this attempt to use economies of scale to keep print publications going will work.

Good Luck and Take Care,

Louis J. Desy Jr.
LouisDesyjr@gmail.com
Saturday, November 24, 2018

Please follow and like us:
error0