Comic Book Stores – Could Marvel Comics End Up Being Closed Down by Disney? – Part 4 of a Series

While I had planned a more orderly presentation of the different aspects of comic books stores and the comic book industry in general; there was a recent article mentioning the possibility that Marvel may end up no longer publishing comics.

While the comic book industry has been in the middle of a multiyear decline, in spite of the success of many comic book characters in a number of movies, comic books themselves have been in the middle of a gradual decline spanning multiple years. Some things are not in the control of anyone related to the industry, but there are parts of the decline that are within the control of the various stakeholders.

In general, over the decades, comics have always had boom/bust cycles, especially after the whole distribution model changed from drugstores, supermarkets and book stores around the late 1970s/early 1980 to dedicated comic book stores, as they are today.

While Diamond Comics Distributors Inc (hereafter referred to as Diamond) does not usually publish the number of comic book stores it has as customers, as far as I can tell, at the highest level, probably in the middle of the 1990s comics book boom, there were about 22,000 comic book stores. In recent years the last Diamond ‘official’ number of accounts with Diamond was put out at around 4,200 with 2,200 being comic book stores. (The non comic book store accounts are ‘entities’ that are buying comics through an account with Diamond but they do not have a retail store.)

Over the many years I have been discussing the comic industry with people, is that it was generally believed that no matter what happened, the publishers and Diamond would always stay in business as long as they right sized their organization for the level of business they had. Since most comic book sales are the result of orders in advance by customers through stores, it should be very possible for publishers and Diamond (the one and only distributor of comics) to properly size their businesses and keep operating. Individual comic book stores have a problem in that customers may order comics and then not pick them up, leaving the store stuck paying for comics that end up sitting in inventory forever and costing the store money.

Over the years I have been part of a number of discussions about if there was some ‘lower limit’ on comic book sales that could or would cause something to happen that would bring an end to comic books in the United States.

One speculation, especially during the financial crisis of 2008/2009 was the possibility of Diamond failing. Diamond is the only comic book distributor left in the United States so its failure could be the end of the comic book industry, or at least a big financial hit to publishers and comic book stores. Without Diamond there would be no way for comic book stores to get their new comics, and publishers would have no way to sell to the vast majority comics to their customers. In such a scenario, it would be easy to see how a lot of comics book store and publishers could all go out of business. It was rumored for a number of years that DC was so worried about the effect of a failure of Diamond on the industry that it had some kind of agreement of understanding with Diamond that if it ever was in danger of failing, and being unable top operate, that DC would have the first right to take over Diamond and continue to keep the distribution operation going.

A recent article at comicbook.news (DISNEY SHUTTING DOWN MARVEL COMICS? : https://cosmicbook.news/disney-shutting-down-marvel-comics , March 1, 2019 ) talks about recent rumors that Disney may close the Marvel (Marvel is a division of Disney, trading under the stock symbol DIS) comics division because of a continuing drop off in volumes and revenue. While it is not clear from the financial reports of Disney just exactly what the revenue is for the comics or if Marvel comics makes a profit or not, because comics are grouped in with other Marvel revenue in the quarterly reports. It does sound like more and more people are under the impression and belief that Marvel comics is losing money, has been losing money for a while, revenue continues to fall, and there is serious speculation about Marvel not publishing comics anymore.  

Within the same time period, IDW Media, the third largest comic book publisher, appears to be having its own set of problems. IDW Media is a publically traded company under the stock symbol IDWM. Its stock closed today at $25.75, down around 50% from its 25 week high of $53.99. Last summer there was an unusual capital raising done that looked like, to me, done to raise cash and keep the company operating. To me this lends credibility to this belief that the comic industry is having serious problems, in general. In addition, BleedingCool.com reported on March 5, 2019 that investors sent an open letter to IDW Media calling for the company to be sold.

(IDW Media Holdings Investors Call for Sale of Company in Open Letter

https://www.bleedingcool.com/2019/03/05/idw-media-holdings-investors-call-for-sale-of-company-in-open-letter/ March 5, 2019)

Here are some of the comments, posted with the first artilce, that I found alarming from the first article, Disney Shutting Down Marvel Comics?, were are follows, along with my comments on those comments:

1: ” Too bad Marvel’s deplorable business practices are killing the comic shops that kept them going all these years.

I’m done with the Big Two. It’s indies and creator-owned for me as has been for over a year now. If Marvel wasn’t putting out such miserable crap, and insulting and attacking its own customer base, maybe it would be in a better spot, but most of the creators they employ these days are worthless hacks, so…”

This commentator clearly thinks that Marvel is partly responsible for the sales declines, which also have been hurting (killing?) comic book shops.

2: If Quesada actually thinks the mouse is going to subsidize Marvel’s garbage tier work while it runs an endless deficit, because it somehow ‘inspires’ the MCU… he’s delusional. The last time Marvel made comics that were coherent, much less entertaining enough to feed into the movies, was almost ten years ago now.”

3: “It’s time for the comics industry– and Marvel in particular– to clean house. FIRE these obnoxious scolds who spend all their time antagonizing the company’s long time customer base with their endless identity politics. Stop all the scams on comic book retailers. Get some legitimate editors. Cater to the actual customers again.”

This commentator believes that identity politics has ruined the product. The ‘scams’ this commentator refers to I believe are promotional items like variant covers, or requiring stores to have certain minimal orders in order to get special limited items. The problem is the minimums are so high that usually it is impossible to sell enough to at least recover the stores cost, leaving the store with unsold inventory and losing money on the promotion.

4: ” Marvel floods the market with new #1s and a million variant covers to get that sweet #1 spot with Diamond every month so they can show their masters at Disney that “We’re still number 1. See?” It’s a bluff. It’s always been a bluff. These #1s sit on shelves collecting dust while a “Second Printing” is announced because they “sold out” at Diamond.

There has been some considerable speculation over the past few years that at times Marvel has been printing and sending out for distribution comics that no one ordered. The theory under this idea is that Marvel prints and sends out product that no one wants because it is able to report to the higher ups at Disney what their print runs are, and look better by doing such antics. Part of the reason some people think this is that there are multiple reports of stores getting in quantities of comics that they did not order or way too many ‘extra’ comics. According to the reports, this keeps happening and the speculation is that Marvel is deliberately overprinting comics so they can report better numbers. If this is what is going on, someone at Disney should be able to tell by looking at the gross margin percentage over a period of several years. If what I just describe is happening, what one would see is that the gross margin percentage would have declined over time and be much lower than it should be, for no discernable reason.

5: Gee,

You must live in a different world than many people who don’t even have a comic shop closer than 45 minutes away!

There can’t be much of a comic book industry if there’s no place SELLING comics!

There are fewer than 1900 comic shops in North America. They lost around 300 shops in the last 3 years alone! There are many people evaluating whether to keep their stores because Marvel and DC are NOT making moves to improve the situation. They essentially told them at the last major meet-up between the companies and retailers that they’re not going to change how they run the business because it would cost too much to change their business models!

It’s completely insane to do business like they have been for about 40 years and most people are aware of that except guys like you who are ignoring the reality.

The business model HAS to change if the industry wants to survive BUT they’re not going to make the changes and it’s a bit late for some of things like selling anthology reprint books at Wal Mart especially when the retailer is indifferent to that idea and doesn’t care to promote comics.

What B&N and most places sell are packaged reprints, not original stories for the most part.
B&N has DRASTICALLY scaled back the size of the American comic section (which looks disorderly) while the manga sections have at least doubled in size. This doesn’t paint a nice picture for American comics on top of the reports about massive shipments of trades and hardcovers to discount places like Ollie’s unless you care to dispute that, too? I’ve been to a local Ollie’s and seen TONS of books from the last 5 years that just haven’t sold!

Yes, the industry CAN collapse.

They HAVE tried to make a go of it on digital but digital does NOT pay the bills and many web artists are finding it impossible to make a living off of web comics!

Do you think it’ll be much better for “comics pros” who are better at insulting the people who buy comics than selling themselves and their product?!?

I think the most alarming part of this comment is the mention and estimate, if true, of about 300 shops closing within the last few years.

6: I am gonna gonna tell you what has slowly killed comic books. Comic shops. I am 49 and when I was a kid you bought comics at grocery stores and convenience stores. Comic still depend of that 9-12 year old first time buyers to get hooked for 5+ years. 
The publishers only want to sell the 100% guarantee to shop. Selling other places that return unsold issues just isnt acceptable anymore.”

This commentator cites to the change in the business model. Pre comic book shops, publishers had a big incentive to put out a quality product that people would buy, since the grocery stores and convenience stores could return unsold comics for full credit. Once the business model change to direct to comic book stores, who had to pay for the comics in full when they were delivered, the incentive and driver was just to make a comic ‘look’ good enough in Previews (monthly catalog of new comics available for ordering with Diamond) to get customers to order them through the store.

Hopefully, Marvel is still doing at least ‘ok’ and sales will rebound, but I find it alarming for an article like this to be published, and, with how things have been going with sales, for it to seem very possible that Marvel comics could get shut down by Disney.

Good Luck and Take Care,

Louis J. Desy Jr., March 8, 2019

LouisDesyjr@gmail.com

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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

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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

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Is the eBook assault on traditional publishing over?

It has been several years since eBooks started roiling the publishing industry and book stores, but it finally looks like that maybe the onslaught from eBooks is over. While a number of indicators are that eBooks, mainly through Amazon and its Kindle reader or program for computer devices, took a large part of the market, it looks like the market may be starting to stabilized for traditional publishers, but at a much lower level of sales.

Ebooks are books that are distributed in an electronic format instead of a print format. There are multiple forms of eBooks, but one of the best well know formats is the Amazon Kindle program where books are downloaded to a special Kindle Reader or a Kindle program on any one of a number of computer devices. Ebooks have been a boom to vendors like Amazon and a great help to writers and authors for a number of reasons which have changed the market for books and publishers.

The first transformation of the publishing industry is that eBooks allowed anyone to write and publish their own book with little to no costs. Anyone can write an eBook with a word processing program, like Microsoft Word, and when done, format and upload it to a vendor like the Amazon Kindle KDP Select program for publication. A buyer can then buy either a print copy of the work or an electronic eBook version of the work. One of the big advantages of eBook over print is that there is no large cost to do a print run. Prior to eBooks, if someone wanted to get a book into print that no publisher was interested in, it would be up to them to find someone with a printing press, usually a ‘vanity press’, and pay them the few thousand that it would cost to do a print run, usually of about 1,000 books. Typically, those books would sit mostly unsold forever since there was no marketing or promotions or ability to get the book into any of the sales channels. People who went the vanity press route to get their work published would usually sell a few copies, give away as many as possible to the people they knew, and then get stuck with boxes sitting in storage in their garages and basements forever.

With eBooks, there are none of the problems of how little or how many copies a work sells. If only one copy sells or one million copies sell, the Amazon system takes care of it all automatically, downloads are automatic once paid for, print copies are only printed on demand and as ordered.

With Ebooks and programs like Amazon Kindle writers get paid much faster than the old publisher model for paying royalties. Pre eBooks, writers were only paid twice per year and there was a ‘hold back’ amount to cover returns from distributors and book stores. I personally know a person that use to have a book section in his comic book store and his distributor would allow him to return and take credit for books that had been sitting in the store for a decade, with no questions asked! An eBook does not have that problem, Amazon pays authors once per month for any and all amounts earned, no more waiting as long as 18 months to get the royalties for a book that sold a long time ago!

Another advantage for authors is that eBooks typically have a much higher royalty percentage than print copies. The typical royalty percentage for a print copy is about 17.5% of what that publisher sold the book for to a customer, distributor or retail store. The royalty for authors through the Amazon eBook Kindle program is 35% on retail prices of $2.99 and below, or above $9.99. The program pays 70% to the writer on books with a retail price between $2.99 and $9.99. Why would Amazon structure the royalty percentage this way? Apparently, Amazon has determined the most number of units and highest revenue overall is when an eBook is priced around $9.99, especially when the typical print book is around $20 to $30. So Amazon is giving writers an incentive to price their book at $9.99 to get the highest royalty payout. This is an example of how Amazon structures things so their interests and the interests of the authors are aligned in a way that traditional publishers have not been able to do so or not wanted to do so. (I would like to thank and credit J.A. Konrath for his lengthy postings about the publishing industry over the years for this information on how things work in the publishing industry. http://jakonrath.blogspot.com/ )

Ebooks do have one big disadvantage when compared with traditional print publishing, however. The problem is that with the barrier to publishing books having come down, anyone can put out a book. As a result, the market is flooded with terrible books, many of which never sell anything. As an example of how tilted the market is, I put out a book in August 2012 about taking and passing the bar exam; How To Pass the Bar Exam by Louis Desy. To date, about 381 copies have either been sold or given away under the Amazon KDP select program as a free promotional or as part of the Amazon program where authors get a cut of a pot of money parceled out to authors if they allow their book to be ‘borrowed’ under a Kindle program. Most of the time there are no sales or one sale of the book, which puts the book at about 1.5 million in ranking. That means 1.5 million book sold more copies than my book. I estimate Amazon has about 2 or 3 million titles listed and ranked in their system. That would mean there is at least 500,000 books that sold nothing in the same time period. Sales or borrowing of 2 or 3 copies of my book as put my book as high as 15,000 in ranking; meaning that everything with a higher number had not even sold 2 copies!

Ebooks has had a large effect on book stores, since with the ability to download eBooks, there is no need for a buyer to ever step into a book store again to purchase a book. This has had a devastating effect on retail books stores with a number of store going out of business since the financial crisis and Borders completely liquidating after filing bankruptcy in 2011. Barnes and Nobel has hung on since then, but large parts of the stores are now devoted to non book items, like toys and gifts, and appears to only be able to do well with its college bookstores that are mainly in the textbook business for a captive audience at the college they are part of. Barnes and Nobel did have their own eBook reader product, the Nook, but it has mostly faded away over time and was a constant money loser every quarter due to not being able to compete with the Amazon Kindle.

It can be argued that some of the changes over time were inevitable since the idea and possibility has been around since the 1980s at least. In the early years people made some efforts with computer PDF files but the problem in those was how to prevent copying and get paid for downloads? My friend that I mentioned about his comic book store, was part of an effort in the 1980s to prototype a kind of reader like device, but the hardware was not up to the task, kept overheating, and was too early in time for a successful device being made at that point. Maybe if he and his group had made their attempt in the mid 1990s the hardware would have been up to the task and they would have been successful?

In short, the changes over the years from eBooks have been brutal for book stores and traditional publishers but a boom for Amazon and authors.

Louis J. Desy Jr.
Friday, August 24, 2018

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