| 
by Brian Hibbs
(#149 – September
2006)
The Direct Market
is changing. Well, really, the whole comics market is changing,
but I’m most concerned about the Direct Market portion of it.
One of the problems
is that a lot of the things that are changing are doing so relatively
invisibly, and under the surface, so you’re probably not too aware
of them, or how they’re affecting things.
Hell, I’m not
sure most of the time either, really!
One of the things
we take as an unwritten assumption in this market is that Diamond
is basically the sole source for comics
product. Discussions of virtually any topic involving comics sales
largely revolve around Diamond’s business – look at the long threads
that happen every month when the monthly sales charts are published,
for example.
There’s also been
a pretty strong historical emphasis from publishers to use and utilize
Diamond. There’s at least one publisher I could name, that on a
recent very high profile expensive hardcover release, flatly told
me that I should order my copies from Diamond, rather than directly
from them (despite a significantly worse discount sharing for both
of us) because they want Diamond to see the value in what they do,
and for Diamond to put more of their muscle into helping this publisher.
I’m pretty sympathetic
to this position, to be honest. Since most of you think that
the Top 300 (and Top 100 GNs) are the
total sales of comics (even when, y’know,
they’re not), there’s a certain understandable impulse to
inflate those Diamond numbers as best as they can be. Even
when that’s not the best deal for the market.
And, let’s be
honest, most of the people at Diamond also appear to believe that
the Top 300 (and Top 100 GNs) are the
total sales of comics as well. I still remember going out to Timonium
(Diamond’s HQ) for a “graphic novel summit” several years ago. Several
retailers brought up the sheer number of SKUs (I think, at the time,
it was in the 10k range) that are available, and what a significant
portion of the non-brokered ones sold, and a senior Diamond VP said
“There’s simply not that many!” to us, utterly convinced he was
right.
He was wrong then,
and that was many years ago before the complete and utter explosion
of GN product from non-exclusive-to-Diamond publishers.
There’s no doubt
that the overwhelming majority of Diamond’s customers sole-source
their orders through Diamond. There’s a number of reasons for this,
some of them devolving down to financial issues, some of them around
convenience ones. But majority of bodies almost certainly buy every
comic they stock from Diamond.
However, the more
important thing to think about is the “80/20 rule”, which is to
say that 80% of your sales will typically come from 20% of your
customers. I could say, for example, that my average subscription
customer buys 8 to 10 comics a month, and that statement would be
accurate. But it doesn’t tell the true story that I make most of
my money from that 20% of my subbers who
are buying 40-plus titles a month.
I believe this
is just as true in terms of retailers buying GN product – it’s the
minority of stores that is moving the majority of the product, but
when they’re not buying it from Diamond, Diamond has a very hard
time seeing the size and shape of the iceberg.
I know of several
retailers who only order publishers x, y, or z from Diamond as “trigger”
orders (“Ah, this has been released finally – let’s go buy our real
order elsewhere”) or to cover shortages from other channels. These
are, of course, some of the largest retailers in the business. What
I assume is happening is that Diamond can’t perceive what they’re
losing, because they’re seeing some velocity from those accounts,
and it tracks proportionately to what the “average” store is doing.
“There isn’t any large market for [title] – look, even [retailer]
only ordered [quantity] from us last year” without having the tools
to understand that [retailer] ordered 10x[quantity]
of [title] from a different source!
Still, this was
both understandable and forgivable to a certain extent, simply because
only the largest of accounts really could buy from other
sources – profitable minimum orders were often high, and the amount
of non-exclusive-to-Diamond GNs that had
any real sales velocity was fairly low.
In, like, the
year 2001.
However, by 2006,
the equation has changed quite significantly. There are
a lot of really high-quality and high-sales works being released
outside of the usual DC-Marvel-Image-Dark Horse equation, and I
think we’ve reached a tipping point.
I have to sidebar
here a minute to explain that I strongly believe that it was the
signing of exclusive distribution deals with Diamond that allowed
the GN explosion to occur. As absurd as it sounds, there was in
fact a time where a store could order something as basic a stock
item as Watchmen or Dark Knight, and have maybe a
50/50 chance that any of your distributors had it in stock that
week. By taking the responsibility for inventory management away
from the distributors, DC can ensure that I can reorder Watchmen
fifty-two weeks of the year, so lo and behold, who woulda
thunk it, I sell more copies of Watchmen and so do
they.
With that piece
of the puzzle solved, managing a backlist program becomes a lot
easier. Just look at the three-or-fourfold increase in the number
of GNs that DC releases today, as compared to pre-exclusive.
Because the big-four
can then dictate to Diamond their infrastructure needs for
handling a large volume of a large number of perennial items, non-exclusive
publishers like Tokyopop or Viz
were able to leverage their firm non-returnable orders to take advantage
of this infrastructure, and to also create wider and deeper backlist
catalogs.
Suddenly, you’ve
got a dozen comics publishers each with really wide backlist catalogs,
and of course the bookstores saw this and started bringing
in our wares better. The only reason the last “new mainstream”
breakout failed in the 80s was because we had maybe a dozen titles
to offer them. Now we had hundreds of great books, and thousands
upon thousands more that maybe could become so.
Ultimately, I
think history will find that Diamond’s signing DC to an exclusive
deal (When they only had to wait a year or two and let Heroes World
implode) was one of the key factors that brought comics back to
bookstores in a big way. That’s pretty ironic, I think. Anyway,
end sidebar.
Meanwhile, back
in 2006, the situation has changed in a couple of key ways. The
first is that the number of non-exclusive-to-Diamond GNs
has exploded. The width of availability makes a huge difference
in the viability on reordering from other sources. If there’s only
5 books you might need 1 copy each of, well, it’s not really cost
effective to have multiple distribution channels. However, if you’re
talking about 1000 different books you might be buying from
that source, then the situation changes dramatically, even for a
smaller store.
Right now Diamond
claims to be the largest Western distributor of comics. And that’s
probably still true. Will it still be true in 5 years, however?
Here’s some data
about Diamond to frame this next part: for non-exclusive publishers,
Diamond sets an initial order discount for the books they release.
Most commonly for comics these are “H” (40%, all accounts), “F”
(45%) or “E” (50%) discounts. However, if your order is a reorder,
rather than an initial order, you lose 3% of your discount. Thus
an “H” publisher is sold at 37%, and an “F” at 42%. Retailer pays
all shipping costs. And, of course, the books are non-returnable.
Therefore, if I want to buy a copy of, say, Persepolis
from Diamond, which is an “H” book, I’m only going to get 37% off
cover price on it, plus pay for the shipping.
But, here’s the
thing, Diamond’s next big challenge isn’t coming from a Direct Market
distributor (they’ve killed most of those) – it’s coming from the
bookstore distributors.
This next part
is hard, because it takes me having to admit I’ve been a dumb-ass.
I should have read the deal and figured it out two years ago (no,
this isn’t a new program) when my peers first started telling me
about it, but I, as many comic retailers, am slow to change sometimes.
Baker & Taylor has a program called
“First Call” where you agree to make them your primary source when
buying from the book channel. It makes no claims over the Direct
Market channel. That’s about it – there are no minimums, or any
other hoops to jump through. B&T doesn’t have a fixed discount
per book like Diamond. This is what their deal looks like:
On any order of
10 (ten) or more total units, any number of titles (so that can
be 1ea of 10 different titles), minimum
discount: 40%. Free freight ($1 per-box surcharge). Returnable
(10% of net invoices, over a 12 month period).
If you order 5
or more units of any one single item: +1% to base 40% discount.
If you order 10
or more units of any one single item: +2% to base
If you order 100+
units of any one single item: +3% to base
If the individual
invoice is 500+ units: an additional +1%
If the title is
“Not Yet Published” (ie, an advance order):
an additional +2%
If you pay your
(monthly) billing by the 15th, you pay 98% of the invoiced amount.
And I think rule
of thumb should be their free 2to3-day shipping = 2%, though individual
circumstance varies.
Thus 10 units,
preordered, of a single title is somewhere in the neighborhood of
a 46-48% discount, depending.
But even just
reordering 1 copy each of ten titles, there’s an effective discount
of 42-44%.
Plus, since it’s
a bookstore distributor, books are returnable, no questions asked,
so it allows you to take an occasional low risk gamble on new lines.
Mm, and, for a
lot of books lately, B&T has been beating Diamond to the market,
sometimes by a month or more.
Rationally, all
reorders from Diamond “H” (37% at reorder rates), and “F” (42%)
publishers become the same or cheaper in most normal circumstances.
Preorders of 10 copies or more, are also the same or cheaper at
both those discounts.
I’ve just started
switching my preorders over. I actually kind of can’t believe that
I’m actually preordering books from outside the Direct Market. I
almost feel like, oh, I don’t know, I’m a traitor to the cause or
something. But business is business, and B&T is, in many cases,
offering an effective 5% or better discount, and they’re returnable
on top of that! It’s not that it isn’t normal to not be buying Pantheon
from Diamond – but Drawn & Quarterly or Fantagraphics? That just seems kind of wrong. They are DM
companies!
Y’know,
the basic premise underlying the Direct Market comics industry is
that we traded discount for returns. So what’s going on here?
Can publishers
possibly determine what sales are coming from where, when we’re
crossing the streams like this? Look, I’ve even ordered from B&T
some copies of Marvel’s Halo GN, since they were unavailable
through Diamond, what kind of messages are
being received?
What happens as
the lines get blurrier between the two channels?
**************************
Brian Hibbs has owned and operated Comix Experience
in San Francisco since 1989. Feel free to e-mail him with any comments. You
can purchase a collection of the first one hundred Tilting at Windmills (originally
serialized in Comics Retailer magazine) from IDW
Publishing. An index of Tilting at Windmills on Newsarama
can be found right here.
|
Spider-Man Action Figures
