Merry Christmas! While many are settling down for their long winter’s nap and the go-go news cycle downshifts, Newsarama will keep you fires burning with fascinating anecdotes never before revealed. Enjoy!
In 1979, comic books basically had one giant distributor - Phil Seuling’s Seagate Distribution - and a handful of tiny wannabes such as Irjax and a new player called Diamond run by a guy named Steve Geppi. Seagate enjoyed highly favorable trade terms with publishers that other distributors could not access. One of those other distributors was Chuck Rozanski, owner of the Mile High Comics stores and tiny Mile High Distribution. Chuck set out to change things…
Take it away, Chuck!
“My stated goal in 1979 was to break Phil’s monopoly. We were buying from Phil. And where Phil really made his money was not just in the margin he made - the publishers sold to him at 60% off, he sold to his sub-distributors at 50% off, and everybody else at 40% off. When you’re selling at 40% off and getting at 60% off and doing it to the tune of hundreds of thousands of dollars a month, you’re making a lot of money.
“But the real way Phil was making was he was getting 60-day billing terms, and charging us with the order form. For every book that was solicited, Phil got the money up front, and he didn’t have to pay the publishers until 60 days after it shipped! Everyone paid up front! No one had billing from Phil! That was a huge cash flow he was sitting on. Imagine for a moment all the cash flow from all the new comics sold at comic stores in America being paid up front to Phil - and he doesn’t have to pay for them until four months later! He had four months clean cash flow on the entire comics industry!
“And Phil was using it to buy collections. He wasn’t just letting it sit. And that tremendous working capital allowed him to make big deals.
“In April of ’79, I finally wrote Marvel. I got signatures from 100-150 retailers, small publishers, and people from the book industry and basically said, ‘Look, we’re tired of getting hosed. We’re tired of putting this money up front. It’s just killing us. Without credit, you’re strangling the cash flow of the business, and putting stores out of business. I love Phil Seuling as a person, but the fact that he has his fingers around our collective throats is killing the business.’
“Marvel called me up and said, ‘We like some of the ideas in the letter you sent. Please come to New York, we’ll talk about some of this.’ I took a redeye to New York, took my little suitcase with me, stashed my suitcase behind a secretary’s desk there, and I met there with basically everyone at Marvel. I met [Editor in Chief] Jim Shooter for the first time, and really hit it off with him instantly. I also met [Sales Manager] Ed Shukin, Jim Galpin, who was president. I’ve always had the ability to be convincing in my rhetoric, and in this particular instance, I knew I was dead right.
"I told them, ‘Look, if you were to let all Phil’s sub-distributors become actual distributors and give them billing terms, with the proviso that they give billing terms to their retailers…this business will ex…plode. You will be astounded at how many retail stores will open as a result of having that working capital. All that money will be flushed into the system, and it won’t cost you anything, except maybe some credit losses on a few bad accounts. And you won’t be reliant on just one distributor, which is always dangerous. You’ll be putting a massive amount of working capital into an industry that is right at the proper moment in its development.’
“We had about 800 comic stores in ’79. By 1983, we had about 2000. By ’86, it was over 5000. The direct market had grown from 6% of the business in 1979 to 60% in 1986 as a result of my having gotten Marvel to change the terms.
“Irjax sued in the spring of ’79, and the fact that they kicked in the door made it exceptionally easy for me to make my argument with Marvel. The publishers at that point settled with these guys, and let them distribute comics in the same way they had dealt with Phil. And that was the beginning of Diamond. Steve took on Irjax’s accounts and warehouses. It was a huge roll of the dice, but it worked for him.”