dc diamond splitImage via Chuck Rozanski

Yesterday’s titanic news that DC was cutting ties with Diamond did not go unremarked upon by the comics industry.

As you’ll recall, DC announced that they will go with two newish distributors, Lunar (run by mail order retailer DCBS) and UCS (run by giant comics store Midtown), while continuing on with Penguin Random House for graphic novels and such.

When DC first announced they were adding two new distributors to get comics out during the COVID-19 shutdown, retailers were aghast. I guess the first cut is the deepest as reactions this time out were not quite as hysterically horrified, but more long, bitter reflections.

However, on Twitter creators and some readers (and even a few retailers) expressed positive feelings over the news that Diamond’s monopoly had ended.

Before diving in to the responses to the DC Diamond split some of my own analysis: fundamentally, this is a head snapper. For YEARS people have been complaining that Diamond is a monopoly. A benevolent monopoly that bails out shops and publishers alike, but a monopoly is usually a bad thing.

Perhaps as proof of the proverb that “comics retailers like to complain,” these years of complaints about Diamond (complaints I have heard publicly and privately in an unending torrent) have changed to “the devil you know…” Maybe the updated proverb is “retailers hate change. ” And I can’t really blame them for being a bit fraught. I mean we have this deadly pandemic thing, the world teetering on the brink of a depression, a nation coming to a long overdue reckoning with its tolerance for disgusting racism and police abuse, and hurricane season is just starting.

Nonetheless, retailers have legitimate complaints about the new distributors: the discounts are not as high, the shipping costs are higher, and international sales look to be very expensive indeed. (Brandon Schatz will hopefully be exploring more of that in a column next week.) It’s not just the fuss of having to deal with more than one distributor. The numbers are bad, as Walt warned us long ago.

One concern is that DCBS and Midtown are competitors and will use the ordering info to put shops out of business. Mind you, retailers have been thinking that DIAMOND will use their info to steal their customers and put them out of business for years, as well. I remember retailers telling me their concerns that Pullbox, Diamond’s automated comics reservation system, was a way to steal their customers when that was announced.

It’s worth noting, from a historical perspective, that virtually every comics distributor, including Diamond, started as a retailer. Friendly Franks, Heroes World, Lone Star, Pacific. Capital is a pretty big exception, having started out as a distro. Anyway, the retailer to distributor model is very common in many industries and nothing to get anxious about – IN THEORY.

On the other side you have what is very clearly Diamond’s general financial shakiness, which, now that this is all happening, seems to be an open secret in the industry. Although they would often float comic shops and publishers – to their credit – we’re not talking about million dollar loans here. The fact that Diamond had to stop shipping new comics a few weeks in to the lockdown and stop paying publishers – and set up a very long payment plan – was a very serious sign that they didn’t have the float to withstand even a slight supply cut off.

While many are pointing a finger at DC head Pam Lifford and AT&T’s overall cost cutting measures – factors that can’t be ignored – just as many people are telling me that DC’s break with Diamond really was something that was a long time coming, and was exacerbated by the current crisis – and by signs that Diamond’s overall liquidity is a tenuous thing.

Perhaps the most telling post in all of this is one by former DC president Diane Whelan Nelson in a response to Brian Hibb’s post (which I’ll get to) which seems remarkable enough to quote in its entirety. When asked her thoughts on the move she wrote:

I”;m afraid I”;ve not been privy to this recent decision. I can say purely as a private individual that Diamond has, for a long time, been unwilling or unable to modernize and support and grow the biz as needed for a healthy direct channel. And may not even be solvent. It would be imprudent for any publisher to not have a distribution contingency plan. I am disappointed by the communications roll out if the decision, as it seems (from my admittedly removed and limited POV) not nearly robust enough and to not have offered retailers sufficient notice and explanation as to what I”;m sure is a reasonable and probably even advantageous decision for them. It”;s never good for any company to have a monopoly on a business and Diamond has for too long. I”;m optimistic DC will help retailers understand how to navigate the transition. And I”;d almost guarantee (I would guarantee but as I say, I”;m not privy to this) that there”;s no way DC or WB have a financial stake in these distributors.

“MAY NOT EVEN BE SOLVENT.”

So while you let that sink in, let’s listen to some other voices!

FIRST, you must read John Jackson Miller’s historical analysis:

The market share involved: DC in 2019 represented 30.74% of Diamond’s comics and graphic novel units and 29.23% of its dollars. On the dollar side, that amounts to almost exactly $155 million at full retail. DC’s share of that would have been in the $60 million neighborhood, with Diamond’s fee –; which Geppi has said hasn’t changed in years –; being considerably lower.

Comics and graphic novels are, it should be noted, only a portion of Diamond’s sales, though certainly the largest portion. It’s unclear what happens with regards to physical merchandise that might have been DC-branded.

Miller also connects some very very interesting dots regarding back issues. Many people were surprised by Steve Geppi’s fascination with back issues during his recent press tour, and Miller suggests this may be part of a larger plan:

But a nonreturnable comic book becomes a back issue the second it reaches a retailer’s store. There’s nothing stopping Diamond from obtaining DC comics on the secondary market in bulk and making them available to other retailers; that’s exactly the business DCBS and Midtown are in, only they sell to consumers as well. Diamond already carries collectible comics that have gone through the hands of a third party before –; think the Dynamic Forces signed editions –; so there would be little in the way of Diamond launching a category making comics DC has already sold to retailers available to its own shops as back issues.

That’s speculation, but make no mistake –; there is eighty years of history behind the idea that once a comic book has been purchased, it can be resold anywhere and to anyone. A seller doesn’t even have to put it in a bag and board. You can’t start a store or print something on bagged multipacks that violates a publisher’s trademarks, but comics are absolutely tradable commodities.

And, as you’ll see below, UCS’s own charts demonstrate that no distribution agreement is required for a distributor to sell back issues to retailers.

Something is DEFINITELY afoot with back issues. There is a lot more analysis and charts and stuff which deserve its own commentary, so just go to the link and read!

Former Beat commentator Todd Allen was kind enough to provide us with his own EXCLUSIVE commentary:

DC telegraphed this move when they switched their catalog to online. Let”;s be real -; the reason Marvel moved to their own catalog all those years ago was so if they ever break with Diamond, retailers are used to looking at Marvel”;s catalog as its own entity. They just send everyone the same catalog they”;re used to seeing with a new order form. I”;m a little surprised they did this so soon, but it was clearly being prepped as an option.

The first question I have, and it”;s not what most of the retail community is asking: Does DC own a piece of the legal entities that DCBS and Midtown are distributing through? Is this a vertical integration? Indie publishers may want that information if they aren”;t under a Diamond exclusive and are contemplating if they need to open up availability.

The second question is whether Diamond”;s current structure can survive approximately 30% of their volume walking out the door? Diamond appears to be a volume-based business. I can”;t imagine a world this doesn”;t cause layoffs at Diamond, but is their infrastructure built to be scaled down when they have given the impression of already having cash flow issues?

The idea of having multiple distributors is not a bad one. I”;ve been writing about distribution”;s single point of failure problem since 2004. If DC was acting because they didn”;t trust Diamond”;s health, it”;s a necessary business move from that perspective. If.

Still, doing this so aggressively in a time of industry unrest has created a lot of ill-will in the retail community -; DC”;s real customers unless they move into Direct to Consumer offerings. There may be a cost of that. Perhaps it”;s the cost of survival? We don”;t really know what”;s going on at Diamond. If they accidentally topple Diamond, I don”;t know many comic retailers who could survive on DC alone while the market tries to piece together a new distribution model.

From a risk analysis perspective, should this cripple Diamond, Marvel is big enough for their own distribution scheme if they have to play it that way. They”;re not quite 50% of the market. Is the roughly 25% of the market that is indie comics big enough to support its own distributor? That”;s smaller volume and a lot more vendors, so a more logistically complicated venture.

Remember, back in the 80s and 90s there were several distributors before consolidation set in. Everywhere I shopped in the Mid-West from junior high through college ordered from multiple distributors (and, to the man, complained about whenever they had to order something through Diamond -; it was Capital City territory). DC just made multiple distributors a requirement if you want to continue carrying their single issues. Could we see more distributors pop up? Hard to say until DC clarifies if they want more partners…; or if they”;ve vertically integrated.

For the general retailer overview, go to Newsarama, er GamesRadar+: Comic book retailers unite in shock and anger over DC split with Diamond

A very rare comment from Image’s Eric Stephenson:

We asked the top Direct Market publishers their thoughts on DC/Diamond's break-up, ans so far only one publisher decided to comment for the record."Those who ignore history are doomed to repeat it." @ImageComics Publisher Eric Stephenson tells us. https://t.co/Vmc3S973gv

–; Newsarama (@Newsarama) June 5, 2020

Mile High’s Chuck Rozanski has a comprehensive and passionate post on what’s happening:

To say that I am seething with rage right now, is a total understatement. I actually saw this coming a couple of weeks ago, but was hoping against my own common sense that the new owners of DC (AT&T) would come to the realization that keeping Diamond alive was critical to the revival of the 2,000+ Direct Market comic book retailers who serve the core of their most dedicated readers. Instead, my own predicted worst-case scenario is now unfolding, with DC announcing this afternoon that they are severing all ties with Diamond Distributing, effective in three weeks.

So, what do the new kingpins at DC think that they are doing? Well, first of all, they want to drive more business to their online channel. Second, they think that they can do just fine on their trade paperbacks and hardbacks selling them to traditional bookstores through their distribution relationship with Penguin/Random House. Third, their recent “experiment” of selling $9.95 pseudo comic books through Walmart and Target has shown them quite clearly that they can generate massive comic book sales without a single comics speciality shop remaining in existence.

Another explosive piece of analysis from Rozanski:

Truth be told, my greatest concern with the future of the Direct Market retailers revolves around money and/or credit. With so many stores having been shuttered for eight weeks, or longer, who has the means remaining to establish credit lines with these new “distributors,” while simultaneously meeting their existing obligations to Diamond? Truthfully, this is a perfect storm of disasters for Direct Market retailers. Some stores will most definitely survive, but thanks to the unilateral decision today by DC Comics, I think that number of surviving entities was just reduced drastically. It is a sad, sad day in the history of comic books.

But in the very next paragraph:

As regards Mile High Comics, I believe that we are going to be just fine. I was nearly four million dollars in debt nine years ago (including a million dollars (!) in outstanding Diamond invoices), and deduced that my operating losses were mostly resulting from unsold new issues that we ordered for our clients, but which they then failed to purchase from us. Simply put, I started reducing new comics as a key element of our company product mix, and immediately saw things turn around for us. We paid off most of our company debt through the sale of our 56th Ave. building three years ago, and (finally) paid Diamond totally off last week. I will never again (ever) go in debt for new comics.

This back issue thing again!

Brian Hibbs, as mentioned, was not happy:

This is an insane bombshell. I don’t believe that it will be profitable or practical for most retailers to order low-ROI periodicals from a second distribution source — the extra shipping and handling involved is going to melt profit, while the endless extra HOURS trying to enter and massage data into POS systems that are not designed to quickly process mass data dumps from anyone other than Diamond is going to be nothing but waste for thousands of individual store fronts when what they NEED from their suppliers streamlining, is nothing but disheartening.

I am also being offered substantially worse payment terms from these new “distributors” (They are NOT, really, distributors: they are jumped up retailers, and the direct competition for periodical comics for every independent comic store owner. They are Midtown and DCBS), so my cash flow will be curtailed, just when I need cash flow the most.

I don’t even want to think about what this does for Diamond’s solvency, and their ability to help float stores and publisher over the short- and medium-term.

What DC has done is disgraceful and is flatly harmful to the Direct Market.

Dennis Barger, a retailer who no longer owns a physical shop but has stood up at many a retailer summit talking about how awful Diamond is, wrote:

Bye bye DC comics, don”;t let the doorknob hit you where the good lord split you!!! This is a declaration of war against the direct market and I”;m happy to oblige

Bill Schanes, a former Diamond VP, was non plussed:

DC Comics announcement today about no longer partnering with Diamond Comic Distributors appears to me to be a utter lunacy, with dire consequences for the comic book specialty retailers, the consumers who support them, and as a direct byproduct, the freight costs involved for retailers will increase dramatically.

While I”;m no longer privy to the current contract negotiations between DC Comics and Diamond, this 180 degree reversal of what has been working fairly well for 25-years (it wasn”;t perfect), just seems like an almost final act of desperation on DC Comics part.

The extremely short notification period, the change of discounts, billing terms and freight costs will increase for just about every comic book specialty retailer (with maybe a few exceptions).

I love our industry, been involved for almost 50-years…an absolutely devastating, inadvisable, poorly thought out business plan, which leaves me with the thought that DC Comics May no longer look at the comic book publishing piece of their business as viable, and may look to license their universe of iconic characters to a larger publishing conglomerate.

Peter David saw it as part of a larger battle with Marvel, and if you want a comics celebrity response thread this is probably it.

DC has just declared war on Marvel Comics.

Oh, they aren’t framing it that way. But they have.

Because DC has just announced that they are severing ties with Diamond Comics. DC represents thirty percent of the market, and there is no way–simply no way–Diamond will be able to survive with that kind of come down in revenue. The mission here is to drive Diamond out of business, which will then cripple Marvel Comics.

And of course stores are now screwed, because they suddenly all have to open accounts with new unknown and untested distribution centers. The ones that managed to hold on during the Covid-19 closures will have considerable trouble surviving.

This is potentially catastrophic.

PAD

Udon’s Erik Ko in the comments:

To everyone that cheers ‘The comic monopoly is finally over!” – look again. DC is just shifting and enabling the monopoly of their products to two retailer-upgraded distributors that are competition to every other comic stores. All comic shops now has to be forced, with no other options, to deal with a new system and new terms and pay extra shipping to get their DC books. Real break of monopoly would be letting Diamond keep distributing and add more options. Right now, it is STILL A MONOPOLY.

OK! I guess you get the case AGAINST the DC Diamond Split.

Now the case for…well, mostly people who don’t like Diamond’s monopoly. A few hesitant comments from the PAD thread:

Fabian Nicieza: I don’t pretend to know the details of today’s marketplace forces, but as a mutual veteran of the 80s distribution days, philosophically, don’t you think having multiple distribution sources for product is ultimately better for the retailers and the industry?

Matt Bowers: It’s shocking to me how many want there to be only one company distributing comics for America. I’m sorry but I’m don’t think monopolies are a good thing. Think about it this way. The entire industry shut down not because it decided to shut down. It shut down because one company decided to do so. There is something very wrong about that.

One retailer was pragmatic, Jesse James (Who also doesn’t sell new comics it should be noted):

Pivot your business folks…dont think about what happen…just take care of your customers… CUSTOMERS DONT CARE where their Dc books come from they just want them….. Sell them comics!

And from the tweets:

I'm stunned that DC has cut ties with Diamond completely.

However, this is a good move.

Diamond has been a scourge on comics for decades. They've destroyed shops and killed any evolution in the comic industry.

It's good to see the cracks beginning to show.

Your move, Marvel. https://t.co/D5W2TJFLwt

–; Mary (@sapphicgeek) June 5, 2020

This may not make a lot of sense or matter to most of you, but we wanted to assure you that Star Comics will continue to carry DC Comics and graphic novels, and we should see limited interruptions in availability and service. Thanks! – Star Comics

2/2

–; Star Comics (@StarComicsLBKTX) June 5, 2020

It appears today's DC/Diamond news has created a lot of experts who … don't really understand the many channels in which comics are sold, including the direct market. This is a complex, multi-faceted situation. If you think there are simple answers, you are missing the point.

–; Ron Marz (@ronmarz) June 5, 2020

Ryan Higgins, one of the big ComicHub solution supporters, has a thoughtful, mixed response – click through for the whole thread.

Personally, I wish they stayed with Diamond. All of ComicHub (and every comic-specific POS) is tied in very closely with Diamond. This is going to be a massive undertaking by the @ComicHubPR team over the next week to get it so customers can continue to order from us.

–; Ryan Higgins (@RyanHigginsRyan) June 5, 2020

And the final word:

diamond: we”;re not a monopoly!dc: not anymore, anyway diamond: pic.twitter.com/ru6GaLYSJb

–; 🍑🔌véronique emma houxbois🔌🍑 (@EmmaHouxbois) June 5, 2020

SO!

Is this really the Death of the Pamphlet, long foretold? Is this the entry to either Doomsday Scenario #1 (Marvel and DC go Digital) or Doomsday Scenario #2 (Marvel and DC license out their comics.)?

Will comics shops survive?

Will small publishers survive?

Will Diamond survive?

Keep reading this space!

The post End of an Era: The comics industry reacts to the DC Diamond split appeared first on The Beat.

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