2020 has been a rough year for the entertainment industry as a whole, and comics has been no exception. The COVID-19 pandemic forced the postponement of Free Comic Book Day 2020 and caused Marvel and DC’s distributor Diamond Comic Distributors to stop shipping new releases for several months. Just when it seemed like things were starting to get back to normal, DC announced it’s permanently cutting ties with Diamond and distributing new comics through its own channels.
In a year full of huge shake-ups at DC (including the ouster of Co-Publisher Dan DiDio), this might just be the most significant change yet. To explain why, we’ve turned to several industry figures for a better perspective on why DC’s latest business move is a game-changer.
Why Did DC Leave Diamond?
For roughly the past 25 years, Diamond has been the sole distributor for the vast majority of comic book publishers such as Marvel Comics, DC Comics, Image Comics and more. Diamond is essentially the middleman between publishers and comic shops. The publishers release solicitations for upcoming books (generally three months ahead of release) and store owners place orders through Diamond, which handles the actual shipping of those books.
It’s a system that has been regularly criticized over the years for benefiting Diamond itself more so than publishers or stores. Most of the actual risk, critics say, is borne by comic shops, whose owners must pick and choose books they think will sell to their customers. Unlike the older newsstand distribution system the industry used to rely on, in this direct market system unsold comics generally aren’t returnable, so they become money lost for shop owners. That forces many owners to be conservative with their orders and makes it that much harder for unproven creators and franchises to gain a foothold in a system where Batman and Spider-Man are the safe bets.
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Publishers face their own problems in the Diamond era. With no other competition remaining, Diamond has little incentive to lower prices or pursue dramatic changes to its business model. Currently, Diamond requires a book to earn at least $2500 worth of orders before including it in their monthly Previews catalog, a barrier many small press and indie creators find difficult to cross.
This has raised concerns about Diamond monopolizing the market. Those concerns were valid enough that the US Department of Justice actually began an investigation into Diamond’s business practices back in 1997, though the DOJ ultimately closed the investigation in 2000 after deciding no further action was warranted.
In short, there are certainly reasons why any publisher might choose to break with Diamond and pursue a different distribution model. But for now, we can only speculate as to DC’s motivations. When asked for comment or to talk to someone within the company about the matter, a DC spokesperson provided IGN with this statement: “After 25 years, DC and Diamond Comic Distributors are ending their long-standing relationship. Moving forward, comic book retailers can obtain their DC books from Penguin Random House, or their books and periodicals through Lunar or UCS comic book distributors. DC continues to be committed to providing the Direct Market with best in class service and the fans with the world’s greatest comic books.”
Did DC Declare War on Marvel?
Interestingly, long-standing Marvel writer Peter David (X-Factor, The Incredible Hulk) has his own theory on why DC left Diamond, and it has more to do with the eternal Marvel/DC rivalry.
“DC has just declared war on Marvel Comics,” David wrote on Facebook, arguing that Diamond won’t be able to survive the sudden loss of so much revenue. As he sees it, DC’s abrupt exit will put Marvel in a precarious position if Diamond collapses and leaves Marvel without a distributor.
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Former DC president Diane Nelson seems to agree with David’s assertion that Diamond may be facing financial disaster. In response to a Facebook post by retailer Brian Hibbs, Nelson wrote, “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.”
Feeding into fears of Diamond’s potential insolvency, the distributor began withholding payments to publishers and vendors shortly after its COVID-19 shutdown began in March, though payments have resumed in recent weeks.
IGN reached out to David for more on his view that DC is specifically trying to attack Marvel by weakening Diamond. Couldn’t it simply be that DC is working to protect its own business? According to David, it comes down to the questionable timing of the announcement. If Diamond is facing financial troubles, he argues, DC jumping ship only worsens the problem and puts the entire industry at risk.
“If Diamond, upon which the entire industry is dependent, is insolvent, naturally what you should do is yank all your product and thus deal a potential death blow to the company and the entire industry,” said David. [note – he’s being sarcastic here] “Also, a contingency plan is something you implement if it becomes necessary. Diamond has not declared bankruptcy. They’ve started shipping material again. Did they have a bumpy time during the pandemic? Absolutely; welcome to the club. Yanking support for Diamond is akin to pulling a fire alarm in a building even though it’s not burning and saying it was your contingency plan because you’d heard that poor wiring might cause a short and thus a fire.”
The History of the Distributor Wars
While Diamond has basically been the only game in town for the past several decades, that wasn’t always the case. The direct market once comprised several major distributors in the ’80s and ’90s, with Diamond operating alongside competitors like Capitol City Distribution and Heroes World Distribution. The turning point came in late 1994, when Marvel broke from Diamond and acquired Heroes World, effectively transforming Marvel into both publisher and distributor.
Thus began a period now referred to as “The Distributor Wars.” Both Diamond and Capitol City struggled with the sudden loss of revenue from Marvel, with Diamond responding by establishing exclusive distribution deals with many of the industry’s other major publishers, including DC, Dark Horse Comics and Image Comics. This significantly weakened Capitol City, leading to Diamond’s acquisition of the company in 1996.
This isn’t to say Marvel had an easier time of it during the Distributor Wars. The company’s purchase of Heroes World turned out to be an especially poor business decision in a decade marked by overspending. IGN turned to industry analyst John Jackson Miller, whose website Comichron has been tracking monthly sales figures since 1996, to explain the reasons for Marvel’s failure.
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“Even with the lead time, Heroes World found it difficult to service every retailer that wanted to carry Marvel,” said Miller. “At the time, there were still around twice as many stores as there are today, but many failed during this period. Interminable phone waiting times were reported in that pre-Internet era. Marvel also realized by the summer of 1996 that it really needed, after all, something that had not been possible since July 1995: unified all-industry sales charts that provided vital supply level information to retailers and consumers.”
Miller noted that realization was actually the genesis of Comichron, with the site’s very first monthly sales report debuting in September 1996.
Miller continued, “By April 1997, however, with the debt [owner Ron Perelman] had heaped on Marvel sending it into bankruptcy — and Carl Icahn waiting in the wings to briefly seize control of the company — Marvel declared the Heroes World experiment over and returned to Diamond. In the interim, every other full-line distributor had vanished, as well as another huge chunk of the retail base.”
The end result of Marvel’s failed Heroes World experiment is that Diamond became the last distributor standing by the end of the ’90s, paving the way for the industry as it existed until June 2020.
Will History Repeat Itself?
Many industry figures fear DC’s move to self-distribution will prove just as disastrous as Marvel’s attempt in 1994. Not mincing words, David told IGN, “I very much see [history] repeating itself. The Heroes World move was an unparalleled disaster, causing wide-spread chaos throughout the industry. As Santayana said, ‘Those who cannot remember the past are condemned to repeat it.'”
While there are certainly comparisons to be drawn between the old Distributor Wars and DC’s move toward self-distribution, Miller argues the situations are actually quite different. For one thing, the industry on the whole is healthier in 2020 than it was in 1994, after a speculation-driven sales bubble burst and caused an industry-wide crash.
For those not collecting comics back in the ‘90s, that marked an especially tumultuous time for the industry. While blockbuster releases like 1991’s X-Men #1 and 1992’s Superman #75 (featuring the death of the Man of Steel) shattered sales records, and the rise of Image Comics made celebrities out of creators like Todd McFarlane and Rob Liefeld, this boom period was eventually followed by a bust midway through the decade. The Hollywood Reporter covers the reasons behind the crash here, but the gist is that a combination of publishing gimmicks (holographic covers, excessive crossovers) and the realization that none of these heavily printed comics had much in the way of real investment value drove away readers and collectors.
“As I wrote in March 2020, the Direct Market began the year healthy in historical terms,” Miller said, “and it was on track for a decent year until the Coronavirus and attendant shutdowns, which impacted not just Diamond and stores, but DC’s printer as well.”
However, Miller also points to a number of extra logistical challenges this time around. Where Marvel gave retailers months of notice before switching to Heroes World, DC only gave a couple weeks’ notice. There’s also the fact that Heroes World was already an established distributor in 1994, whereas Lunar and UCBS are new and largely unfamiliar companies. Even with the Internet streamlining the ordering process, this sudden change will likely create headaches for retailers.
Miller continued, “Another difference is that in 1995, comics and graphic novels were part of the same trade given to Heroes World, where here retailers have been told to order [graphic novels] from Diamond’s bookstore distributor, Random House. So in a sense the number of agents full-line retailers will need to go to has tripled, with all the logistical issues that entails.”
As to whether DC’s move to self-distribution will ultimately end the same way as Marvel’s, Miller is reluctant to speculate. ” What we can say for sure is this: The pandemic and surrounding issues continue to radiate uncertainty, and while that remains the case, long-term projections are nearly impossible to make.”
DC Without Diamond: What Happens Now?
Whatever DC’s motivations here, the real question is how this shake-up impacts comic book retailers and readers. What does this mean for the store owners on the frontlines?
“This is absolutely the biggest change for the Direct Market in the 20 years I’ve had a Diamond account,” Aaron Haaland, owner of A Comic Shop in Orlando, FL, told IGN. “Now we’ll have more than one distributor to deal with, for better or worse.”
With news that Lunar Distribution and UCS Comic Distributors will be handling the distribution of DC’s comics to shops, some retailers have raised concerns about who runs those companies. Lunar is run by the same owners of Discount Comic Book Service, a mail-order comic seller, while UCS is run by those in charge of Midtown Comics, a chain of comic shops based out of New York City that also has a large mail-order business.
Haaland describes Lunar and UCS as “shell companies” for DCBS and Midtown, respectively, that allow them to play the part of both distributor and retailer, and highlights the issues with such an arrangement.
“There’s a possible conflict of interest when product gets allocated. How do we know they won’t favor their own retailer fronts?” Haaland posits. “Also, since they will have all the analytics of how much we order of which titles and where we’re located, they could do geo-targeted ads with those titles in our locations trying to sell to our existing customers. I think these possible conflicts of interest should have been discussed, as well as what would be in place to prevent it.”
To find out what’s being done to address those concerns, IGN spoke with Gerry Gladston, chief marketing officer and chief legal officer for Midtown, as well as a partner of both Midtown and UCS.
“UCS’ primary goal is to put comics in the hands of retailers so they can put them in the hands of readers, so we can all grow the industry together,” Gladston said, adding that “UCS will share all the proper information needed to help retailers achieve that goal.”
Gladston went on to explain, “There will be no favoritism toward UCS by DC, and UCS will not only never use retailer information or data for its own advantage, it is contractually forbidden to do so by DC.”
The other Big Two comic publisher, Marvel Comics, is still with Diamond, and Haaland doesn’t see that changing anytime soon.
“One reason I don’t think Marvel will leave Diamond, as well, is because they tried that before as Heroes World and failed,” he said. “Also, Disney seems more inclined to have other publishers produce and print their character’s comics, as evidenced with IDW and Dark Horse deals, meaning they seem like they don’t want to take on more responsibilities when it comes to bringing comics of their characters to market. Perhaps they may do multiple distributors at some point, but I don’t see them leaving Diamond.”
As for the possibility of Marvel also switching to UCS, Gladston simply said that Marvel has not approached them yet.
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While comic retailers have a lot of adjusting to do after this seismic industry shift, it will largely go unnoticed by actual comic readers, save for the fact that DC’s comics will now go on sale on Tuesday rather than the previous industry-standard of Wednesday. Aside from that, unless they follow the business side of the comic industry, a reader would be hard-pressed to notice there’s been commotion behind the scenes.
“I think it’s on the retailers to roll with the punches and do everything they can to make it so DC fans can just continue to enjoy their DC comics,” Haaland said. “Sure, retailers will likely have higher shipping costs, and more labor hours processing shipments from two different distributors, but … readers will still be able to come into our stores each week and buy all their books from all the publishers the same way they did before.”