Comics and the Digital Ecosystem

I thought this was a big hit?

Hey all – I’ve been working on a bold Blogfox experiment for this month, which I was hoping to roll out this week – but that’s been back-burnered for a few days… so I’ve given myself ten minutes to jot down a couple of things I *have* to get down regarding “ye olde funnybooks” before they become too dated: One is about the value of a “hit” in any media, and the other is how to really look at “profit margins” when comics publishers move into digital distribtuion. Napkin calculations ahoy!

1. I don’t mean to keep picking on Brian Hibbs “Tilting at Windmills” column, but as long as he remains one of the few retailers IN MEDIA (not just in Comics) willing to talk honestly about his business realities, I’m going to keep coming back to him. In his latest entry, Brian laments the lack of “top sellers” in his store (the economics of selling 100 issues of 10 top comics is, obviously, preferable than than 5 copies of 200 different comics… even if the total number of pieces is the same). Brian details this as a trend that he’s been seeing for a while, and calls publishers bloated lines on the carpet. “Make better stuff” is never the wrong answer, but it’s also not entirely fair since this is the exact same trend that’s being seen across all media: movies, books, magazines, music, television. “Hits” are drawing fewer and fewer distinct eyeballs across the board because there is so much more stuff available, in all media at all times. At some point I did a quick napkin calculation to show someone that “Avatar” had *half* the comparable attendance to the first “Star Wars” film in it’s initial release (not even counting for the wildly more profitable 3D ticket price or the fact that it had access to over twice the total number of theatres). “American Idol” finales draw 20-30 million viewers – “M*A*S*H”s finale drew 105 Million.

Once you’ve fragmented a market by giving them more choice – there’s no way to put that genie back in the bottle. This is the flip side of the long tail. Yes it’s great to have continuing library sales – but that money has to come from somewhere – and it comes from increasingly lower value of “blockbusters”. And since, to some extent, television networks, movie studios, record labels, and publishing houses are all financed on a “blockbuster model” (the few massive successes cover the majority of works which are unprofitable) welcome to the brave new future of everyone trying valiantly to ignore the fact their entire business models from the ground up work less each year. It’s just rare to see such a perfect example of this in action, backed up with numbers.

2. DC Comics is rebooting their whole line, along with day and date digital copies.
Along with the usual introspection on this announcement has been a reignited fan outcry that the price for digital copies is unreasonable at $2.99 (DC’s most usual “Day and Date” price… although many have also chimed in that $1.99 or even $0.99 is unreasonable).

I want to elaborate on something I wrote about digital pricing in the comments at MGK:

I’d love to see lower digital prices – but the numbers don’t really work (on new releases… I get the argument for back catalogue being “free” money… but it also ignores the biggest shift in the move to digital from a publisher perspective):

Most numbers I’ve seen put the retail/diamond margin on physical issues at about 65%, and printing costs at about $0.35 – so on a $2.99 comic DC is clearing about a buck.

The Apple + Comixology cut on digital is likely 40-45% (Apple is a hard 30% for in app purchasing) – so at $1.99 DC is clearing $1.10 per issue, so obviously they could cut per issue to at *least* $1.69 and maintain the same margin right?

The flaw here is that digital distribution is *sell through* (only comics that sell to customers bring in cash) while the DM has been built on *sell in* (the real “customer” is the store owner since they can’t return unsold product).

So when you look at sales figures of 20-50k (sad as they are), that’s not the number of issues actually being sold to paying customers, some proportion of that is sitting on shelves, dollar bins, or ultimately getting pulped. In a nutshell comic store owners are subsidizing the publishers since the actual customer market is (possibly *a lot*) smaller than we even think… so to even “match” the physical model – DC needs a (much?) bigger profit margin per issue.

I suspect this, more than anything, is why they’re reluctant to dump cheap back-issue content on-line. Your audience only has so much time in a day, and (personally) I know I’d probably buy less modern content if classic content was widely (and cheaply) available. It might create some new, energized buyers… but it also might depress the existing market even further.

This is also the real reason why “gimmick” events do boost sales. I don’t personally know any readers who care – but what store is going to risk not having a whole crossover line in stock if it becomes hot?

The obvious follow-up question is “so what should publishers do”? To which I’d point out there’s two possible things worth looking into:

a. Given my (limited) understanding of the digital marketplace – Apple has a lot less leeway on purchases made outside of their “app” ecosystem – and has a hard 30% cut on in-app sales. There is no reason why you shouldn’t be able to “subscribe” to titles through the Comixology (or Comics+ or Dark Horse) websites – arrange re-occurring billing (or pay in advance billing, or paypal subscription) – and just have that content *delivered* to whatever device you read it on (like when you use the Kindle app on a iPhone, but buy the book on Amazon.com). This changes the margin calculation significantly, even if you add some additional costs for payment processing and the like.

b. Start experimenting with different production models. Maybe it is time for a line wide hair-cut to try and better focus on more popular fare… but that needs to be coupled with trying to find entirely new models. Bi-monthly? Occasional “annual style” stories? Trade-length stand-alones? Throwing classic issues in with paid issues (buy a day and date title for $2.99 – get a free credit for two classic library titles of your choice)? If you are going to move away from the newsstand model – you need to stop thinking like that is the only way for your company to work.

Yes, that may mean you need to radically re-envision the size, scope, and scale of your entire organization.

That’s it for time – hope I get a chance to follow up on this soon with my own “radical re-envisioning” shortly.