Tilting at Windmills #38
By Brian Hibbs
(Originally Ran in Comics Retailer #39)
So, I'm a little pissed.
O.K., that's not a big surprise, I 'spose.
I'm going after Marvel this month, and Marvel alone, so let's get this disclaimer stuff outta the way: these are my opinions, and mine alone. They don't necessarily reflect those of Krause Publications, or any employee thereof. Anything not specifically marked as fact should be considered conjecture! If you're the kind of cry-baby that can't take a little ragging, well do something to me, not Krause. I've been asked to not just dun any one organization, but I'm breaking that request of my own volition. John never tells me what to write (nor does he censor me), and your wrath should be aimed at me, not him, Maggie or Greg.
There. That wasn't so hard, was it?
I wanted originally to call this column "Do The Math", with an emphasis on analyzing your Marvel purchases with a hard eye at what your bottom line would be. But after a few moments of reflection, I realized that all I could tell you is how to determine what your discount would have been, not what it is going to be.
Oh sure, we've got a handy little chart of Marvel's projected discount, and the various "incentives", but they don't really tell you one damn thing -- in the end, you don't have any idea of what your discount is going to be in, say, December.
That's the insidious bit of this New World Order – you can't plan for it, you can only react.
Oh, sure, you can, more or less, determine what your basic discount is going to be -- assuming Marvel doesn't decide to "move the goal-posts" every quarter, at least. But you're gonna have no idea if you can meet their incentives, or not! Don't believe me? Well, how are the incentives determined? The "full line support" bonus is determined by, well, full-line support. If you don't know what the full-line is, how can you know if you're going to be able to support it? What if (a purely hypothetical) Marvel decides to create 3 spin-offs of, say, Fantastic Force. Will you (can you) be able to support them all? What if they decide in September to produce 8 TPBs a week? Matt Ragone, at the San Francisco Marvelution meeting stated that TPBs would be included for the purpose of supporting full-line. Will you (can you) support them all?
Or what about the "Sales growth" bonus -- Marvel has stated that "sales growth" will be a function of the product mix that month gauged against a "base month" -- but they get to determine how you should be performing. Your "incentive discount" exists at, shall we say, their suffrage. Their numbers will not be based upon (if Sales to Astonish is any indication) where we are, but rather where Marvel thinks we should be -- dissimilar numbers to be sure. But the real point is, you won't know what that incentive level is until you get the catalog for the month.
Even the "dealer loaders" become problematic -- what if they decide one month that the loaders should be 25 copies each of Barbie Fashion, Ravage 2099, Fantastic Force, and Dr. Who magazine. Will you meet those minimums (can you)?
How this effects you is in your ability to walk into a bank and ask for a loan -- most financial institutions are going to ask you for a business plan, with your projected cash flow for at least a year. But, if Marvel is any significant portion of your business, you've now lost the ability to do this.
Or how about Marvel underwriting the expansion of chains, and buying you out? The quickest way to "grow" your business is not roll-up-your-sleeves hard work and dedication -- it's buying up smaller businesses (Marvel sure knows this lesson -- hasn't the majority of their growth in the last 18 months come from purchasing other companies as opposed to growing their own business?) Let's say I'm a 12 store chain that does a million dollars a month in Marvel retail business. I want the 2% growth bonus, but my sales are declining. 2% of my sales are $20k. If I go to Joe's Comics Hole, and offer him $19k to get out, take his bills with him, and give me his storefront and customer base (and I think most of the "Joe's" of the world would take the deal in a heartbeat), I've just made $1000 of Marvel's money for doing nothing! Even if the-store-formerly-known-as Joe's Comics Hole goes out of business next month, I've still made a profit!
Sure, there's a point of diminishing returns, where the growth bonus gained offsets the short-term purchase of a store -- but where is that? 50 stores? 100?
Terry Stewert said, at the SF meeting, perhaps apocryphally, that he had over 20 retailers, on the first 4 tour stops alone, offer to sell their stores to Marvel.
Look at all that statistical information at the end of the Heroes World credit application -- note that nowhere does it state or suggest that this data is proprietary. What's to stop them from giving this data to your competition? To the future chain builder? After all, they're already under-writing him buying you out!
The question becomes, how much do you trust Marvel to look after you and yours? This is not a dollars and cents equation. From a little straw polling, about half of you expect your discount to lower between 2 and 6 points. The other half expect them to rise an equivalent amount, predicated on the "incentive bonuses". So how long do you trust them to keep giving you those "incentives"? Ask yourself: What if they throw a Marvelution, and nobody
comes? What if their sales don't rise to their targeted levels? What will they do then? I'll tell you what they are likely to do: take away or cut back upon those incentives.
And in the meantime, you're paying them to underwrite your own inevitable destruction.
At Comix Experience, only two non-X-Men Marvel titles sell over 20 copies. I believe this is solely a function of the editorial quality (or lack thereof) on the Marvel line. I'm currently receiving a 55% from Diamond. Based on Marvel's published terms, I'm going to receive an average of a 49.5% discount (taken from my last 12 months of Marvel and Malibu sales). It is generally acknowledged that you must achieve a 90% sell-through before an individual title starts making a profit for you. A 55% discount on a 90% sell-through nets me the same profit as a 49.5% discount with 100% sell-through! We've decided that we have no recourse but to go subscription copies only on any Marvel title we're not confident that could sell 20 copies or more (a 90% sell-through on 20 copies only leaves us two copies "wiggle room) This leaves us with Hulk, FF, and the X-Men family as the only comics we will rack anymore.
This may not be your best decision -- pull out your last 13 months of Marvel and Malibu orders. Note your total dollars, so you can determine your base discount. This is the only number you can count on, for sure!
Try to determine whether you qualify for the "full-line support" bonus. This is a fairly complex piece of math. First, count the number of titles solicited, then count the number that are under their plateau (as of this writing, it's stated as five copies -- at the meeting, however, they suggested this might drop as low as 2 copies) -- this will tell you what percentage of full-line you're at (again, at the meeting, they suggested 75%, but it might rise to 95% to qualify). Then figure out the least number of titles each month you'd need to get to Marvel's bonus -- if, for example, Marvel and Malibu published 80 titles, at 95%/2 copies you want to look at no more than 4 titles selling less than 2 copies. At 75%/5, you want to make sure no more than 20 titles are selling less than 5 copies. If your number is greater than these, then you want to add up the cheapest number of copies, and their total cost that it would take you to get to Marvel's minimums. Then multiple your total cost, plus the amount you'd over-order to get to Marvel's minimums, by 2%, and compare that what it would cost to meet the minimums. If your cost is lower, then you could get the extra discount, and just give away the unsalable comics -- but if it's higher, then you probably won't qualify.
Under the 75%/5 plan, it would, on average, cost Comix Experience twice as much to match the incentive as we'd benefit!
The last thing to do is compare your totals on a month-to-month basis -- if you're not getting an annual 10% growth, or better, I would hazard a guess that you won't gain the growth bonuses, on any dependable schedule.
This is a lot of calculations to do -- some of them fairly complicated. And you're going to need to do this every single month to arrive at what your final discount will be. And the formulae will change each month! This is almost the least of the extra work you'll need to do in order to deal with a second primary distributor.
It's time for you to take a hard look at your product mix and how important each part is to your overall business health. Even a 2% loss of discount could easily put a lot of us out of business.
I decided that I don't trust Marvel, that they're going to cost me the equivalent to two month's rent a year in lost profits, because of the decisions that they have made, not my own, and that they don't have my best interests at heart. Is it any wonder that I can't, in good conscience support their titles in my store any more?
What's your decision?
Brian Hibbs, Owner of Comix Experience, also points to several secondary signs that Marvel is expecting more than we could, or would want to, deliver: The June Maximum Clonage co-op ad says, "You'll find all 6 issues of this amazing Spider-Man saga (and multiple copies of each) at..." -- is this not an exhortation to speculate? How about this tip on Pocahontas in "A View From The Field" in the June Mega-Business: "Multiply what you think you can sell in one month by six, that's your order"? Ouch! Why isn't the publisher pledging reorder availability for six months rather than asking us to foot the holding costs? Or how about this statement in the solicitation for Spider-Man 2099 #34 (also in the June information): "You should order this title based on #'s for Amazing Spider-Man"? Do any of these statements sound like they're coming from a publisher that has any understanding of actual sales reality or long-term planning?