So! A little while ago I promised to explain the following statement in more depth:

Diamond’s new order minimums increase is going to hurt the DM worse than Marvel’s Heroes World Debacle did. It is essentially the beginning of the end for the Direct Market, in my estimation. Specifically because Diamond Comics Distributors is a monopoly.” – Me, a couple weeks back.

Then I got too busy to follow-up. Since then Bill Schanes at Diamond has followed-up with a couple of interviews, and most-everyone has weighed in on it. But since it’s about 6 hours before I have to get up to go to work, I figure now is the perfect time to, you know, offer my thoughts.

FACTS:

- Diamond’s job is to serve the Direct Market, and specifically the network of comic book specialty stores that make up the direct market.

- Diamond’s goal is to make money at this.

- Diamond does this by buying comics at a deep discount from publishers, and selling them to the retailers at a lesser discount.

- Somewhere along the line, they calculated what it costs to solicit and ship a book to those retailers versus what it makes them, and came up with a dollar figure for their comfortable-profit-zone. I do want to note that this order minimum has never been expressed as “the break even point”, this is just where they make a profit on the book they’re comfortable with.

- Recently, they raised that minimum so that you have to sell $6250 or so of comics, retail, to get distributed. That effectively means anything not in their “top 300″, most months. The books just never show up in stores, despite being ordered.

- They announced these increases under the increasingly specious cover of “economic downturn.”

- They did this and it was pointed out that their sales were DOWN 4% IN 2008!

I’d like to point out that sales were down 4% after numerous increases, year-over-year, for the last 5 years at least. Here’s what ICV2 had to say about the comics industry in 2007:

“It is clear that overall 2007 was a very strong year for comic sales (up 7% compared with 2006), graphic novels (up 18%), and combined sales (up 9%), though the increases in comic and combined sales not quite as strong as in 2006, during which comics (when compared with 2005) sales rose 14%, while graphic novels were up 8% and the combined total was up 13%.” – ICv2

OPINION:

So… what? The combined total sales for comics and graphic novels was up at least 13% in 2007 over 2006, and this is not just the Diamond numbers but I’d be shocked if they weren’t right-in-line. So now comics slip by 4%, putting them what, a few points above 2006, right? 2006 where we actually delivered books that we solicited? Hmm.

I doubt their stated reasoning, flat out. This is all, at best, suspicious. Year-over-year growth in the midst of the graphic novel and manga boom, there’s a slight slip, and now it’s time to cut stuff? Huh.

FACTS:

- Let’s give Diamond the benefit of the doubt on the economic necessity of their moves. Why not.

- After all, Diamond cut the salaries of numerous staff in January. Seriously.

- Diamond is still a monopoly.

- That’s not just a cute word I’m throwing around here… Diamond seized power in a time of uncertainty, eliminating all other national and local specialty distributors of comics and graphic novels by signing prohibitive exclusivity agreements that meant that the vast majority of published comics and graphic novels could, realistically, only be distributed by them. There is no other distributor of comic book periodicals, at least non-returnably (there is the newsstand, but there are lots of reasons that has nothing to do with anything…).

- These were really sweet deals they offered to companies too, to sign exclusive and ditch doing direct-sales to retailers, or work with other distributors. It had nothing to do with the bookstore market, or sales to customers (like companies with a webstore), or any other form of sales. These were exclusives For The Comic Market, designed to make Diamond the only distributor for the comic market.

OPINION:

Fine, let’s… let’s pretend for a moment that this is all okay too. Sure. Why not. Capitalism, right?

FACTS:

- Diamond made themselves the only outlet for comic book periodicals, and graphic novels. Diamond IS the Direct Market.

- They made retailers dependent on them for the vast majority of their business. Diamond IS the Direct Market.

- They systematically removed other avenues of sale for publishers through their exclusivity tactics. Diamond IS the Direct Market.

- And now that there are no competitors, and no other avenues, they are dictating stricter and stricter terms to pubs who won’t play ball with them (ie: sign a brokerage agreement, sign an exclusive, sign a contract to have handle their bookstore distribution).

- They admit flat out this will result in the delisting of 20-30 companies in the first month, with more to come.

- Diamond IS the Direct Market. Distribution, publishing, retail.

OPINION:

This is not a good thing. Monoculture is not a good thing, it leaves us susceptible to disease, to being wiped-out entirely.

I have always argued this, and while my arguments haven’t fallen on deaf ears, exactly, many companies have made decisions that embrace a “streamlined” DM, to what I feel will be their eventual detriment… Once you eliminate the bottom, the middle becomes the new bottom. I’m having a hard time seeing how anyone is going to be renegotiating their exclusivity deal with Diamond from a position of anything approaching “strength” in the next few years. Diamond has just told you that they want the low-hanging fruit, and that fruit’s just gonna get lower and lower.

But even more importantly than that: Diamond is pushing content out of the Direct Market.

Let me say that again:

Diamond Is Pushing Content Out Of The Direct Market

We established this way up at the top there, “Diamond’s job is to serve the direct market.” So you tell me, by denying entry to creative people, by setting the minimums above what _all comics_ not in the top 300 can accomplish, and only ‘working’ with their core publishers, how are they serving the direct market?

The only answer that comes to mind is “because this will allow them to continue to exist.” No insider information here, nothing that’s not out in the open, but staff cuts, salary cuts, and big cost cutting? I’m sure New York will be a-twitter.

Because seriously?

If this is not a necessary move, then it’s an incredibly stupid one.

Diamond’s job is to serve the Direct Market, so why are they sending publishers to find other ways to sell their books, ways that aren’t the direct market?

I help run a direct market comic book store, one of the best in the industry. I’m going to be honest with you here: We will weather the storm.

But we’re also on the front lines of indy publishing and retailing: Between my independent comics festival and my indy comics friends and my goddamned zine rack, and our Diamond orders where the back of the catalogue is almost always worth more than Marvel, DC, Image, and Dark Horse combined. The publishers that are going to be the ones that disappear out of the back of the catalogue are ones that we order, and the books that have customers who come to my store specifically for them. So, you know, I know what I’m talking about here.

This move is going to push publishers to produce comics that effectively _can’t_ be sold by Diamond, by the Direct Market. Webcomics, digital print-to-order, print-on-demand, comics with low profit-margins, produced in small numbers, sold directly by the creator to the reader.

And it’s probably going to work.

Already some of the solutions that have been floated for small publishers tout this method. More importantly, more and more comics creators–and I want to stress that many of these people are my friends, this is not anecdotal–are making a living solely through the digital publication and distribution of their work. Either through merch or advertising or other sales. Comics creators have found a successful alternate way of making money doing comics, that has nothing at all to do with comic book stores.

And Diamond has provided the kick-in-the-ass to get more people to follow that path.

Diamond is serving the Direct Market, by encouraging publishers to stay the FUCK OUT of the Direct Market. Sending books that I want to sell, and customers I want to sell them to, to a completely different distribution stream where I don’t make any money.

FACTS:

- The margins on digital-print-to-order and POD books are too poor for the books to be sold competitively through most comic book stores.

- Think that webcomics can work as a “proving ground” for books, only to be embraced by the direct market when they’ve “proven themselves”? Think again! The Direct Market hates webcomics! Check this out:

Johanna Draper-Carlson: Publishers are currently preparing their giveaway titles for Free Comic Book Day (FCBD), which will be on May 3, 2008. Three planned webcomic-related titles won’t be included, though, because even though their publishers participated in previous years, they were rejected for 2008. I’ve interviewed Chris Crosby about his reaction to this decision.

Will you be participating in FCBD this year?

Crosby: Apparently not, as all three titles were rejected by Diamond on the advisement of their FCBD committee. The reason given was “no core title being currently published, or the current books sales not warranting the FCBD promotional support.” … Most of our 3 million+ readers do not read print comic books, not including print collections of webcomics. Not because webcomics are free and webcomic readers are cheap, but because they haven’t yet been exposed to a print comic that interested them enough. When webcomics participate in FCBD, we are actively promoting the event to millions of readers. Those are potential new comic shop customers, assuming you can grab them enough with a title they’ll want to try while they’re in the store. … Since we’re not being allowed to participate in FCBD 2008, we won’t be trying to drive our millions of readers into comic shops this year.

OPINIONS:

Yeah.

I’m not a dullard, I know that the digital revolution is well underway and the paradigm? It’s shifting. But it isn’t shifted, and it’s a little disconcerting to see my largest retail partner pushing content away from my market and into one I can’t touch. I think that’s a WEIRD DECISION TO MAKE.

I’m going to say this flat out, probably the most indefensible part of this whole post, but here goes: Diamond has a responsibility to the market it has created. And that responsibility doesn’t start and stop with making money.

It is essentially the beginning of the end for the Direct Market, in my estimation.”

Is that hyperbole? I can’t tell. Once upon a time a friend of mine wrote an angry-young-manifesto imploring all who would hear him to tear the direct market to the ground and let something else rise up out of the ashes. I feel like we’re closer to that now than we’ve ever been, but I never thought it would be Diamond doing it. Diamond can’t afford to distribute comic books to comic book stores. Not all comic books of course, just the ones that aren’t superheroes or licensed other-media tie-ins. Or exclusive to Diamond.

No retailer is immune to the effects of this. No publisher (save 2…) is immune to the effects of this. This is going to change the market quicker and in ways that none of you would ever have expected.

And in the end, none of this ensures a healthy Diamond Comics Distributors. We’re all still taking are chances with a distributor that the vast majority of comic retailers and publishers spend great amounts of time ripping-on, in public and private…

Good luck in 2009 everyone.

- Christopher


16 Comments on “The Diamond Post”

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  1. there it is, plain as daylight. » Comics in Memphis and Other Things says:

    [...] Chris Butcher has a great post about Diamond’s new order minimums, and why he thinks it will kill the direct market. I admit [...]

  2. Jim Ottaviani says:

    Hi Christopher:

    With regards to FCBD, my understanding was that the decision to carry books was not solely, or even primarily, Diamond’s. Specifically, the quote

    “[A]ll three titles were rejected by Diamond on the advisement of their FCBD committee. The reason given was ‘no core title being currently published, or the current books sales not warranting the FCBD promotional support.’”

    indicates unwillingness of retailers to support non-top 300 titles as well. Unfortunately, I believe Diamond’s customer base (Diamond doesn’t sell to readers, after all) could make a difference but taken as a whole*, those retailers have voted — with their money — for less diversity of content than stores like The Beguiling offer. And they have done so in good times and bad.

    Jim

    *It’s important to emphasize the “taken as a whole” aspect. Meaning, the people who are likely to read this are probably already running or shopping at stores that offer a range of titles well beyond the front list of the front of Diamond’s monthly catalog. They’re important to me as a publisher and a reader, and I’m lucky to have a couple within walking distance of my home and work. Really lucky. But when we look at the Direct Market in its entirety, which is what I as a publisher and Diamond as a distributor sometimes have to do, those stores are thin on the ground, and they always have been. Diamond’s latest decision will make it harder for such stores to appear or evolve. No question about that. But they weren’t appearing or evolving rapidly years, or decades, ago either.

  3. Journalista - the news weblog of The Comics Journal » Blog Archive » Feb. 4, 2009: Minimum quality threshold says:

    [...] a long and passionately argued essay, retailer Christopher Butcher states that the recent moves by Diamond Distributors to restrict access to its listings signals the [...]

  4. Paul O'Brien says:

    Chris, I’m not sure it’s particularly helpful to think in terms of Diamond having a “duty” or “responsibility” to help the direct market. As you say, Diamond ARE the direct market. What is bad for the direct market is, ultimately, bad for Diamond. They are a big fish in a small pond; it is not in their interests to let the pond dry up. And when you’re dealing with businesses, enlightened self-interest is a more powerful motivator than a sense of duty. On that broad level, of whether products go through the direct market at all, their interests surely align with yours.

    Is the market failing because of Diamond’s actions, or is Diamond acting like this because the market has already started to fail? Are massive price rises and a drastic cutback in the product line signs that the market is already collapsing of its own accord, and that Diamond can’t think of anything to reverse it?

  5. Franklin Harris says:

    Paul is exactly right, but I’d put it less speculatively. Not only are Diamond’s actions the result of a weak market, rather than vice versa, Diamond’s monopoly is the result of the direct market’s decline following the 1990s bubble. When you get a monopoly like Diamond, it’s almost always because that company just happens to be the last company standing in a market that is dying.

    And it’s no good to say, “Diamond seized power in a time of uncertainty, eliminating all other national and local specialty distributors of comics and graphic novels by signing prohibitive exclusivity agreements ….”

    Diamond didn’t “seize” anything. It offered the exclusivity agreements and the publishers took them — because this is a dying market. Period. And Diamond is now down to amputating limbs.

    The direct market was a life raft after the newsstand market sank, and it’s amazing it has held up this long.

  6. The Beguiling’s Chris Butcher discusses the new Diamond thresholds « THE JOE SHUSTER CANADIAN COMIC BOOK CREATOR AWARDS says:

    [...] The Beguiling’s Chris Butcher discusses the new Diamond thresholds Beguiling manager Chris Butcher presents his thoughts on the Diamond threshold changes on his blog. [...]

  7. Scott Bieser says:

    Others have already suggested this could be a golden opportunity for Haven, to set itself up as The alternative distributor for alternative comics and publishers.

    And why not? Of the roughly 3,000 comics retailers, only about 300 have been receptive to alt-comics anyway. Surely Haven could service 300 shops effectively, and by focusing on this sub-market, working with progressive retailers such as yourself, start growing that sub-market carefully and intelligently? Diamond isn’t in a position to do that even if they wanted to.

  8. Jason Thibault says:

    These are tricky times.

    Our first release last year, Danijel Zezelj’s Rex, sold enough copies with it’s initial order that it would have met Diamond’s new benchmark.

    When we solicited a second book by Zezelj, the orders came in lower. The book met the old standard of $3750 (in retail sales) but far below the new benchmark and we ended up cancelling it even before Diamond made their recent changes.

    We publishers are going to have to get a lot more creative in how we market our graphic novels. If there was ever a time to strengthen our relationships with indie-loving retailers it’s now.

    Chris I wish the North American comics industry had 500 more shops like yours. I guess that’s what makes The Beguiling unique and why I make sure to visit your store whenever I’m in Toronto.

  9. Journalista - the news weblog of The Comics Journal » Blog Archive » Feb. 5, 2009: Next gasp? says:

    [...] “Diamond didn’t ’seize’ anything. It offered the exclusivity agreements and the publishers took them — because this is a dying market. Period. And Diamond is now down to amputating limbs.” – Franklin Harris [...]

  10. Macbeth Uk says:

    Very interesting comments, being based in UK, we’ve an even harder time of raising profile in US and Canada which is even more necessary with Diamond’s benchmarks – our previous ZOMBIES and ROBOTS anthologies did make the cut but we’re planning to send advance copies to identified indie-friendly stores with this year’s WESTERN book to ensure we keep up the average.

    This just increases our up front costs but we’ve got to try something and are doing our best to promote new European talent ahead of 2 planned one shots this year which without the anthologies profile wouldn’t have been possible.

    Fingers crossed

  11. One thought on the death of the alternative comic book « Picture Poetry says:

    [...] minimums. Tom Spurgeon has a characteristically meditative but surprisingly assertive piece while Chris Butcher spells out the reasoning behind his even more alarmed [...]

  12. ted whitby says:

    I have a theory.
    So far I have not seen an explanation for Diamond’s moves that makes sense unless they are in trouble, or just thinking very short term (which is not at all unusual for American businesses). Two other thoughts are, 1) they, like many businesses, are taking significant steps to improve their efficiency by cutting costs in anticipation of a terrible year or longer, and 2) it is more expensive to handle items in small quantities (since each item to be tracked individually no matter how small the quantities). So maybe this is all this is about. But it really is sacrificing the future for short term gains/defense.
    But here’s my thought…
    Correct me if I have my facts wrong. But it strikes me this is may be an attempt to force the hand of many small publishers to make Diamond their distributor to bookstores. That’s clearly the future, and is already where most of the manga sales are, no? The industry is moving to books from pamphlet periodicals, which opens up the outlets exponentially. Diamond sees the trend and is trying to use its leverage (while it still has some) to consolidate distribution.
    Thoughts?

  13. Leland Purvis says:

    Chris, I really think you’re right about a lot of this and it mirrors some of my own thinking.

    I think this essentially kills floppy comics for indies. And I think that it increases the likelihood of low-risk, homogenous stuff being shipped to the shops.

    The thing that outrages me isn’t that a lot of comics which weren’t making money will have to cancel, it’s that some of the best stuff we’ve seen come out in the last ten years from the self-publishing camp would never have been made under these minimums. A book needs a time to gain an audience. Some great stuff isn’t going to get the chance now.

    I do think self-publishers and committed writer-artists will find new ways to get their material to readers, it’s just a shame that the DM is dead for them.

  14. Robot 6 @ Comic Book Resources - Covering Comic Book News and Entertainment » Food or Comics | A roundup of money-related news says:

    [...] Retailer Christopher Butcher elaborates on his earlier comments about Diamond’s new threshold for publishers: … [...]

  15. Haven Distributors picks up Bane of the Werewolf | Bane of the Werewolf says:

    [...] Diamond’s cut back has effected independent publishers across the board. For more info click here The new benchmark was a necessary business decision for Diamond’s profitability. [...]

  16. To Spite One’s Face | Savage Critics says:

    [...] I don’t really have time to do this (I should be working on the BookScan stuff… next column is due in like a week, ugh!), but Lester bugged me about it, and I am also spurred by Chris Butcher’s excellent post on the subject. [...]

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