Longbox Graveyard #60

I’ve been a comics fan and reader since the early 1970s. I left comics in the 1990s and have only this past year returned, but my interest is confined to nostalgia — today’s books don’t really interest me, which I think is a problem both for me and for publishers, as I am affluent reader with two kids who might pick up the hobby but the current approach at Marvel and DC holds limited appeal for us. I worked briefly as a writer on some non-Marvel/DC books decades ago, and I still have friends in the business, but I don’t think either one of those things gives me any special insight into what’s happening in comics today. However, since 2008 I have been partners in an iOS publisher and developer, and that DOES give me special insight into the digital world, at least in the apps publishing space.

I have two problems with the digital programs now on offer from the “Big Two.” One is editorial, and the other is with the marketplace.

The marketplace issue is the easiest to address. First off, there may not be a marketplace issue. As of March 2012, ComiXology is on record saying they’ve shipped 50M comics through their app, and they make frequent appearances on the iPad Top Grossing lists in the United States. Maybe Marvel and DC have managed to dig a flaming, gasoline-filled trench around their digital IP and will be able to keep their prices artificially high.

Speaking as a publisher who has to work to give away free games that pack hundreds of hours of content … if they can do that, then I say more power to them!

Speaking as a digital entrepreneur, my view is that publishers could be leaving money on the table due to inflexible pricing, a creaky storefront, too many partners (DC and Marvel must share revenue with Apple and ComiXology with their current apps) and cross-platform incompatibility that erects an artificial wall between new books and the catalog offerings of Marvel’s Digital Unlimited service.

Were I running the digital initiative for Marvel or DC I would ween myself from ComiXology as soon as possible in favor of my own publishing platform, built around microtransactions with in-app currency (to allow more flexibility in pricing and bundling), with laser-sharp metrics closely watching reader behaviors to guide future business decisions. I’d also leverage comics as a social platform by opening up the sharing possibilities of digital books and empowering readers to evangelize their passion by migrating the “collecting” experience from the physical act of owning books to virtual achievements built around viewing and sharing digital comics, with an eye toward restoring comic books as the brand leader for superheroes, instead of the trailing appendage they’ve become in this era of better than a billion dollar box office superhero movies (while equivalent books sell in the hundred thousand copies range).

This might already be in the works. A recent report put ComiXology’s “gross merchandise value” for 2011 at nineteen million dollars, with that number projected to jump to $70M in 2012. With that kind of money on the table, Marvel and DC can certainly afford to build and control their own platforms (and in fact they can’t afford not to).

A simpler solution would be for Marvel and/or DC to buy ComiXology outright, and it wouldn’t surprise me at all to see this happen.

The bigger problem is on the editorial side of the business, which is stuck with largely the same playbook they’ve been running for the last three decades. The freemium digital marketplace I’m advocating only make sense if you can reach a mass audience — a truly digital approach to content and monetization will work only when your audience numbers in the tens or hundreds of millions.

Evidence suggests the current system works to some degree for a market where the top print book struggles to sell 200K copies. The question is whether that market can ever be brought back to the levels of prior decades. If they think there is a mass digital audience out there, then it is an inevitability that DC and Marvel will have to stop price protecting their print retail partners and adopt lower prices for their digital offerings. I’m in my fourth year in the iOS business and I have seen the “Race To Zero” first-hand (with my own money on the line). It’s gotten so even .99 is considered a “premium” price, and you have to work to give away free apps.

In truth, even “free” costs too much these days.

The danger for comic publishers is that it may be too late for them. The market may be so damaged and diminished that it is no longer possible to tap into a mass audience by dropping prices to .99 or free. If the worldwide market for superhero comics really has collapsed to a half-million or so hardcores buying DC and Marvel print titles each month then the free market just won’t work — you’d need ten times that many people interested in digital books to make a profitable business off the 5% of your customers that you will monetize through free distribution. There would be some organic lift from getting free books into more people’s hands — and thus spreading your brand to a collateral audience — but I think the editorial problem at Marvel and DC is pathological enough that just getting the books into peoples’ hands won’t be enough. The content has become too dense, self-referential, and fringe to work as mass entertainment. Witness DC’s “New 52” reboot — presented as a means of making DC’s line more friendly to new readers — which after an initial surge of interest appears to have posted only modest readership gains in the long run (though there are encouraging indications the market is coming back).

So if there is no reaching new readers, then it is actually best for Marvel and DC to do what they’re doing — circle the wagons, hold the price line as long as they can, and fight a delaying action until the publishers as we know them are closed down and their properties are licensed out to smaller shops. Paramount and Hasbro both have comic books without being in the comic book business — might Marvel and DC ultimately elect to go the same route? Marvel and to a lesser extent DC have already realized they are in the “superhero” business rather than the “comics” business and are reorganizing their operations accordingly. I have friends who will lose jobs when this happens and it gives me little joy to say it, but markets are never wrong — the music, publishing, and software businesses have already been disrupted, and there’s no reason to expect comics will be any different. The collapse of Borders and Blockbuster are just two of the earliest and most visible casualties in the digital disruption of entertainment. There will be a pile of bodies on the field before this shakes out.

The indie side of digital offers some opportunities but will be hamstrung by the absence of meaningful brands. There will be successes here and there — particularly for small shops who can keep their costs in line and put a LOT of effort into fan outreach via social media — but for that mass North American moviegoing audience we should be trying to tap, “comic books” = “superheroes,” and “superheroes” = Batman, Spider-Man, and Superman (and now also a host of lesser Marvel characters as well, thanks to a stellar effort from Marvel’s movie studio). Mark Waid has made news by shifting his creator-owned work to digital and I think he is smart to set up his own channel to distribute and monetize his work. He is definitely biting the hand that feeds him but the tide is inevitable and irresistible (and I have enjoyed his digital effort, “Insufferable”).

The problem Mr. Waid will face is that there’s only a fraction of this already-small audience interested in reading his original books than there are people who want to read his Daredevil books. The power of the superhero brands is substantial (which is why the movie business is roaring, for the most part), and with seventy-five years of brand equity built up around their superhero rosters there’s no way any small indie operation is going to challenge Marvel and DC with superheroes for the mass audience. It’s a risk for Mark (because he is making a living off this business) but he’s wise to know the end is near and to make the jump too soon instead of too late. The disruption is real and no one will escape. The guys still standing at the end will be the ones who disrupted themselves and changed into new and profitable forms.

So there you have my view — the major publishers afraid to take the leap, knowing there likely isn’t a far side of the ravine out there in the dark, while indie guys have the tools but don’t have the networks or the superhero properties the market cares about. In the next three years I expect you will see a few digital indie studios take root, clutch and grab to break even, and then be positioned to pick up the licenses to the big superhero brands when the monthly paper publishing arms of DC and Marvel inevitably collapse. The brick and mortar comics market will continue to struggle and is probably doomed. Fans will vote with their wallets and pirate digital books rather than pay inflated prices to placate direct market retailers. Publishers and retailers will remain chained to each other at the ankles, until the last second when the publishers will sever the chain and give retailers a shove over the side. Then the publishers better hope they still have an audience. Digital consumer habits for the next hundred years are being established RIGHT NOW and Marvel and DC are flirting with extinction because they aren’t at the center of it.

Time is critical and there may not be a second chance to get this right.

Note: This column original appeared at the We Talk Podcasts site, to support my appearance on the We Talk Comics podcast. This revised version of my Digital Comics Rant has been updated to reflect new information, and is reprinted here to support next week’s review of the Legends of the Dark Knight digital comic, as well as the pending release of the next Longbox Graveyard Podcast, which will cover digital comics. Thanks to We Talk Podcasts for providing a forum for the original version of this article.

NEXT WEDNESDAY: #61 Legends of the (Digital) Dark Knight

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