Broken Frontier

Before I hand the reins of OTB over, a quick note, originally I was scheduled to do a single-shot opinion piece this week. Unfortunately a number of things went on this week that just made it impossible to do it right, and you guys deserve much more than just a hacked out piece! So, since Will ‘Newsstand’ Norris has been doing such a great job and is ahead of schedule on OTB’s first multi-part, in-depth feature, I figured I would just get out of his way! So, without further ado… (C.)

Out of the Ashes of the Newsstand I: RIP

I am starting this article with a disclaimer.  I am not an expert on the topic I’m about to discuss.  I have a great interest in the industry and have studied it closely.  I may be right on the mark, or I could miss it by a mile.  The point is to think outside the box.  Hopefully what I say gives others something to ponder, maybe even spark better ideas.  Now on with the show…

How many times have you heard someone say, “If someone would put comics on the newsstand again, they would sell like gangbusters!”?  Personally, I’ve heard it dozens of times.  Before I started researching this article, I’d said it myself a dozen times.  I couldn’t fathom why publishers wouldn’t want to take this avenue to grow their business.  It seemed like a no-brainer.  “Duh, publishers: get your act together!” is what I always thought.

But knowing what I know now, I stand corrected.  My apologies to all the times I thought “Duh publishers!”  They apparently knew what they were doing.  Let me share with you what I have learned:

• Top selling magazines have a circulation of over two million issues per month; the top 2% have a 5+ million circulation.
• There are about 140,000 newsstand outlets carrying an average of 400 titles per outlet.
• In 2000, major magazine retailers earned an estimated $300 million in profits from magazines/periodicals.

So that doesn’t sound too bad, but that was the good news.  Here is the rest of what I learned:

• In 2000, wholesalers collectively lost $100 million dollars.
• In 2000, 66% of titles dropped in newsstand circulation; the top 100 dropped by 8% and the rest by 12%.  This was a steeper drop than in 1999.
• In 2002, 51% of titles dropped in newsstand circulation.  The average decline was 22%.
• In 2004, AdAge.com reported that over 70% of titles had declining newsstand sales.
• In 2000, only 9% of titles had a sell-through greater than 50% (meaning that if 50 copies ship to a newsstand, 25 sell and 25 are returned).  64% of titles had a sell-through of less than 40%.
• In 2002, the average sell-through was 38%.
• In 2000, 78% of publishers/marketers surveyed believed sales would continue to decline for the foreseeable future.  This was up from 50% in 1999.
• The newsstand is repeatedly cited as the single biggest challenge facing the magazine industry.

I could continue at length about problems facing the current newsstand system.  There are even some experts who believe that in the next 5-10 years, the newsstand system will essentially be dead, except for the few magazines that can sell over two million issues each month.  So, is putting comics back on the newsstand still a good idea? 

It doesn’t sound like it to me.  For example, let’s say Marvel publishes a million copies of Ultimate Fantastic Four each month for the newsstand.  The data shows that 62% of those copies are likely to be returned for a full refund; that’s 620,000 issues!  Even if Marvel only pays $.30 per issue to print and ship them, they loose $186,000 per month.  With a $2.25 cover price, Marvel would only gross about $.90 an issue.  Subtract production, printing and shipping costs and Marvel might make $.50 for each extra issue sold on the newsstand.  This is a profit of $190,000.  The result is a net gain of $4,000 for printing an extra million copies.  This is all assuming there is no additional overhead, like paying the person in charge of issuing those refunds.  This example also uses one of Marvel’s top sellers and more visible titles.  How would a title like District X hold up in the same analysis?

Even with everything stacked in favor of a comic publisher, it’s at best a zero sum game.  Factor in declining newsstand sales and sell-through rates and it is no surprise why comics aren’t on the newsstands.  There is no money to be made there: more likely, there is money to be lost!

Enough doom and gloom though.  I did say I had some ideas that were outside the box.  Armed with some facts, I can understand why publishers don’t pursue the existing newsstand market.  I had to let that idea go before I could move on to new ideas.  Does this mean we should be frustrated and quit trying?  No way!  If the current system of newsstand distribution is broken, then it’s time to develop a new system!

In order to get comics back into the traditional retail outlet, the industry will need to be retailer-driven.  To develop this new approach, we need to establish the needs of the traditional retailer, the requirements of the publisher, and finally, the requirements of a distributor.

My next installment will get to the meat and potatoes of this discussion… The Retailer!

- Will Norris

Footnote:
We want to be clear, we’re 100% supportive of Comic Book Retailers and this is not about replacing the Comics Stores out there. We all know one of our biggest challenges is dealing with the shrinking consumer base for comics, due to a rather insulated means of distributing. Really, how many non-comics fans walk into a comic shop?

This series is intended from the angle of providing comics as a whole a wider diversity of outlets, and perhaps a higher chance of attracting new fans, or lapsed fans back into the fold by getting comics out there and visible to a broader demographic. The Comic Book store, like a magazine store, will always still attract the major fans who want to have folders or boxes to make sure they don’t miss titles, want to find the best small press stuff, back issues, etc. As a matter of fact, my philosophy is that a wider distribution of comics would help the comic stores by ‘hooking’ fans who will then, inevitably, go looking for more! (C.)