Love it or hate it, we all remember the chromium, die-cut, polybagged, acetate extreme-ness that was the 1990s. But scratch just a little below that flashy, superficial surface and you’ll find a comic book hobby and an industry rife with issues that – in hindsight – should have been Klaxons alarming hobbyists of the impending implosion should they stay on the same path. To understand why there won’t be a bubble burst today and why today’s landscape is unlike that of the 90’s, we have to travel back in time to take a look at that decade, and understand what brought about the boom and then ultimately what caused the collapse.
If we are going to travel back to the beginning of this story, we have to travel back to the middle of the 1980s. DC Comics was enjoying a revitalization with hits like Watchmen, Crisis On Infinite Earths and Frank Miller’s The Dark Knight that were hitting stands with massive sales and great amounts press coverage. Across the street at Marvel, Jim Shooter’s bullpen was pushing out it’s own series hits like the uber-hit event Secret Wars. Shooter was pushing out good content that was on-time and creators were (finally) getting their money and proper credit. The collectibles market, bolstered by a strong economy, was booming. For example, a 1909 Honus Wagner card sold in ’85 for $25,000 eventually being sold in 1993 for just under ½ million dollars. All eyes were on comics when the New York Times published an article called “Holy Record Breaker” about a Detective Comics #27 that sold in a Sotheby’s auction for $55,000 and an Action Comics #1 shortly thereafter for $82,500 dollars. While the Sports Cards makers never published their print run numbers, estimates had the number upwards of 81 billion cards per year and comic book print runs were in the hundreds of thousands even millions themselves. There was a massive amount of product whose prices were driven up by savvy collectors and guides like Wizard Magazine and Beckett Price Guide.
There are three core causes to the comic book market crash of the 90’s whose roots began around this time. 1) Collectors and speculators 2) The Retailers and Distributors and 3) Executive Boardroom battles within the Publisher’s, specifically Marvel. Let’s look at each of these individually.
First, Collectors and speculators misjudged the market and just what made those newsworthy collectibles like the Wagner and the first appearance of Batman so valuable. In short: They are extremely rare. These things were made at a time when they weren’t considered collectible, when the paper was recycled for the war effort, when kids rolled them up and stuck them in their back pocket. To be read, traded and most likely discarded. Not many survived. But companies like Marvel and Upper Deck started to manufacture collectibles and rarities in the form of new first issues and rookie cards with gimmick covers and slick card stock. They featured deaths and major events within their pages. People ate them up en-masse, stuck the collectibles in their white boxes in the basement, bagged and boarded, with the promise that in 20 years they could put their kid in college or they’d be able to pay cash for that new Mercedes they keep seeing in the neighbor’s driveway. Superman is dead! That issue will be as important as Action Comics #1 (so they were promised). Batman’s back broke and there’s a new X-Men #1! Buy buy buy. The problem here is that everyone got the message.
The Second part of the three part equation is that the retailers and distributors contributed to the problem. During the very late 80’s and early 1990s there was Diamond Distributors and Capital City who shared the burden of delivering comic books to all of the comic book shops across America. During the height of the boom, that number of shops reached somewhere around 10,000. With the promise of big returns and a very healthy market of consumers to sell to, people unfamiliar with the particulars of how to run a shop and manage inventory were getting in on the boom. Collectors and even Wall Street investors were opening shops, drawn by the promise of better ROI’s than some bonds after reading about those big auction sales in the paper. To feed to proverbial hunger of all those collectors and speculators at the peak of the boom in ’92/’93, the distributors lowered the “entrance fee” to become a retailer. Just $300 could set you up with an account in good standing and – boom- just like that you’ve gone from collector to retailer. But that doesn’t mean you have the experience, and the additional cash-flow to continue beyond that. And, just like the collectors, shops misjudged ordering. Chuck Rozanski of Mile High Comics estimates that 30% of new stock ordered from 1990-1994 ended up as over stock. These inexperienced store owners, cannibalized sales from more established stores. Publishers only saw sales figures at the retailer level (not what shops actually sold in store). Distributors knew shops were over ordering but were making money so they let it happen. What comic stores were left with is entire boxes and rooms and basements of unsold comic books and cards. And those unsold books led to the closing of nearly 6,000 Comic shops. We’ll talk about the bottom falling out and the burst in a moment.
The Third contributor to the crash was the publishers and corporate greed. This one might be complicated but I’ll do my best to break it down for you. A year after New World Entertainment began their 3-year ownership (they bought Marvel in ’86 for $46M during the Cadence Industries liquidation) stint at Marvel, Jim Shooter (the man who helped the boom of the mid-80s) was fired. The roots of the crash start here. It was not long after this – 1989 actually – that Ron Perelman (via Andrews Grp.) bought Marvel for $82.5 Million dollars. Perelman’s goal was to create something much larger than a comic book company. He wanted an Entertainment company and, in the short term, was successful. To appease shareholders his mandate was to increase prices (they’d gone from 0.65 cents in 1986 to $1.25 by 1993 (… $2.17 in today’s #s, adjusted for inflation). The title line itself ballooned massively during this time but so did profits. This massive push was a strain on the bullpen and ideas started to form in the minds of a few to leave and start their own venture. By 1991 Tom DeFalco (Shooter’s replacement as EIC) and Ron Perelman took the Marvel public which caused stocks to shoot up even higher. Perelman’s strategy at this time was to issue “junk bonds”, backed by Marvel Entertainment Group’s rapidly rising stock value. Perelman purchased other companies like Fleet in 1992 for $340 million dollars and 46% of ToyBiz in ’93. This is where two important players entered the arena: Avi Arad and Ike Perlmutter, both joined the Marvel Board of Directors. Perelman was also opening holding companies like Marvel Holdings and Marvel Parent Holdings to spread out operating losses and reduce tax payment requirements. These new holding companies also became collateral upon which he issued additional junk bonds. Money was good at the top.
And THAT is the boom.
So what happened? While most say that 1993 Valiant/Image inter-company crossover event DEATHMATE was the nail in the coffin, one could portend that the exodus of creative from Marvel to the newly minted Image Comics in 1992 was the start. Why? They were creative and when it came to running their own publishing company, they didn’t fully understand the business side. So when it came to their titles and, eventually, the Deathmate crossover, they were plagued with delays – called Schedule Slip – and issues with not understanding the other company’s characters and what people like about them. The delays were so bad that peoples’ demand for the book and interest in them waned. Part of the problem is that stores had already pre-ordered the $4.95 book based on initial demand 2 months before hitting shelves. All those promises of permanence, namely with DC Comics’ “Death of Superman”, an event that made the evening news, proved to be empty promises. Less than a year after Superman died, DC decided to bring him back. When they did, collectors went to sell their Superman 75s and found that everyone else already had multiple mint copies stored away. That thing they didn’t understand about the Detective Comics #27 or the 1909 Honus Wagner was that they were truly rare because they just weren’t around. Just print “Collectible Issue” on the cover does not make it collectible or rare. Some estimates have the print run on Superman #75 in the 3-4 million copy range.
And the bottom dropped out.
By 1994, Marvel was reporting losses of $48.5 million dollars range. Alan Greenspan, fearing an inflation spike, had instituted a rate hike which dumped the Dow causing stock to fall sharply. Capital City Distributors, in response in part to the massive delays of Deathmate, instituted penalties for “schedule slip”. This propelled Marvel to buy their own distributor and distribute in-house via Heroes World. Capital City’s competitor Diamond Distributors did not want to lose a third of their business to Marvel’s in-house distributor so they bid aggressively for exclusivity on Dark Horse, image and the DC titles. Comic book shops didn’t like having to put in 2 orders, pay for double shipping and – frankly – couldn’t afford it in a large number of cases. Smaller publishers were going out of business like Defiant and Eclipse and Malibu. Eventually even Capital City, after clients like TSR shut down, went out of business themselves …. Leaving Diamond as the sole distributor for the entire country and an infrastructure that was far from support shops on that scale.
The Major League Baseball strike of 1994 and the NBA lockout in 94/95 killed demand on collectible cards and demand fell drastically on Fleer and Skybox cards which Marvel scooped up in 95 for $150 million. As money slowed and Perelman kept buying, Marvel’s debt soared to $700 million even after taking ToyBiz public. Perelman had convinced investors to buy $900 million in junk bonds but these were only backed by Perelman’s own shares.
Both retailers and publishers misjudged the market. ”We couldn’t get a handle on how much of the market was driven by speculators,” Perelman said; “the people buying 20 copies and reading one and keeping 19 for their nest egg…” At the worst of the bubble, in 1996 there were just 4K shops nationwide. Buyers had left, disillusioned, which meant less orders, cut titles and less product for store shelves.
There were no buyers, no comics, no value and … no money.
Around the Christmas of 1996, Marvel filed for Chapter 11 bankruptcy protection and thus began a corporate boardroom and courtroom war between Ron Perelman (an owner of 80% of marvel but whose value was all but pledged to all those issued bonds), corporate raider Carl Icahn (an investor who was buying up Marvel bonds at 20% of their value) and the ToyBiz team of Avi Arad and Ike Perlmutter. The Chapter 11 filing was partially to save Marvel, since a collapse of Marvel might’ve meant the collapse of the entire industry, and partially to block Carl Icahn from getting a majority ownership of Marvel. But in the end, Chase Manhattan made their choice so Ike Perlmutter and ToyBiz won out. In 1997 they bought the rest of Marvel and formed a new company, bringing them out of bankruptcy however the industry truly hit a nadir around the year 2000 and has been slowly evolving since then.
So how is the comic book market of today different?
Ed Glasier, a Harvard Economist, says boom/bust always follows same pattern – 1) Decisive change in sentiment or credit conditions and 2) Investor tendency to underestimate the extent to which supply eventually responds to demand.
Why is this important? These 2 factors, without question, impacted the state of comics in the 90s and it impacted the state of comics at multiple levels. Comic book collectors and speculators became disillusioned and left, leaving retailers with massive amounts of back stock that the distributors were pushing and front loaded debt. Marvel’s C-Suite was pushing for bonds and big ROI’s, so focused they were that they didn’t have a grasp on when the market fell out and to what extent. They underestimated the extent to which supply responded to demand.
This is not the case of the industry today. On the surface, we can see similarities in variant covers and flashiness and big events promising sweeping changes. We’ve even seen a resurgence in superstar artists. And we must acknowledge the comic book shops that have closed over the past couple of years. Beyond that, how is today different?
The first – and perhaps the biggest – difference is that Marvel is owned and backed by the giant global empire of The Walt Disney Company. While simplified, D.C. Comics was able to weather to storm of the ’90s due to their backing by Warner Brothers. Both Disney and W.B. are experiencing a golden age of cinematic comic book related movies and content. Their movies are bringing in billions in profit, bolstering the pop culture profile of superheroes to astronomical levels. While this doesn’t always translate to comic book sales, the good thing about being owned by a Disney or W.B. is their variety and their ability to hit numerous fandoms and columns of consumer.
The field of today is much more varied now than it was in the 1990s. First, the amount of smaller press, independent publishers is phenomenally vast and is constantly growing. Technology has allowed nearly anyone to publish a comic book now via crowdfunding platforms. If one publisher goes under there is a still a large and varied field that can bear the weight of the void.
That said, the market is NOT booming enough to crash. While I do say there will not be a comic book bubble burst or a “market crash”, per se, that does not mean that we are in a healthy, thriving marketplace. There are many issues that would help improve the health of our hobby and they exist at all levels from fans to distributors to publishers alike. And those factors have continued to contribute to a smaller, tighter, thinner market. A smaller market means much smaller prints runs (they’re a fraction now of what they were in the 90s) and even if a book doesn’t sell, the publisher isn’t out the cost of production + printing x 1Million. That said, a thinner market means tighter margins and tighter margins mean retailers have to watch their numbers very closely and when they can’t manage inventory and trends they do end up closing. Smaller stores typically rely on new issues from Marvel and DC while larger stores likes the closed Hastings order in quantity without much strategy for regional distribution. Some stores close and some stores open while others yet expand. That’s not unique to this industry.
The 1990s had no online or digital sales. There was no eBay, no ComiXology, no Amazon, no Heritage Auctions website or forums with digital marketplaces. There was no previewsworld.com. There was no burgeoning, steadily growing international market. You had to drive to the next town to find that missing issue, you couldn’t hop online and buy a copy in five minute from someone three time zones away from you. Comic Book shops were beholden to customers within a predetermined geographic radius from their brick and mortar store. They were not able to list unsold copies online, instantly accessing a global customer base.
BookScan reports indicate that Scholastic sales and book fairs are strong, even hitting $1.74 billion dollars in 2017. According to Amazon, digital sales crossed the $100 million dollars per year mark in 2014. Per Comichron, print and digital combined in 2016 (the last year available) is over $1 billion dollars. Overall, the industry is bringing in more than $100 million more than at the peak in 1993. This is partly due to the increased retail costs per issue (cost has rapidly outpaced inflation) and partly due to the increased amount of publishers and outlets available to the consumer.
Yes, there are still speculators but the industry is not relying on them as they were in the ’90s. The speculators of today are reaching in to the back issue bins for those silver and bronze and copper age key issues that tie in to today’s superhero movies. They do still boost short term sales with variant covers of new issues and first appearances but if people suddenly stop if will not be a fatal blow. Why? Again, print runs are a fraction of what they were.
What we are left with is an industry that is much smaller and leaner than it once was. It is also an industry that is much more varied and broad in its reach. It is also a market that has become ingrained in popular culture.
Where will we be in twenty years? I can not predict that far in to the future but what I can tell you is that right now – and for the foreseeable future – comic books are safe.