Posted in: Comics, Current News | Tagged: AENT, diamond

Alliance Entertainment Boss Talks About Why They Bought Diamond Comics

Alliance Entertainment boss Bruce Ogilvie talks about why they bought Diamond Comic Distributors and his plans for the direct comics market.

Last week I was the special guest on the Beyond Wednesdays podcast with comic store owners Jesse James, Dennis Barger and Bryan McClay. And it turns out someone rather interesting was watching us. One Bruce Ogilvie, Chairman of Alliance Entertainment who, a few days later, with his partner Jeff Walker (who was physically at the auction) would buy Diamond Comic Distributors at auction as part of their Chapter 11 bankruptcy proceedings. And yesterday he was on the podcast as this week's special guest. First, the guys broke down the news of the sale and then quizzed Bruce Ogilvie about what had gone down.

We learnt that Bruce Ogilvie began selling music at swap meets in 1978, later founding Abbey Road Distributors in 1980 after convincing record companies to work with him. He also said that he grew this company to $94 million in revenue by 1994. As a self-taught programmer, Ogilvie developed a warehouse order-picking system in the 1980s to improve efficiency, motivated by a desire to lower costs and increase profitability. This system helped computerize seven other music distributors. After selling Abbey Road Distributors in 1994, Ogilvie joined Jeff Walker in 2001 at Alliance Entertainment, which evolved from a retailer in 1991 (CD Listening Bar) to a distributor (one stop) called Super D. They grew the company from $18 million to $1.4 billion in revenue by 2020 through acquisitions and diversification. Alliance expanded beyond music into movies, video games, and imports, acquiring companies to leverage existing relationships and diversify revenue streams, especially as digital music impacted physical sales.

Alliance Entertainment has grown through acquisition over the years, and the Diamond acquisition is part of a new five-year plan to grow faster as a public company. Bruce Ogilvie admits a lack of knowledge of the comic book market and learned of Diamond's potential bankruptcy from an industry tip at an investor conference. It was Alliance who contacted the firm Raymond James Financial and tried to buy Diamond outright without having to go through the expensive bankruptcy process and to avoid costs and creditor losses, but to no avail, the wheels were in motion. And above the payments to cover debts, a guessing game in the chat saw Ogilvie admit they will have paid closer to $40 million than $50 million…

There is a big learning curve coming, but he definitely seems open to learning more about what his company has bought. Alliance is employee-owned, and Ogilvie plans to retain Diamond's staff for their vendor and customer relationships, to learn from their institutional knowledge, and to address operational issues to make the business profitable. Ogilvie and Walker also aim to integrate Diamond's inventory into Alliance's system for efficiency, avoiding multiple platforms.

The price point of comic books is going to be an issue

Bruce Ogilvie emphasizes profitability over being an "expensive hobby," targeting higher price points. They cited that it was pointless selling $5 CDs, they would rather distribute $20 CDs and look for a minimum profit on items as 95 cents. That may well be an issue. Currently, Diamond makes much less on their comics, usually between 2% and 5% of the cover price on most comics, depending on their deals. Maybe 20 cents on a $3.99 comic? If that? Would the cheapest comic that Alliance Entertainment be willing to distribute around $20, netting them a dollar? Will they be pushing up the profit margins on floppy comics? Or will they just change the policy for comic books? There are likely to be changes in the long term but for now, Diamond will continue as usual.

Ogilvie admits there was pressure to buy more of the Diamond assets in one fell swoop. He was surprised to learn Diamond's San Diego Comic Con booth was part of the asset purchase and still has to talk about the future of the comic price guide Overstreet with his team. But for Alliance Entertainment, this is all about diversity. Ogilvie cited Ingram Entertainment's failure to diversify as a cautionary tale. And sees this as year one, aiming to leverage public status despite the high cost and complexity of going public.

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