Posted in: Comics, Marvel Comics | Tagged: Comics, dc comics, diamond, distributor wars, marvel, Penguin, Penguin Random House, prh, Random House

Thoughts About Marvel Replacing Diamond With Penguin Random House

Yesterday, Bleeding Cool reported the news that Marvel Comics was moving its exclusive direct market business to Penguin Random House and away from Diamond Comic Distributors. Although retailers could still order through Diamond, as a wholesale customer of PRH. Though, as Bleeding Cool emphasised, "You can order Marvel through Diamond and through PRH. But PRH won't charge you freight." But there's more. We also had 52 questions asked and answered by Penguin Random House to potential comic book retailers. The headlines seemed to be free shipping, a standard 50% discount level for retailers, a specific warehouse for comic book distribution (half an hour away from  Diamond Comic Distributors own big warehouse) and assigned sales reps for all comic book stores.

But how will this all shake out? Here are some overnight thoughts. As well as a few doodles I found myself doing over breakfast.

If Diamond Comic Distributors loses Marvel accounts as well as DC Comics, it would have to contract significantly or go under. DC and Marvel made up 95% of the comic books distributed by Diamond, 85% of the graphic novels and collections and around 50% of everything Diamond distributed to comic book stores.

Aside from the future of the distributor, if they do go under, a lot of independent publishers are owed money and have stock stored in warehouse by Diamond. There was a big problem last year when Diamond stopped paying and then only partially paid balances during the pandemic shutdown. It demonstrated Diamond's financial fragility and impacted cash flow severely to smaller publishers. Indeed it was this action that spurred DC Comics to split entirely from Diamond and, odds are, it heavily contributed to Marvel's decision to move to Penguin Random House, and for a number of publishers to move their graphic novel market to Simon & Shuster – a company that Penguin Random House is in the process of buying for over two billion dollars.

Not only that, but Diamond Comic Distributors acts as a bank for the direct market of comic book stores. Many are heavily in debt to Diamond and Diamond keeps the debts, preserving the comic store that owes them. One of the reason far fewer comic stores closed during shutdown was Diamond not insisting that outstanding bills be paid. This also makes Diamond financially vulnerable, and if they called the debts in to pay for other expenses, such as losing Marvel Comics, many stores would go out of business.

But how many stores will Diamond lose the Marvel business to Penguin Random House? It has been established that Diamond will be operating as wholesaler for PRH to the direct market, so comic stores can continue to get their comics from Diamond Comic Distributors if they wish. It would certainly mean less paperwork for stores, but does it make financial sense? Unusually, leaving Diamond for PRH will benefit smaller comic book stores more than larger stores, and here's why.

Through Diamond, Marvel Comics sets different discount levels for the size of the store making the order. The smallest stores may only get 35% discount, those who order a few comics. That discount increases with the order, most comic book stores are around the 45-50% mark, while big stores are around 55% and the very biggest stores are on 59%. Diamond Comic Distributors gets around 60% discount from Marvel, so those margins get tight when all the costs of distribution are taken into account. There are also very few stores getting that 59% discount and we are basically talking about Midtown Comics and DCBS, who DC Comics left Diamond for last year, as UCS and Lunar. There are rather large ironies at play here, and I am sure Marvel's David Gabriel has been having lively discussion with both.

Because Penguin Random House seems to deliver a flat 50% discount for all account, including free shipping. This means that smaller accounts will see their discount increase and shipping decrease, a real financial shot in the arm. Even mid-size and large comic stores should benefit from switching to PRH. Retailer Brian Hibbs estimates that overall Marvel shipping from Diamond costs about 4.5% of the cost of the comic. So a store gets less than 55%, they should go with PRH over Diamond. But on that basis, the biggest stores should stick with the existing Diamond deal. That's if the Diamond deal stays the same. As a wholesale sub-distributor, it may not be able to make those 59& discounts work any more. So whether they stay or go, the biggest stores are going to take a hit to their profit margins over this. While the smaller stores will be quids in.

How this all affects UK stores, which have free shipping from Diamond UK already, though international shipping baked into the prices offered and discounts given, I don't know. I am trying to find out, however. And we have until October to iron out the kinks. In comparison, DC Comics' instant switch to Lunar and UCS was such a botched job that DC Comics had to revert to Diamond UK when they realised the costs of shipping individually to the UK was around three times the cover price.

Bleeding Cool has received a lot of comments talking about Penguin Random Housedamages to trade paperbacks and graphic novels received, far higher than Diamond. And now with the more vulnerable-to-being-bent comic books joining that journey, some are rather worried. PRH has a dedicated comic book warehouse for this, but you can imagine that the learning curve is going to be rather steep on this one. Which stores want to be the guinea pigs? Or the guinea penguins?

What will be of massive benefit for Marvel Comics is that they will be able to distribute comic books not just in comic stores but in bookstores that already order from Penguin Random House. A potential market that's five-to-ten times that of comic book stores in North America alone. If they only start ordering a few comic books, that will see Marvel's numbers boosted significantly.

Bleeding Cool has also confirmed that while Marvel is exclusive with Penguin Random House, it is only one way. PRH can bring in other comic book publisher to the direct market as well. And given DC's longstanding relationship with PRH, how long before DC drops Lunar for PRH? And other publishers decide to do the same, especially when PRH's purchase of S&S brings them all under one roof? Could PRH be the new Diamond? And does that make Diamond the new Capital City?

And all bookstores have to deal with is multiple titles featuring a character, with multiple variant covers, printings, lateness and changes. That won't cause any other problems, will it? We have lots of questions submitted to Marvel, Diamond and Penguin Random House, yet to be answered. Bleeding Cool will keep asking them and try to get some answers from… someone. And I guess I'll have to keep drawing penguins.

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