For those that don't know Chuck Rozanski is, he the owner of Mile High
Comics. Long time readers might remember their ads in Marvel Comics and in
various industry magazines. He has been in the business of selling comics
for decades and has an influential voice in the comic industry. Below is a
very eye opening interview where he discusses his opposition to recent
Diamond Comics / Steve Geppi dealings with online super stores
AnotherUniverse.com and the upcoming NextPlanetOver.com. Also
discussed are his near purchase of Marvel Comics publishing arm and
his thoughts on other industry matters.
Coville:
You recently asked the Department of Justice to investigate Diamond Comic
Distributors. For those that don't know what is going on, can you explain
what Diamond is doing to warrant this investigation?
Rozanski:
My initial contact with the Justice Department was when they called me for
my opinion on Steve Geppi's acquisition of anotheruniverse.com. I told them
that I considered his personal ownership of the leading Internet retailer of comics
to be a direct conflict of interest with his other role as the owner of
Diamond Comic Distributors, the sole-source supplier to the retail comics
trade of Marvel, DC, Image, and Dark Horse publications. But I told the
investigators that I was negotiating with Steve Geppi personally to find
ways to mitigate the conflicts involved with his ownership of
anotheruniverse.com.
Unbeknownst to me, however, at the same time as I was trying to explain to
Steve that he needed to find ways to utilize the huge Internet mailing list
(400,000 addresses...) of anotheruniverse.com help the Direct Market retailers
dependent on Diamond, Diamond was secretly negotiating an arrangement with
yet another Internet retailer, Next Planet Over, to enter into a deal by
which Diamond would provide exclusive shipping from their Sparta warehouse.
This arrangement allows Diamond to collect shipping and fulfillment fees for
a period of two years from Next Planet Over, while denying this same
opportunity for that same two-year period to any other Diamond accounts. It
also allows Next Planet Over nearly immediate access to the huge Diamond
Star System inventory backlist of trade paperbacks, toys, cards, etc. with
minimal, or possibly no freight charges. The Diamond team also revealed,
under intense questioning by retailers, that they were going to warehouse
inventory in the Sparta warehouse for Next Planet Over, including back issue
comics. The revelation that caught everyone by the most surprise, however,
was Steve Geppi's admission that he had an option to purchase equity in Next
Planet Over. If exercised, that option would give him partial ownership of
both major Internet retailers of comics product.
This information came out by accident at the annual DC Comics retailer
meeting the weekend of March 12-14, and it's sudden release caught the
Diamond management team by surprise. They tried to convince the
approximately 65 retailers in attendance that their secretly negotiated
contract with Next Planet Over was no threat to other Diamond accounts, but
were met with extreme skepticism. All the retailers with whom I had
discussed the matter at the DC meeting were very concerned about the
possible implications of Diamond/Steve Geppi making this bold intrusion into
comics retailing. Given that he already owned the majority of stock in
anotheruniverse.com, Steve Geppi was viewed as now having a personal
interest in gaining a percentage of the retail market for comics.
While I had already resolved at the meeting that I had to call the Justice
Department (I promised them I would call them back if the situation with
Steve Geppi changed...), I was given added impetus by Diamond's announcement of
March 17th that all retailers currently being serviced out of Diamond's Sparta
warehouse (including Mile High Comics) would be shifted to Diamond's
warehouse in Plattsburg, NY effective April 8th. The net effect of this
shift (according to our Diamond customer service representative) is that it
will now take seven days, instead of five, for Mile High Comics (and all
other retailers formerly serviced out of Sparta) to receive a Star System
reorder unless we are willing to shift from truck freight to UPS. Given that
UPS shipping costs are significantly higher, we've just seen a degradation
of our service. Meanwhile, Next Planet Over has nearly immediate access, and
theoretically no freight costs. All this because they're willing to pay
Diamond a fee to ship for them.
According to Diamond, the shifting of accounts from Sparta to Plattsburg is
being done to facilitate expansion of the Star System. But the fact that the
displacement to Plattsburg comes right on the heels of the admission by the
Diamond staff that they had a secret arrangement to give space in Sparta to
Next Planet Over, makes this entire process highly questionable to many
retailers. In any event, whether it was planned, or not, this move increases
the already significant competitive advantage of Next Planet Over over the
retailers who were displaced from Sparta. It was this combination of events
that made me feel that petitioning the Justice Department for relief was the
only option left.
Coville:
If Steve Geppi/Diamond Comics continues their plans with
NextPlanetOver.com, what will their positions in the industry be like one
or two years from now?
Rozanski:
I have no way of knowing. Much depends on the negative feedback they receive
from retailers, fans, and the Justice Department. I have already been told
that they are changing the reality of some of the answers they gave to the
retailers in Baltimore. I have to believe that they were expecting little,
or no, reaction to the eventual announcement that they were taking fees for
giving Next Planet Over competitive advantage over their captive retailers.
The fact that comics retailers have taken to the Internet to inform the
entire world of comics about how the Diamond team is altering the
competitive environment of comics retailing, seems to have never occurred to
them. What they do now completely depends on how much negative reaction they
get...
Coville:
You have asked for other retailers to join you in getting Diamond
investigated. How has the response been?
Rozanski:
I've actually been working primarily on a very lengthy report to the Justice
Department about the entire history of my interactions with Steve Geppi
about anotheruniverse.com. Since I had been trying to reason with him for five
months prior to the DC retailer meeting, this report is up to 22 single-spaced
pages, and still growing. I actually have only sent my Justice Department
letter to comicon.com, and a couple other individuals. They have been spreading the
word. I am now receiving e-mails from around the world faster than I can
download and answer them... Once my report is finished, and I post it on our website, I
am anticipating far greater response.
In terms of feedback, I have had 100% support. There are those who are
(quite naturally) skeptical that we will win, but all those who have written me
have praised me for taking this public stance in opposition of the Steve
Geppi/anotheruniverse.com/Diamond/NextPlanetOver.com potential combination.
Coville:
Diamond has come out with a press release discussing the terms between
them and NextPlanetOver.com, what was your reaction to the release and the
information in it?
Rozanski:
They're working like crazy to "spin" this information now that they've been
forced to reveal their secret dealings. If the press release you're
referring to is the one where they say that Steve Geppi "forgot" that he
owns a small part of Next Planet Over, I would ask how anyone could believe
such a statement? The retailers at the DC meeting asked Steve point blank if
he owned any stock in NPO, and he swore he didn't. Now they're saying he
does, but he didn't contribute any funds. So how did he get the stock? No
one ever gave me stock for nothing...That's just one of many inconsistencies
in their press release. I think it's safe to say that these guys are
sweating the proverbial bullets.
Coville:
The press release says Diamond is exclusively fulfilling internet orders
from NextPlanetOver.com, what does that do to others selling comics online,
like Mile High Comics?
Rozanski:
Since we specialize primarily in collectibles (back issue comics, toys,
etc.), this will have less impact on Mile High Comics than others who sell
more new, or Star System backlist. Those who have been selling Star System
backlist are now at a huge competitive disadvantage, as they now have to
either buy massive amounts of inventory and stock it at their in-house
shipping site, or pay the huge expense of setting up a fulfillment point in
Sparta. Otherwise Next Planet Over will have up to a seven-day advantage in
filling orders for Star System Backlist. There is also the fact that they
will have to pay freight, while Next Planet Over theoretically does not. And
don't forget that Next Planet Over will have a much greater likelihood of
being able to discover when the Star System is running short on a desirable
item. When we call in to Star, they tell us if an item is in stock, or not.
But they never tell us how many are left... Even if Diamond sets up a
"firewall," it seems reasonable to assume that the managers of Next Planet
Over will figure out how to get the information on what's available on the
other side of their same building.
Coville:
The press release also says NextPlanetOver.com will be buying comics from
the comic companies and selling/shipping them to individual customers within
2 days. Does this not make them both a distributor and retailer?
Rozanski:
Sure seems like it. This would very negatively impact our N.I.C.E. new
comics subscription club. How can we compete with a distributor selling to
consumers?
Coville:
NextPlanetOver.com had earlier announced they made deals to carry titles
and online content from Abstract Studio (Strangers in Paradise), Oni Press,
Slave Labor Graphics and Adhesive Comics. Will this not help those publishers?
Rozanski:
Maybe. The industry currently receives most of its sales from about 3,000
independent retailers. If even just a few more of those retailers are forced
out of business by these new practices, will the lost sales volume be made
up by just one company? It could be that they end up with fewer sales, not
more. Also, did these publishers realize who they were actually making a
deal with when they agreed to give preferential treatment to Next Planet
Over? These are all companies who pride themselves an being very
retailer-friendly. What will they think as the truth reaches them? How will
they explain their actions to retailers who have supported them for many
years?
Coville:
You clearly feel betrayed by Diamond's deal with NextPlanetOver.com, do
you think you can trust Diamond or Steve Geppi again?
Rozanski:
Coville:
Exactly what would you like the Department of Justice do to Diamond
Comics and Steve Geppi?
Rozanski:
I am now a firm advocate that the exclusive relationships that Diamond has
with any comics publishers must be voided. We trusted Diamond and Steve
Geppi, and I feel they have betrayed that trust. I once advocated the
exclusive relationships because I felt that maintaining stability in the
world of comics was more important than fears of monopolization. I now fear
Steve Geppi and Diamond far more than I fear chaos.
Coville:
What would Diamond have to do in order to convince you that they are no
longer competing against retailers through NextPlanetOver.com
Rozanski:
- Publish the contract between Diamond and Next Planet Over for everyone to see.
- Offer the same terms and services allowed Next Planet Over to any
retailer at the same cost
- Guarantee in writing that neither Steve Geppi, Diamond, or any member of
the Diamond staff would ever take any equity position in a comics retailer ever
again.
- Immediate divestiture by Steve Geppi of his personal stake in
anotheruniverse.com
Coville:
Do you think the industry would improve if Diamond Comics had
competitors?
Rozanski:
I think Diamond has done a pretty good job of shipping comics. But I would
sleep better at night if I had an alternative to their service. Otherwise they are
free to inflict deals upon us like the Next Planet Over deal, and we still
have to buy from them.
Coville:
Is there any chance you would start a distribution company to compete
with Diamond Comics? If not why?
Rozanski:
No. My wife ran a distribution service (Alternate Realities) for ten years.
She found that the economies of scale in distribution greatly favor those
who operate near great masses of population. Since there are only about 8
million people living within 500 miles of Colorado, any distributorship I could set
up would be highly inefficient compared with a distributorship based in one of
the more populous states. Besides, I am proud to be a comics retailer. Making
comics fans happy is what gets me up with a smile every morning. I don't want to do
anything else.
Coville:
At the recent Retailer Representative conference between Diamond and
retailers, there seemed to be other complaints about Diamond policy. Can
you tell us what they were?
Rozanski:
Actually, no. That meeting was so intense, and I was involved in so many
discussions about anotheruniverse.com and Next Planet Over, that the rest of
the meeting was a blur. I know that Rory Root from Comic Relief in Berkeley, and
Mimi Cruz from Night Flight Comics in Salt Lake City briefly raised other
issues, but I was distracted, so I don't know what they were.
Coville:
How do you feel about DC Comics option to buy Diamond Distribution in
three years?
Rozanski:
It seems an unreasonable consolidation of the market. But I respect the
individual members of the DC management team very much. After this situation
with Steve Geppi, however, who I had considered a personal friend since
1977, I would like their assurances that any such deal would be reasonable
to be put into writing.
Coville:
How has Mile High Comics remained successful in today's market?
Rozanski:
Internet, Internet, Internet. We run Internet auctions, we have six million
back issues listed on our website, we send weekly e-mail specials, we cut deals
with companies like Excite, and we post thousands of items on ebay.com. The
Internet is now over half of our business, and all of our earnings. Without
the sales we derive from the Internet, we would go out of business very
quickly.
Coville:
Mile High Comics has an associate program for selling back issues, how
much has that helped your company?
Rozanski:
Not very much in terms of sales, but the goodwill has been great. Sharing
revenues with anyone willing to send us a little business has been very
pleasant. Even if we don't generate many sales, we make lots of new friends.
Coville:
In terms of getting new comic readers, how do you think the industry
proceed. Should we try to latch comic books to other stores or should we try to
make comic shops like music and book stores?
Rozanski:
My vision is entirely different. All of our stores are very profitable right
now, as we have shifted over to selling more backlist and collectibles. I
started selling comics in 1970, and in those days new comics were a tiny
part of the business. I view the Direct Market boom period of 1986-1995 as
being an aberration. The income from new comics was never intended to keep
stores in business. New comics are (were) a way of getting collectors to
visit your store. Selling new comics was a service you provided in order to
sell them backlist. We're now seeing a return to that more stable world, and
retailers who have adjusted are doing very well. But this is bad news for
the publishers, and for Diamond.
Coville:
Do you think putting comic books in book stores or other places would
draw people to comic retailers?
Rozanski:
It's been tried, and didn't work. I believe collectors like going to an
environment where they can speak with individuals who share their same
dreams and manias. That seldom happens in any book or record store.
Coville:
Some readers complain that comics are too expensive. Do you agree?
Rozanski:
Yes! Ron Perelman wrecked this industry when he rammed through the yearly
price increases after he took Marvel public. They took comics from being a cheap,
disposable, impulse item to being (of necessity) a collectible. Once readers
became (at least partially) investors, the industry collapsed. Comics should
be a buck. But rebuilding sales volume to the point where that would again
be feasible is such a herculean undertaking that I doubt it will ever
happen. But it sure would be nice if one of the publishers were to take the
economic risk of trying to work prices back down.
Coville:
Fans also complain that event story lines and gimmicks are hurting the
industry, driving long time readers away in the long run. What is your
opinion as a retailer?
Rozanski:
Long-time fans complain. But publishers find that the "silent majority" buy
more when those tactics are used. I think it might be a mistake to give too much
credence to fans who know when, and how, to provide input. They're good
folks, but they are only one perspective.
Coville:
Mile High and Jim Shooter attempted to buy the publishing arm of Marvel
Comics not that long ago. Exactly what were you two planning on doing
with Marvel if you bought it?
Rozanski:
I was supposed to be in charge of all marketing. I was going take Marvel on
the Internet in a massive fashion, and use the Internet to drive more business
into comics stores. I was also going to try and get top creators on reduced
priced books. A tough job, but I was going to break the price cycle... Jim was
going to run editorial, and his goal was to provide more stand-alone stories, plus
make sure that the stories that were written were more understandable, and
maintained the integrity of the Marvel Universe.
Coville:
Jim Shooter said you talked him into self publishing his Daring Comics
line and using a limited print run of 5,500. Why the limited print run?
Rozanski:
I knew that Jim could get only a limited amount of credit from Ronalds to
print. I debated the issue with my staff here at Mile High Comics about how
many of a new Jim Shooter book would absolutely, positively sell. I argued
for 10,000, but was voted down. Everyone pointed out that the market is so
bad these days, that even a Jim Shooter book (in Black & White) probably
wouldn't sell more than 6,000 copies. Well, that didn't make economic sense.
So I came up with the idea that we could have Jim sign 500 of them, and sell
them for about $10 each (later raised to $17.95). If we sold a bunch in
advance, and we gave Jim 90% of the gross from those signed issues, then the
project was guaranteed breaking even. Since that was really the only goal of
the first issue, that's where the number came from. Some folks thought this
was some scheme to drive up the price on the first issue, but it wasn't. We
just had to make sure that Jim generated enough income to pay the printer.
