Is 2007 a "bad" Year for Comics?

The end of the year is approaching and one of the things many business owners do is look over the climate of their industry to see how their own store performance fits into that. Making that examination easier were two recent columns I read discussing performance in the comic book industry in 2007.

First, let me point out that I did several bits on stores closing this year. Here is one in March and in August and in November.

I also posted about Marvel's falling profits in the second quarter of this year. But the profits did rebound in the third quarter, thanks, they say, to Spider-Man 3 toy revenues.

Today in his Lying in the Gutters column on CBR, Rich Johnston discusses the financial trouble at Wizard: "I'm told from current Wizard sources that the entire Wizard operation was $200,000 in the red for August, and they've taken moves to cut easy short-term financial liabilities as quickly as possible. Which now also includes staff writer Brian Warmoth giving his two weeks notice." For those of you unfamiliar with them, Wizard is one of the most requested comic book magazines at my store and they host several comic book conventions across the US every year, plus they have a web site where they sell comic books, toys and other comic book related items.

Today on ICv2 News they gave the November 2007 numbers and for the first time since 2005 the year over year numbers for comic book sales were down. Comics were down 12% according to the report, but graphic novels were up 29%, yet the total combined dollar sales were down 5%. But October's year over year sales were up, they reported. In September they reported that August 2007's growth was a slow 5% overall, and even in the summer months they showed very slow to almost no growth, and those are usually the best months in the comic book business.

Broadening the picture a bit more... If you have been paying attention to the retail stocks in the stock market you would know that many stores in the retail sector experienced slow, if no growth, and even some losses, in the first three quarters of 2007. Anyone who turns on the TV or radio or looks at a newspaper has to have seen or heard about the "housing crisis" of 2007 as well. The stock market's Dow Jones Average is up for the year, but it looks like it's down since October 07.

In my store we've experience year-over-year growth every month of 2007, but not as much as we have in years past. But part of this is expected as a retail store starts to become "established" in a community in year 3, so the growth does slow down. November had the lowest growth of all of the months so far. So, while our growth continues, it has slowed while overall expenses continue to grow.

A number of comic book retailers have been complaining since August about their sales slowing. Some have said sales remain constant while expenses continue to rise. Others have seen little growth at all. And still others have gotten into a bad financial situation and have had to close down.

2001 started what seemed like a new boom for comic books. Movies were being made again and sales were steadily rising. Graphic novels and maga were rapidly increasing in popularity as well, boosting the industry overall.

So, based on the information, I wonder: Have we just started to see an inevitable slowdown in the comic book industry? Or, is this just the beginning of a downturn? Is the nation experiencing an economic crunch that all businesses are feeling, or is it more specific to brick-and-mortar retail? Will we continue to see brick-and-mortar comic book stores closing down in 2008? Will someone or something start a resurgence in the comic book industry next year, bringing growth back up?

I know we're still in business, so we are doing better than some fellow comic book comrades did this year. But I'd be lying if I didn't say that the finances here are pretty tight, much tighter than they should be during the holiday shopping season. I am not sure if the slowdown will turn into a full-fledged downturn. I hope it won't! But if we're seeing negative numbers in November it worries me. I'll be even more concerned if December's numbers are also down. I am sure there will be more closings in 2008 - because someone always closes for one reason or another. Hopefully good stores will not be forced to close because they can't afford the overhead costs of being a good store. In order to increase the popularity of comic books I think we actually need MORE comic book stores, not less. Look at Starbucks, there was a time when people didn't even know what they were and now that there's at least one one in every city on the map just about everyone has gone into one, or at least knows who they are. But a chain like Starbucks is not in the near future for the comic book industry, from what I can tell. Maybe we just need another installment of Dark Tower comics or some good, solid comic book stories that will increase sales and we'll all be back on track. The big comic book movies won't hit until early summer, so we won't see any spikes from that as 2008 starts.

My crystal ball is in the shop, so I can't predict how things will look at this time next year. But I hope this downward slip that's been reported and that a number of comic book retailers have said they've been witness to, is a temporary thing. I hope that 2007's slump passes and that 2008 brings us all better things! I hope fans, new and old, find new stories and characters that excite them and bring them in week after week and get them to bring their friends into comic book stores too. I hope comic book stores learn how to cut costs and make good business decisions rather than having to close down. I hope Marvel and DC and Dark Horse and the other publishers continue to try to diversify into non-superhero genres so that we can continue to see more new people coming in to read those stories. I hope that without any new TV during the writer's strike people get into comics and back into comics (for those that left in years past) because they now have more time for reading. Let's not let 2007 get us down, but focus on doing what we can to make 2008 better!

Marvel's Profits Fall

Remember a couple of days back when I was discussing that several comic book stores, some of them very high-quality stores and some not, have been closing. I then put out the question of weather or not this was a sign of consolidation or trouble in the comics and pop culture entertainment industry. (Click this link to read that post)

Today I see that Marvel Entertainment's 2nd quarter profits were down, lower than expected. According to the Reuters report, the Hasbro toy line for Marvel has been down, and they've cut their toy sales forcast for the second half of the year. "Marvel's second-quarter toy segment revenue fell about 24 percent to $19.3 million, which makes up about one-fifth of total sales... Shares of the company were trading down about 8 percent at $22.05 in morning trade on the New York Stock Exchange."

I have put Marvel's 1-year stock chart here, so you can see how the price has been moving. It looks like it's actually up, but on a decline at the moment. Not all that unusual, as sometimes stocks go up too quickly and then the market corrects the price by brining it down to a more realistic level. How hard this loss of profit will hurt them is to be seen.

This could be a sign that the pop culture/entertainment market is in a decline. Or, it could simply be proof that Marvel made a bad choice when they moved their toy line from Toybiz to Hasbro. (Have you seen the Hasbro made Marvel Legends? They're HORRIBLE!!)

Publically Traded

There is a comic book/pop-culture/cigar store called Zaldiva, down in Florida, that is publilcally traded under the symbol ZLDV. Who would have thought that this type of store would be a publically owned company? Not me! It is an interesting idea, though.

Of course it's just a penny stock traded OTC. (That's over the counter, for you non-stock types. This is commonly where small businesses with penny stocks are traded, as opposed to the New York Stock Exchange, Nasdaq or American Stock Exchange.) Having been a stock broker in the late 1990's and early 2000's, I know that OTC stocks are really the smallest and riskiest kinds out there ususally. Often they are for companies that don't have good enough credit or are not large enough to make it to any of the other public trading floors. The Securities and Exchange commission says, "Penny stocks may trade infrequently, which means that it may be difficult to sell penny stock shares once you own them. Because it may be difficult to find quotations for certain penny stocks, they may be impossible to accurately price. Investors in penny stocks should be prepared for the possibility that they may lose their whole investment."

I assume this was the way they decided to fund the company - by selling shares to the public. I don't know that for sure, but it's my assumption. The shares seem to, asside from a initial spike and drop that often occurs when a new stock is made public, hold their small value. It's kind of an interesting way to fund a small business. I would think that doing this would also be difficult for a small business, since now the ownership is in the hands of several people, who can vote people in and out of control of the business as well as have control of the other decisions in the business. I would not recommend this as a way to fund a new comic book store personally, but who knows, it might work out well for this company.

Comics Outperform Stocks

I just found this article on Outside the Beltway. In it, it says that if you bought a golden age comic book for $.10 back 45+ years ago and sold it today, in most cases you would outperform stocks. Comic books are the only collectible that would do this, the writer says. He uses an example of a $.10 Fantastic Four that sold for $36,000 - giving the person who bought it for $.10 and kept it all of those years a 32% return on investment. Of course many of those that have these older comic books were not the original buyers - they have bought them more recently and for much more than $.10. Still he says that even at $250 that Fantastic Four comic book would have yielded a good return.

He does say that the golden age is over - that new comics just don't have the same supply and demand issues that make the old comic books valuable. I am glad he brought this part up. While Golden Age comics do go up in value, especially those still in good shape, it is highly unlikely that modern comics will see that same kind of appreciation in value over the same 45-year period. Today many people save their comics, and store them in bags made for comics, where back in the 1930's and 40's comics were considered kids magazines and often thrown out or recycled, or shared amongst many kids until they were in tatters. In addition, today's comics are printed on different, less acidic paper. The comics of the golden age were printed on news print, which is very acidic and caused comics that were saved to yellow and crumble over time. People can save whatever they want, and maybe one day they will get lucky and see that item grow in value. However, with modern comics, you can't count on that and they should be purchased for enjoyment, not for collectible value.

Marvel's Business

I just found an interesting column on Marvel Enterprises on The Motley Fool. That's an investment site, for those of you who don't know. The writer, Tim Beyers, took a tour of Marvel, guided by it's EIC, Joe Quesada and they discussed Marvel's business model both as a publisher and as a movie maker.

JQ said that the comics arm is the R&D for the movie arm. Interesting concept. They have been using characters that have been around for a long time, like Fantastic Four and Spider-Man to make movies. However, it sometimes seems like the movie arm has never actually read any of the comics they're making into movies. But such is the bane of Hollywood. Even Stephen King said at the NYCC that he doesn't care how the movies are that are made of his books. He just takes the check. Sure, he hopes they're good, but he doesn't involve himself in the movie part.

JQ also told the columnist that Marvel is at it's best when it reflects the real world - like it did with Civil War. First of all - let me say I prefer comics as an escape from reality - if I wanted reality I'd just watch the news and read the newspaper. Second, how real is it when we're talking about super powered people - mutants and gama-ray infected characters of all kinds. That's not too real! I personally think if people want books that reflect the real world they don't read super hero comics. Maybe I'm wrong. I thought that Civil War, while it had its good moments, tried to be too "realistic" or to reflect some kind of realism the creators and master minds of the event would like to see happen in the real world. (People for and against the government realize the government is right and give up their freedoms for a kinder, gentler world, maybe.)

At any rate, Beyers seems to feel that Marvel's been growing and that they'll continue to grow. He's bullish on MVL as an investment. I'm not so sure I'd be, but then again, I'm just a former stock broker who gave it up to hustle funny books.