As most, if not all, of you have probably heard by now, Marvel will be raising the price of their monthly titles to $3.99 in 2009.
In regards to that price increase, Brian Hibbs mentioned this is his most recent column:
‘The reason Marvel is willing to try selling regular monthly comics at $3.99 is because 10 of the top 10 for the year are $3.99.’
Given the current economic climate, one might wonder why Marvel would decide to increase the price of their titles by 33%. With people losing jobs left and right and a significant number cutting back on non-essentials in order to lower their expenses, it might seem on the surface to be an illogical move.
The math tells a different story.
First and foremost, the numbers I am about to use are purely speculated. I don’t know what the exact discounts are through Diamond, but I do have a rough idea of one side of it. According to Dan Vado’s comments in regards to Diamond’s recently announced policy change (more on that later), it appears Slave Labor sells their titles to Diamond for around a 60% discount of the cover price (it is slightly less than 60%, but I’ll round it to sixty to make the math easier). Marvel and DC likely have a better deal but I don’t have any data on those numbers. As far as the retail side goes, I don’t know what percentage of cover price they pay to Diamond. I’m going to take a wild guess and say they pay Diamond somewhere in the neighborhood of 50% of cover. It could be less, it could be more, I just don’t know (the only real numbers I have to go on would be the discount that is offered by online retailer Discount Comic Book Service --- they sell Marvel and DC books for 40% off cover and most other publishers for 35% off cover, so clearly they have to be buying Marvel/DC books for at least 50% of cover and at a slightly lower discount for all other books). For the purposes of my calculations, I’m going to use 50% as the basis.
In regards to that price increase, Brian Hibbs mentioned this is his most recent column:
‘The reason Marvel is willing to try selling regular monthly comics at $3.99 is because 10 of the top 10 for the year are $3.99.’
Given the current economic climate, one might wonder why Marvel would decide to increase the price of their titles by 33%. With people losing jobs left and right and a significant number cutting back on non-essentials in order to lower their expenses, it might seem on the surface to be an illogical move.
The math tells a different story.
First and foremost, the numbers I am about to use are purely speculated. I don’t know what the exact discounts are through Diamond, but I do have a rough idea of one side of it. According to Dan Vado’s comments in regards to Diamond’s recently announced policy change (more on that later), it appears Slave Labor sells their titles to Diamond for around a 60% discount of the cover price (it is slightly less than 60%, but I’ll round it to sixty to make the math easier). Marvel and DC likely have a better deal but I don’t have any data on those numbers. As far as the retail side goes, I don’t know what percentage of cover price they pay to Diamond. I’m going to take a wild guess and say they pay Diamond somewhere in the neighborhood of 50% of cover. It could be less, it could be more, I just don’t know (the only real numbers I have to go on would be the discount that is offered by online retailer Discount Comic Book Service --- they sell Marvel and DC books for 40% off cover and most other publishers for 35% off cover, so clearly they have to be buying Marvel/DC books for at least 50% of cover and at a slightly lower discount for all other books). For the purposes of my calculations, I’m going to use 50% as the basis.
So let’s take a look the numbers based on a $2.99 comic vs. a $3.99 comic, and then we’ll factor in a decline in quantity sales due to the price increase.
We’ll use 50K as the baseline monthly sales for the publisher and 50 as the monthly sales for the retailer. You’ll note in these numbers as presented that the bottom number is what matters for the publisher (sales after discount) while the discount (profit*) amount is what matters for the retailer (because that is the money they are making back before any expenses are factored in).
Marvel
Copies 50,000.00
Price 2.99
Sales (pre-discount) 149,500.00
x 0.60
Discount 89,700.00
Sales (after discount) 59,800.00
Retailer
Copies 50.00
Price 2.99
Cost (pre-discount) 149.50
x 0.50
Discount (profit*) 74.75
Cost (after discount) 74.75
Marvel
Copies 50,000.00
Price 3.99
Sales (pre-discount) 199,500.00
x 0.60
Discount 119,700.00
Sales (after discount) 79,800.00
Retailer
Copies 50.00
Price 3.99
Cost (pre-discount) 199.50
x 0.50
Discount (profit*) 99.75
Cost (after discount) 99.75
So in this instance we see the retailer is making an extra $15 and the publisher is making and extra $20K.
Now let’s have a look at things when we factor in a 20% drop in sales.
Marvel
Copies 40,000.00
Price 3.99
Sales (pre-discount) 159,500.00
x 0.60
Discount 95,760.00
Sales (after discount) 63,840.00
Retailer
Copies 40.00
Price 3.99
Cost (pre-discount) 159.60
x 0.50
Discount (profit*) 79.80
Cost (after discount) 79.80
Both the publisher and retailer are still making more money than they were at the $2.99 price point even though sales have declined by 20%. The publisher is making $4,040 more and the retailer is making $4.95 more.
Now we’ll look at the numbers when we factor a 25% drop in sales.
Marvel
Copies 37,500.00
Price 3.99
Sales (pre-discount) 149,625.00
x 0.60
Discount 89,775.00
Sales (after discount) 59,850.00
Retailer
Copies 38.00
Price 3.99
Cost (pre-discount) 151.62
x 0.50
Discount (profit*) 75.81
Cost (after discount) 75.81
The publisher and retailer are still making more money than they were at the $2.99 price point. The publisher is making $50 more and the retailer is making $0.06 more.
But here is where things get tricky. The publisher (Marvel in this instance) isn’t going to be hurt by the surface drop in sales (even if it is a 25% drop across the board). However, chances are there will be some cannibalizing of titles going on in addition to the primary drop. By this I mean that people will be dropping some titles they may not want to drop just because they can’t afford to buy as many as they previously did at the lower price point. This is in addition to people who just drop out completely because they decide this ‘hobby’ is getting too expensive for them (that is where the original drop would be coming from – whether that would be as high as 20% - or even 25% - isn’t something we can know at this point). If we assume it is lower (or even if we assume 20%), the publisher (Marvel is this case) would see only minimal decline in overall sales dollars (if there was a decline at all --- chances are there would be an increase in sales dollars overall).
Retailers, on the other hand, won’t be so lucky. Because if people are dropping out completely due to the cost increase, it isn’t just one publisher’s books they will be dropping. It will be every publisher. So the retailer has to contend with a larger scale drop in revenue. Then factor in the cannibalization of books (especially as relates to titles from publishers other than Marvel and DC) the remaining customers will be doing to cut costs (and allow them to continue to be a part of the ‘hobby’), and their sales decline even further. So while the publisher (Marvel in this instance) might see higher sales, the retailer can almost certainly be expected to see less money.
I think this move also makes it much more difficult for a publisher (such as Marvel) to launch new product. There will already be a cannibalization of titles as I mentioned. Readers are going to be less interested in trying out a new limited series or new on-going because it will mean bumping something else off their list. Retailers will order less because their numbers are already down and they are not going to want to get stuck with a bunch of copies of something they can’t move. So that puts the new series (limited or on-going) behind the eight-ball before it ever gets out of the gate. That means fewer opportunities for creators as well. If a publisher isn’t careful about thoroughly testing the waters on a project before they decide to move ahead on it, they are going to end up losing money on it and cutting into whatever gains they realized from their price increase.
We’ll use 50K as the baseline monthly sales for the publisher and 50 as the monthly sales for the retailer. You’ll note in these numbers as presented that the bottom number is what matters for the publisher (sales after discount) while the discount (profit*) amount is what matters for the retailer (because that is the money they are making back before any expenses are factored in).
Marvel
Copies 50,000.00
Price 2.99
Sales (pre-discount) 149,500.00
x 0.60
Discount 89,700.00
Sales (after discount) 59,800.00
Retailer
Copies 50.00
Price 2.99
Cost (pre-discount) 149.50
x 0.50
Discount (profit*) 74.75
Cost (after discount) 74.75
Marvel
Copies 50,000.00
Price 3.99
Sales (pre-discount) 199,500.00
x 0.60
Discount 119,700.00
Sales (after discount) 79,800.00
Retailer
Copies 50.00
Price 3.99
Cost (pre-discount) 199.50
x 0.50
Discount (profit*) 99.75
Cost (after discount) 99.75
So in this instance we see the retailer is making an extra $15 and the publisher is making and extra $20K.
Now let’s have a look at things when we factor in a 20% drop in sales.
Marvel
Copies 40,000.00
Price 3.99
Sales (pre-discount) 159,500.00
x 0.60
Discount 95,760.00
Sales (after discount) 63,840.00
Retailer
Copies 40.00
Price 3.99
Cost (pre-discount) 159.60
x 0.50
Discount (profit*) 79.80
Cost (after discount) 79.80
Both the publisher and retailer are still making more money than they were at the $2.99 price point even though sales have declined by 20%. The publisher is making $4,040 more and the retailer is making $4.95 more.
Now we’ll look at the numbers when we factor a 25% drop in sales.
Marvel
Copies 37,500.00
Price 3.99
Sales (pre-discount) 149,625.00
x 0.60
Discount 89,775.00
Sales (after discount) 59,850.00
Retailer
Copies 38.00
Price 3.99
Cost (pre-discount) 151.62
x 0.50
Discount (profit*) 75.81
Cost (after discount) 75.81
The publisher and retailer are still making more money than they were at the $2.99 price point. The publisher is making $50 more and the retailer is making $0.06 more.
But here is where things get tricky. The publisher (Marvel in this instance) isn’t going to be hurt by the surface drop in sales (even if it is a 25% drop across the board). However, chances are there will be some cannibalizing of titles going on in addition to the primary drop. By this I mean that people will be dropping some titles they may not want to drop just because they can’t afford to buy as many as they previously did at the lower price point. This is in addition to people who just drop out completely because they decide this ‘hobby’ is getting too expensive for them (that is where the original drop would be coming from – whether that would be as high as 20% - or even 25% - isn’t something we can know at this point). If we assume it is lower (or even if we assume 20%), the publisher (Marvel is this case) would see only minimal decline in overall sales dollars (if there was a decline at all --- chances are there would be an increase in sales dollars overall).
Retailers, on the other hand, won’t be so lucky. Because if people are dropping out completely due to the cost increase, it isn’t just one publisher’s books they will be dropping. It will be every publisher. So the retailer has to contend with a larger scale drop in revenue. Then factor in the cannibalization of books (especially as relates to titles from publishers other than Marvel and DC) the remaining customers will be doing to cut costs (and allow them to continue to be a part of the ‘hobby’), and their sales decline even further. So while the publisher (Marvel in this instance) might see higher sales, the retailer can almost certainly be expected to see less money.
I think this move also makes it much more difficult for a publisher (such as Marvel) to launch new product. There will already be a cannibalization of titles as I mentioned. Readers are going to be less interested in trying out a new limited series or new on-going because it will mean bumping something else off their list. Retailers will order less because their numbers are already down and they are not going to want to get stuck with a bunch of copies of something they can’t move. So that puts the new series (limited or on-going) behind the eight-ball before it ever gets out of the gate. That means fewer opportunities for creators as well. If a publisher isn’t careful about thoroughly testing the waters on a project before they decide to move ahead on it, they are going to end up losing money on it and cutting into whatever gains they realized from their price increase.
That leads me into part two of the discusson (which will be in a separate post that should be available in a day or two).
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