Tuesday, 26 July 2011

Why Digital Publishing Won't Save Comics (Yet)

I was pondering the state of digital comics the other day. As much as I love traditional dead tree publishing, there are kids today growing up with iPads in their hands for whom paper holds no such charm, and it is there, if anywhere, that comics might recapture something resembling the mass market it (foolishly, IMO) ceded when it withdrew from the high street and supermarket to the specialist comic shop.


Before we get to the nitty gritty, I think it's important to define some basics, especially since we're going to be talking about a business model.


Firstly: how much is a comic worth?


Here are some numbers -- these are for illustration purposes only and are chosen as much for easy maths as for accuracy, but aren't a million miles from what you might expect from a low-to-mid-level indie publisher in the US:


Script: $50 per page
Pencils: $80 per page
Inks: $60 per page
Colours: $50 per page
Letters: $10 per page


That's based on each contributor making about $10 an hour for working on the book. That probably stiffs the writer a bit, but I imagine they'll be used to that by now.


That makes $250 to produce a page, meaning that a 24-page comic contains $6000 of work. If the book makes less than that for its contributors, then the creators would have made more money flipping burgers at McDonalds. Now, as an individual, you might be fine with that. Your book might be a labour of love, you might be happy just to have it in front of an audience. As an individual, that's no problem. As a model for a business, never mind an industry, I think we need to be paying our creators more than McDonalds.


Second: we need to define a couple of terms, most importantly, what I mean by publisher in this post. By publisher, I mean the person, group or organization with the legal right to publish a work. In a self-published work, this will mean one or more of the creators; in other circumstances it may refer to a publishing company in the more traditional sense.


I'm going to talk about how money from digital sales flows to the publisher. If that's a different legal entity to the creators, then there's a different mechanism by which money passes to the creators, but that's a discussion for a different day.


So… you want to get your comics onto a digital platform. Phones are, let's be honest, a rubbish medium for reading comics, so we're mainly talking about tablets. Right now, we're talking about iPads.


Unless you have access to a friendly iOS developer to do write you a dedicated app to serve up your content, you're going to need to go through one of the comic apps that already exists. I believe the deals on offer are broadly similar, so I don't want anyone to think I'm singling out a specific app; let's refer instead to GenericComicApp. You know the sort of thing: the publisher submits their comic to GenericComicApp and people can buy the comic through their phone or iPad using the App.


As for the specifics, let's take Mark Millar's word on this since, if there's anyone in the industry today who knows how to make money from comics, it's probably Millar, who wrote:


  1. Apple take 30% right off the bat.
  2. In the case of Wanted, Comixology then splits 50/50 with the publisher.
  3. Then the publisher pays the agent and creative team out of the remaining cash depending on their deal.

(Note: I remember Mark making a post about this on the Millarworld forums, but I can't find that post for a direct cite, so I have lifted this text from Andy Yen's My Day Will Come blog.)


Mark refers to Comixology, but I don't believe their deal differs in any significant way from GenericComicApp.


So… crunching a few numbers:


Let's say that, as a publisher, you're really invested in the future of digital comics; you've got no print overhead and no returns so why not price the product aggressively and try to pick up casual sales. Let's say that you price your book at $0.99.


Apple take 30% right off the bat, leaving $0.70 (rounded up for easier maths).


Publisher and GenericComicApp split that 50/50 and get $0.35 each.


Remember that there is $6000 worth of work in this book, so simply ensuring that the creators make their money, before we've even thought about profit for the publisher, you need to have sold 17,143 digital copies.


That's a lot. You're not going to shift those sort of numbers without some promotional activity, which is going to cost money in itself and drive up the number of copies needed to turn a profit.


Of course, you can drive the number of copies needed down by raising the price, but I'll say right now that I believe $2.99 is too much for a 22 or 24 page digital comic unless you're adding value over and above the normal comic page (I always like Infurious' rather ingenious approach). $3.99 for a single issue is, in my opinion, impossible to justify.


So, let's stick with that $0.99 number for now.


Let's back up for a minute, though, because I think there's something distinctly iffy about that illustration. Let's think about traditional distribution for a moment -- I worked in the newspaper and magazine industry for years, so I know a bit about this…


Traditionally, the publisher approaches a wholesaler/distributor (pretty much always Diamond for US comics but there is more plurality in the wider publishing industry). In return for a discount on the cover price, the wholesaler agrees to distribute the publication to as many retail outlets as the agreement covers. The wholesaler will usually want a discount on the cover price ranging between 45% and 65%, call it 50% for easy maths.


I sell my publication to the wholesaler for 50% of the cover price, let's say $0.49 on my hypothetical $0.99 cover price. The wholesaler sells the publication to the retailers for 75% of the cover price, say $0.75 netting themselves 26 cents profit on each copy. The retailer sells the publication at cover price, $0.99 which is $0.24 over what they paid for it.


Now, let's go back and think about that digital model again.


In that model, Apple is the retailer: they provide the merchant services, the servers, the bandwidth and, most importantly, access to their shopfront which is arguably the most trusted channel in the world for online purchasing of content.


GenericComicApp is the distributor. So why are they loading the cost of the retail mark-up onto the publisher?


What should be happening is this: publisher approaches GenericComicApp and sells their comic to them for 50% of the cover price, netting the publisher $0.49 per sale. GenericComicApp then distributes to the retail channel at $0.99. The retailer, Apple in this case, takes 30% of the cover price, $0.30, leaving $0.20 per issue for GenericComicApp.


Using this model, you need to sell 12,245 copies, nearly 5,000 less to cover the work done by the contributors.


Obviously, you can see why GenericComicApp would rather run their business in the way it currently works, but this is essentially screwing the publisher by loading both the wholesale and retail mark-ups on the publisher when, in fact, each 'link' in the chain from production to sale should only be concerned with the sell-on price to the next link in the chain.


Even Diamond, of whom I am no fan, follow this model and they, at least, have to warehouse stock and move physical product around. GenericComicApp doesn't even have those overheads: a couple of iOS developers retained on a freelance basis to keep the app maintained is hardly going to break the bank.


Let me phrase that as simply as I can: at least some online comic distributors have fashioned a business model that is even less favourable to publishers than the one Diamond uses, despite having lower overheads.


If even Mark Millar can't make money from digital comics, then we're doing it wrong.

22 comments:

  1. Thanks for such an informative post, Jim. There's definitely a lot of food for thought here. I'm not a big digital comics fan, but I'd accepted it as the way of the future - I guess I was a bit hasty!

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  2. Good stuff Jim.

    I think what people might want to look at is that Apple have gone back on their strict rules about in-app buying. So someone like Dark Horse can sell direct to the reader through their app (cutting out Apple and digital publishers like comiXology) but have it load within the app on your iPad. This gives a considerably larger slice back to the creators and publishers - they could even afford to put the comic up through someone like comXology and Graphic.ly but undercut the price there in their own app - they get some extra sales from the large userbase those publishers have (sales you wouldn't have got otherwise so even a fistful of cents is better than a boot in the grapes), while driving the canny buyer to your own app where you make a lot more money.

    I think we'll see a lot more of these dual approaches, although the consumer might start getting annoyed about having to switch between different apps for different comics it might be worth it for them if they are saving money.

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  3. And here I was complaining about e-books. Great insights Jim!

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  4. "In that model, Apple is the retailer: they provide the merchant services, the servers, the bandwidth and, most importantly, access to their shopfront which is arguably the most trusted channel in the world for online purchasing of content."

    That's not completely accurate. They host the app, but not the content. The makers of GenericComicApp have to provide a server to host and deliver content bought via in-app purchases.

    "I think what people might want to look at is that Apple have gone back on their strict rules about in-app buying. So someone like Dark Horse can sell direct to the reader through their app"

    That's not true. They've gone back on forcing you to sell through the app if you sell anywhere. But if you sell through the app, you have to use the in-app purchase mechanism, and they get their 30%.

    You can sell direct from your web site (like Amazon), but you can't even mention that option inside the app - Amazon have just removed the link from Kindle, for example.

    That's an option worth considering, but you need a strong existing relationship with your customers to make it work, or they'll never figure out where they're supposed to find content.

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  5. Great read. Has made me re-consider how I'm going to do things for my own works. It's nice to see some figures, even if they are vague. FYI I ran those numbers over our own project and they pretty much work out (including the writers getting stiffed, lol).

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  6. Very nice write up.
    However its all from the publishing/distribution angle. What does the fan actually GET out of it?

    The tactile qualities in the physical world are removed... I address this topic in my blog. http://kountis-comics.blogspot.com/2011/07/on-line-comics.html

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  7. Ipads and the like are very very new...and the kinks are yet to be worked out.
    I personally don't have one, they could pass with 8 track tapes in about two years.
    What about the PC? That's were I read my digital comics. I've already bought the right to read on Mavel's site for awhile and I'm enjoying it because I don't have many Marvel's.
    It's not Comixology, but Marvels own site, so I think the middle man publisher needs to worry, because I think they are going to be cut out of digital comics.

    I think the Individual owned comics are going to become more popular, they don't have to use Comixology or any middle man publisher to sell you the download, they just need to invest in the right encryption, so that you can't sell it to someone else, but I think if its a dollar, most people would rather pay it then risk getting infected by Torrent.

    The market... is the whole wide world, not just who you can get to carry it. A lot of people don't get comics because... its inconvenient to stop at the LCS or they don't have a LCS. You have billions billions of people to entice your way.

    Advertising...google (it's free)...creative advertising...news...CBR...then it reaches other peoples blogs.

    There is also the difference between PC and IPad. You can cheat at work with a PC, and for the most part not one knows that your reading a comic.
    The IPad you can carry around with you and read in a chair...how soon before someone figures a out a conversion (if not already) for the PC downloads to Ipad. I've got a conversion for my Itunes music to get it to my MP3.

    As far as Apple charging the bandwidth...I don't see the Comic creators paying that...that's already being paid by the consumer to have web services.

    It's like Netflicks etc...think of the cost of a Movie...millions and millions into billions. Yet Netflicks and others seem to make a profit. Netflicks pays the Movie creators to sell their movies.
    Comics are a entertainment industry...even more so then Novels.

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  8. Nice article.

    I'd like to see if someone could verify the Comixology split as being 50/50 AFTER Apple gets it's cut.

    Graphic.ly, one of their chief competitors, is 70/30 (70 going to creator) AFTER apple gets it's cut. Also, if comics are purchased outside of the Apple device (through web store for example)there is no Apple cut in the deal.

    I was under the impression Comixology is the same terms, more or less. So, even through Apple, publishers would get a minimum of 49% of the retail price, and as much as 70%.

    Regardless, that's still a lot of copies needing to be sold at $0.99.

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  9. "Apple take 30% right off the bat"
    All the more reason to NOT bother with apple and instead invest in Android or head toward color-e-reader formats and head to Amazon, Barnes & Noble, etc.

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  10. All of this is why the better solution might be to sell digital comics directly through one's website in the form of PDF, CBR or ePub files that can then be read in a variety of apps on the iPad. You can even have the PDF file download directly to the iBooks app when purchased on the iPad. The only fees the creator / publisher would have to pay is to PayPal.

    Apps like Comixology where necessary for reading comics on the iPhone because of the restrictions of a small screen, but they are completely superfluous on the iPad. The creator / publisher can earn more many selling direct and consumers get something they actually own and can put on any capable device. Everybody wins.

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  11. @Jason D: You understand that there are 25 million iPads out there and there are credible projections that there will be 40 million of the buggers by the end of the year? Compared to -- optimistically -- 2 million Android tablets… which is why I said "Right now, we're talking about iPads."

    A 30% cut to what is effectively the retailer -- especially one offering the halo effect of the iTunes store -- is in no way excessive in comparison to other businesses. Try being a traditional book publisher some time, where you have to offer a discount substantially larger than that to a distributor who will then DESTROY your stock if they over-order and expect YOU to pay them for it.

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  12. I'm similar to what you're describing in terms of a comic creator looking to make a living digitally, and obviously we're way off. There are a couple of notes here.

    I develop my own apps (although I'll be going through another company soon b/c it's just exhausting to paint/write/letter a comic, then make an app and market it), so there are ways to do the app dev work yourself. Submitting to Apple is a different story obviously, but it's possible, and if you've coded it well the only real changes for subsequent releases are image replacements.

    Also the biggest problem imo with digital comic sales is that there's almost no difference between browsing to view a comic online and reading it on your iPad. The gallery view in google+ is almost IDENTICAL to the comic-reading experience in an app, which discourages people from paying. And the reason is simple. Apple has made Flash (which I use to dev) and Javascript (which runs horribly on their devices, unfortunately) non-factors. This relegates magazine and comic developers to often using HTML5/CSS combinations.. the same thing we use to create websites. I'd like to see Apple resolve this as much as anything.

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  13. Good points in part echoed here on MacWorld: http://www.macworld.co.uk/digitallifestyle/news/index.cfm?newsid=3294244

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  14. An excellent article and while the field clearly has more variables you are right to focus on the dominant model and accurate in the gloomy picture you paint.

    Regardless of additional content (such are retaining your library on their servers) the cut that Comixology takes is hard to justify - just how large are they as a company? Has anyone actually written on how they defend their money-grab?

    Apple had to remove its in-app parity take requirement because it was clearly contrary to anti-trust / competition law. If comixology is the dominant provider for comics content provision on the ipad (and it certainly is the one people mention time and time again)then they too are subject to the rules on competition law.

    It is obviously still early days in the formation of the provision of digital content but you are certainly right to flag up that this particular model is simply not sustainable for a healthy industry.

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  15. Good post. Lots to mull over. And as always, reality-based. Thanks!

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  16. I've just started selling my new comic digitally, and I must say that if someone can manage to get buzz going for their self-produced title, digital is great. A lot of the business talk with comics circles around retailers and publishers. Neither are really that necessary with digital. I suppose a lot of that has to do with the capes genre being so synonymous with the medium.

    As for different readers, I would think that comic fans don't really need software to guide them through panels. Honestly, if a reader is having a hard time figuring out which panel to read next, that's a creative problem, not a consumption problem.

    I'm selling my stuff as cbz and pdf for (hopefully) maximum compatibility. There's no DRM or any of that mess. Keep in simple.

    Oh, and you can buy/read here: http://www.nashphalt.com/p/comics.html. I'm selling this story for $.65, the next story (just a two-pager) will be $.30, and I keep about 90% of that. The art is not that expensive at my level. There are tons of artist who want work.

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  17. I'm going to get flamed for this, but...
    Mike, YamesPeach, you have it right by me; skip the middleman, that's an old system. I say, just sell a DRM free copy (jpg, pdf, cbr, rar, zip, whatever) straight from the publisher for $0.99. Essentially no overhead goes into it (other than processing the payment). Then you'd only need to sell 6061 copies to break even on an issue. Far fewer than the other options you have up there.
    Of course "people will pirate them" is a concern, but already you can find pirated versions of most any comics. I know people who, after they get a physical copy, pull a pirated copy so they can have it on their ipad/android phone while on the go too, and they just don't want to bother with their own scan.
    There's another idea, publishers could include a QR code on the physical comic, or handed out after purchase, that would instantly add the digital one to the customer's archive. That would add even more value to the physical ones and help allay the fears of stores going out of business.

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  18. Scanning groups tend to scan all the major titles on the day, or in the week, that they come out. As long as a comic is printed on paper, it can be scanned and read.

    And it's not only through torrents either. Direct download on file-sharing sites.

    Even if someone made a good encryption to protect a digital copy, it only takes 1 person to distribute a cracked version. A digital encryption that would prevent piracy completely would cost to much to implement, and require a special device to securely download and read the comic.

    Some people pirate comics because they want free comics; some because they can't afford all the comics they want; some to read the comic without causing wear to their physical comic.

    But the most common explanation I hear: People want to preview the comic so that they don't spent $2.99 ~ $3.99 buying something they don't want to read.

    I think that speaks more to the creators/publishers than anyone else.

    If the music business can survive on $0.99 songs from iTunes (etc.) when music is so easy to pirate, then comics should be able to make a profit.

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  19. It looks to me like it comes down to the same business problem any other creative production would have: if you don't own at least part of your own pipeline, you're going to be paying for that and it's going to slice and dice your profit margin, possibly to the point of not ever being able to be profitable. It's a sign that the problem is greater than just print versus digital. Those producers who do not own and operate their own distribution are going to have a rougher go of it than those who do - and of course that means there's a huge barrier to entry for most independent producers. Not sure what the solution is, or even if there is one at all that will help most people. I'm guessing that a blanket, general solution doesn't exist.

    - Gene Turnbow
    Krypton Radio
    http://kryptonradio.com

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  20. People love paper. But your math is way off.

    I have comics on comiXology through their Submit portal. Comics sold through iTunes have Apple taking a cut. Comics sold through the website have no cut going to them. That means that after a minor charge for upkeep, there is a 50/ 50 split with comiXology.

    Comics sold through the Kindle Store net 70% to the publisher (you) depending on the price point.

    I'm assembling enough material for a trade paperback. The printing bill for that will be in the tens of thousands. Selling digital copies of the individual issues in the mean time helps defray the cost of that big expense.

    Digital books are an additional revenue stream and given enough time a way to make a profit.

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    Replies
    1. My maths is spot on if you're talking about in-app purchases on an iPad, which is very specifically what I'm talking about! The tablet market, and the options for digital distribution, have opened up considerably in the two and a half years since I wrote this piece, which is no bad thing.

      In fact, it's opened up so much that Mark Millar, who I cite above, has come to embrace day-and-date digital releases of his books.

      Nonetheless, I know a number of people with digital product whose revenue is still very disappointing…

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  21. Hi
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    ReplyDelete