Run your business (into the ground) the Marvel Comics way

The collapse of Marvel comics in the 1990s is legend – one everyone can learn from.

Sean Howe's new book, Marvel Comics: The Untold Story, sounds like it will be an interesting read for more than just comics aficionados. The fall of Marvel in the 1990s is a lesson in failure which is applicable far and wide.

In July 1991, the company went public, with a market cap of $41.4m. The month after, it relaunched X-Men, with superstar creators Chris Claremont and Jim Lee, and, with the help of five different covers, the first issue shipped almost 8 million copies, still a record for the modern age.

But by the end of the year, Lee – along with other key figures, including Eric Larsen, Rob Liefeld and Todd McFarlane – had left Marvel over poor treatment, and just five years later, following a disastrous string of acquisitions, the company filed for Chapter 11 bankruptcy.

A large chunk of this sorry period is covered in an excerpt of Howe's book over at the Comics Journal. Their failures may seem specific to their industry, but they represent flaws in thinking which are alarmingly common.

The single biggest cause of Marvel's collapse was its desire for a quick buck. Inspired by the genuine success of X-Men #1 and its variant-cover driven sales, the company wholeheartedly embraced gimmickry. For instance, Amazing Spider-Man #365, the 30th anniversary of the character, came with a holographic cover, and an increased page count – but also a cover price of $3.95, over twice a normal issue. The results were a slow-motion car crash:

For every enhanced cover, a meeting was called to determine special pricing. It wasn’t just the cost being added, of course, but extra profit margin as well. Add in markups between distributors and retailers, and the ten-cent addition of foil on the cover translated to an extra dollar on the cover price. This, however, wasn’t a problem for Marvel — price increases had been a part of the plan all along, a promise to the stockholders. . .

[Director of Sales, Lou Bank]’s concerns weren’t rooted in some naïve idealism about artistic purity; he worried about Marvel’s long-term business interests. Field representatives had gone out to nearly forty different stores, collecting sell-through numbers — the number of copies that retailers actually sold to readers, as opposed to the larger number of copies that distributors sold to retailers — for a dozen different comics over a three-issue period. The findings were stunning.

“Every time we did one of these stupid-ass covers that caused us to increase the price by 33 percent—say issue #475—we would have a 20-percent drop-off from 474 to 476. The numbers would spike for #475, but we’d actually lose readers from #474 to #476. It was consistent with every single example.”

Of course, none of this would have an impact on Marvel’s quarterly goals. Marvel’s bottom-line reports, which only reflected distributor-level numbers, would continue to show sales and profits going up, even as the readership began to cool and the retailers, who couldn’t return unsold copies, absorbed the costs. “In the meantime,” said Bank, “we were killing the stores that were feeding us.”

It wasn't just that the gimmickry led to customers being gouged. It also piggybacked on a vision of the industry which was little more than a Ponzi scheme. Customers, both comics fans and people with little to do with the industry, were hearing stories of record-breaking sales of titles like 1939's Action Comics #1 – which introduced Superman to the world – and bulk-buying "important" issues in the hope that they could one day pay their children's college fees with the proceeds.

Needless to say, that never happened. Even 20 years later, all five covers of X-Men #1 can be found for less than £5 on eBay, and many of the lesser "events" aren't even worth the cost of postage. The speculator boom pumped huge amounts of cash into Marvel's pockets, but when the crash came, it nearly took out the industry.

Even worse, Marvel should have known it was coming. In 1991, it spent $265m on Fleer, one of the largest makers of sports cards. In the short term, that acquisition doubled its sales – but as the card market collapsed, due to exactly the the same focus on speculation and "collectibles" which would get comics years later, a large chunk of Marvel went with it.

This lack of focus, ignoring its core business for potential profit elsewhere, also led to Marvel's failed attempt to vertically integrate its business. In 1994, it acquired Heroes World Distribution to use as its exclusive distributor (these are the companies responsible for getting comics from the publisher on to the shelves of retailers). This land grab led to every other publisher to attempt the same thing, but by the end of the next year, it was clear that the diseconomies of scale that that fragmentation had introduced were unsustainable. Distributors started to fold, until just one, Diamond, was left. When an editorial initiative in early 1997 failed for Marvel, they signed up with Diamond as well, guaranteeing one company a stranglehold on the industry.

And then, of course, there's the act which is often seen as instigating Marvel's demise.

Malibu Graphics and the eight Marvel émigrés announced that the artists were forming their own imprint, to be called Image Comics. Although Malibu would be the publisher of record, each artist would own his intellectual property and have editorial control of his work. The press release emphasized that Lee, Liefeld, and McFarlane had been the men most responsible for Marvel’s recent record-breaking sellers, and played up the idea of Image as a refuge for creators who wanted to retain creative and economic rights. By the time Image’s maiden title, Youngblood, was published, its advance orders had nearly reached the one million mark. Todd McFarlane designed T-shirts to promote Image’s second release, Spawn, which would showcase the character he’d already slyly previewed in his Comic Book Greats interview with Stan Lee. Somehow they were managing to be the hot new thing and the underdog all at once. For the first time in its history, the media was painting Marvel as a Goliath and not a David.

The lessons for business are simple, really. Know your product. Treat your staff well. Respect your customers. And don't put Captain America in body armour, because really, that's just silly.

Rob Liefeld's Captain America, an infamous example of 90s excess.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle