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.

Photo: André Spicer
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“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.