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Monday, June 01, 2020 

Diamond's chairman apparently wants to maintain a monopoly

ICV2 ran an interview with Steve Geppi of Diamond distribution a few weeks ago, talking about the business he's specialized in for many years, and almost from the get-go, he strongly indicates he sees nothing wrong with maintaining a competition-free monopoly on comics distribution:
ICv2: We'd like to ask about some of the decisions that were made early on, back in March, when things started to go south. Why did you shut down all of the Diamond and Alliance warehouses, when some of them theoretically could have continued to operate? Some were under shutdown orders, but they wouldn't have all had to be shut down at the same time. Why did you shut them all down?

Steve Geppi: Knowing the comic stores are very competitive, …we felt we had a fiduciary responsibility to keep the playing field level.

That's why it was upsetting when DC announced they were going to come out. We had already told DC there was only a maximum 20 percent of the customers open at the time, …and quite frankly, we got a lot of positive response, particularly from stores that knew they were going to be closed for a period of time, like California.

I'd use an analogy, and this may not be the best analogy. It's not all about speed of delivery. It's about content. If Netflix says tomorrow that the final episode of The Blacklist that everybody's waited for …they release on Netflix only in the Northeast, knowing that whoever watches it's going to spill the beans to everybody in the rest of the country. There's an element of that, but more so, the nature of got to have it, want it first.
It's not the best analogy. In fact, it's an awfully poor one. What is so wrong with competition, which, come to think of it, makes little sense from state to state? Even without the Coronavirus crisis and state lockdowns, it's not like the customers are going to travel for miles and spend so much money on gasoline just to reach another store, and end up paying loads extra in order to get the items they're looking for.
We felt like if we just opened in fractional areas (and keep in mind, it's a very small percentage we were hearing that were open), it wasn't worth opening that can of worms to piss off everybody else, and I think we made the right decision, because as it turns out, you've seen some of the letters, some of the accolades, "We'll stick with Diamond." I'm sure there's been some opposites to that, but we think (unless you tell me something I don't know), by and large, most people were happy to at least be on a level playing field, as opposed to behind.

Now, in the case of DC shipping three or four weeks worth of very small quantities… When they started shipping on April 27th, they had five books, three of which were second or third printings. The next week was seven, and then they said two and two. Over four weeks, only 16 books were coming out. When we re‑emerge on the 20th, we're going to catch up to DC's.

Marvel is actually going to start a week later. They're doing slow, a few periodicals, then a few graphic novels the next week, vice‑versa.

Long answer to your question, I'm sorry. We felt like it was the right thing to do. If we were guilty of anything at that time, it was the communication wasn't as rapid as it could have been. That was because we didn't quite know what was right at the point in time, so we had to rally around the flagpoles, get some input as best we could from retailers, and make a quick decision.

Fortunately, I think we made the right decision at the time. When we did our projections for resuming shipping for May 17th (or for the week of May 17th, shipping, arriving May 20th), it's almost looking like we had a crystal ball. That date's looking really good now, because A, we've confirmed it, and literally, within the last week, we were qualifying it. I would say things like, "Barring unforeseen occurrences," and that's technically still true, something could happen.

We're feeling pretty good now. We're bringing people back almost immediately to get ready. You can't bring them back the day of. That was the rationale that went into it.
Yeah, I'm sure they're feeling very good; in fact, very smug about any and all trouble they've caused with their monopoly on distribution. The whole notion any store would be instantly damaged because they couldn't or wouldn't deliver to them at the same time as others is laughable, as is his notion that all the stores had to be punished by not delivering at all. Competition isn't wrong. Monopolization of a profession most certainly is, and that's part of what's brought down an entire industry besides collapsing story merit. If they wanted to, Geppi's company could've held some supplies in reserve for stores facing more difficulties than others, and delivered them at a later date. The whole idea they couldn't ensure a decent deal for those who did have to close more time than others is laughable. And I doubt all the retailers were pleased either. Some might've been quite furious, with reason.

My eyebrows were also raised by the following:
[Marvel CEO] Ike Perlmutter was one of the first calls I made. The first words out of my mouth to Ike were, "Ike, you are going to get paid in full, but let me tell you how this going to work." He was the biggest call, because I figure if anybody's going to be tough, as you know, Ike's going to be tough.

He couldn't have been more accommodating, because he gets it. He understands, no matter who you are, I am sure Disney and other companies have similar issues. We did what we could. We relied on the fact that our history of paying our bills was impeccable.
Oh, I'm sure Perlmutter gets it. He may not be as influential as before, but if he's still working with at Marvel and Disney, he's as much a problem as Geppi himself. What he doubtless understands is - what else? - monopolies serve to his advantage. That's a most irritating thing about conglomerates. It's amazing if DC now wants to arrange for their wares to be distributed differently, considering Time Warner has many of the same problems as any other corporation, though that alone won't guarantee artistic merit will improve. Even Jim Lee's got some responsibility to shoulder here.

I went ahead to the third part of the interview, where he goes on to take potshots at DCBS:
You said early on in that answer that you thought Penguin Random House right now is prohibited by contract from selling to comic stores?

Right now, I would say by virtue of the notice we got saying that they broke our exclusive, the answer's twofold. Yes, they can, according to DC. No, they can't, according to us, because we have a 45‑day period that runs through May 31st that we are not pressing, because just like we weren't pressing the wrongful sales of Random House on reorders into the direct market, that would still be applicable now, because in giving us 60‑day notice, there's a 45‑day period of the exclusive that they have to honor.

We're into May. Let's call it ‑‑ what's today, May 10th? ‑‑ 20 days, 21 days left of our exclusive that is being violated, even by the other two distributors who just came on.

We're not rocking the boat, because I've been put in the awkward position of having to try to save DCBS and Midtown from themselves. What we were hearing, that at the last CBLDF board meeting, [DCBS CEO] Christina [Merkler] said, "This is temporary, and we're excited for Diamond to be shipping again on May 20th," whatever that means. In an interview recently, she said she doesn't know. Then she'll say, "We might also pick up new publishers."

DC says it's temporary. DC has preached to us forever that they want world‑class partners. Now, in our case, they were saying that. We can say to them now, "We have the biggest bank in the country; we have the biggest law firm in the world; and we have the biggest accounting firm in the country." We think we're first‑class. I daresay that's not true of the other two.
If he had anything to do with barring Penguin Books from doing distribution separately, I think that's wrong. It only compounds the image of this guy as a monopolist who thinks he's above critique or responsibility for any harm inflicted upon the industry he has no business representing. Funny thing is, under Dan DiDio, DC was preaching to the audience, and pretending they're incapable of any wrongdoing. Based on that, plus their lack of merit under his stewardship, it's hard to believe they ever wanted world class partners.
A big percentage of your periodical business, in Diamond's case, is based on final order cutoff. Retailers have a chance, fairly close to the ship date, to alter orders. On maybe 20 percent of the product that retailers buy, that's not the case. There's a huge amount of product in the pipe that maybe they don't need that much of, because the timing has changed, or some of their customers have dropped off, or they can't be open all the way. What are you going to do about all that product in the pipe for which you have orders that are theoretically set, but the retailers don't see?

In a lot of the cases, particularly Marvel and DC, we're an agency, so the inventory is theirs. If we sell 100,000 Superman, and they print 150,000, the 50,000 is not our liability. We have to store it and work it, take reorders, but that's not ours. In the buy‑sell case, it's more of a concern for Diamond, because if we get orders for 10,000 of a buy‑sell vendor, and order 11,000, not only do we have the 1,000 at risk but, like you said, if we have some attrition, we have that to worry about.

Marvel and DC have indicated that they are going to do some form of returnable during this pandemic period. It will be an effort for us during this transition to find out how to regulate these orders.
Regulation? That doesn't sound good to me. It's like controlling sales and where they go, or who's allowed to buy them. Not a good example, IMO. And when he gets around to discussing merchandise, he says:
That's not going to be an open ticket for the guy who tries to abuse the system either. We'll have to balance that. Just like if Marvel or DC decides to give us extra credit terms, which they talked about but haven't confirmed, for temporary purposes, we're still going to administer that judiciously, so in other words, a bad‑pay guy is a bad‑pay guy who has proven he's just a guy you can't trust. We're not going to go extend him beyond what we think is prudent. Whereas a good‑pay account who's always been good‑pay suddenly has problems, apart from what we would normally do anyway, we're going to try to take any relief we get from a publisher and extend it to them.
Look who's talking about abusing systems. Somebody monopolizing distribution. If some publishers are now looking for alternate forms of distribution, it's his own fault, because he did nothing to avoid creating an atmosphere where they'd all have their sales regulated, and no competition was allowed. So what does he expect? If there weren't stores and publishers before who felt the time had come when a better system was sorely needed, they'd be bound to turn up in the future. Diamond's decidedly past their prime, and it's time competition was brought about to ensure everyone gets a fair shake in the business.

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