CrossGen has operated like a well-oiled machine since its launch around four years ago, shipping almost all of its books as scheduled (except for a week's glitch related to a shipping problem) and creating good will in the creative community for its smooth relationships with talent. But over the last couple of months, some trouble spots have emerged. Beginning in late July, CrossGen titles were not released as scheduled from Ronalds, for reasons that were attributed to corrupted data files the first week, and for 'internal CrossGen reasons' for subsequent periods (see 'CrossGen Revises Schedule'). No trade paperback titles have been released since July, and comic periodicals have been released on a limited and delayed schedule. Also during August, several CrossGen free-lancers went public with late payment issues with CrossGen. All of these events have spawned much speculation and discussion about the company. We spoke to CrossGen founder and CEO Mark Alessi to get the story from the retailer perspective.
The first general area we'd like to talk about is to get a little background information from you on the business situation at CrossGen. Based on things I've seen you or Bill Rosemann say in other venues, I take it you're currently raising some financing?
We're currently working on an investment round. It's always tough to gauge specific time frames, but we feel pretty strongly that we will have solved the primary financial short-term issues of this company in the next 30 to 45 days.
So you are giving high odds of a successful completion of the round?
The one guarantee is that people aren't done with us yet.
CrossGen's had a little bit of a rough patch recently, so it appears that you might have expected this round to come in sooner. Can you talk a little bit about that?
We had an agreement with another organization at the beginning of the year that didn't work out as we felt they had committed to us, and we were forced to restart the process. So we ended up moving forward on some initiatives that utilized capital that if we had known that people wouldn't be moving forward with their commitments we would have probably delayed. Plus, there are people who, quite frankly, owe us quite a bit of money and who haven't paid us, or have changed the contractual rules which would require legal action to fix, and delay it for years anyway. So it's been a series of circumstances happening together that have forced us into tightening our collective belts, so to speak.
That takes us to an area that's very important to our retailer audience, which is product flow. What should they expect in the coming weeks and months from the periodical end of CrossGen?
By periodical you mean regular comics?
Yeah, the floppies.
Well, right now we have an abbreviated schedule for some of our more major titles. We're working on some options that we hope will allow us to bring the entire line back online within the next several weeks. So worst case scenario, next week an abbreviated line of our strongest titles will kick in and and continue, plus new launches like El Cazador. And with any luck we'll have our entire line back online soon. So, worst case is four to six weeks of an abbreviated line, then a gradual catch up because you don't want to inundate retailers or fans all at once (given the fact that these things actually cost money). In a good case, a more rapid catch-up over the next two to three weeks will start up. The good news is that all the books are being made and are being finished. People have the story lines to look forward to, though they may end up just having two books to read in one month instead of one.
Then after this catch-up period, do you expect to be fielding the same number of titles as you did in the past?
Absolutely. We have a new book, Abadazad, being drawn by Mike Ploog and written by de Matteis coming out in December, right on schedule.
What about the trade paperback side? It's been a while since any of those shipped, what are your plans there in the near and longer term?
Actually, last month we had a phenomenal graphic novel sales report, and since it was primarily older graphic novels it looks like we're catching new readers. That's a positive. And it's my personal goal to rapidly catch up and bring the Travelers [small-format editions] even with the regular graphic novels, then continue the process forward as normal.
I'd like to ask you to reflect a little bit on your period in the comics industry--what are some of the lessons learned when you look at this transition period for CrossGen?
Well, I learned that Compendia sell everywhere in the world except the United States. That was an interesting lesson.
The biggest lesson that I've learned over-all through this process is that there are a lot more kind, supportive, reasonable business people in this industry that I ever thought. We've had to fight for every inch the last three or four years against pretty negative odds. As we ran into a three or four month problem period, people stepped forward and said 'what can we do to help you?' Fred Pierce from Wizards has been phenomenal. Couldn't ask for a more understanding and supportive human being than Fred has been, and he's known as a notorious businessman. The folks at Quebecor have been tremendously supportive. Richard Tremblay, the president of Quebecor Worldwide, has been tremendously supportive, as has been a guy named Paul Ronko, who is a senior vice president in the finance department. Tremendous people. So, a lot of well-wishers, a lot of e-mail support from people who really want to see CrossGen continue and love the books.
And two other incredibly positive side effects: one is that 95% of independents or freelancers who do work for us on the fill-in issues have been unbelievably supportive. I've spoken to at least 25 of them personally and their primary statements have been almost universally that, 'This is incredible, I can't believe you're actually calling me ahead of time to tell me my check's going to be late. I can't imagine this happening with publishers from other companies.' For guys or gals who could afford it, they said, 'Don't worry about it, you paid us so rapidly in the past, I'm with you for the long haul.' A few have been in financial trouble and we've expedited payments to them with the knowledge and permission of others in their support. So we haven't lost a single independent outside of those which were planned attrition.
And internally, the response has been unbelievable. Senior management folks have decided to forgo checks so that additional monies could be funded out to freelancers. Staff members have been willing to forgo checks (which I wouldn't allow) to pay some of the freelancers early. People like Greg Land have stood up in meetings (and Greg's been getting calls probably every other day by Marvel or DC) and said, 'I'm here for good. I'm not leaving this company, I love what it stands for and I want to be a part of it.' To George Perez who calls me up and says, 'I've been getting calls every day from Marvel and DC. I can tell you this -- the only way I'm leaving CrossGen is if you fire me.'
So, when 100% of your people back you; when outsiders from other companies -- whether they be Websites or magazines or printers -- work with you because they want you to succeed; when fans write you support letters, you realize that to a great extent it's a vocal minority of people who, whether they like it or not, I perceive as people who complain no matter what CrossGen does. And they're going to always complain, and God bless them, we need more people shrieking into the wilderness, because it's so quiet out there. But on the other side of the coin there's been a massive rallying of support from the people we do business with, the people we work in conjunction with, and our own employees and freelancers have all been phenomenal. So, there's an awful lot of good in humanity that doesn't show up sometimes until the worst of times. In this particular situation all they've shown me is good and support and in many ways I'm heartened that the core of this industry is filled with so many good people.
Has the effort to create a successful entertainment company that introduces new properties in comic book form been tougher or easier than you anticipated when you started the company?
Oh, it's clearly tougher. There are two real key factors. One is the big companies in this business that are heavily competitive, Marvel and DC, probably make about 20% of their income from publishing. And we make about 95% of our income from publishing. So, you have that immediate shortfall not only in volume of books and tenure on the stands for brand recognition, and the fact that they make a bigger percentage on their sales than we do through their arrangement with Diamond, they also have a whole range of ancillary revenue sources that aren't open to us. We're just starting to turn that corner now into movie deals, TV deals, toy deals that are generating alternate revenue sources that will help propel us positively in the future. They take a little bit longer than I had anticipated.
I came from a software world where if you weren't quick, fast, effective, and efficient and you weren't bring out new product right away and planning three generations ahead you were going to be out of business. In this particular business things are slow. The WizKids line that launches in September, which is 25% CrossGen figures [Indy Clix] was agreed to in a deal over a year ago. I've been told that when the Way of the Rat goes into production fourth quarter this year that it will be one of the fastest comic book to film adaptations in history, but it still took fourteen months. DVDs, we've been working on the DVDs since last November. They'll hit the shelves next week. So many of the things you're working on today won't bear fruit financially for another twelve months, eighteen months. So when you go to compete with the major players, you're going to be running behind the eight ball for the better part of three to four years to just establish brand recognition, decent shelf space and racking, reasonable support from retailers and alternate options for revenue. But we've tried to make the best of that by generating an entire range of ancillary revenue options that no one else has, and that we think will be advantageous to us in the future.
How do you feel the support has been from the pop culture stores; the comic stores?
The people in the stores that we talked to have been primarily supportive. It's really sort of odd, we've never missed a ship date 'til recently, and when we did it became 'the sky is falling.' And in an odd way it's had a backlash positive effect in that people have really made clear that they want our books. They're missing putting CrossGen books on the shelves. They have empty racks where they used to sell a ton of our books, and they want us back in production as fast as possible. What could have been bad, and hurts them to some extent due to lost revenues, the best part about it is that more and more we're hearing, 'Damn it, we want you guys to get your books out here. We need them, we like them, your fans want them, we're hearing complaints.' And all that really says is that people like what we're doing and we're growing. So in an odd way, another silver lining in a dark cloud.
How is the response and the support been from the book channel, both for the products and in the current situation?
To some extent it's been a real positive saving grace for us. Sales from Travelers have increased two consecutive months at 400% a month, and we've been please to find that our esteemed competitors are launching Traveler-sized versions of their products in the future as well. So, I guess that imitation is the most sincere form of flattery. We've had real strong sales in book chains, book stores, and major retail chains in the last two months on Travelers in particular that have helped offset some of the other issues we've had to deal with.
Overall do you have anything else you want to communicate to the retail community out there?
They can be very, very confidant that their investment in CrossGen isn't going to go away; that all of the products are currently on target and on time; if it weren't for the issues we discussed we never would have missed a ship date because every book has been finished and completed on time; and that we'll begin that roll-out very shortly.
I don't believe we'll ever have an interrupted schedule again, and I apologize for the impact we've had on them from the negative perspective in that we've impacted their net revenues (and quite frankly we've impacted our own). Whenever you're looking downstream you want to be very considerate of the people that take care of you, which largely to date have been the mainstream retailers, the direct market store, and we want to apologize for the financial inconvenience regarding CrossGen and let them know that every product is being made, is being completed, and will be on their shelves.