You'd think that with that much financial smoke in the air, the comics market must be on fire. And sure, a few segments like trade graphic novels, kids comics and certain kinds of comics-adjacent art books are doing well. But are the fundamentals on the demand side strong enough to justify the levels of investment we’ve seen?
Inside the ‘content play.’ For most of these companies, publishing is only the tip of the iceberg. Everyone’s business plan appears to include "exploitation of IP" (turning comics into movies, videogames, t-shirts and Happy Meals), taking as an article of faith the unlimited public appetite for all things comics on every possible screen. After all, the path leading from comics to the media big-time is so well-traveled these days that it’s starting to look like a four-lane highway.
Let's step back and look at the dynamic playing out in the larger entertainment/media industry that’s stoking interest in comic-based content. The bundled-cable model of TV is rapidly crumbling, replaced by an a-la-carte world of cord-cutting and over-the-top services delivered through devices like Roku and Amazon FireStick. Disney, CBS/Paramount and Warner Media are making gigantic investments in streaming services to compete with Netflix, Hulu and Amazon. Apple is reportedly ready to pump $4 billion into content development. It is indisputably a seller's market if you own or can produce the kind of stuff that succeeds in these new formats.
But again, does anyone see consumers clamoring for the opportunity to pay monthly subscription fees to a half-dozen different streaming services? Did everyone get a big raise this year and decide to spend it on staying current on Star Trek, Titans and the Handmaid’s Tale? Is there enough money on the demand side to sustain all these heavyweight contenders?
House of Cards… It's not just a binge-watch on Netflix anymore. All of this reminds me of an old joke about a chemist, a physicist and an investment advisor stuck on a desert island with a can of food and no way to open it. While the chemist and physicist propose science-based ideas for getting the can open, the financial advisor waves them away. "What's your idea, smart guy?" they ask. "First," explains the investment advisor, "assume a can opener…"
One unremarked-on byproduct of media consolidation is that there is a much smaller number of people making the big decisions about strategy than there used to be. And by and large, they are all the same kind of people: similar background, education, professional socialization and business experience. These are the people who have been insulated from the economic insecurity that's afflicted the other 90% of Americans for the past decade or two, and who tend to generalize from their own relatively affluent circumstances when making decisions about their businesses.
They're all getting their information from the same sources, and all have the same people whispering – or sometimes screaming – in their ears about the inevitable future of entertainment in all its wondrous glory.
As someone with a foot in that world in my outside life as a consultant and business analyst, I'm here to tell you that groupthink is real. It's very difficult to challenge the consensus view, and the primary motivation of decision-makers is "fear of missing out" on the next billion-dollar bonanza.
Inside the bubble, it makes sense to dump piles of money into these kind of Big Content strategies. As for audience demand? "First, assume an audience willing to pay…"
Other people's money. One reason all this is happening is because corporations have gigantic piles of cash they've accumulated from a decade of increasingly extractive, rent-seeking business practices. Some companies like Amazon have an almost pathological need to reinvest in new businesses. Others, like Apple, let the billions pile up as a way to scare competitors out of the market. And the new tax laws have just opened the spigot to the trough even wider.
There’s only so much they can do with that cash. Interest rates are low, foreign markets are risky (or, to foreign investors, America looks safe), and Wall Street punishes companies who raise the wages of ordinary workers. Companies have bought back so much of their own stock that valuations are at record levels. But the money has to go somewhere. So let’s make comics and turn them into TV shows, because that sounds like fun.
In the case of startups, investors are looking for "scale" first. They figure with enough users and market share, profit will come eventually. That's how we ended up with MoviePass, the too-good-to-be-true movie subscription service that burned up over $120 million in the past year buying movie tickets at full price and offering them to subscribers on an all-you-can-eat basis. It turns out that if you are losing money on every transaction, you do not, in fact, make it up in volume.
Plutocratic socialism. The MoviePass example is instructive. Last year, stock in MoviePass’s parent company was trading at about $135 per share. Now it’s at 5 cents.
So what happened to all that money? It didn't just vanish. Fun fact: US box office in 2018 is up a little under $1 billion from 2017. MoviePass is on track to lose about $900 million this year. At the risk of oversimplifying, it appears that MoviePass transferred hundreds of millions of venture capital and investor dollars to Hollywood studios, distributors and movie theater chains by laundering it through the accounts of a couple million ordinary MoviePass subscribers.
The same thing is happening right now on a smaller scale with the Golden Age of Entertainment, and its little brother, the investment boom in comics publishing. A few very wealthy companies have decided to use a little of the loot they've accumulated to subsidize creation of way more content than the market can bear, on the belief that if they don’t do it, they’ll lose out to their competitors. Fundamentals need not apply.
For the moment, the beneficiaries of this are the artists, writers, editorial staff and other professionals involved in the creation of new material, as well as consumers who are getting a much larger assortment of content to choose from, in some cases at below-market rates (particularly on the digital side).
Let me repeat that. This weird, inside-out, over-consolidated and distorted market has produced a system where wealthy investors and groupthink-bound executives are subsidizing creators and consumers. It’s enough to make Bernie Sanders blush.
The opinions expressed in this column are solely those of the writer, and do not necessarily reflect the views of the editorial staff of ICv2.com.
Rob Salkowitz (@robsalk) is the author of Comic-Con and the Business of Pop Culture.