Steve Geppi, head of Diamond Comics Distributors, formed 1982 sits down with Alex and Jim discussing various phases of his comics career via livestream. We start from his humble beginnings as a comics dealer, comics retailer, sub distributer, distributor, to various decisions positioning him as the president of the main comics distribution company in North America and the United Kingdom, with various expansions into games and publishing. Steve also goes through in detail how he’ll help the modern comic book industry from the economic collapse of COVID19! Edited & Produced by Alex Grand. Audio © Comic Book Historians 2020Support the show (https://www.patreon.com/comicbookhistorians)
Alex Grand: All right. So, welcome to the Comic Book Historians podcast with Alex Grand and Jim Thompson. Today, we have a very special guest, comic book distributor, Steve Geppi, Head of Diamond Comics Distribution. Steve, thank you so much for joining us today.
Steve Geppi: My pleasure. Glad to be on with you guys. Thanks for having me.
Jim Thompson: Welcome, Steve.
Steve: Thank you, Jim.
Alex: Steve, we're going to kind of jump throughout different stages of your life. We have a comic book great series. You're in that series. Basically, we're going to start from your childhood and on. Jim's going to get started. Take it away, Jim.
Jim: Okay. What I like to do, Steve is to go to basically where you were born, who your parents are, and your earliest experiences with comics. Let's get started.
Steve: Is the standard joke that I was born in a hospital because I wanted to be near my mother?
Steve: Actually, I was born in Baltimore back in 1950. Yes, I'm a relic. I grew up in a really famous neighborhood in Baltimore to this day called Little Italy. It's not quite what it used to be, so to speak, but there are all the Italian restaurants, and that was my origin growing up in that neighborhood.
Jim: Did you go into DC pretty much or did you stay just primarily in Baltimore?
Steve: I was pretty much my whole life in Baltimore. A big outing for me once in a blue moon as a teenager was to go to Ocean City, Maryland during the summer with the guys for a beach party, but I didn't really travel much. I was always pretty much a neighborhood kid.
Jim: I'm from Richmond, Virginia so we were practically neighbors.
Steve: Kings Dominion, two hours away; I did it many times.
Jim: Yup. Me too. Lots of time. All right. The 1950s. Where were your parents and what were they?
Steve: My dad was formerly a full-time guy in the service in the army, but later on in life, he was driving a truck, blue-collar-ish. My mom, prior to when she got married to my dad, she was a hairdresser. She used to, in fact, do all the hair for all the strippers on the block, the infamous block in Baltimore, the nightclubs. It was funny because when I was a little boy after she became a homemaker, I remember distinctly as a little boy in the kitchen, she had put two eye hooks in the door jamb and put a swing in there. I would swing in and out from the backyard into the kitchen while she was cutting strippers' hairs. Little did I know.
Jim: Oh, that's great. What about comics? When did you start reading them? Were you an early reader?
Steve: The very first comic book I probably ever had was when I was five years old. It was a Batman comic. Ironically, that's kind of what got me back into it years later because it was almost that very comic book that later I want to tell you the story of how I evolved. You'll know. As a kid, I remember at five years old, I would look at the pictures of the comics and I wasn't reading yet but it was like an incentive. I wanted to know what the hell they were saying. That was like an incentive for me to want to learn to read. I remember telling people to this day about how you can even learn from an Archie comic. It was Life with Archie and there was a story, and the word "spelunking" came up. I had to know what that was. I learned out that spelunking was talking about cave exploration. Even the simplistic comic like an Archie comic could improve your vocabulary. I was an avid comic kid. Every time my mother would get home and back in those days, your mom brought home "a rat toy," "Mom, what did you bring me? What did you bring me?" Of course, everywhere she went, comics were everywhere. They were at grocery stores. They were at drugstores. It was inadvertent, but she's always bringing me home a comic so I got used to reading comics.
Jim: Now, did they ever get concerned about comics once the comics scare started to develop, or were they fine with it all along?
Steve: If they did, I wasn't aware of it. I just was so wrapped up and I think my mom thought it was a great thing for me to be, A, reading but I would pacify. I'd sit there with a pile of comic books. The real good story about this is how I got kind of into back issues. Every kid would love seeing something they hadn't seen before. It didn't matter if it's a month old or 10 years old. It was an old comic. I'll never forget that glorious day when one of my friends came in. He said he found this little, ironically, liquor store just outside the neighborhood, in the Jewish neighborhood. They were known for the corned beef and the merchants there. This little liquor store on the corner of Central Avenue and Lombard Street. The guy owned it and his son had a fledgling magazine business. I won't go into what kind of magazines he was selling at the time, but he also had, it's 1959; I'm nine years old. He had this little cubbyhole boxes of comics that were nickel apiece old comics, but back in 1959, he was the first guy, A, that I knew where I could buy old comics. He was the first guy that I knew charged more for older comics. He had his quarter box, his 50 cent box, et cetera. That was like the score of all scores. I would walk those five or six blocks up every Saturday, rally around whatever I could do to scarf up $2 and come home at the time with 40 comics I had never read, pop up on the couch, my mother would make me a couple of hamburgers. We had no air conditioning so the fan was on, and I was in heaven.
Jim: Now, what were you reading by that point, by 9 or 10? Were you going back and looking at DC comics, Mad, or were you looking at Archie?
Steve: They probably went through my hands at that store. But I was primarily reading, I was very strict with the Superman family. I wanted Superman, Batman, Superboy, Jimmy Olsen, Lois Lane, and anything other than that was getting too exotic. The Flash, Green Lantern, when it was starting to come out. But I also read, I love the Harvey comics. I love Archie Comics. I love Disney comics. So, I had a pretty good diversification. So, humor as a category, superheroes as another. Of course, the infamous teenager, Archie was a part of what you fantasize with when you got the seasonal stories, whatever holiday or back-to-school or out-of-school. I would sit there and just go into my own little dream world.
Jim: How long did you keep reading?
Steve: Well, I was reading regularly. But what happened, my life took a left turn. I graduated from Saint Leo's School, which was the elementary school. I took the entrance exam to Calvert Hall High School, which was where all my friends were going, and I was excited to go there. I aced the test. I had like the highest mark anybody had on the test. I was all excited. But that was kind of the day I found out I was poor. Because I didn't realize maybe I should have on some level, that my mother couldn't afford a whopping $400 a year of tuition. Because my mother had been, you know, separated from my father, pretty much my whole life. Went in and out, in and out. He'd be gone, he'd be back, he'd be gone, he'd be back. So, I was devastated at the thought I couldn't go to that school and they put a lot of pressure on me and I reluctantly went to a public school for a whopping three months. I went to Mergenthaler Tech, which in Baltimore is known as Mervo. A very, very good vocational school. But academically it wasn't exactly rocket science. So, it was in January, though, after I'd been there a few months, myself, my freshman year, and my mother was really then going on welfare, food stamps, and I had to quit school and go to work to support my mom. So, I guess around that time, when my life went from a pubescent kid to a man supporting the family, comics kind of just drifted away. I didn't want them to. I didn't even realize it was happening, it just my life changed. I had to work.
Jim: What kind of jobs were you doing?
Steve: Well, I had a friend. His name was Lester White. Now first, I had worked at a lot of different jobs. I would get a job, whatever it was. I did so many different things. But if I left the job on Friday, it was only because I had a better job on Monday. So, I'd never stopped working. But I worked at anything from though there's a famous, well was a famous place in Baltimore, called Bethlehem Steel. It was where everybody worked in an area called Sparrows Point. They were one of the major steel industry players. I already worked there on two different occasions. Once as a contractor's employee, Hilgartner Marble, and Granite. Then later actually, for Bethlehem Steel. But I also worked at a friend of mine, his name was Lester White, he hired me, he was doing burglar alarms. He was a sole proprietor. Literally, we would go out and he would cold call a liquor store or whatever to put in what we call a signal mat. You just come in, you walk into the liquor store or the flower store, whatever kind of store, and you step on the mat, and it rings a chime to let them know if they're in the back that somebody's in the door. So, we would actually physically make them. We get sheet metal and wire and we put them together. But the problem was when we went out to sell and we went all over the Baltimore-Washington area and in Virginia. If he didn't sell something, we had a problem. So, literally, there were days when we would go and we were on the fly, so to speak, and it would be lunchtime and we'd scraped together $3 and buy a jar of mustard, a couple of hot dogs and a loaf, a half a loaf of bread until he made a couple of sales. But it paid me a whopping $50 a week cash. Keep in mind, this is like in the 60s. I took the greatest delight when I got my pay at the end of the week to give my mother 40 of the 50. She spent the rest of the week trying to spend it on me. But it was a great time in my life. I felt so fulfilled being able to help my mother.
Jim: Then you went to work for the post office. Is that right?
Steve: Yes. September 6, 1969. I love that palindrome, 9669. I got a job as a letter carrier. I took the test. I was fortunate I got the highest mark on the test. I got the job in two months, which at the time, I was told was unheard of. You really had to wait a long time to get the job. But I got it and I became a letter carrier. I did that from 9669 'til June 30th, 1974. So, just shy of five full years.
Jim: But now, when you were 22, you came back upon Batman again and that caught you into thinking in a different way. Tell us about that?
Seve: Well, I was married at that point. I got married when I was 20. I had two children at that point already. It was actually kind of 1973 maybe up, I'm not sure it was 72. But I had two children, so it had to be 73, and we were on vacation in Wildwood, New Jersey, which is a resort kind of like Ocean City at Maryland.
Alex: I used to live there.
Steve: It was at that point that my nephew, my sister's boy, was reading a comic book on the beach. I never forget it was Batman and Bat-Mite. It was a detective comedy. I'm looking over his shoulder and I get this tremendous, nostalgic flashback. I guess it suddenly crystallized in my mind like, you know, why did I stop getting these. I love these things. This was my passion. So, I made a mental note that when I got back from vacation, and I was on my job, every opportunity I got to talk to a patron, I didn't literally knock on their doors and bother them. But periodically I would just say, you know, you got the old comics, making small talk. Then one day, I'll never forget, 5607 Liberty Heights Avenue, good old Mrs. Donna Tell, she had a son, my age, who was in college where I should have been. But I had to go to work. She showed me his collection. He had like, I don't know, over 1000 comics, all right in my wheelhouse right around the period, I would have been buying them. I kept trying to buy them and she wanted to sell them to me, but she didn't want to do without her son's permission. It took her like three months. I never forget that glorious day when she gave me the green light, "Yes, he said it's okay." I bought them. Now, you got to remember at the time I had no clue. They were worth anything. It wasn't about value. It was strictly about nostalgia. So, I loaded them up, I went home, and I was like a kid in a candy store going through all my memories.
But shortly thereafter, that, I discovered the Overstreet Comic Book Price Guide, which was in its third edition in 1973. So for the first time, I was aware there was value. Then coupled with the fact that I was getting things that I already had because I kept trying to get more comics or I had duplicates. I thought, "There's might be some way to offset my hobby here." So, armed with that, I found out about these comic book conventions, where you'd actually go buy a table on a weekend, and sell old comics. I started doing that. Before I knew it, I was making more money on a weekend than at my job. The crazy part was I loved my job and I didn't want to quit. It's a good government job with a wife and two kids, government benefits, vacation. But the problem was all the conventions, as they pretty much are today, were all on weekends. Now, if you work for the post office, and you're the new kid in the block, you need to have about 237 years in order to get off on the weekends. So, I had this dilemma. I'm making more money on the weekends than my job. I love my job, but I can't go to the conventions. So, I did the only logical thing a sane man with a wife and two kids and a good government job would do? I quit. And open an unprecedented comic book store in the basement of a TV repair shop at 612 and a half, mind you, Edmondson Avenue, and the rest, as they say, is history.
Jim: That's where Alex takes over.
Alex: So, this is an interesting thing and I've noticed a couple of things. You mentioned the palindrome number. I've read that when you were 10, you would help neighbors with their tax returns. It seems like there are numbers. Like, numbers, kind of--
Steve: I'm always been a numbers guy. That's been my thing.
Alex: Numbers. Yes, and you think in numbers. That's great. I think that's clearly a skill. That makes you calculate everything you need to calculate. So, that would mean that when you were buying and selling comics, the numbers they were adding up and you were probably always had in the back of your mind, what price this one comic was even if you bought it three months ago, you probably remembered how much it was, right?
Steve: Absolutely. To this day, they tell a story, we'll be in the warehouse and this is like 40 years later. It was funny my son, Josh, they tell the legendary story of Steve can pick up a comic book and tell if it's missing a page without opening it. I was in my office one day playing around with a collection I just bought and I don't even know he's paying attention for that matter. I don't even know he knows the story. I picked up the Spider-Man number 10, I believe, with The Enforcers, I said, "Damn it, it's missing a page." He looked at me, "What do you mean?" I said, "Yes, watch." I open it, sure enough, there's a page that came out. He goes running and my son's said, "I just witnessed it. It's true."
Alex: Yes. You can feel the number, yes.
Steve: I don't know what it was. I did it so many times over the years. I bet you I'm not the only person who could do that. It was just a dreadful feeling you got after having for the first time discovered that was a possibility. But then when it had happened, you are almost sneakily or suspiciously holding your breath, "Oh my God, please, please. It's a great issue. It's a great cover. It looks so beautiful. Please don't let it have a page missing."
Alex: It definitely shows how physically in-tune you are with the comic itself. If you can almost read its page and everything like that, almost like Johnny Carson, in a way. Now, also during this time with the comic shop in the basement, you were also driving up and down the country, finding memorabilia items to sell in your store. It seemed like you really kind of were realizing like sentimentality is a commodity. We can buy and sell that and you really made the most out of that space in that basement, it sounds like?
Steve: Yes. It was funny because when I opened the store, a hundred bucks, tiny little place, I really had no expectations of making sales per se in the store. To me, it was a place I needed to have to get ready for the conventions to bag the comics. The biggest hope I had at the time, was that through advertising, somebody would ring my phone and bring me in a great collection. Not that I could sell them to store but that I could sell at the conventions. I never forget it's even going back before the store, if you're a mailman in the morning, you have to follow up in chronological order of the way you walk the route. If you got down a little early, you had some time to kill and on my route at the time, The Antique Trader was like the Bible of the antique industry, big thick publication. So, I would have some time to kill, and I'd open and flip through. Then I suddenly see books, magazines, newspapers wanted. I see ads in there for all the guys that I kept seeing at the convention that had all these great golden age comics. I was like, "Damn it, now I know where they're getting them." So, I started advertising in there and I was in there for years. What would happen then is after I opened the store, I never forget the mail would come and I'd see a thick envelope. I never forget I would open it and if I even went halfway through opening it and I saw like a golden age book on it, I'm already dialing the phone. Because I knew the speed of calling was, snooze, you lose. That was what led me to be driving up - Pennsylvania was one of the greatest states, still is, for finding old collections of everything. That was the thrill. I mean, getting up early in the morning, packing your lunch or your breakfast or whatever getting ready, and then driving up there with the thrill of the hunt, which, after all, that's really the bottom line about life, isn't it? The thrill of the hunt?
Alex: Yes. Sure.
Steve: Having it is one thing, but getting it is even more fun.
Alex: Yes. Sure. Of being on the prowl of it and making it happen. I've read that in researching a bit, that, like, let's say, if you made a good hunk of money from one deal, you would almost kind of almost think a little riskily a little bit with it, and then make an even bigger deal next, and then, that kind of got you out of the basement into another location. Can you tell us like an example of a deal, and then how deals like that then got you to a new location?
Steve: It's funny. In hindsight, I probably was crazy with a wife and two kids to make a bunch of money on a small, you know, at the time relative, to the time. But if the next morning my phone rang and there was a collection that cost - and that was amazing how many times it happened that it was almost exactly what I had. Someone would that be would want. I remember a couple of different occasions, may he rest in peace. It was a guy named Mark Feldman, who owned a Maryland funny book shop. We actually had a couple of stores here. One was called the Imagination Bookshop. He helped to run the Maryland Funny Book Convention. But Mark was quite an entrepreneur. Unfortunately, he died in his late 20s with some disease or sickness. But Mark - who was actually where I bought my second store was I bought his store in Silver Spring. But Mark was a guy that, you know, he would always come up with stuff. So, I never forget the closest I came to what anybody would call a stake to start my business. Because I really started it without a stake. I just have my paycheck or not even my paycheck now. But when you leave the post office, you have a choice of leaving your money in a retirement fund or taking a lump sum. Of course, I've only been or like less than five years. So, I got a whopping 1,500 dollars. That was like, a big number at the time.
Well, lo and behold, good old Mark almost magically calls me up. Guess what the price was? $1,500. He had the most beautiful, to this day, I've never seen better copies of Four Color 199, Bullet Valley with Carl Barks. I still remember the people I sold them to. So, that was a case of I get a nice little nest egg, boom. Sold. Another time I bought a collection, and I made like $5,000 on this collection. The next day, somebody had a collection, $5,000. So, I was always confident that I would roll the money. So, it led to a philosophy that has really served me well even up until today. Because call me the eternal optimist, but I would go to a convention like everybody else. We had all our expenses, we pack up the truck, and then I would say, "Oh, man, it's a slow convention." But the optimism would say, "Okay, it's a bad convention for selling. But you know what that means? It's gotta be a great convention for buying." So, I would then go around the room and the guy that was on Friday had the highest prices in the room was desperate on Sunday and was needing to take some money home. So, buying was always to me, the biggest thrill. Because you couldn't replace this stuff. You couldn't just call the factory and order back issues.
Alex: Yes. Selling is good, but sometimes it's painful.
Steve: It is. It is. We have a joke called the chippy lending library. I sell them but they're never really not mine anymore. They're only on loan.
Alex: Because it'll come back eventually. So, your retail business grew from this, it sounds like the numbers would almost line up, and you kind of went with some gut instinct. Then you would able to go to a new location and then you had a second. Then by 1982, you basically had four locations. Is that correct?
Steve: Actually, 1980. Because I had bought, as I mentioned before Mark Feldman's little store that was in Silver Spring that I'm, you know, moved there later to another location. Then I opened the third store and what is called Crystal City Underground in Virginia. Then in 1980, it was really unprecedented at the time, they were opening Harborplace, which ironically, today is 38 years old. It's hard to imagine. But at the time, it was the new festival marketplace. It was the second version of what had already started in Boston called Faneuil Hall. Since that, there's another South Street Seaport in New York. I never forget when I took the bite to open a comic book store in a mall where rent was going to be crazy. The night before all the merchants were getting ready, excited about opening day, and I'm sitting there thinking, "I'm excited too, but am I really going to get them walk-by traffic to buy comic books?" Well, the next day, we opened, you would've thought we've been open for 30 years, just people. That told me that the comics had the appeal that it always had if they were in front of people. So, that was the fourth store.
So, in 82, when I was well, I'm getting ahead of myself, so around that period, I was having other little retail stores opening up in the Baltimore-Washington area. By that time, I had started carrying new comics. Almost kicking and screaming because nobody wanted to buy comics, pay two months in advance, get a short discount, have to buy them in increments of 25 because they were dropped shipped from the printer. It was not desirable. We needed them to keep people coming in on a regular basis every week. So, other little stores started to open. They would call me and say, "Steve, I can't meet the minimums. I'm way on the other side of town. I'm not a threat to you. Would you mind if I add them on the order?" I said, "Sure, no big deal. I'll do it." So, I had like, five or six guys and it kept becoming like a pain. But then my distributor, New Media/Irjax, was the one supplying me. He got them into Rockville, Maryland, and drive them down, et cetera.
But what happened was, he won a lawsuit against all the publishers that's pretty well known in the industry. They were forced to break up what was considered a monopoly at the time for Phil Seuling. It wasn't so much that is it was the fact that he had the ability to dropship. He could never even touch the books he would say Joe Blow store needs 500 copies of this, two of that, three of that. The printer, which is literally dropshipped him. So, he would just take his cut, and that would be it. That put him in a handicap position because the speed of delivery was important. So, if the books had to go to Rockville first, and then back out, they're already on the way to the store. So, he would lose the battle of speed. So, I won that. When he did, he moved to Florida, and he went out soliciting all the big sub-distributors and giving them a better deal. One of our friends, Bob Beerbohm, was one of them. Well, this was called Common Ground. So, there was like a bunch of those.
So then, time went on, and eventually, I saw the writing on the wall that he was going to be in trouble. He wasn't paying his bills, blah, blah, blah. I applied to go direct to Marvel Comics. It was after I got accept to direct, I had to sweat it out. That for those two months he would stay afloat, so I wouldn't lose my supply and him getting put on hold and lo and behold, with one week to go, he got put on hold. The publishers weren't in a position to release the books to me because technically, he might yet still pay. So, I needed his permission. So, I was in Florida. I went to the first Marvel meeting that I was invited to. While I was there, I visited his location. That's when we cut a deal for me to take over.
Alex: Yes. That's when you became a sub-distributor to distributor yourself, right?
Steve: Yes. He had a location in Largo, Florida, had some crazy name he'd called, one called the Fantastic Kingdom. He had one that he ran himself with his own employees in Cambridge called Solar Spice and Liquors. Then he had me as a sub-distributor in Baltimore. He had Mike Ferraro, who owns Fat Jack's in Philadelphia, and then he had in Northeast Ohio News.
Alex: You're talking about Hal Schuster, right?
Steve: Yes, Hal. His father was Irwin and Jackie, originally was Irjax. As in Irwin and Jackie. Then his other son, Hal, had New Media. They combined to become New Media/Irjax. Then when I did the deal with him, I suddenly had a location in Florida, one in Cambridge, my one I had in Baltimore, the Philadelphia, Mike Ferraro came aboard. The only piece I really didn't get at that time was Northeast Ohio News, NEON. That, ironically sort of became the nucleus of Capital City Distribution, which became our biggest competitor for many years.
Alex: Now, before we get into the distribution. Jim, do you have any questions before we go to the next point?
Jim: Yes. One thing we wanted to do, Steve, was because some of the listeners are going to be interested in and your thoughts on what's happening now. So, when we cover something, I'm going to kind of then apply it to a question that's about the current comic industry. Because I can't think of anybody that understands a lot of aspects of this industry any better than you do. So, we want to hear from you on that. So, we're talking about retail and I guess the question I would have would be, and I'm sure you hear this a lot, who's going to survive in terms of your retail stores? Are the current owners going to make it? Or are they just going to go out of business and new people, when things get back to a different place, new people are going to open up new stores? And what is Diamond going to do to help these people get through this?
Steve: Well, I think none of us have a crystal ball to be able to say, who is going to survive or not. There's been clear speculation, not just in the comic book industry, but everywhere in the world now because everybody's affected by the pandemic, that there's going to be some shrinkage or some fallout. I'm encouraged by the fact that we're shipping soon and going to have comic book stores having comics on May 20th, which means at that point, we'll have had maybe a two-month drought. While that can be devastating to any business in the industry we're in, it can be even more so if a store was already kind of on the ropes and hanging on by a thread. However, having said that, it's a very resilient type of retailer that we have out there. These are very young, energetic, not always young, necessarily, but entrepreneurial people who are resourceful. Keep in mind, when I started, it was a different world. But we didn't carry new comics at all. So, it was all about back issues.
Now, interestingly enough today, a lot of stores because space is so precious and so expensive. There are many comic stores that only carry new products because they don't have the room for it, or the rent is too high. But I think those that are savvy have been around a long time. That doesn't just preclude, it doesn't mean the new ones aren't. Some of them do it too. They've used the stores on eBay, they've had online sales on Facebook, various other social media tools, curbside service. I think when you try to speculate who's going to survive or not, you know, it's kind of like I'll give you an example. If you own an insurance company and you use mortality tables to determine your insurance rates. An insurance company through the history of mortality rates probably knows within a few, you know, percentage points, how many 35-year-olds are going to die next year? You don't know which ones, but they know they're going to set a budget, "This many are going to die and we base our rates on that." Now, it's not a good analogy of what we're doing here. But it does say that there probably will be a fallout. Now keep in mind, Diamond's goal is for there to be zero fallout.
Now, it's kind of like the COVID pandemic, you worry about sometimes the people being said that they died of COVID-19, might have died of something else. Now, that may be the case of stores that don't survive. There may be some that were on the ropes or contemplating retirement, and they'll be locked in as people who didn't make it. But keep in mind, every year we have a fallout and a growth. We have new stores, we have stores that go away. It's just a matter of time. That may have been in the case of somebody who's doing well, who just said, "You know, at this point in time, this may be the signal I need to go away." But what you hope is that whether it's a new entrepreneur opening a comic store for the first time, or an existing retailer who sees the opportunity to expand that the volume that we are used to having will get maintained somewhere, somehow. It doesn't have to even necessarily be in brick and mortar. It could be a mail order service that gets it.
The good thing about our product is it's evergreen because of the back issue market. I've used this the other night on the show I was on where I said, "If you're in the restaurant business, sad to say, and the last two months, you weren't able to open. All those meals that got eaten at home instead of your restaurant, you're not going to recapture. They've already eaten them." But if the comic books that you wanted that came out or should have come out two months ago, you might still pile them up in the box and want them. So, we have a little bit of a built-in, pent-up demand that helps us. Now, as far as what Diamond's doing to help, historically, Diamond has always been even by default, and we don't shirk that responsibility. We've kind of been, by default, the bank of the industry. We feel comfortable about having actually the privilege of being the guys who when a good account, for whatever reason gets a little bit behind, we're happy to be able to try to help them and get through. That doesn't mean we're going to take an account who's notoriously not paying for not good reasons, and just be stupid about it. But we're going to continue to do that and probably more than we have in the past.
Keep in mind, our own cash flows gotten murdered at this time. But we have a great banking relationship with JP Morgan Chase, the biggest bank in the country. We've worked out a plan with the publishers. So, that we could make sure they all got paid because while we weren't getting income, it affected our ability to pay. I'll give you an example, back in 1995, when we bought out Capital City. Capital had, you know, through losing Marvel, DC, and a bunch of the other top-tier publishers had shrunk down from a company that was 20 warehouses. We had 28, they had 20, we were all over the place with a speed of delivery, and down to one warehouse in Sparta, Illinois. They hung on valiantly, a fierce competitor, for a year trying to carve out a niche distribution. But when I guess things got a little worse, they were smart enough to recognize that and called me. Because we've had a good relationship despite the competition, and said, "You know, Steve, would you be interested?" Now, some people said to me, "You know, Steve, you should just wait. They're going to go out of business, and you're going to get it all free." That is not where my head was because I knew if that would have happened, a lot of publishers wouldn't have got paid. Then it wouldn't have helped me because I would have all the accounts, but that would have these vendors going out of business.
So, it's kind of likewise today you're sitting in a situation where we're trying to preserve as an industry, I mean, the parts may move around, this retailer has two stores, and now he's got to five. One had none. He's got one. But we're trying and that's our goal as Diamond. How do we, in our unique position of being the main distributor? It's a really ominous responsibility. But when I take happily to try to caretake for that, it's tough. We're not asking for accolades for it. We feel like we benefit a lot from it. So, we should be willing to do the things that need to be done. Otherwise, we'd be being selfish, saying, "Okay, great for me, I get all the business. But when there's a problem, let somebody else fix it. That's not the way it works. We've got plans for the retailers not only to help them financially. We're talking to the publishers that got a certain amount of returnability for them. We do a lot of programs that relied on point-of-sale purchases and things that we provide. I remember when the comic industry was so infantile that we had to have a cash register program. Most stores and mine was one included, way back when they had a little box. I mean, we didn't even know what a cash register was. So, things have gotten a lot more sophisticated today. Retailers are looking like retailers, they got point of sale systems, and they do a lot of things, right. So, we're doing our best to help them. It's not limited to what we think they need. They know better than us what they need and a lot of what they need is unique to them and not every retailer. So, we're going to be there ready for them and do everything we can to get them through this.
Alex: That's awesome.
Jim: That's a great answer. That's what I was looking for. Alex, back to history.
Alex: Yeah, so distribution-- so I want to give the audience just a little bit of background because I was following you with what you're saying with Hal Schuster and those guys and Beerbohm's Common Distributors. I want to give a little background. So Phil Seuling, he was said to have established - this is kind of what they say in the history books, the direct market in '72. There are some monopoly issues that led to the New Media/Irjax lawsuit which started in '78 and he was against the four publishers that you mentioned, it was Marvel, DC, Warren, and Archie Comics. Then eventually that kind of broke down - the monopoly and there was some market share up for grabs and New Media/Irjax got some who-- and they were your distributor. Then, also there was Big Rapids. They actually went from '70 to '80, they would distribute for some sub-distributors like Beerbohm's Common Ground Distributors from '70 to '80. They went bankrupt. A couple of their employees then started Capital City which you kind of pointed out already. And that was in 1980 and they grab some of the distributions market share. Now they kind of set up where it's like you, Capital City and there's a couple of other things like by 1982, which is a big year. Bud Plant, he acquired Abar Distributions, right, in 1982. So the stage is being set, right? Where these three figures are going to kind of combine at some point. So now that we have some background, first, did I get any of that wrong?
Steve: You've got it right and there were a few others, actually. There were a couple of guys called the Donahoe Brothers, they were back up on that day. There was a lot of fledglings, by today's standards, they wouldn't have been considered the same thing because everything was so new. When Marvel finally published public trade terms, that's kind of what opened it up for a lot of other potential distributors. So it wasn't just in a sense that Hal Schuster and Jackie and his father got their share. It literally meant, "Okay, you're going to be able to get drop-ship privileges but if somebody else meets our minimum requirements and all our rules and all our requirements for distributing, we'll open them up too," and that's when they started opening a bunch of distributors.
Alex: Yeah, it just, kind of, open the gates. And then it all just started to grow fast and then Diamond Distribution in 1982 is its key year because that's when officially Diamond Distribution starts and it was called Diamond because there was a Marvel Comics imprint of non-returnable items that had a diamond on it and that was your symbol to tell what you were. It was a symbol of your function as a distributor. Is that right?
Steve: That's correct. The story is kind of funny because I've always been a believer that whatever your company's name is, it should tell you what you do, you know?
Steve: If you say, flower boutique but you're a comic bookstore, that would be very misleading or just say nostalgia crypt and nobody knows that means comics or whatever and with due respect to those who have store names like that. But in my mind, and so I got to thinking, "What do we do?" Well, we distribute comics. But other people distribute comics? But what do we do that's different? We distribute the Diamond Comic, because at that time, to differentiate between returnable and not returnable, they sent copies to the newsstand that the newsstand retailer would purchase at a shorter discount, but have full return ability.
Steve: We would get a bigger discount, hence the retailer was buying them cheaper, but if our books got returned to the other system, they can make a profit just by returning them because they'll say, "I bought them from Diamond at 50 cents on a dollar and I can return it to them at 60 cents on a dollar. I'll make 10 cents for returning them." Obviously, the publishers need to have a way to do that. So they came up with that little Diamond slug. What they did is they run whichever print run was bigger first and then change the plate and added that little slug. So I said, "You know what? We're the Diamond Comic Distributors." Of course, three months later they stopped doing that. [laughs]
Alex: Well, exactly. Well, you kept it and it's a nice name.
Steve: We kept it and it was always a good name, I thought. It was not unique that a lot of companies - jewelers. We got calls they think we sell jewelry. I went out with Geppi's Comic World, I got some people thought I was selling comedian supplies, so.
Alex: Yeah, right. Yeah, there is an issue with that terminology right, with comedians. And then, basically, during the '80s, there's just kind of an intense time of change, a lot of flux and you're basically had to keep your mind on all the numbers all the time and multi-task all sorts of accounts mentally. So, before that started and the deal of buying or acquiring the New Media/Irjax accounts, when you bought them out because I've read that, first, you're helping them out, you gave them some free comics to sell to help supplement because they were overextended on what they were publishing, things like that. But then it came to a point where they really just couldn't do it anymore and so then you had basically bought their warehouses and their debts as well. Is that correct?
Steve: That what it really got. Typically, we didn't buy anybody's stock. I don't mean physical stock. I mean, like their chairs. So we bought, as we've done with many acquisitions, selected assets, and liabilities. In their case, there was no real cash transaction, but what was happening for them, they were getting off the hook for all the debt. All the books that they had already received, everything that they needed that they were going to be chased for personally we assumed. And then in addition to that, because Hal was going to go into publishing and we put out a few little publications comics feature and a variety of other things. That was going to be their niche and whatever else he's going to pursue. So it was a smooth transition. The accounts, what it did for me and I used as an example or analogy. I mentioned what happened in 1995, how people said, "Why don't you let the accounts go, you'll get them all," and why I did it then? It was a little bit similar but at the time when New Media was on hold, one argument was the same way. Why don't you just let them go out and you'll get the business? But there were other distributors, there's no guarantee I was going to get all of them.
Steve: So, as I said the other night on Dan Shahin's show, "To a broken gate, with a corral full of horses, if I bought the corral while the gate was broken and the horses where still in it, I could fix the gate and keep them."
Steve: That gate represented the two-month lead time that the orders were in process. So these accounts technically didn't have a choice but to buy from me for those two months. They had a choice after that. They could return their order form but I have two months to give them a chance to see what I could do. And fortunately for me, we did a good job, I'd like to think or otherwise we wouldn't have kept them. So all of the accounts-- none of them, all of them stayed.
Alex: You organized it, yeah. And then you also had yet to figure out who were good clients, who were bad clients, and then talked to the creditors and be like, "Look, I'm going to organize this thing." There was quite an interesting movement there to kind of keep the order and keep that functioning while you're kind of putting together your company. It's really interesting stuff. It's fascinating.
Steve: Yes, so what I did and as a result of all that, when I got direct Marvel's terms, it was like, you had to have a separate company to buy direct from Marvel, you couldn't be a retailer. So I separate the companies in February 1st, 1982 and Geppi's Comic World, the proprietorship became Geppi's Comic World Inc. and Diamond became Diamond Comic Distributors Inc. And then it was during that tenure, where I was now for the first time in my mind really a distributor, not a retailer, sub-distributor who was doing it as a sideline, as a favor or maybe even as to make a few bucks. So when I did that, I had to look at it like a real business and I thought, "If I'm going to do this, I'm going to do this," and this is my nature. So we did everything we could to try to be as good a service as we could, competitive as we could and I saw the opportunity to buy through or grow through acquisition. And over those years, we literally bought out a lot of distributors.
Steve: I always thought one of the reasons I was able to do that, maybe this is just self-serving, but I had a good relationship with the other distributors. They might have competed with me not like when I got an account but they were still friends and I still consider them friends. But if they got into a situation where maybe things were not so good, I always felt that they felt, that's hard for me to say, but it evidently the history shows that it must have been the case, they were more comfortable calling me, telling them they had a problem and they wanted to sell because I guess they felt they could trust me and I was happy about that and I would never betray them and say, "Okay, well, we didn't work this deal out but now that you showed me all your numbers, sorry, buddy, I'm going to go pounce on your accounts." I just would never do that.
Steve: We never had to. We never considered it.
Alex: Yeah, there's like goodwill. Because I've talked to other distributors like Beerbohm and Bud Plant and they say good to great things about you, so--
Steve: One of my favorite letters I have is from Milton Griepp who's a dear friend of mine. Milton on Capital City along with John Davison, when our deal was all done and payments were all made and everything was over and finished to the dot. Milton said to me - I still have one of the nicest letters telling me that, "Everything I had overheard about when you bought somebody out. You did it to the T and then some." It's a really good feeling because when you compete with somebody, there's natural negativity that interferes but we always had respect for one another. And I highly respect, now look what he does now for the industry. He's one of the most knowledgeable guys we have in reporting what's going on. So, that was a good feeling and I'll never forget that letter.
Alex: So is the basic reason why a distributor would fail and be in the position in which they could be acquired is because they delivered too much product without getting paid by a retailer?
Steve: Well, it's a variety of things. Keep in mind, distributors work on the shortest margins of anybody. Now today, it's a little different, the margins are even shorter now but back when it was strictly 20 distributors, everything was buy-sell. Meaning the publishers would say, "This is what you pay and it's up to you what you want to charge to your customers." Staggering-- sliding scale discount. So in an effort to get more business, somebody says, "I'll give you 55 off," and then somebody says, "I'll give you 56 off." And then, "I give you 57 off," when they got working on such tight margins, it was almost financial suicide to think you could sustain that.
Steve: On such minimal margins. So that coupled with the fact that you're buying on return. So you might say, "What risk do you have?" Well, you have plenty of risks. First of all, if you order 10,000 of a comic book and you needed to have extras for re-orders. So you bought 11,000, just to make up a number. A - some of your accounts who ordered the 10,000 that are so to speak pre-sold they might not get be able to buy them, so you get stuck with them. Then if you order a thousand extra and you don't sell a thousand on re-order, they become your inventory and you could get stuck with that. So, it doesn't matter if you sell a million or something but if you order two million, you're going to lose money.
Alex: That's it, yeah. So it's always assessing all the time.
Steve: So that's a couple-- the freight cost, the air freight wars to get books there faster. I would like to think that, today after having been an exclusive distributor for twenty-five years, if people really look at it, and I know that everybody has their opinions on different levels, but the really good thing that came about, a lot of that money that was wasted on things like air freight is gone, because now, you might not beat your competitors by getting your books a few hours early or a day early, but the protection you have, you're not late. So you trade of being early for not being late and everybody gets their books on Wednesday. You know, that's a good thing, so there are a lot of good things that I could promote, maybe biasedly self-servingly but there is a truth that is a certain amount of value in consolidation.
Alex: Yeah and the trains run on time like you were saying.
Alex: So, one more question then Jim's going to go over another section. Did I read correctly that you had purchased Mile High Comics?
Steve: No, I'm not the company, no.
Steve: Not at all, never. Chuck Rozanski is a good friend of mine. Chuck started Mile High Comics back in the '70s--
Steve: He's still a great customer of ours. But no, I have never purchased Mile High. I've purchased comics from the famous Mile High collection, this might be the confusion.
Alex: Okay, all right.
Steve: Not the company.
Alex: I'm glad I cleared it up, 'cause I was like, "What's going on?" Yeah.
Steve: No, no.
Alex: All right, now Jim go ahead.
Jim: Okay, so a couple of different things, let's do another bringing it up to modern times. Listening to the part Alex was going over, it seems like one aspect of comics for you throughout your career is that someone else's failure or difficulties and you want to help them but it's also an opportunity for you to expand or to do something different or to move into a different area and that's how business works. In the current situation, knowing that there's going to be changes in how everything works in this new order, can you think of business aspects or new technologies that are going to emerge as new players or new winners. I think of like Walmart and what they're doing or ComiXology in that aspect of it with online things. Are there things directly from the epidemic that we're probably going to see become more influential?
Steve: I don't think the basic function of getting from A to B with a product is going to change now, grant you we had to evolve tremendously. We spent 10 million dollars in our Olive branch warehouse in Mississippi to put on a system that is called Dematic, that is the same thing that Amazon.com uses. There's an inherent sophistication with conveyor belts and pre-stamped, pre-weighed boxes. So, it takes a lot of the human element out of it. But as it relates to potentially new competition coming in and different sources of that or even aside from competition just let's take digital for example. When digital first became something that was our concern, a lot of people that were in the print side of the world, which is the comics stores and the publishers and even distributor, oh my God, you would hear, "Digital is going to replace print." I can honestly say and I'm documented about this that I never get rattled by that, I actually said I think it's the opposite. I think that it's a good thing that they are spreading the word through digital and I think it's going to help us create new customers that we might not otherwise get. Because they're going to discover comics online and they might not have found a comics store to discover them. It's not like in the '50s and the '40s where there was I think like 150,000 different outlets you might have been able to find across the country. Whether be it a grocery store or drug store, whatever. The comic books existed so your mom tripped over them everywhere she went. Today, there are much better places to buy comics called comic bookstores but far fewer of them. So the children today, when I was five that was one of the first things I ever got brought home to me, so I was predisposed. But the kid today not only sees, not have that come home to him because it's not in front of his mom. He's got an iPad, he's got a million of other things that take his attention away. So, from our perspective, digital is a good example of new innovation, something that's happening and yet I look at it as a good thing. I think it's going to be bringing it because I guess my belief is based strongly on the inherent belief that the comic books themselves are something that was meant for print. Meaning, that, A, they're collectible, nobody comes running up to an artist and says, "Sign my iPad."
Alex: No. [laughs]
Steve: They want you to sign their comic book.
Steve: And they have value, not to put on all the emphasis on their value, but its another-- remember the whole comic industry direct market started because of back issues. We didn't have new comics, they weren't available to us, they were on the newsstand. But we just open stores because we knew there was a demand. And so, that's something that the digital can't do. No one's going to have a digital Spider-Man number one and feel like they got anything special.
Alex: Yeah, you're right.
Steve: Because a billion people might have it. But if you got a 9.8 Spider-Man one or any grade Spider-Man one, that's your baby and it's got value. So, that's one example, digital. Today, you got Kickstarter as another way to create revenue for a publisher or a creator and I don't begrudge them that. If they can go out and find a market that they know, starting out would probably not work in a direct market, starting out. It may be the feeder tube, because for example if you have a comic that maybe you come to Diamond and Diamond even says, "I'll carry it," but Diamond puts it out there, it's in this monstrous catalog, pre-call previews, the retailers got a limited budget, he sees the thing in there but it's so buried in the sense that he can't really even sometimes notice it. So they get pathetic numbers.
Steve: But it goes and does a Kickstarter and develops a following. It's kind of like YouTube show, you know, you get enough followers eventually, then you become commercial and monetized. So, that's the same thing. I like the idea that there's experimentation. It was asked to me recently, I think that was Kevin Smith show or whatever, how do I feel about the new competition. I said, "Well, you know, I've always been competitive," and even though it might be argued that we have the most of the direct market, on our other sidelines are merchandise, and are other toys and things like that, max. We're the little fish in the big pond. So we're used to competition and quite frankly, when there were twenty distributors, we felt like we did pretty good or we wouldn't end up where we were. But with that in mind, if there are new distribution out there and it helps make the market grow, I would rather have a lesser percentage of a much bigger market than a hundred percent of a smaller market.
Jim: All right, we, kind of, going to go back to the historical aspect of it. But one that I'm interested in very much which is a function as a gatekeeper or some would say a censor, but during your time, both as retail owner and as a distributor, you've run into an occasional controversy where some people took exception to the decisions that you've made. I'm thinking of-- I know Pacific Comics had a bit of write-up about some things at one point. Gerber and Erics, Void Indigo Graphic Novel, and more recently, but not that recently Alan Moore's Miracleman 9, with a childbirth scene. Are those three good examples or am I missing--
Steve: They're very good. And, Omaha the Cat Dancer? I remember.
Steve: There were certain-- at the time, basically, it was a two-way street in a way like I felt I was definitely called the censor, I guess, by everybody's definition because I was saying, "I'm not going to carry that." It did mean that-- remember I was in Diamond Comic Distributors, the big chunk of the market. There was still availability through all the other distributors. But I understood, it looks like yeah, but my customers, they're being shut out on being able to buy this, that, or the other. And I learned from that, I was concerned because I was a little offended by the fact that I had no choice whatsoever. Miracleman 9 was an example where there was a birthing scene. And I gave the illustration nobody cared about it, but I said, "What if my daughter picks this up and there's this--" I'm trying to teach her the birds and the bees and somebody's pitching them for me, would I get a chance-- you know, I felt a little offended but I got to expect there were times that it wasn't my place to interfere. I can still do it with my own stores if I wanted to, which at that time I had a few stores. To tell you the truth, I don't think I even end up doing that, but I also had other concerns at the time. And to tell you the truth, some of those are still true, because even as Steve Geppi doesn't care what he carries or wild pornographic or whatever it is, when you try to take comics over the border into Canada or vice versa, we had issues. I couldn't hold up the flag and say, "But it's my amendment, my First Amendment Right."
Steve: "Well, I'm Canada, you're the United States. I don't want to hear your argument." So I also felt there's part of my job called, whatever you want to call it, was that I had a fiduciary responsibility also to protect the retailer. Now a lot of people didn't want protection because they thought I was being a censor. But in the same token, there were those who blotted it. I created a section in previews which is a far cry from what previews are today, it was more like a stapled cut of pieces of paper and it was called cautionary comics. So when I first tip my toes into the books that I might not have carried before, I felt at least a little personal relief by saying, "Okay, I'm telling the retailer ahead of time, I've got to see the samples and rather than me, just have you call me up and say, 'You didn't tell me this had a birthing scene or whatever.' We're going to list these under the auspices of cautionary comics, so you know ahead of time we prepared what you might get." And it's kind of funny on that because it wasn't just about sexual content or things like that, it had to do with also what we felt about the professional level of the comic book.
Steve: I didn't feel that I had the responsibility or I didn't feel like I would be doing the retailer right if two kids in college got a roll of toilet paper and drew two stick men and put a set of trade terms in and said solicit this and I say no, I'm a censor? You know, I feel like that's not fair. However, the funny story about this is I had a drawer, I would get the samples. Next to my desk was a credenza and when I get something that maybe I chose was just not really worth putting all the order form but retailers going to thank me because this is too amateur, I throw it in that drawer. So years later, when Teenage Mutant Ninja Turtle became a mega-hit, I immediately ran into my drawer and I found a copy of the first print of Teenage Mutant Ninja Turtle.
Steve: Oh, god, forgive me for actually not being bright about seeing the potential for that. But I guess at that time, it was so new and so fresh that it was like I'm so used to looking at color Marvel Comics with famous artists and anything look that less than that was probably in my amateur mind myself or from a professional evaluation standpoint, probably not commercial--
Alex: Not going to work out.
Steve: I tell you this though, 99.99% of what in that drawer probably would have never been successful. Today, we don't have that approach, today, we still have to be careful I'll get a stick man on the toilet paper, but at the same token today, we carry a lot. And then you know what the irony of it is, now we got the opposite, "Why are you carrying all this crap, this is the previews is crowded enough, Marvel's got too many titles, DC's got too many titles. And now you're putting this on the previews." It's like you can't win.
Steve: It's a tough job being a distributor.
Jim: Yeah, the last question, I'm curious, did you ever run into any problems or resistance or get on the bad side of the comic book legal defense fight?
Steve: No, no. I was on the board for a period of time I've never had a problem with comic book legal. I am a very big supporter of theirs.
Jim: Yeah, I knew that and I wonder if there was ever a conflict because of some of the stance that you were taking. But they never had any issues.
Steve: You know, I remember, I think the comic book defense fund came later. It probably wasn't even in play at the time. I don't know the dates but I'm pretty sure that was after that little period of time where I was being cautious.
Alex: Right, and those two years of those comics in 1983 and 1987--
Jim: Since then, you would--
Steve: So I was personally on the board, Chris Powell is still on the board, he works for me. So, I'm a supporter of them. I stand by what they do.
Jim: That's great. Okay, Alex.
Alex: So back to the '80s, 1985. So, now, I'd read you had hired a dollars and cent CPA guy, Chuck Parker to help iron-out some of the emotion out of some financial decisions because you made relations with people and you needed kind of like that cool kind of cold kind of look at the numbers. Was that an important step for you to have someone like that around?
Steve: It was very important because going back to whatever it is, the '80s. Chuck's been with me for almost 35 years I think now.
Steve: Pretty much the whole length of Diamond's tenure.
Alex: And he's still with you now?
Steve: It's funny because it started with my bank-- yeah, he's still with me now. It started with my bank, the bank then. I was just to say I had all the right number but the wrong product when I talk to a bank. They love my balance sheet, "But you sell what? Comics book?" And then there was a little suspect, like a lot of mothers and fathers thought when they brought their kid in there, they're going to a drug shop. "You can't be making money selling comics, you must have drugs here." So the banks also I kind of prove my worth. I remember I got my first 10,000 dollars unsecured loan, that was like a score and I paid it all for logistics because of that I wanted to make sure. I actually went one or two times took a loan I didn't need--
Steve: Just so I could pay it off and show him my history. What happened was as I started to grow, and this is still wee numbers compared to today. We did more in a week today that we did in a year then. But what happened is the bank would start telling me, "We want to work with you, we know what your needs are, we see the numbers, they're good, but you really need a controller in here. You need somebody who can understand." Prior to that, Chuck was working for a company now called KAW - Katz, Abosch, and Windesheim and they were friends. And so the bank told me I should, which meant you have to - in definition - hire somebody internally. Now prior to that, Chuck had been working for KAW, my outside accountant. So he would literally come in, spend days dragging out of my boxes, my paperwork to create the numbers that ordinarily we were supposed to be giving them to do.
Steve: He had to literally go get them and then do them.
Steve: So we went around, started interviewing and Chuck was at every interview. And I was one of those guys that comfortability was important. And I thought every time we interview someone, I'll be looking over Chuck and saying, "I think I should hire him not those guys." So one day I went over to Steve Kirshman who was one of Chuck's bosses and said, "Steve, I don't want to offend you and I would never do thing behind your back, but you've been showing me all these candidates-- I really like to hire Chuck. Would you be upset if I hired Chuck?"
Steve: He said, "Well, it would hurt us," he said, "But we'd be flattered--" and that's the nature of our business, people move on. And I think Chuck kind of expected that I might have been sending body language signals, I don't know. He could tell you. And then I hired Chuck and it was probably one of the best moves I ever made.
Alex: Oh, that's awesome.
Steve: Because it freed me up from having to be doing everything.
Steve: And I had the comfort of knowing I had somebody really-- not only understood but cared a lot. And it really led to a lot of other great employees, not the least of which of Larry Swanson our CFO. These are guys all-- I think they hate me at KAW because I think I hired like six people out of that company. But that was really important, that was one of the most important things that happened.
Alex: Oh, that's awesome. Yeah, thanks for giving some background on Chuck, that's cool and that's cool that he's still with you now.
Alex: So, now, 1987, interesting year for you and Diamond. So, Diamond made around 19 million in sales, went national in 1988 with the purchase of the West Coast Bud Plant's business who would also acquire on the way there between '82 and '88, Pacific Distribution as well as Naneth Razonzki's Alternate Realities Distributors and so basically with that buyout, it looks like around that time he was interested in kind of selling because he sold commerce and comics a year after that. Basically with that buyout, you have control about 40% of the direct market. So, did you call him or did he call you? How did that happen?
Steve: It's a great story, I told you before I always kind of had a good relationship with these competitors and friends. Where we would be comfortable. It's a great story because at that time, First Comics, Rick Obadiah, may he rest in peace, started First Comics. Rick was suing Marvel and he was also suing World Color Press at Sparta, Illinois for price discrimination. And they called me, Bud Plant and Garry Colabuono, a retailer in Chicago, another dear friend, into court as witnesses for First Comics. It was an awkward position because I don't want to be an enemy of World Color Press or Marvel but I was, you know in a subpoena. I think it was actually a subpoena. Bottom line is, I forget the guy's first name, his last name was Cherry. He was a hotshot attorney, really fast-moving, aggressive. So I never forget they put me on the stand, I was on the stand all day long, grilling me, the lawyers for World Color Press back and forth and I was just being honest. And at the end of that-- and this sounds a little self-serving. But at the end of the day, Cherry came over to Gary, me and Bud and says, "Steve did such a good job today, I'm not going to need you guys." Gary couldn't go, he had a home, he lived in Chicago, me and Bud lived on the coast. So he sent me and Bud to dinner at Knick's fish house, I think it was called or Knicks steak house in Chicago. I don't know if it's still there but it was one of the greatest meals I ever had.
Steve: And so Cherry must have called the maître d' and we were like kings. I think we didn't even see a menu for the first hour-- we had everything being brought to us like kings. But what's significant about that, because it was an hour before we saw a menu. We had a three-and-a-half-hour dinner and it was during that dinner that I started to talk more seriously to Bud about the possibility of selling his company. You have to understand that up to that point, my distribution scope had been from the MidWest called Chicago, Sparta/St. Loius, Dallas East. He represents all new territory for me the West. He had seven locations as a result of the acquisitions you mentioned. And keep in mind, when Bud used to advertise before he got in the comics, his ad slogan was, "but no comics." He would have art books--
Alex: Artbooks, yeah.
Steve: And everything but no comics. So Bud kind of went into this, and he'll tell you this kicking and screaming. He never-- I don't think really wanted to be a comic book distributor like we define it today. So during that dinner, we formed the kind of semi-handshake version of it and before I knew it we were signing a deal, July 16, 1988. We purchased Bud Plant Inc., who was the third-largest distributor, Diamond was the second-largest distributor. And by virtue of that acquisition, we overnight became the largest distributor, hence the world's largest distributor of the English-language comics.
Which gave us, as you mentioned collectively about a 44% market share overall. And that purchase, you've mention we did 19 million dollars in 1987, which I think an accurate number and we-- it was overnight on paper, much let alone reality, a 60% increase in our size, which is a big thing for any company to take a company and have 60% growth overnight. And it actually ended up being more because the industry was growing. But we swallowed it and those seven warehouses-- never forget Chuck Parker went with me, we flew to seven cities in seven days. We've met with all the employees at each location, we called in every retailer at every location and I never was so never worn out from meetings in my life--
Steve: but in seven days we manage to make our pitch and we got the opportunity and as I say the rest is history.
Alex: Yeah, that's interesting. Because there's one thing signing the page but the other things you have incorporation and physically--
Steve: Actually doing it, yeah.
Alex: And making it-- coordinating everybody. That's pretty stressful.
Steve: We have had a lot of experience with the others, having bought out of a bunch of smaller distributors. But it was still challenging and it was a very, very big ask to do. But we got great cooperation from-- keep in mind you're working for these other companies, and for all intents and purposes, even though they were on the west coast, Diamond "competitor".
Steve: And now, all of a sudden, you're going to be working for the competition, but I think meeting with those employees was a big factor, they got to see me in person, got to talk to them personally, reassuring them honestly from my heart what my intentions were. They gave me a chance and it worked out. So, I'm very blessed to have had that opportunity but it was scary and I'll give Chuck Parker a lot of credit there because once I did the signing, him and the other people from my company took over the heavy lifting and not the physical side of it, of shipping books, but the behind the scenes, doing the contract, getting it ready, negotiating, and making it happen. That was another significant part they played.
Alex: That's awesome. Now, Bud was also distributing underground comics, which you hadn't distributed those before that, right?
Steve: I have not, no. I'm trying to remember the transition. Actually, we took the position, though. We were not going to take away from anything that Bud was doing and make it be less than what they had. So, I don't remember the details, but if Bud was carrying something and we weren't, we were not carrying it.
Alex: So you incorporated that part of the distribution too, then?
Steve: Yeah, and it was interesting because that's kind of your birth of Previews because we had been putting together or stapled-together a package of pages with one-line listings, for whatever we were soliciting. I'll never forget the day when some of the guys moved East, come to work for me, that worked for Bud Plant, not the least of which is Mr. Previews, Marty Grosser, who's still doing it, but it was a guy named Steve Bond that I'll never forget the day, how proudly he walked into my office there and handed me my first copy of what was a much smaller version of Previews. I was so proud. I had such a primitive-looking order form compared to Capital City, who had Advance Comics that looked much better than ours, quite frankly. But now look at this, I've got a catalog that looks like a catalog because we didn't have those capabilities. Despite the size we had, we had been doing it more on a shoestring, in a sense. So that was a fun time.
Alex: So, you picked up new tricks with each acquisition?
Steve: The goal was to take the sum of the parts and make them greater than the total. So, we, through a Bud Plant acquisition, became better on the graphics side with the order form.
Alex: That's cool.
Steve: One of the most valuable things I've always felt that I got in an acquisition was the human resources. We weren't just buying volume and geography. We were getting people that were loyal to Bud for many, many years, that had proven themselves in the industry. Some of those people are still with us today. That's valuable. I couldn't have done it without them, to tell you the truth.
Alex: Right. Now, okay, so then now, due to the volume of product delivery, you had mentioned it that you and Capital, at this point now, were able to have better deals with Marvel and DC because you had more efficient freight systems with handling high volume. Then by basically having a high volume, you have less of a margin, but you could still make a good profit because there was so much stuff being transported. Is that right?
Steve: Yeah. We never got a better deal from the publisher per se, because the discounts were the discounts and it was still buy-sell at that time. We'd buy at 60% off and so on, a sliding scale, upwards of 55%, 56%, 57%. But in the course of that, where we would benefit was the combined volume gave us the economies of scale because a certain amount of the overhead was fixed. Bud's was a little different because we're picking up seven new locations, but there was still a certain portion of that economy of scale that is newer to us, that made us be able to work, albeit, on the same or lesser margins over the years with the increases of cover price, with the increases of the amount of copies we were selling, we could allocate the costs of customer service and whatever other add-on services we do across the board. So instead of having 500 accounts to allocate that heavy cost, that fixed cost, we could now have a thousand or whatever as it grew to.
Alex: Then the last one then, Jim, we'll go to the next section, is in 1990, you acquire selected assets of Seattle-based distributor, Destiny Distribution, and took over the operations of Oregon's Second Genesis. Right?
Steve: Yes, sir.
Alex: Is that correct?
Steve: Richard Finn, yes. I never forget that deal because I had flown in to meet Phil Pankow, who owned Destiny, and I'd done a deal. I was done. I had to fly to Los Angeles. I'm in Los Angeles, happy about the deal. I get a phone call from Phil. He had gotten apparently a call from Milton, and now he was telling me I've been topped. The deal was off the table. I had to fly back up there, kept him up till four in the morning, I think. I finally convinced him to come back and salvage the deal. So, that was one that almost got away.
Alex: That's interesting. Then did, basically, just solidify full control of the West Coast at that point?
Steve: What it did for us, that certainly the Bud Plant deal meant, for the first time we were a coast-to-coast distributor. We weren't just middle country, East. We weren't defined by a region. We were coast-to-coast. In addition to that, because of what he initially started with as Bud Plant's Catalog for retail, Bud had a lot of accounts internationally. We didn't really have a lot of that. Bud was kind of a good start for us internationally because he was already servicing those accounts, and because we had a broader product line that encouraged some of those foreign accounts to become bigger and more important accounts. That evolved pretty good, too.
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