How Going Digital Helped the Comic Book Industry Gain Superpowers


When I returned to San Diego Comic-Con in 2010 after decades away -- I'd attended as a fan and collector in the early '90s -- the show I'd remembered as a kid had gone Hollywood.

Movie studios dominated every main-hall presentation. Tens of thousands lined up overnight to see previews of the newest Harry Potter and Twilight films. For Time Warner , Green Lantern promised (and then failed) to give birth to a new DC Cinematic Universe. My old gathering of like-minded fans had exploded into a 130,000-person-strong must-attend media circus for the entertainment elite.

Thousands working their way into San Diego Comic-Con. Source: ABC News.

A surprising origin story
Meanwhile, the business that give birth to Comic-Con was busy being disrupted. Retailers and publishers alike worried that an upstart distributor of digital comic books known as comiXology would undermine sales of their periodical counterparts. The local comics shops I'd frequented as a kid would soon be no more, the doomsayers said.

Boy, were they wrong. Digital's role in resuscitating the medium was a hot topic at this year's Comic-Con.

"Digital has not to anyone's observation pirated the sales of comics. It looks like just the opposite," said John Jackson Miller, a comic book writer and fiction author who also tracks the industry at his website, The Comics Chronicles. His data shows that unit sales of comics rose 11.4% last year. In dollars, the industry grew almost 15%.

Comic books ordered by comic shops in North America. Source: John Jackson Miller/The Comics Chronicles.

And what about digital? Readers have downloaded 80 million comics since October, when comiXology announced its 100 millionth download. Fans have taken to the format at an astounding pace, says comiXology co-founder and CEO David Steinberger.

"A lot of our business is brand-new business that has never existed," he said. For readers who were missing issues of their favorite titles and didn't live near dealers with big boxes of old inventory, "unless it was in trade [paperback], there was just no way to fill in those collections." That's all changed thanks to the nearly limitless back-issue bin that is the Web.

For that reason and plenty of others, you might even say digital has been like a superpower transforming what had been the 98-pound weakling comics industry into the muscular titan it is today. TV and movie successes are fueling comic book sales, and vice versa. Take AMC Networks , which is profiting like never before because of its handling of The Walking Dead, a comic book adaptation that rose to become the top-rated scripted show of the fall TV season.

Fans fight off fake zombies at The Walking Dead booth at Comic-Con. Photo credit: Tim Beyers.

How did the naysayers get it so wrong, and what we can learn from the comics book as investors?

3 mighty powers
Three forces conspired to transform digital from a threat into a catalyst:

1. Quality. Digital came around at a time when the comics industry was putting out rule-breaking material in great volume. Certainly The Walking Dead from indie publisher Image, but also a wide variety of other properties. For example, Showtime is working on adapting another Image title, Chew, while BOOM! Studios' 2 Guns is about to reach theaters.

2. Format. Miller says the iPad makes digital comics "palatable" while comiXology adds features that makes the experience of reading different and, in some ways, better. Making the experience both different and attractive, with a device built to deliver just such an experience, tipped the scales for digital at just the right time.

3. Access. Comics used to be a specialist market with an even more specialized distribution system. Not anymore. Now, anyone with a smartphone or tablet and the comiXology app can try comics instantly. History proves that simplicity wins in consumer markets.

Investors have seen these sorts of factors at work many times. Tesla Motors is profiting by delivering a quality experience in an electric car. Intuitive Surgical has found a unique and profitable format for robotic surgery. And of course Google is winning by giving consumers access to more of the world's information -- wherever we are, whenever we want it. The stock touched a 52-week high of $928 a share in mid-July, with more catalysts on the way. The latest? Chromecast, a $35 streaming device that promises to bring Internet video to any modern TV.

In media, AMC is waging a format war by licensing known properties such as The Walking Dead and then putting them not only on cable, but also on iTunes, on, on Netflix , and everywhere else it makes sense. All while profiting from free marketing as new issues of TWD make their way to the comic shop shelves, and to millions of tablets, every month.

Don't be surprised if fellow AMC shows Hell on Wheels or Breaking Bad also come to life as comic books. After all, fan favorites Firefly and Buffy the Vampire Slayer became comics after going off air, while author George R.R. Martin has authorized a comics adaptation of A Game of Thrones that can't help also marketing HBO's hit drama. Netflix uses this same sort of "recycling" strategy to make the most of niche TV properties. In March, the company teamed with AMC to bring viewers a third season of the Emmy-nominated drama, The Killing.

There's a disruption under way alright, but as Miller's numbers show, it isn't the comic book industry that's being upended. It's the entire production and distribution system for pop culture entertainment. And it's the companies delivering quality experiences conveniently, reliably, and on consumers' own terms that are saving the day.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google, Netflix, and Time Warner at the time of publication. He was also long Jan. 2014 $50 Netflix call options. Check out Tim's Web home and portfolio holdings, or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends, AMC Networks, Google, Intuitive Surgical, Netflix, and Tesla Motors and owns shares of, Google, Intuitive Surgical, Netflix, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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