Comics Economics, Part 9

This week has seen the release of sales info from the month of October, the first full month of data we have after the economic meltdown began. I put together a couple of handy charts, showing the past year's worth of data. The first one (with the blue line) traces the overall number of individual issues sold. The second one (with the red line, for those of you playing along at home) shows sales in terms of revenue dollars (i.e. the cover price times the number of issues sold).


(For the record, I'm using numbers pulled from the ICv2 site. And it should go without saying that these are all estimates based exclusively on Diamond's reporting. I think most arguments about how accurate these numbers are shouldn't concern us much here, since I'm only concerned at the moment on overall trending.)

As you can see, October actually shows an industry-wide increase both in terms of how many comics were sold and how much money was spent on them. In fact, The Comichron has done some more historical research to discover that we're also looking at the highest dollar value since at least April 1997. October unit sales are up 5% over last year, 2% over five years ago, and 7% over ten years ago.

In fact, the only thing that looks down at all are year-to-date sales compared to 2007, and that decline appears to mostly be the result of weak numbers back in February and March.

I'll admit that this totally caught me off-guard. I'd expected that sales, like those being reported across the country in other industries, would be down.

But on the way home from work today, I caught this report on NPR that made a quick reference to the fact that the index of leading U.S. economic indicators fell 0.8% in October. And then it clicked for me in a way that I hadn't realized before: comic sales numbers are seriously lagging economic indicator and won't take a downturn for another month, and won't take a serious downturn for another two.

"Sean, what the heck are you talking about?"

There are any number of things people can measure to get a sense of how well the economy is doing, right? It should be easily understood that some things are better measures than others for any of a variety of reasons. One of those reasons is that the time it takes to provide a measurement of something is long enough to allow for conditions to change. I actually alluded to this in Part 1 when I cited that comic sales are a lagging indicator because we don't see those numbers until several weeks after the books are sold. The numbers that came out this week are talking about comics sold last month.

Now there are some things, though, that can actually provide economic information before it affects the economy. We're not talking a huge amount of time, mind you, but it does provide a little advance warning of things to come. For example, it costs a fair amount of money to build a house. You have to buy lots of lumber and drywall, and nails and screws; and hire contractors to put it all together. But before you can do any actual construction -- before you buy the materials and hire the builders -- you have to get a permit from the local government to be able to build on a particular site. So if we look at the number of permits that are issued, we can forecast how many homes will be built, and consequently how much lumber will be sold and how many construction workers will be employed.

There are actually ten different indicators that are generally looked at to assess the future of the economy. It includes such things as the number of permits issued (see above), the average number of hours worked by laborers in manufacturing facilities (stuff needs to be built before it can be sold), and the number of new unemployment applications (more people out of work means less people producing stuff). If the leading indicators are showing a downward trend, it's a pretty safe bet that economy as a whole will follow soon after.

Now, the epiphany I had with regards to comics is that we have the exactly opposite situation there.

First, you have to realize that the numbers we see from Diamond are not the amount of comics sold to fans but the number of comics sold to retailers. A Local Comic Shop can order 100 copies of Schmuck-Boy, the Wonder Twit #23, but he might only sell 2 copies to people who come in his store. He's then stuck with 98 copies he has to file away in the back issue bins. But it's that 100 number that Diamond cares about and it's that 100 number (or, to put it more accurately, something estimated to be around that 100 number) that makes it's way on to the sales reports you and I see online.

That's relevant here because the comic you bought from your LCS on October 29 was ordered from Diamond on August 26. Some numbers can be adjusted after that date, and retailers have some ability to return some books after they've arrived in the store, but those changes are, by and large, relatively minimal.

Now those orders that retailers put in to Diamond months in advance? Those are implicit and explicit orders from you, the fans. If you've got a pull list with your LCS, you've effectively said, "Order a copy of Schmuck-Boy for me each and every month, and I will buy it from you." (That would be an explicit order.) Alternatively, you might buy every issue with an appearance by Schmuck-Boy and, even if you didn't specifically ask for it, your retailer (if he's a good one) will also order a copy of Shmutz-Man #12 for you because he knows it will feature a Schmuck-Boy appearance. (That would be an implicit order.) In either case, you tell your LCS what books to order before he makes his order to Diamond. You're effectively making a future purchase based on your current economic conditions.

(Credit Where Credit Is Due Department: The cartoon at the right was drawn and copyright by Mark Engblom.)

But think about this: if you tell your LCS to stop ordering Schmuck-Boy for you every month, he will have already ordered at least the next issue, if not the next two (depending on when exactly you tell him and what schedule the book is on). So the sales numbers we see from Diamond are indicative of what you felt you could afford to buy at the time your LCS made the order, somewhere between a month and a month and a half before you actually have the book in your hands. And THAT means the October sales numbers are representative of the economy as it looked back in August!

The sales numbers we saw reported on November 18 only tell us what comic book fans' wallets looked like on August 26, several weeks before the world's economies went south.

The orders that were made in the end of September after things started going down the toilet were for November's sales. As it will have only been a couple weeks into the problem (as reported by the major news outlets), I suspect that many fans hadn't started adjusting their buying habits by that point, as they either didn't understand what was going on or believed it was more of a blip than it is. Plus we won't see those sales figures until about a week before Christmas in any event.

My guess is that most people will have been sufficiently informed about what happened to the economy to change their buying habits by the end of October, which would have been the next order cut-off date for retailers after September. The books ordered at the end of October are due to come out in December, and we won't see those sales numbers until Barack Obama is about to be inaugurated.

To be continued...

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