Digital Comics Platforms, Part I - Costs of Existing Systems

Small publishers better dust off those digital distribution business plans. Diamond Distributors is raising their order minimums to $2500 from $1500. According to Johanna from Comics Worth Reading, publishers need to sell 66% more books to reach the order minimum to sell in the direct market. With one recessionary tactic, Diamond has chopped off a long-tail of small press books.

We're all aware of the great opportunities for distributing comics on the web. Unfortunately, no one yet has succeeded at building a delivery system workable for small publishers. Most small publishers are now faced with cobbling together a strategy to drive visitors to their websites in order to convert them into customers. Cost of course is half of any business plan. In the first part of this series, I'm going to analyze the costs of building the existing digital comics systems. After framing the costs, we'll discuss cheaper alternatives in the second part.

At one end, we have Marvel allocating $10M for the next generation Marvel digital comics system. We may get a sneak peak from Marvel at New York Comic-con in February as they are running a panel called MARVEL Digital Comics and Beyond! My guess is that they'll try to keep the project under $5M and leave the rest for a huge marketing campaign.

Now consider DC's Zuda Comics as a case study. The site was built by a team of IBM consultants. IBM did a great job with the actual site. Built on the Drupal open source content management system, it was totally re-themed to not look like a typical Drupal site. There are also a lot of built-in social features. The site's performance was horrendous in July last year, but they have definitely made some significant performance improvements since then. The site is now quite zippy. It might even have a small advantage over the Kidjutsu comic reader in the latency of the first image load.

The team consisted of two lead technologists, Mike Martin and Bill Shaouy and at least 4 other IBMers. Here are some pics of the team . The project took about a year according to Mike Martin. I would estimate the total engineering salaries to be about $500k for the year. Bill and Mike spent all year prototyping and architecting the system. The other four engineers were mustered to implement the site in the final 4-5 month stretch. Consulting companies with the reputation of IBM typically mark-up their costs by 2-3x to come up with their consulting fees. With marketing efforts and server costs, the project probably cost DC at least $2M to complete. That doesn't include the DC Online web developers that helped and the Drupal sub-contractors they hired.

Software tends to only last four years before a major overhaul is needed to keep up with the changing landscape. Amortized over the next 4 years, the Zuda project costs DC about $42k a month. Maintenance costs including the salary for the lone Zuda editor are probably another $8k a month. This total cost of $50k a month to run Zuda is a significant hurdle for most publishers.

For well-established small publishers, a good option is to partner with a bigger site with an established audience. Myspace Dark Horse Presents is an example of the biggest such partnership. UDON Entertainment and Crunchyroll recently partnered to bring Street Fighter comics to the anime-streaming site as the Udon Combo.

The out-of-pocket costs for these deals are usually minimal for the publishers. Their partners bring technical and internet marketing expertise, so all the publisher has to do is provide the content. Of course, there is an opportunity cost for a publisher to partner instead of rolling their own systems, but those are definitely offset by the increased chance of success that expertise brings. In general, these are usually very good deals to make for publishers. More eyeballs tend to translate to more customers buying merchandise and graphic novels.

I would highly recommend pursuing strategic deals with established websites. Trade content for eyeballs, but always make sure to provide readers a way to get to your own website or online store. These deals don't come around often though. As always, go into any deal with eyes wide open.

In this part of the series, I've covered the cost structures of the online strategies for the top 3 publishers. In part II, I'll discuss other cheaper alternatives that are open to small publishers looking to get on the web.

Also see the Digital Comics Platforms Part II blog entry.