Decade in Review: Return of the Speculator

I originally had planned to discuss the state of the collecting market at length as part of my Decade in Review series later in the year (past topics include Conquering Hollywood and The Big Event), but considering some of the high profile sales that have taken place over the last couple weeks, now seemed like a good time to talk about how the stratification of the collecting market is once again posing a danger to the hobby.

That may seem like a strange sentiment considering the immediate impact of those sales. which began on February 22, when the blogosphere went gaga over the sale of a copy of Action Comics #1 for a cool $1 million dollars. The sale event managed to even grab the attention of the usually uninterested mainstream media, which gave the auction house behind the deal an unfortunate platform to hype his business and the comic collecting market.

"When you look at what happened to real estate, the stock market and in banking, people are terrified. They're making no money in the banks, they're not sure about real estate, and the stock market is like playing roulette," Vincent Zurzolo from ComicConnect told CNN. "With comic books, they feel a lot more confident."

Zurzolo's statements seemed to be backed up by the much less hyped sale on February 26 of a copy of Detective Comics #27 for $1,075,000 to another unnamed collector -- or is it investor? While that sale was a little more complex -- the actual sale price was $900,000, with the other $175,000 being an auction fee -- the amount was still multiple times that of any other non-Action #1 ever sold.

But while non-collectors and auctioneers around the world were greeting the news as a sign that the comic hobby is thriving and vibrant -- in addition to claiming that the sale of Action #1 "is the single most important event in comic book history," Zurzolo also posited that it put comic collecting on the same level as fine art -- long time comic readers and fans were shaking their heads, because we've seen this before. And the last time it happened, the entire industry almost collapsed.

That, veterans of the speculator wars may recall, was in the mid-90's. Much like baseball cards during the same period, comic collecting as a hobby took off like a rocket in the late 1980's and early 90's, with sales figures increasing seemingly exponentially. Marvel's much-hyped launch of a new X-Men book in 1991, powered by hot artist Jim Lee, sold over 7 million copies, just one of a number of books to crack the million mark, a figure that previously hadn't been reached since the industry's Golden Age heyday during World War II. Business was booming.

But there was a major difference between the 40's and the 90's: people in the Golden Age were actually reading and enjoying the comics they bought. In the 90's, though, the sales were being artificially inflated by speculators who, hoping to capitalize on rising back issue prices (themselves artificially inflated by Wizard, which notoriously published a "price guide" designed to push specific back issues that the publishers were trying to sell on the secondary market). Assuming that demand would continue to rise and that first issues and character debuts would in future years become hot commodities, speculators began buy dozens of copies of every hyped release. And with magazines like Wizard pushing everyone onward, regular readers (including myself) got in on the act as well. Soon everyone was buying baskets of comics and socking them away for the presumed payday.

So what happened? Well, the companies began turning out specials editions, collector item first issues and gimmick foil crossover events as fast as the presses could run, trying to strike while the iron was hot. People were buying anything regardless of quality, after all, so rather than focus on craft the big publishers began chasing the latest trends and pumping out as much "kewl" product as possible. One problem though: the people actually reading these comics began leaving, first slowly and then in droves, as the quality of the comics declined and the characters and series they followed were prostituted out to the speculator market. Combined with some shady behind the scenes deals (Marvel's attempt to monopolize the national distribution system, for instance, and their disastrous merger with ToyBiz) and the entire industry almost collapsed -- and has never really come close to recovering (consider that December saw only one title reach 100,000 copies, and that just barely -- a far cry indeed from Jim Lee's X-Men #1).

Now, you may be wondering what this history lesson has to do with anything, but for long time collectors, statements like Zurzolo's that encourage people to view comics as an investment commodity rather than as entertainment to be enjoyed or an artform to be appreciated are enough to set off alarm bells. And that, in turn, is fueled in part by the real threat to the collecting market and the rason these books sold for so much in the first place, namely the new hyper-critical grading system and the rise of CGC.

For those not familiar with it, CGC -- the Certified Guarantee Company -- is a comic grading service that purports to supply neutral, third party review by expert graders to provide the industry with a standard grading system that ensures fair trade when, for instance, you buy comics sight unseen from eBay. And, indeed, on the surface this does seem to work as it should in some segments of the secondary market, such as with Golden Age comics, where the supply is limited and grades are usually low as most books have seen decades of use.

[Note: As an aside, and probably deserving its own topic, it should be mentioned here that the CGC itself has been accused by many people of being little more than the next generation Wizard price guide scam, as the service has frequently been accused of providing false high grades to inflate prices for the seller and, of course, the CGC is hyped incessantly in the pages of Wizard itself in an attempt to push the service and CGC graded back issues -- something made more problematic by the fact that the service is too expensive for most individual collectors to use, meaning dealers who can send in bulk orders have a near monopoly on the service and thus the supply of CGC graded back issues.]

Where things really start breaking down, though, is the use of CGC for newer comics. Beginning in the 1960's, during the Silver Age, comic collecting as we now know it came into being, meaning there are many more copies of each back issue available. And considering the massive drop off in readership caused in part by the last wave of speculators (Uncanny X-Men, for instance, sold just 68k copies in December compared to over 400,000 monthly two decades ago), that in turn means that there are actually more copies of many comics than there are actual collectors who want them. Considering that all collectibles (and business in general) are based on the concept of supply versus demand, this would seem to cause a drop in back issue prices.

However, the opposite has occurred, especially in the realm of CGC graded comics and the reason is simple: many speculators are no longer buying the comic, they are buying the CGC grade. In order to ensure that their grade is accurate and uncompromised, the CGC seals every comic they grade in an airtight case; if the seal is broken, the grade is no longer valid, as they can no longer guarantee that some damage hasn't occurred to the comic. This, of course, has the additional affect of also ensuring that nobody can actually read the comic without invalidating the CGC grading, meaning that most CGC graded comics are not collected as a comic to be read, but rather as a static object. The CGC part is more important than the comic part. The most glaring example of this? For newer comics, a CGC certified comic will often sell for multiple times the amount of the exact same comic in the exact same condition that doesn't have the CGC label. In other words, having that mark adds a massive premium unrelated to the actual comic itself. Indeed, the CGC slab is so important, I have personally seen people giving a premium to CGC copies based on the condition of the CGC case itself!

So if you aren't going to read the story but instead can only look at the cover and the protective case, the appearance of the comic -- reflected by the grade -- is really the only important thing. It's just an object, a poster or a paperweight. Further, since supply is greater than demand, many collectors have multiple copies of each back issue to pick from, meaning that even among high grade comics, the tiniest imperfection can mean all the difference. After all, if you have the choice between a comic graded 9.6 and one graded 9.8, well, why not pick the better copy?

The final result of this? Massive inflation of comics with the highest grades. It wasn't long ago, after all, that the highest selling copy of Action Comics #1 was only $317,000. Thanks to the fact that Zurzolo's copy was an 8.0, one of the highest unrestored CGC copies in existence, though, it sold for a massive premium. Again: nobody is ever going to actually read this comic. What matters isn't the content, but the pedigree.

That, though, almost makes sense considering the historic importance of Action Comics #1 and Detective Comics #27. What doesn't make sense is how speculators have taken this new collecting trend -- the need for the highest number -- and applied it to new comics. Dealers, who, as I've mentioned have a near monopoly on the service, will often go through their brand new comics when they receive a shipment, cherry pick the best copies in the batch and send them off to be CGC graded. When they return with a 9.8 or a 10.0 grade -- what you would expect a brand new, unread comic off the press to receive -- they inflate the price to 50 or 100 times cover value and sell it as a high-grade commodity.

And speculators are buying them up. Collectors and readers, of course, can buy a comic off the shelf in nearly the same grade for cover price; but speculators push the marketplace, which is why a CGC 9.9 copy of New Mutants #87 -- which lists for a reasonable $40 for a non-CGC 9.4 -- recently sold for $2900 on eBay. Now, keep in mind that for a non-expert, the difference between a 9.4 and a 9.9 is probably undetectable to begin with. And then ask yourself this: does anybody really care about Cable enough to actually pay $2900 for his first appearance?

The one upside to this phenomenon -- or, at least, it's not a downside -- is that, unlike the speculation boom in the 90's, this latest boondoggle doesn't actually affect the publishing industry itself but rather only has its teeth sunk into the secondary market. But for collectors, the comic book world has become an increasingly bizarre place to be; as investors and speculators search for the highest grade comics for their sealed vaults, they have managed to actually shift how comics are graded, so that a comic that would have been graded as a Near Mint twenty years ago might only qualify as a Very Fine today. The tiniest imperfection can mean the difference between a 9.0 and a 9.8 and, in turn, lower or raise the value on the market by a factor of ten -- or a hundred. And even more: if you do end up with a comic in high grade, with a high value, now you have to worry about the possibility of destroying the value simply by reading it. Even a stress mark at a staple caused by opening the cover could be enough to drop the value in half. All seeming to defy the most basic of logic, because as demand falls further and further and fewer and fewer collectors stay in the hobby, prices for the highest grade comics -- now reduced to simple objects or investments -- skyrocket wildly out of control.

One thing is certain: as sure as the speculator market crashed in the 1990's, it will crash again. Ironically, it may be the same vehicle that has pushed this inflation that will eventually cause it's deflation as well: eBay. That's because the online sales service has already revolutionized collecting. No longer do collectors have to schlep all over the country, going to comic shops and conventions trying to find that one back issue they need, only to discover the price has been jacked up by the dealer who controls local supply. Instead, comic fans can go to eBay and often find multiple copies of whatever back issue they need, which in turn leads to lower prices. Anything you need can be found there, after all, something that most price guides have yet to realize; ironically, while the high end CGC copies are going through the roof, regular, solid non-CGC copies are often selling for just a fraction of the listed price guide value.

In the end, then, this should be a warning to anyone out there who believes Zurzolo's claim that the comic back issue market is safer than stocks or bonds or other traditional investments. As long as there are comics and as long as there's a Superman, Action #1 will have value. But these days, the entire secondary market is little more than a house of cards being propped up by speculators and shady businessmen like the folks at Wizard, trying to promote this back issue Ponzi scheme for their own short-term financial gain. Real fans and real collectors will buy the comics they love, because they love them. Any other reason for spending money on back issues is a sure recipe for financial disaster.

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Decade in Review: Conquering Hollywood

Welcome to the latest in our occasional series looking back at the themes, events and personalities that shaped the last decade in comics. Last time we discussed the rise of the event book as the primary mover within the mainstream comic book (and specifically superhero) industry. Today we take a look at a development that has far larger cultural and fiscal ramifications for comics: the conquering of Hollywood.

Movies based on comics books are nothing new, of course; starting in the late 70's, the Superman films remained popular for over a decade. And just when that franchise was wrapping up, the Batman films kicked off. During the 90's, as the Batman line devolved into kitsch, films began mining comics for lesser known properties such as Men in Black. But while comic films were a viable part of the Hollywood strategy, they were just one minor aspect of the industry, barely more than a cultural footnote. Something was missing.

That something, as it turned out, was Marvel. Just as they revolutionized the comic industry in the early 1960's, Marvel helped lead an overhaul not just of the comic adaptation ghetto but of the movie industry in general and pop culture as a whole. Beginning with 2000's X-Men and 2002's Spider-Man, Marvel properties pushed the boundaries of what was possible with comic movies (teams, for instance, rather than just solo heroes) while also redefining the box office; the $403 million brought in by Spider-man was at the time the fifth highest gross in movie history.

Where there's that kind of money, of course, imitators will follow. And while not every comic book movie has been a critical or commercial success (see: Catwoman, Elektra, et al), studios have turned more and more to comics for both big budget superhero franchises as well as smaller budget action adaptations (Wanted, for example).

As the appeal of comic films has broadened, so too has the influence of comic fans increased. Nowhere is this better seen than with the ascension of the San Diego Comic Con, which over the past decade has evolved form a mid-sized gathering of comic fans into the premiere movie event of the year, with studios falling over each other to present bigger and splashier previews of their upcoming sci-fi films and TV shows. If osmehting is a hit at Comic Con, it's likely going to make money at the box office; and if it is a flop, then, lookout below. And with the advent of instant feedback social networks such as Facebook and Twitter, the buzz from Comic Con spreads across the globe instantaneously: two of the biggest hits of the decade, 2008's The Dark Knight and Iron Man, rode massive Comic Con buzz to box office history.

Which makes one aspect of the rise of comic movies somewhat difficult to understand: while the characters and films are more popular than ever, the comic books themselves are selling at an unprecedentedly low rate, with sales continuing to hemorrhage even as potential buyers flock to the megaplex for the latest blockbuster. For whatever reason, widespread popularity and cultural influence have not yet translated into a rise in sales, something that publishers will need to figure out sooner rather than later.

For the time, though, it now seems as though the value of comic books to the publishers lies not in the comics themselves, but rather in the potential marketing opportunities those comics create. Because of this, the popularity of comic book movies has had the strange side effect of actually devaluing the comics themselves and potentially handcuffing creators of properties in development (though this is not always the case; Marvel, for example, allowed Iron Man to be portrayed as a fascist wing-nut in the comics at the same time production on the Iron Man feature film was progressing).

But perhaps because of this dichotomy, publishers are being forced to take drastic measures to protect their new primary source of income, and again, it's Marvel leading the way. The creation of Marvel Studios was one of the biggest gambles in recent Hollywood memory, with Marvel borrowing some $500 million to produce their own films in-house, a move necessitated by the fact that under their old deals for the X-Men and Fantastic Four franchises, they were receiving only a small flat fee and a tiny percentage of earnings, while the studios raked in the money off of their properties (and yes, this can be seen as ironic considering those characters in turn were created on a work for hire basis for Marvel by creators who weren't seeing a dime from Marvel in return). But with their comics sagging, Marvel had few other options, as they needed the revenue streams their characters were generating to stay in house.

In turn, of course, the popularity of Marvel's films convinced Disney that, again, the characters (and not the actual comic books) were now iconic and popular enough to warrant a buyout. It has been widely speculated that Disney's purchase of Marvel won't affect the publishing arm and why should it: after all, in the grand scheme of things, the comics are now little more than an afterthought, a petri dish for the next actionable ideas to come from. What Disney was getting was access to those ideas -- a huge backlog of characters, concepts and properties that, if the last decade is any indicator, may well provide Hollywood with the next massive pop culture hits and worldwide blockbusters. The next big test is coming up in 2012, when The Avengers is scheduled to hit theaters. And if that experiment -- bringing a comic-style shared universe onto the big screen for the first time in movie history -- turns out to be a success, then comic movies and Marvel may just manage to change the way people think of movies and what kinds of stories can be told in film.

And if that happens, then the amazing successes of the last decade will be little more than a prologue to the real show. We hope you like comic movies, because we have a feeling you'll be getting a lot more for a long time to come.

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Decade in Review: The Big Event

Welcome to the first of our ongoing series looking back at the decade in comics. Over the next month or so, we'll be taking a look at some of the trends and events that shaped the comic industry over the past ten years. Fittingly, we begin with perhaps the biggest trend of all: the Big Event.

Event books, of course, aren't a new development over the past ten years. First pioneered in the early 80's with series like Secret Wars and Crisis on Infinite Earths, the giant event has long been a staple of the marketplace. Not all events are created equal, of course; after those first early successes, Marvel and DC struggled to recapture their success, turning out duds like Legends, Millenium and Invasion (and those were just some of the DC failures). But while these mega-crossovers were once just an annual excuse for readers to buy a couple tie-ins, over the lats decade they have evolved to become the single driving force in the mainstream marketplace.

That change can be laid in part at the door of what was unquestionably the biggest event of the decade, Civil War. Not since Crisis on Infinite Earths twenty years earlier had an event comic actually had a major effect on the shared universe it occurred in. This, for the most part, helps explain why events had previously been so unpopular, as the effects of these giant storylines rarely lasted for more than a couple months, and only then in the core titles.

Civil War changed that, with widespread ramifications that altered the entire concept of the Marvel Universe on a scope that far exceeded, say, Onslaught (which only really affected a small handful of books, and only then for a one year period). With Civil War, Marvel editor in chief Joe Quesada and his team of hot writers re-imagined the status quo of every character in their stable. And they did it in a series which played to fanboy tastes by pitting heroes against each other. Now all those people who had argued for years about "who would win in a fight" could find out for themselves as the heroes battled it out in the streets.

And it wasn't just a gimmick (though, of course, it was that too); the ramifications of Civil War are still being explored today, as the event has been revealed to be just the first part in a multi-event arc that is still ongoing. The combination of kewl concept and lasting effects helped drive Civil War to be one of the biggest sales sensations of the decade. And that, in turn, meant one thing: imitations.

Concurrent with Civil War, of course, was DC's own (and typical for the company, confusing) tweaking of their universe, Infinite Crisis, which was also a massive sales hit. With both companies experiencing unprecedented success with their events, then, it was inevitable that both would turn to even bigger and more frequent events than in the past. Now, instead of a once-yearly crossover, events are ongoing and overlapping; ramifications from Civil War were still being explored when World War Hulk hit; that, in turn, was being cleaned up when Secret Invasion started; and Secret Invasion never really ended, as it led directly into Marvel's ongoing non-event event, Dark Reign, which itself spawned multiple events-within-events like the upcoming Siege storyline.

The downsides to this phenomenon, of course, are multiple, starting with the fact that an industry indebted to large scale events is by definition unstable. Previously, a long standing title might have a solid baseline sale figure that was occasionally boosted by an event. Now, however, it seems to be the opposite: fluctuating sales that drop when there is not an event. In part, of course, this is because fans are being trained to follow events (an creators) rather than characters and titles; the famous brand loyalty that used to exist within the comics community, and so often resulted in fans habitually buying titles that they may not actually enjoy any longer, is becoming a thing of the past. After all, if Event X is the most important thing going, and a specific series is not involved in that event, is there any reason to buy it? Titles and characters who aren't involved in events are, in effect, marginalized by their absence.

And in turn this also dictates uneven stories within those individual titles, as it is increasingly difficult for creators to plot and carry out extended arcs with specific characters without being interrupted by the need to have the latest event intrude and play hob with their ideas. This, too, is nothing new -- Roger Stern's Avengers in the mid-80's, for example, was diluted by forced Secret Wars II crossover -- but again, it's the scale that is different now. Indeed, some titles seem to have no existence at all outside of these event tie-ins.

Of course, events aren't all bad; at their best, they can offer grand storytelling on a scale impossible for a single title to approach and can, as has been seen with Civil War, generate huge excitement among the fanbase for titles and characters that had been languishing (Captain America being an example that we will look at in greater detail later this month).

But while events draw in some fans with the flash and dazzle, they also drive away others who are turned off either by dissatisfaction with how the story affects their favorite titles or through simple budget concerns over needing to buy so many tie-ins to understand the event. Which may help explain a strange phenomenon: while event books continue to grab the strongest sales of the decade, overall, sales continue to slide.

Whether or not event books are the solution or the problem, then, is something that we'll have to wait a little longer to see.

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