What Tolstoy wrote about families is true of economics: Boom times are all alike, but every crash is disastrous in its own way. That’s why stories about bursting bubbles are always instructive. There are lessons in the smallest of them, even the bubble that led to the comic book crash of 1993.
Once upon a time comic books were ubiquitous and worthless. Sold in drugstores for a dime during the 1930s and ’40s, they were fun, pulpy reading for kids and youths. Issues were printed by the hundreds of thousands—even a million for the top titles—and then read, passed around in classrooms, locker rooms, and barracks, and eventually thrown away. A few odd ducks collected the things for pleasure, but this barely amounted to so much as a hobby.
Over the years the appeal of comics narrowed somewhat, but the audience grew more intense as it shrank. Specialty shops appeared that sold nothing but comic books. By the mid-1980s, a brisk collectors’ market existed.
In 1974 you could buy an average copy of Action Comics #1—the first appearance of Superman—for about $400. By 1984, that comic cost about $5,000. This was real money, and by the end of the decade, comics sales at auction houses such as Christie’s or Sotheby’s were so impressive that the New York Times would take note when, for instance, Detective Comics #27—the first appearance of Batman—sold for a record-breaking $55,000 in December 1991. The Times was there again a few months later, when a copy of Action Comics #1 shattered that record, selling for $82,500. Comic books were as hot as a market could be. At the investment level, high-value comics were appreciating at a fantastic rate. At the retail level, comic-book stores were popping up all across the country to meet a burgeoning demand. As a result, even comics of recent vintage saw giant price gains. A comic that sold initially for 60 cents could often fetch a 1,000 percent return on the investment just a few months later.
But 1992 was the height of the comic-book bubble. Within two years, the entire industry was in danger of going belly up. The business’s biggest player, Marvel, faced bankruptcy. Even the value of blue chips, like Action Comics #1 and Detective Comics #27, plunged. The resulting carnage devastated the lives of thousands of adolescent boys. I know. As a 12-year-old I had a collection worth around $5,000. By the time I was ready to sell my comic books to buy a car—such are the long-term financial plans of teenagers—they were worthless.
The comic-book bubble was the result not of a single mania, but of a confluence of events. Speculation was part of the story. Price gains for the high-value comics throughout the 1980s attracted speculators, who pushed the prices up further. At the retail level, the possibility that each new issue might someday sell for thousands of dollars drove both the sale of new comics and the market for back-issue comics. It was not uncommon for a comic book to sell at its cover price (generally 60 cents or $1) the month it was released and then appreciate to $10 or $15 a few months later.
But the principal cause of the bubble was the industry’s distribution system. Comic books are created and released by publishing houses. There are two giants (Marvel and DC) and then a raft of much smaller independents, which come and go with great frequency. All of the publishing houses left the task of physically getting comics from the printing presses to the retailers to a group of middlemen—the distribution companies.
These distribution companies determined who could and couldn’t sell comic books. They imposed requirements on retailers, demanding that they demonstrate financial reserves and guarantee certain numbers of orders each month. The reason comics were so slow to migrate from newsstands and five-and-dimes to dedicated comic book shops (a process that took nearly 50 years) is that it was hard for these small start-ups to muster the resources needed to secure distribution. These hurdles are why, in 1979, there were only about 800 comic-book shops in the entire world.
In the 1980s, two of the larger distribution companies—Diamond and Capital City—began an aggressive course of expansion. They wanted to nationalize their businesses and eliminate smaller, regional competitors. Their strategy was to lower the barrier to entry for prospective retailers.
Diamond and Capital City were happy to sign distribution agreements with just about anyone. As Chuck Rozanski, the owner of the country’s largest comic-book retailer, Mile High Comics, explained a few years back in a brilliant series of essays about the comic-book bubble, Diamond and Capital City were ready to set up an account for anyone with an initial order check of $300. This aggressive stance had the practical effect of turning many collectors into dealers. Comic book shops proliferated, growing from 800 in 1979 to 10,000 by 1993. Diamond and Capital City were so successful that they drove every other distributor in America out of business.
With all of these comics shops sprouting across suburban America, the two remaining distributors took in record numbers of orders every month. Seeing these orders, the publishers thought they were presiding over a massive boom. So they upped their prices and began publishing more titles, adjusting the supply to meet what they thought was demand. In 1985 Marvel published 40 titles a month, and each book cost 60 cents. By 1988 they were putting out 50 titles for $1 apiece. By 1993, they were offering 140 books a month, selling for $1.25 and up.
All the while, the distributors kept standing up new retailers, who kept putting in orders, enticing the publishers to produce ever more books. It was an unsustainable loop, but what made the situation particularly perilous was that in the comic-book business, orders are placed months in advance and unsold inventory cannot be returned. Retailers eat unsold books as overstock. (Rozanski estimates that at the bubble’s peak, 30 percent of all comics being published wound up as overstock.) In other words, the loop was structured so the publishers would get negative feedback only after the industry had gone over the cliff and the retailers started going belly up.
Which is precisely what happened in 1993. By expanding their output to hundreds of titles, the publishers had diluted the quality of their product to embarrassing levels. That, combined with the higher retail prices, drove away customers.
Many of the new comic-book stores were undercapitalized and poorly run. The weakest of them folded first, and their demise began a cascade: Publishers saw a rapid and dramatic decline in orders, so they moved to reduce costs by cutting back the number of titles they shipped. Which led to less product for the remaining retailers to sell. Which pushed the stores on the margins of survival out of business. The death spiral was on.
By the time the bubble’s soapy residue washed away, nine out of ten comic book shops in America had closed their doors. Publisher sales of new comics dropped by 70 percent. On December 27, 1996, Marvel, the General Motors of comics, filed for bankruptcy. The market for used comics was flooded with the cadaverous inventories of out-of-business stores. The prices of high-value comics dipped or plateaued. Many lower-value comics (books under $100) saw significant declines. Comics printed during the run-up to the bubble became virtually worthless, as the speculator-driven sales combined with the unsold issues to create a massive oversupply.
Since the comics apocalypse, some parts of the market have recovered and even thrived. Over the last ten years, the Golden Age glamour books (such as the early Action and Detective Comics) crept into the six-figure range, and a whole host of books, ranging from Amazing Fantasy #15 (the first appearance of Spider-Man) to Donald Duck Four Color #29, began fetching five-figure sums. As the Great Recession dawned in the fall of 2008, the comics market remained reasonably intact. New issue sales dropped precipitously, but then rebounded. The prices of high-value older issues continued to rise. In one three-day span last year, two comics (an Action #1 and a Detective #27) broke records, selling for $1 million, and then $1.075 million. A month later, an Action #1 went for $1.5 million.
But the contours of the industry have changed almost beyond recognition. In 1950, Marvel and DC together sold roughly 13 million comic books a month. In 1968, they put out 16 million a month. Since 1993 the overall sales trend has been inexorably downward. For January 2010, all American publishers combined sold a total of 5.63 million comics.
This might sound like an industry marching toward oblivion, yet in 2009, Disney paid $4 billion to acquire Marvel (DC was already owned by Time-Warner). The reason for this gaudy valuation is that the comic books themselves are no longer important to the comic-book industry. They’re loss leaders. The real money is in the comic-book properties, which power toy and merchandise sales, theme parks, and above all else movie franchises. Since 1997, 26 comic book adaptations have gone on to gross more than $100 million at the box office. Twelve of these grossed more than $200 million. More—many more—are coming soon to a theater near you.
As a financial concern, comic book publishers are no longer in the publishing business: They’re curators of, and incubators for, extremely valuable intellectual property. To comic-book collectors, that’s very good news.
Or rather, it’s very good news for some comic-book collectors. As a boy I had the misfortune to be buying comics in the run-up to the bubble. Almost none of my books ever recovered their value. Sure, Action Comics #1 will fetch you a million plus, but look around on auction websites and you can find sellers offering lots of a thousand Bronze- and Modern-Age comics—the books I was collecting—for $10. They’re worth just a little less than firewood.
As painful as it was for some of us, the comic-book bubble teaches two important lessons. First, bubble-mania is not always the fault of buyers and sellers. Sometimes it’s caused by intermediaries. Second, sometimes markets don’t “come back.” People who owned blue-chip comics took a hit in 1993. People who owned modern-era comics were wiped out, the value of their collections never to return.
The comic-book market resembles today’s housing market in unsettling ways. The substantive differences between houses and comic books are as obvious as they are enormous. Yet in both cases the speculatory bubble was helped along by irresponsible middlemen—the distribution companies in one case and the credit-ratings agencies and mortgage appraisers in the other.
And it’s unclear to what extent the housing sector is going to rebound. We are now officially in a housing double-dip, with prices in most parts of the country below what they were in 2000—and still falling. Discussing the topic several weeks ago, Moody’s economist Celia Chen told reporters that, nationally, house prices might regain their 2006 levels by 2021. In some large states—such as Florida and California—Chen placed the recovery in 2030. What’s terrifying about such predictions isn’t the specific date. It’s that either way, the return of prosperity is so far in the future as to indicate that no one really has any idea when recovery will come. Or if.
Lots of houses are the functional equivalent of blue-chip comic books. Like a copy of Action Comics #1, a co-op in Manhattan, a townhouse in Georgetown, or a bungalow in Santa Monica will eventually regain its previous value and will prove to be an excellent investment in the long run. And the same can probably be said for the majority of suburban homes in established metro areas from Seattle to Atlanta.
But during the run-up to the housing crash, a crush of construction appeared in places like the Carolina coasts, the southwestern desert, and pockets of Florida. In the summer of 2009, the Associated Press ran a story on Victor Vangelakos, who bought a condominium unit in a new 32-story waterfront building in Fort Myers. He’s the only person in the building—every other unit was either foreclosed on or never sold. That’s not quite as bad as things are in Spain, where entire towns sit vacant. In Yebes, an hour from Madrid, hundreds of rowhouses sit empty on brand new streets. Almost none of them was ever sold. Yebes is a ghost town now, unlikely ever to “come back.”
I have a comic book like that. In 1984, DC launched what became an immensely popular series, The New Teen Titans. The first issue carried a premium cover price of $1.25, the result of the series being printed not on the usual newsprint but on higher quality “Baxter” paper. I missed the first issue when it debuted, and the back-issue price quickly climbed. In a few months I saved up the scratch to buy a copy.
I paid $25, a not-inconsiderable sum for a 10-year-old. It was the jewel of my collection. Today you can buy a copy in near-mint condition for $1.50.
Jonathan V. Last is a senior writer at The Weekly Standard.