SCOPING OUT THE POST-MERGER COMIC SPACE NETWORK

Jaws were dropping earlier in the week when Joey Manley announced his Web Comics Nation family of website was merging with Josh Roberts and his ComicSpace and Onlinecomics.net properties. Jaws dropped further when they announced the new entity would be getting venture capital funding. In a conference call, I discussed the deal and the future of the new ComicSpace with Joey, Josh and Alan Gershenfeld from lead investor, E-Line Ventures.

E-Line Ventures is a very new investment firm. New enough they don't have a website yet. Since you can't look them up, let's start out with biography highlights from its two managing partners.

• Alan Gershenfeld: Most recently the CEO/co-founder of netomat, a company dealing in the crossover between the web and mobile phones, Gershenfeld probably gets a little more webcomics street cred from his time as Senior Vice-President of Activision Studios, where some of the titles released under his watch included "Civilization: Call to Power," "Asteroids," "Muppet Treasure Island," "Spycraft," "Pitfall," "Zork" and "Tony Hawk Skateboarding." Prior to Activision, he worked in film.
• Michael Angst: Most recently a Senior Partner at private equity investment firm, Bluefin Partners, was also Chief Operating Officer at National Health Resources.

E-Line is also a slightly unusual bent, as evidenced in their self-description as "a 'double bottom line' early-stage venture fund focused on empowering individuals, small businesses and disenfranchised communities through innovative uses of personal fabrication, digital media and on-demand business services." Empowering is a theme that came up quite a bit in our talk.

Gershenfeld originally encountered Manley while looking for comics content for mobile phones and found that Manley's goals, especially when combined with Roberts', made for just such an "empower" scenario with cartoonists being the "individuals and small businesses" involved.

If you're thinking there's been a fair amount of merger & acquisitions/venture funding around comics right now, you'd be correct. IDT acquiring IDW. Imaginova acquiring Newsarama. I assure you, there are more talks going on than you've heard about, too.

I asked Gershenfeld about that.

"A number of trends are coming together," he said. "Certainly, the growth of manga has been noticed by everyone in the investment and venture community. The idea of user-generated content has obviously exploded into the venture community, and so a lot of folks are looking for different types of user-generated content, so that's another area. I think some of the high profile movies and games that have come out and originated as a comic are another area. So, all of these things are happening, (like) "Wired" with manga on the cover, it just starts to hit a lot of people's radar at the same time, and then investors tend to read the same magazine, the same newsletters and follow the same deals, so you do get a snowball effect when a couple people jump into the pit."

Gershenfeld then quickly pointed out he was much more interested in the services aspects of ComicSpace than the IP aspects.

I also asked Gershenfeld about the exit strategy. Generally speaking, when investors put money in something, they need money back. In the days of the dot com boom, many companies were built for the express purpose of an IPO or to be acquired by a larger company.

"I've been involved with a number of different businesses," Gershenfeld began, "and I'm a firm believer that you build the best possible business you can build, and the exit opportunities will come to you and speak for themselves. That you don't build towards an exit."

He then made the observation that sometimes, as was the case with Activision, the company opts not to take an exit, but to continue under current ownership.

You might wonder who's investing in ComicSpace. Gershenfeld's somewhat vague answer to that question was "E-Line is leading the round and we're going to keep it open for a little while for some potential individual investors and potentially strategic investors who we think could add value, but we're not disclosing anything on that front yet."

The new and improved ComicSpace, itself is a bit of departure from the webcomics stories that have been dominating the news lately. Zuda and Platinum are more fundamentally grounded in the acquisition of intellectual property. ComicSpace is poised to become what I would call a vertical portal for the comics industry. Before anybody jumps on me about portals, let me elaborate on this for a second.

When I say vertical, I mean it in terms of industry-based vertical integration. Components that are being merged here: hosting (WebComicsNation), mass-audience generated content (WebComicsNation), editorially-branded content (the Modern Tales Family), commentary (TalkAboutComics), social networking (ComicSpace) and a traditional comics-viewing portal (OnlineComics.net). The only thing missing from a traditional MBA definition of a vertical is distribution of a print edition. And Team ComicSpace is downright coy on the subject of print, but we'll get to that in a moment.

Hosting fees, advertising, and merchandising appear to be the components that will account for the bulk of revenue streams ComicSpace will be tapping into. The formulations, however, are not clear… especially where merchandising and publishing, that is to say producing print editions, are concerned.

Remember that bit about "empowering?" Well, the general idea seems to be that ComicSpace's revenue is a function of their client's revenue. Or as Gershenfeld puts it, a "broad set of goals is to be able to create good, solid revenue streams back to the creators."

Currently, a free account on Web Comics Nation is fiscally the same as an account on rival services Comics Genesis or Drunk Duck. The strip is hosted, and there is no financial benefit to the cartoonist. It seems that will be changing shortly.

"Anything we do, if you want to make money, you can make money, and you don't have to pay to do it," is how Manley phrases the upcoming changes.

The first eyebrow raised is over the eye looking at ad revenue. Will the ad revenue from generic accounts be split with the cartoonist? Apparently, the answer is yes, although they're not ready to commit to a percentage at this time.

"We're really trying to do our homework here," Gershenfeld said cautiously. "Learning what people are doing right, what people are doing wrong, because while it's early, there is some history on those models."

And this is true. Off pressure from rival video services, even mighty YouTube is starting to experiment with revenue sharing for its top content providers. To the best of my knowledge, ComicSpace would be the first site in the… um… comic space… to adopt such a model. Whether other comic hosting services adopt a similar plan and how this affects any market shares will be something to keep an eye on, as this is a potential market-shifter.

Now the merchandising discussion is where things get just plain coy.

Manley: "The merchandising element will be the single most revolutionary part of it."

Gershenfeld: "It's something we're spending a lot time looking at."

Roberts: "We're not coy in Maine."

Manley says there are hints to their line of thinking dropped in his recent "open questions" at the Talk About Comics blog.

We can safely infer that t-shirts are a major concern, as are various forms of toys and printed books.

It's especially coy, talking about books with Manley.

"We're not talking about that right now," was Manley's initial response.

Upon further questioning, he gave in a bit and added "We're not a publisher, we won't be a publisher. Our merchandise will be with the same strategy as being a service provider, not being a publisher."

Then Greshenfeld chimed in with "We're much more interested in being a facilitator than a publisher." And suddenly we're back to the theme of empowering people. You have to give to the man, he knows how to stay on message.

While they're keeping the cards close to the vest, the ComicSpace crew seems to be looking at vendor relationships for the merchandising aspect, which leads me to believe they're attempting to integrate a few different merchandising options into the hosting system. Something of a one-stop shop for hosting and merchandising, at least in so much as the individual cartoonist's management time is, and I do suppose you could look at such an arrangement as being a different sort of service provider. Again, call it a developing situation.

You might also wonder what's happening to the Modern Tales family of sites, seeing as how the subscription-based set of comic sites was Manley's original crown jewel.

"They're not changing," Manley offers, "except the last vestiges of the subscription model will be swept away."

A major shift away from the original business model, but ads and merchandise certainly seem to be more en vogue, and certainly a subscription model limits the audience for merchandise. Is that shift towards ads and merchandising related to their new service/merchandising options? It makes a fellow wonder.

The expected time frame for the new, merged site is 3-5 months. In addition to Roberts, Manley and the obviously very involved Gershenfeld, there are a CTO, a project manager, and two consultants currently on staff. ComicSpace does look to be hiring more staff in the near future, but may be focusing on contractors for the initial build out.

RUMOR ALERT

I first heard this rumor shortly after the last Wizard World Chicago, and I heard it again with more details, this week. The rumor is Wizard is having talks of moving to the Schaumburg Convention Center and the Schaumburg is trying to broker for a long-term deal. If you thought Rosemont was a little problematic, in terms of evening entertainment, you're going to like this venue even less. You're going to need a car if you want to do pretty much anything in the evening or go into Chicago. There isn't a train within walking distance. And the attached hotel's website estimates it's a $45 cab fare from O'Hare. Sounds like there's a shuttle to the mall, but that ends at 9pm.

At press time Wizard had not responded to an e-mail inquiring about the Schaumburg Convention Center.

ATTENTION RETAILERS

I'm getting ready to print up another batch of "The Economics of Web Comics, 2nd edition." Alas, I've sold out the last batch. To celebrate, anybody ordering 5 copies by 11/15/07 gets a 50%, up from the normal 40%. Remember, this book isn't available from Diamond, and even if it were, it's not likely you'd see a 50% discount on it. For more details, click here.

Todd Allen is the author of "The Economics of Webcomics, 2nd Edition." He consults on media and technology issues and is an adjunct professor with the Arts, Entertainment and Media Management Department at Columbia College Chicago. For more information, see http://www.BusinessOfContent.com. Todd even did a webcomic. Sort of.