ComiXology's David Steinberger pulls back the digital curtain

Digital comics were the big story of 2011, and there is no question that comiXology dominated the field. CEO David Steinberger and his crew realized the potential of digital media to transform comics back in 2007, but they didn't start on the iPhone. What comiXology did first was put comics solicitations online (as opposed to trapping them in a paper catalog, as Previews does) and set up a system for digital pull lists that users could tie in to participating retailers or simply print out and bring to the store.

Now the comiXology brand means much, much more. They were among the first digital comics distributors on the iPhone and then on the iPad, and their digital comics app, simply titled Comics, is one of the top grossing apps in the iTunes store. They also have their own web store as well as an Android app. ComiXology is also behind almost every comics publisher app, including Marvel, DC, Image, IDW (a recent addition), Dynamite and BOOM! Studios, as well as single-property apps such as Scott Pilgrim, The Walking Dead, and Star Trek.

Brigid Alverson: Let's drop back and look at the big picture first. We all know comiXology is the biggest digital distributor, and with six of the top seven publishers on board, you are starting to be regarded as a digital monopoly. What are the challenges that come with that?

David Steinberger: First, I think that given the beating that Diamond takes in just about every circle in that way, we need to be very cognizant of how we treat people and how we operate. One of the reasons I think that IDW chose to work with us is that we were executing at a very high level and we were providing consumers with really great experiences. I would take issue that we are anywhere near a monopoly when you have players like Barnes & Noble and Amazon selling comics digitally. I think we are a majority of the market, but it's very early. There is room for several players. We are blessed by having a lot of validation in the marketplace, between IDW switching their apps over to us and our inclusion as a preloaded application for Kindle Fire.

We really believe that when we started putting together comiXology, one reason we succeeded was because there were tools that Diamond could have created that they didn't, and with all respect to Diamond, getting out that many books to that many retailers every Wednesday is a task. They are very reliable and they pay on time, which is very important, but getting your catalog online—if you are not in a monopoly-like situation, you would be building those tools. If I were Diamond, I would be building those tools.

The most important thing for me is that we continue to make great experiences finding and reading comics. You can't slow down and say OK, we now own this marketplace and we can just kind of hang back and not innovate. That's especially not true in digital. It's not true in print either, but that's what everybody fears, that somehow we are going to stop listening to our customers, stop taking care of the publishers, and that's just not how it's going. We released version 3.0 [of the iOS app] last year, we did the Kindle Fire apps, we are today going into public beta with a HTML-based web store, so we are not sitting still. Consumers worry they are creating a Diamond of digital, they worry that we are not going to continue to innovate and improve the experience, but we are. So I am not worried in that way. I understand where people are coming from because we power both Marvel and DC, but they are available in other channels, and you can't underestimate the competition from retailers like Amazon.

We still don't have any social stuff in the app. I'm sure our competitors look at that and say "There's the opening." Our whole philosophy is to expand the market. That has been our philosophy from the beginning. That's one of the cool things about this year: We are a non-disruptive digital force in a market that does not need to be disrupted because of the way it is put together. Suddenly it is 2011, it looks like we are going to have an up year in print, and we certainly had an up year in digital. This will be looked back on as the year comiXology got all the pieces of its programs, including our affiliate programs, some of which are making real money, which is exactly the point of this whole thing—building a platform that is buy once, read anywhere, and giving retailers the ability to be involved with that. So in one way there is an achievement for us that is personally gratifying, we got there. It wasn’t on the exact schedule we projected, it doesn’t look exactly like I thought it would look, yet there are retailers that are happily participating in it, and we are in every platform that I would call a good marketplace.

Alverson: ComiXology is available on a lot of different platforms. Can you give us a snapshot of how popular they are relative to one another?

Steinberger: The iOS has a lead in terms of just being first to have a great product at a good price out in the market, which is the iPad. More and more people actually use our website, once they discover it, to shop and buy, and I hope with the HTML release, more will do that. It's quicker. You don’t have to wait for approvals like on the iOS and the Amazon app store.

It's kind of an unfair look, because Apple has had so much time to be ahead, and we have been building the audience for almost two-and-a-half years. July 2009 was the iPhone, and the iPad came out 2010, so it's only a year and a half old, but it's ahead of everyone. The Android market has a lot of devices, but you buy an iPad to consume stuff, watch movies, read comics, unlike the phone. We have a ton of downloads on Android but more purchases on iPad.

Alverson: So you think of the Android platform as a phone, as opposed to a tablet?

Steinberger: Yes, although the Kindle Fire is an Android device. I think it has a tremendous amount of promise in tablets; we have more Android sales on tablets. With the Kindle Fire, now you have this gorgeous screen, $199 price point, and a device that was created to consume media. Amazon has made a real consumption device. Everything about the interface is about getting to your media and purchasing it. And at an incredible price point, so they are going to sell a ton of them. It's really amazing—you just go to the app area and there is our icon. That means somebody doesn’t have to search for us. So that is going to change the pie quite a bit over the next six months.

That doesn’t mean they are taking away share from Apple; they are adding share. Apple continues to grow at a very, very rapid rate, and the device market continues to grow at a very, very rapid rate. Our job is to make our app discoverable. The Kindle Fire preload is the ultimate in discoverability, and on our roadmap this year very heavily is customer acquisition, letting people know about it, people who are not just comics people.

Alverson: With the IDW acquisition, you at least doubled the number of stand-alone apps you have for specific properties, such as Star Trek. How well do these perform compared to the publisher-specific apps and the general Comics app?

Steinberger: We will do them as appropriate. It is still a discoverability issue in the app stores. Having the Walking Dead comics app—iTunes did a whole AMC area of their store, and as part of that they had a Walking Dead section. There's a Walking Dead page where they have the current season, past season, music, and apps, and there is our Walking Dead app, and books, audiobooks, podcasts. If we had simply left The Walking Dead in the comics app, iTunes wouldn’t have featured it alongside the TV show. So yes, as the opportunities come up and as media properties are comic connected, we will do that as necessary.

I did an interview with someone who wanted a job here. I said "Do you read comics?" and she said "Only recently. I started reading The Walking Dead after watching the TV show." That's a great example of a comic that is a media property introducing somebody new. Without having a top-level visibility in the store, we wouldn't see that as well.

Alverson: Are you planning to do a lot more of that?

Steinberger: No more than we have been doing.

Alverson: Have you considered adding any type of subscription model so people could automatically get new comics added to their devices, or some sort of digital pull list that actually puts the comics on your desktop, ready to buy?

Steinberger: I think that is a great idea.

Alverson: Is it in the works now?

Steinberger: I don’t have anything now. It's certainly something we have been thinking a lot about it. It's a no-brainer.

Alverson: For some reason, the manga publishers are not going with comiXology. Why do you think that is? Are you going to try to capture any manga publishers?

Steinberger: I would love to have more manga. We talk about it; it's something we have discussions with publishers about. I would love to have a ton of manga. I would love to do a specific app for it. Getting the content is a little more complicated than dealing with U.S. publishers, but certainly that is a shingle we have out and are discussing with different players.

In the iTunes 2011 Rewind, there were three comics apps: comiXology, Marvel, and DC. Those three apps were in the top 100 grossing iPad apps. We would have been in the top ten had it been just the last few months, easily. I think that says a lot about where we stand in terms of how many consumers we are reaching, comparatively. Doing your own app is great, otherwise we wouldn’t support and improve the white-label app experience. DC and Marvel have apps that speak to their audience. But it's no requirement of mine for anyone to transfer all their existing apps to us. It was a wonderful experience with IDW, we are proud of that, but we are now a pretty good market unto ourselves. I'm very proud that we power the three apps that are the top grossing iPad apps that are about comics. That gives you some sense of where everyone else stands in comparison and as an opportunity for those publishers who haven’t joined us. I would love to have tons of manga, I would love to be selling Dark Horse comics. We are all about just selling comics, and we have miles to go on being better at that.

Alverson: There has been a lot of conversation about price, particularly for comics that are released the same day in digital and print. How much input, if any, do you have into prices?

Steinberger: There are different forms of contract, and with some of them we choose and some of them we don’t. Of course, we have data and trends and lots of information about how people behave to help publishers make decisions. Again, one of the reasons we have succeeded is we are very friendly to publishers, and when they came in five years ago, when we first started putting together our business plan, they were all running scared of digital, that digital was going to collapse print. Part of that is, for some publishers, price equivalency. Archie has less to lose in the direct market, so they can take that risk and determine whether they are selling a whole lot more.

Most publishers did price at 99 cents to start, and a few of them still do, except for the brand new stuff—like Red 5, most of their stuff is 99 cents. When we got The Walking Dead, Kirkman said, "I think the material is worth more than this, I think people think it's worth more than this," and that's when the switch started happening. There is a value to a comic book. I agree that for most it is more than 99 cents. The big complaint is day and date, with the price the same in digital as in print. Publishers are still rightly concerned about whether retailers are going to buy their product. That's what happened with Dark Horse—they had a couple of retailers threaten not to buy their books.

Alverson: Some people argue with digital media that you make more money selling a lot of units at a lower price than a few units at a high price. Have you seen that phenomenon with comics?

Steinberger: I think that there is a perceived value issue. If you throw everything at 99 cents, the perceived value is very low. We have had instances where we move comics from 99 cents to $1.99 and we sell more units, so the price is an indicator to the consumer that this is a valuable thing. This is not the standard, but we have examples of that happening.

Alverson: Can you give me an example?

Steinberger: No, the publisher would tie me up. It wasn't just one. One did it and then another one did it, partially so you could have sales. Who knows what the magic number is, but $1.99 is still an inexpensive purchase. But it says something, the 99 cents vs. 1.99 says OK, this is higher quality. It doesn't say I'm ripping you off. Some people would argue that the $3.99 books are too expensive.

Alverson: I would argue that. I won't pay $3.99 for a digital comic.

Steinberger: They are selling quite well, I am sorry to report. The question is, would you sell more than twice as much if you drop the price in half? That is an experiment that hasn't happened yet. DC has a public policy of dropping their day and date prices a by dollar a month after the comic comes out.

Alverson: Do you see a sales bump on that day?

Steinberger: Not as much as much as you might expect, but sure.

We do sales practically three times a week. They are very effective. It depends on the content, and at the end of the day, this is about great content. We have a really good experience—we can improve in some ways but we have a good experience in buying and reading comics. All we need to make that work well is good content. Price, how things do when they are on sale, all that depends on the content.

Alverson: How is your Comics 4 Kids app doing?

Steinberger: Not as well as I want it to. It has amazing content at this point.

Alverson: How many titles do you have on there?

Steinberger: A couple of thousand at least. We have Charlie Brown on there now, Bone has been on there, lots of really great content.

Alverson: Do you think the problem is that it's an app branded for kids?

Steinberger: Yeah, probably. We have been rethinking that, trying to make a determination what we can do to stimulate that. It's a good app. It has a lot of great content. People should be finding it.

Alverson: One of the problems we heard about a lot in the early days of comics on the iPad was Apple's content restrictions. Is that still an issue, and if so, how do you deal with it?

Steinberger: I think they have lightened up a little bit. I don’t see it as much of an issue at all. We haven't tried to distribute Lost Girls or anything, but in general I think we put out 300 and some books a week right now, and first of all, it's not reasonable for them to look over everything, but also they have gotten to the point where they trust us. And we are a 17 and over app, so they have parental controls.

Alverson: On the IDW move: You were already carrying IDW comics in your Comics app. How does this change things from the reader's point of view?

Steinberger: From a user's point of view, you went from this kind of lock-in to a single app—you couldn't even read a comic on the IDW app if you bought it on the Transformers app. I think we had tens of thousands of people create accounts in the first five days. Suddenly they are untethered to the single app. There are a lot of people that really love guided view, and now they have guided view. That alone for our production staff was a herculean effort between NYCC, when we announced IDW was coming to our app in general, and last week.

Alverson: What about the retailer storefronts? There was a lot of skepticism when you first rolled them out, but how are they working out?

Steinberger: We just released a new version of our terms of service with retailers, and the retailer storefronts will also benefit from the HTML store. That's on the roadmap. We are continuing to communicate and expand those relationships. We have done very well with ICv2 helping us be the customer-facing part of the relationship. And over-deliver. Everybody was really cautious and saying there is a threshold meaning they have to make a certain amount of money before we pay them and that we are getting the customer information. Both those things are untrue. They [the retailers] are being paid on a monthly basis no matter how much they make, and we are continuing to nurture those relationships and improve the tools we are making for them.

Alverson: What can we expect from comiXology in the coming year?

Steinberger: There are lots of improvements to the store that we will be making over the next 12 months. There are improvements to the app still to be made. We haven't finished a real 3.0 build for Android yet, so that is a big deal. We are focused on making the partner apps, the white-label apps, a great branded experience for our publishing partners, continuing to add on functionality for spreading the word about comics. Finding new readers for comics is a huge priority. Continuing to expand the market continues to be a big deal, probably forever for us. We do think that we will have a couple of announcements for some new hires, people we are bringing in to help us make better tools for digital comics, help people to get onto the platform more easily.

Being here and having the achievements we have had, I feel very lucky to be a part of it and help comics come into a digital age. It is a very gratifying experience, and I hope we continue to make people happy over the next few years.

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