Comixology Builds One-Stop Shop for Comics Publishers, Retailers, and Fans

7/5/11Follow @arleneweintraub

Comixology’s small staff of 24 comic-book freaks are working around the clock these days, preparing for one of the biggest changes their industry has ever seen: On Aug. 31, mega-publisher DC Comics will begin releasing its titles digitally and in paper form on the same day. Until now, there’s been a lag of at least a couple of weeks, giving retailers plenty of time to profit off the traditional, paperback comic books that fans love. The transition to digital, says Comixology co-founder and CEO David Steinberger, has left retailers “by turn scared and anxious—and very interested.”

Ever since it was founded in 2007, Comixology has been catering to all the stakeholders in the small but passionate world of comic books: the publishers, the retailers, and of course, the collectors. The rise of digital has been particularly hard for the retailers, who for decades have relied on comic-books nuts filling their stores every Wednesday to snap up the latest editions of Spiderman or Walking Dead, Steinberger says. To ease the path to digital, Comixology has been rolling out a host of services for retailers—including, most recently, a digital storefront. The service allows retailers to have websites powered by Comixology, where they can sell comic books and pull in affiliate revenues.

The movement of the comic-book industry to digital may be a hard adjustment for retailers, but it’s been a boon to Comixology. The company has secured the rights to digitize comics from all the major publishers, including the dominant players, DC and Marvel. Comixology now derives most of its revenues from selling digital comics online and via apps it has developed for smart phones and tablet computers.

Steinberger is himself a comics nut, having collected more than 7,000 comic books as a teenager in the 1980s. He originally trained as a classical musician—he earned advanced degrees in vocal performance from the Manhattan School of Music and Julliard—but ultimately decided that entrepreneurship would be more suited to his creative personality.

A phone discussion with his parents in 2006 inadvertently led Steinberger to dream up a business plan. “My parents called to say ‘Come and get your comics out of our basement. We don’t want to store them anymore,’” recalls Steinberger, who at the time was studying to get his MBA at New York University’s Stern School of Business. He picked the books up, dumped them in a storage unit in Manhattan, and promised his wife he would sell them.

But when Steinberger looked for a way to catalog his collection, he came up empty. So he started to develop an application for cataloging and appraising comic books. Then he called up his friend and fellow comic-book collector John Roberts, who was an expert in software development. Turns out Roberts was in the process ofdeveloping his own comics app. “His problem was he was going to a store, where 200 new comics would come out every week, and he didn’t remember what he wanted to look at,” Steinberger says. “He was building software that would let you check off what you were interested in, then get a reminder every Wednesday—new comic book day—to make sure you would pick it up at the store.”

The two banded together and entered Stern’s business plan competition in 2007. They won, raised seed money from the New York Angels, and launched their website in July 2007. At first, Comixology was merely a “pull list” service—a place where comic fans could go to see what was coming out, and then reserve copies of the books they wanted at a local shop. Steinberger and Roberts had a careful plan mapped out: they would start by building out more such consumer services, then add retailer services, and finally start offering digital comics.

Then the iPhone was born—and Comixology was forced to speed up its plans. “We thought we’d have a couple of years to get to digital comic books, but the minute Apple put up the app store, there were people out there putting out some form of digital comics,” Steinberger says. Apple soon began allowing in-app purchases—an opportunity, Steinberger says to create a major revenue stream for Comixology.

But Steinberger wanted to ensure that the experience of reading comics digitally would be just as satisfying for fans as leafing through comic books is. So he and his software developers came up with “guided view,” a system that allows readers to see the entire page as the artist originally designed it, while easily swiping from one text bubble to the next so they can page through the story sequentially.

Comixology launched its in-app store in July of 2009 with 10 publishers and 80 comic books. Although there is some competition, Steinberger says Comixology is the only digital-comics service working with both DC and Marvel. Today the app offers more than 4,000 digital titles. Comixology also powers separate branded apps for DC and Marvel.

Steinberger and his team have been busy expanding the options on Comixology. They added a GPS function, which allows comics buyers to find the closest comic store to wherever they happen to be when they have that urge to discover Spidey’s latest adventure. And in February, the company launched Comics4Kids, featuring child-friendly titles like Archie, Sonic the Hedgehog, Secret of Kells, and Atomic Robo.

Steinberger was 13 when he bought his first two comic books, Amazing Spiderman and Mage: The Hero Discovered. They’re still sitting in that storage unit in Manhattan, because Comixology never got around to developing the cataloging function that Steinberger originally conceived.

As for Steinberger’s abandoned music career, he has no regrets. “I might have been talented enough, but I wasn’t driven enough,” says Steinberger, who still occasionally gets paid to sing in a church. The musical training has served him well, he adds. “When you’re singing, you’re trying to get somebody to understand something. The focus is on communication. That’s not a whole lot different than trying to describe an idea, or a business plan, while keeping your cool under pressure. Singing has served me incredibly well.”

Steinberger declines to reveal how much capital Comixology has raised, except to say it’s in the “very, very, very low seven figures.” The company is holding its own financially, but the management team is now considering whether to raise an additional round of funding so Comixology can expand overseas. Branching out internationally is tempting, Steinberger says, especially when you consider that the United States is only the third-largest market for comic books, behind Japan and France/Belgium. “Japan is $3.6 billion a year in print,” he says, far outpacing the U.S. market, which sells about $700 million in comic books a year.

For now, Comixology is focusing on two more immediate challenges: Improving the engine behind its app so it will run faster, and gearing up for DC’s August shift to digital/print synchronicity. “It’s impressive what DC is trying to do—they’re looking to expand the market for comics,” Steinberger says. As for the retailers, Steinberger is optimistic that they’ll all eventually get on board with the new digital distribution system. “It’s not going to hurt the market for comics. Our job is to keep them connected to all the different ways they will be able to sell comic books.”

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