Will Amazon.com, Inc. Be Your New Comic Book Shop?

Comic books have never been more important than they are now. Not because the market is bigger than it was a decade ago -- it is, when you look at the top 300 titles sold monthly -- but because of the genre's influence over other media.

In May 2012, Marvel's The Avengers set a new U.S. box office record by earning $207.4 million in its opening weekend.  Months later, The Walking Dead made television history by winning the entire 18-49 demographic. And most recently, comic book shops pre-ordered 500,000 copies of the return of Peter Parker in The Amazing Spider-Man #1. Comics are driving the entertainment business, and in the process, creating what I'd call a new "Golden Age" for readers.

I'm not the only one who thinks so.

Last summer, Amazon.com, (NASDAQ: AMZN  ) launched its own comic book publishing imprint: Jet City Comics. On Thursday, the e-tailer doubled its bet on the genre by purchasing digital comics retailer comiXology for an undisclosed sum. Below I've outlined three reasons the deal make sense for Amazon investors.

The party line
Before we get to that, let's address the specifics of the deal and what the powers that be say about it. First, comiXology will operate as an independent subsidiary and remain headquartered in New York. Existing staff will be offered the chance to become Amazon employees.

Amazon's David Naggar, VP of Content Acquisition and Independent Publishing, told Publisher's Weekly that the two companies are a cultural fit. "We've got a history of buying companies we admire and comiXology has the kind of customer focus that we love. It just made sense."

Meanwhile, in a letter at its website, comiXology co-founder and CEO David Steinberger said partnering with Amazon means the company's goal of "making every person on the planet a comics fan" is now "more possible than ever before."

An audacious goal, to be sure. Yet comiXology needn't proselytize the entire non-comics-reading world to deliver value to Amazon shareholders. Here are three forces already working in the e-tailer's favor:

1. Collectors are no longer the only ones demanding comics
There was a time when DC, Marvel, and major independent publishers such as Dark Horse, Image, Boom! Studios, and Dynamite confined their marketing to collectors like me. Those days ended the minute comics crossed over into mass media.

And yet getting a copy of the latest issue of The Walking Dead still isn't anything like buying the latest best-seller. Print comics are generally sold through a direct market of comic book retailers spanning about 2,600 accounts as of September, according to data supplied by Diamond Comic Distributors. By contrast, there are more than 10,000 independent and chain bookstores operating in the U.S. today.

My local shop, Aamazing Fantasy Comics in Littleton, Colo. Credit: Tim Beyers for The Motley Fool.

Digital bridges the gap. Buying a single issue or collected edition at comiXology is no more difficult than ordering an e-book from the Kindle Store. Steinberger sees the genre attracting more readers as a result. "A lot of our business is brand-new business that has never existed," he said in an interview at last year's San Diego Comic-Con. If he's right -- and I think he is -- then this team-up should make it even easier to sell to new readers, especially those who stream or buy comics-inspired movies and TV shows.

2. ComiXology completes Amazon's content pipeline
"Amazon doesn't make a lot of plans before it makes an acquisition, so we'll have to figure it all out over time," Naggar said in the Publisher's Weekly interview. "But Kindle Digital Publishing has been big for us and so we love comiXology Submit."

Of course he does. Submit doesn't just give Amazon an "in" when it comes to comics self-publishing, a model that gave birth to Jeff Smith's Bone and Eastman and Laird's Teenage Mutant Ninja Turtles, among others. My guess is Amazon would demand a first look deal for the TV and movie rights to any property originating in Submit, thereby preventing competitors from pre-emptively snatching up a promising idea.

3. Creators Amazon wants to do business with are trying comics
Jet City Comics was created specifically for this purpose. In June, the  imprint will begin publishing a digital series based on Hugh Howey's best-selling science fiction novel, Wool. It's a short leap from there to creating custom imprints for other authors who want to try comics -- or, conversely, comics writers who want to publish longer-form narrative. Either way, Amazon now offers a more comprehensive home for their work.

Foolish final thoughts
Scale is what makes this deal interesting. In comiXology, Amazon is getting a platform for selling tens of thousands of titles from over 75 comics publishers. Submit could amplify those totals while giving life to new comics, TV, and movie properties. That's a potential win not only for investors, but also fans and creators.

Now it's your turn to weigh in. Will you make Amazon your new comic book shop, or would you rather comiXology had remained independent? Leave a comment to let us know your take on the deal, and whether you would buy, sell, or short Amazon stock at current prices.

Don't let comiXology pocket all the profits!
There was a time -- not that long ago, actually -- when Amazon was merely Earth's Biggest Bookstore. Those who bought back in those days are sitting on a fortune today. How can you replicate their success? Find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock they believe is poised to do just that, capturing a huge portion of a $14.4 TRILLION opportunity. Click here to get the full story in this eye-opening report.

 

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