Before Diamond became a virtual monopoly, there were several dedicated comic book distributors. Before any of them, however, comics were distributed by the same folks who also distributed magazines an paperback books. The comics were shipped in bundles to these middlemen, who sorted them and sent them off to local newsstands and such along with the latest copies of Time, People, Playboy as well as the latest Harry Harrison or Stephen King novels. Comics were a comparatively minor part of their business, and weren't well-regarded as money makers. Especially in light of the fact that these distributors could get their money refunded from the publishers.
Comics were, for these distributors, a burden as often as not. Rather than deal with them and actually send them on to comic book shops, they would sometimes just shred them, get their refund and not worry too much about them. The newsstand dealers didn't care since that was a small part of their business, and there were few enough dedicated comic shops that they didn't have much economic power.
What comic shop owners started doing, then, was driving down to the distributors and picking the comics up themselves. The distributors didn't care; they just didn't want to deal with them. So what happened was that one guy would drive over, buy up ALL the comics, and essentially hold a local monopoly on that week's issues. Sometimes, he'd pick up all the books and the distributor would still claim the refund from the publisher! It was a decidedly unfair and unbalanced system.
(Side note: because the distributors were claimed the books were shredded, the publishers took that to mean they were unsold. So even though books were sometimes selling like hotcakes at the retailer level, the publishers didn't hear about them. That's why Jack Kirby's Fourth World titles got canceled so early. Same with the Dennis O'Neil/Neal Adams Green Lantern/Green Arrow.)
Suffice it to say the system was broken. That's when Phil Seuling stepped in and suggested something like the direct market system we have now.
(Obviously, that's the EXTREMELY condensed version of what happened.)
But here's the thing. The situation didn't change until it essentially became untenable. That's usually how humans work -- we collectively only tackle issues when our backs are up against the wall. That's why Marvel and DC are still publishing print comics almost exactly the same way they've been doing for decades; there's no real impetus for them to change.
But that doesn't mean that YOU have to wait for it. Don't let things get to the point where you HAVE to change. Try to take a look at your options now and make them better, if you can. For some ideas in the webcomics arena, check out this discussion going on over at The System.
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