Diamond bankruptcy settlement hits snag as Sparkle Pop files objection

A settlement in the bankruptcy of distributor Diamond Comic Distributor was reached last month, but this week the company holding the warehouse assets of Diamond, Sparkle Pop, filed an objection. The settlement would have returned consignment inventory that has been held since January 2025 to be returned to companies including Paizo and Green Ronin, while $892,913 held in escrow from sales Sparkle Pop made of that held inventory would go to the Diamond Estate to pay off debts.

In their objection, Sparkle Pop claims they are owed $1 million in rent for the warehouse that holds the consignment inventory along with $433,270 in processing fees for the inventory it has sold. Another objection to the settlement is that it would allow third party companies to retrieve the inventory, arguing that the warehouse is a working distribution center with “floor-to-ceiling pallet racks requiring specialized equipment and trained operators”.

Sparkle Pop previously attempted to seize the inventory for unpaid rent in June, but that motion was denied.

Green Ronin Publishing, one of the members of the settlement, released a statement on the GoFundMe page for their legal expenses fighting for the return of their inventory:

We are, at long last, moving towards a resolution of our dispute with Diamond and if all goes well, we will be getting our books back before Xmas. As you may recall, the bankruptcy court appointed a trustee to oversee the liquidation of the remaining Diamond assets (the majority were bought by two companies, Universal Distribution and Sparkle Pop, last year). Last month the trustee and our group submitted a proposed settlement to the judge. Before anything else happens, the judge will have to accept the proposal. After that, there is still the matter of getting our books out of the Mississippi warehouse, which Sparkle Pop now owns. You know that saying that possession is nine-tenths of the law? Well, I won’t feel comfortable until our long-held hostage stock is out of that warehouse.

Our group, the Ad Hoc Committee of Consigners, must give some things up in this deal. Notably, a pot of money the court is holding from sales Sparkle Pop made after it had been ordered to stop selling. Green Ronin, thankfully, only has a small amount of money in this pot, but some of our cohort companies are giving up substantial cash to tie this all up. In addition to getting our product back, we’ll also be clear of our old contract for good and free from various forms of legal jeopardy that have come up in this case. It’s not everything our group wanted, but it’s a good deal for us nonetheless. Everyone just wants this resolved and over. I must once again give kudos to our lawyer Cate, who has been a rockstar throughout this process.

The next time I update I will hopefully be able to tell you that our books are safely in our warehouse. As always, thank you for all your support. We’d have lost all our consigned books without the money to put up a legal defense.

Thanks,
Chris

“Consignment inventory” is when a publisher or other manufactuere/wholesaler provides product to a distributor to sell on their behalf, with the consignment seller getting a portion of the sale price. The inventory still belongs to the publisher during this time.

 

[jeffh]

What on Earth are these "processing fees" that amount to nearly half the amount of sales? That's nearly as baffling as the "specialized equipment" line.

 

[Parmandur]

What on Earth are these "processing fees" that amount to nearly half the amount of sales? That's nearly as baffling as the "specialized equipment" line.

No, all that does actually make sense from a warehouse, in terms of costs the warehouse incurs and expertise needed to manage and work in the warehouse. Basically, the warehouses are gritting a bit shafted by Diamond in this whole situation, too, and trying to recoup their costs at the expense of the publishers.

 

[aramis erak]

They've also been selling inventory without paying the publishers. That's what the $800,000+ of escrow was for, plus they suspect they're still selling inventory against court order. They were willing to let all that money go in order to get their inventory back, but that wasn't good enough for Sparkle Pop.

So, grand theft.

 

[Abstruse]

So, grand theft.

If you or I did it, sure. Because it's a corporation doing it - even if it is a corporation formed solely for the purpose of buying the remnant inventory of Diamond - and because they're using the courts to do it, then it's a purely civil matter to be decided by the courts.

 

[Thierry-Advent]

I can't even start to imagine the amount of stress and anxiety this is causing the owners, creators and employees of RPG publishers.

I'll be buying The Expanse AGE Trade Union edition as soon as it arrives at the FLGS in Canada.

 

[billd91]

I can't even start to imagine the amount of stress and anxiety this is causing the owners, creators and employees of RPG publishers.

I'll be buying The Expanse AGE Trade Union edition as soon as it arrives at the FLGS in Canada.

Can you buy it direct from Green Ronin? I know it's also good to support your FLGS, but if you want to help the stress and anxiety of RPG publishers, buying directly from them should give them more profit margin than buying it from your FLGS.

 

[bedir than]

One of the twists is that Sparkle Pop owns portions of the company formerly known as Diamond Comic Distributors.

They are suing themselves.

 

[Thierry-Advent]

Can you buy it direct from Green Ronin? I know it's also good to support your FLGS, but if you want to help the stress and anxiety of RPG publishers, buying directly from them should give them more profit margin than buying it from your FLGS.

From Canada, no. The shipping and duties are prohibitive.

 

[Morrus]

From Canada, no. The shipping and duties are prohibitive.

The shipping always has to be paid by somebody--it never becomes free. If you buy from a game store, Green Ronin has paid for the shipping (as in, they lose half the cover price via the distro model). If your goal is to support the publisher, buy direct from them. But then you have to pay shipping, instead of them. Yes, the system sucks. But somebody has to pay the shipping--you, or them.

 

[Staffan]

The shipping always has to be paid by somebody--it never becomes free. If you buy from a game store, Green Ronin has paid for the shipping (as in, they lose half the cover price via the distro model). If your goal is to support the publisher, buy direct from them. But then you have to pay shipping, instead of them. Yes, the system sucks. But somebody has to pay the shipping--you, or them.

Well, sort of. Retailers generally buy things from distributors in bulk – it is unlikely that that Expanse book will be the only thing that FLGS is ordering. And on larger orders the shipping gets split more ways.

That said, you're totally right that the publisher gets a bigger cut if you buy direct from them. They likely have some additional costs in doing so (handling the mail order side of the business isn't free), but likely not enough to match the discount they normally give to their distributors.