Diamond Distributors Asks Bankruptcy Court For Ownership of Publishers' Consignment Inventory [UPDATED]

Diamond Comic Distributors--which filed for bankruptcy in January--has asked the bankruptcy court to allow it to sell its consignment inventory in order to pay off its creditors.

Consignment inventory is stock which the distributor stores but does not own (as opposed to stock which the distributor has purchased from the manufacturer). The distributor then sells the books via retail stores. The manufacturer or publisher does not get paid until the stock is sold at retail--typically receiving 30%-50% of the retail price (the rest going to the retail store and the distributor itself).

Diamond has listed 128 companies [see below] for which it currently holds consignment stock. Some of these are tabletop game companies, as well as many comic-book publishers, and include Goodman Games, Green Ronin, and Paizo Publishing. Others include comic-book publishers like Marvel and DC, along with a number of toy companies. Some publishers are saying that they are owed payments for retail sales from late 2024, just prior to Diamond's bankruptcy filing in January 2025, in addition to having stock currently in Diamond's possession.

Normally, unsold stock, which still belongs to the publishers, would be returned to them. Diamond has asked the bankruptcy court to allow it to take ownership of that stock and sell it for the benefit of its creditors.

One of Diamond's biggest creditors is Chase Bank, which will likely be at the top of the priority list of creditors to be reimbursed.

In its filing, Diamond says it is in possession of "significant inventory that was shipped… on a consignment basis" and that "consignors have not satisfied the requirements under applicable law to perfect their interests in this consigned inventory". Diamond claims that this gives them the right to "transfer title to this inventory free and clear of the consignor's interests". Essentially, some important paperwork (a 'U.C.C.-1 financing statement') was not filed by consignment vendors like Marvel, DC, and the tabletop gaming companies mentioned earlier prior to the bankruptcy in January, and this means that they forfeit their rights to the stock in question. Diamond's filing says "None of the vendors that provided consigned inventory to any of the Debtors filed a U.C.C.-1 financing statement against any of the Debtors prior to the Petition Date."

Following the closing of the sales of a substantial majority of their assets, the Debtors are in possession of significant inventory that was shipped to the Debtors on a consignment basis.

1. The consignors have not satisfied the requirements under applicable law to perfect their interests in this consigned inventory. As further explained below, this give the Debtors the right to transfer title to this inventory free and clear of the consignor’s interests.
2. The Debtors accordingly seek to sell or otherwise dispose of the consigned inventory free and clear of the interests, if any, of the consignors.
3. To that end, the Debtors seek approval of Consignment Sale Procedures (as described and defined herein) to permit them to market, sell, and/or otherwise dispose of consigned inventory expeditiously, minimizing costs and maximizing recoveries in order to generate the best result for the estates.

UPDATE -- Paizo Publishing has announced that its upcoming releases will not be available at major bookstores or at Amazon because the company has stopped shipping products to Diamond. This includes 12 August releases and 10 September releases, such as Starfinder Player Core, Starfinder GM Core, Pathfinder Battlecry, and more.

The court has scheduled a hearing on July 21 to hear objections from the affected vendors. The full list of vendors can be seen below.

List of Consignment Vendors

1. 12 Gauge Comics LLC
2. 801 Media Inc
3. A Wave Blue World Inc
4. Ablaze
5. Abstract Studios
6. Ack Comics (Amar Chitra Katha)
7. Action Lab Entertainment
8. Aftershock Comics
9. Ahoy Comics
10. Ait/Planetlar
11. Albatross Funnybooks
12. Alien Books
13. American Mythology Productions
14. Antarctic Press
15. Ape Entertainment
16. Apex Publishing LLC
17. Archaia Studios Press
18. Archie Comic Publications
19. Artists Writers & Artisans Inc
20. Aspen Mlt Inc
21. Avatar Press Inc
22. Bad Egg LLC
23. Bandai Entertainment Inc
24. Battle Quest Comics
25. Bedside Press
26. Behemoth Entertainment LLC
27. Benitez Productions
28. Black Mask Comics
29. Black Panel Press
30. Blind Ferret Entertainment Inc
31. Boom Entertainment
32. Bundoran Press Publishing House
33. Chizine Publications
34. Clover Press LLC
35. Cryptozoic Entertainment
36. Dark Horse Comics
37. DC Comics
38. Desperado Publishing
39. Diamond Comic Dist.-Stock
40. Difference Engine Pte LTD
41. Digital Manga Distribution
42. Drawn & Quarterly
43. Dstlry Media
44. Dynamic Forces
45. Eros Comix
46. Eureka Productions
47. Fairsquare Graphics
48. Fantagraphics Books
49. Fiery Studios Inc
50. Frank Miller Presents LLC
51. G T Labs
52. Gemstone Publishing
53. Gen Manga Entertainment
54. Gold Key Entertainment
55. Good Trouble Productions LLC
56. Goodman Games LLC
57. Graphic Mundi – Psu Press
58. Graphitti Designs
59. Green Ronin Publishing
60. Gungnir Entertainment
61. Heavy Metal Magazine
62. Hermes Press
63. Humanoids Inc
64. Idw – Top Shelf
65. Idw Publishing
66. Image
67. Image Comics
68. Joe Books Inc.
69. Laguna Studios
70. Les Editions Pix’N Love
71. Lev Gleason
72. Lion Forge
73. Lionwing Publishing LTD
74. Living The Line
75. Locust Moon Press
76. Mad Cave Studios
77. Magma Comix
78. Magnetic Press Inc.
79. Manga Classics Inc.
80. Marvel Comics
81. Marvel Prh
82. Massive
83. Moonstone
84. Nbm
85. Netcomics
86. Night Shade Books
87. Norma Editorial S.A.
88. Oni Press Inc.
89. Opus Comics LTD
90. Paizo Inc
91. Panini UK LTD
92. Papercutz Inc
93. Pegamoose Press
94. Prime Books LLC
95. Rabbit Publishers
96. Radical Publishing
97. Red Giant Entertainment
98. Renaissance Press
99. Roll For Combat
100. S7 Games
101. Scout Comics
102. Sea Lion Books
103. Seven Seas Ghost Ship
104. Slave Labor Graphics
105. Soaring Penguin Press
106. Source Point Press
107. Starburns Industries Press
108. Storm King Productions Inc
109. Sumerian Comics
110. T Pub
111. Th3Rd World Studios
112. Titan Comics
113. Tokyopop
114. Toonhound Studios LLC
115. Twomorrows Publishing
116. Ubiworkshop
117. Udon Entertainment Inc
118. Valiant Entertainment LLC
119. Vault Comics
120. Wicked Cow Studios LLC
121. Wildside Press LLC
122. William M Gaines, Via Gemstone
123. William M. Gaines Agent, Inc.
124. Wyrm Publishing
125. Yaoi Press LLC
126. Z2 Comics
127. Zenescope Entertainment Inc
128. Zombie Love Studios

 

[Paul Farquhar]

I think the next decade is going to see a revolution in the creative fields, as AI pushes into art, writing, and music in a very big way.

It really aught to push into government and business management, but those people have the power to block AI from replacing them.

 

[Jd Smith1]

It really aught to push into government and business management, but those people have the power to block AI from replacing them.

Hollywood, too. But the RPG industry is very vulnerable. Small publishers are going to be very drawn to AI tools as the technology matures.

 

[Paul Farquhar]

Hollywood, too. But the RPG industry is very vulnerable. Small publishers are going to be very drawn to AI tools as the technology matures.

That's because no one who likes RPGs will be able to afford to buy them, given that RPG players are mostly creative types, and therefore will be unemployed.

 

[Crusadius]

In that light, taking a fractional payout as an unsecured creditor—what bankruptcy lawyers call "pennies on the dollar"—might be the least bad option.

I'm not sure they will be considered creditors. Right now they aren't. And I'm not sure they turn into creditors if Diamond are successful with their claim. But I'm not a lawyer so definitely could be wrong, but I'm sure Diamond and the current batch of creditors will not want any more if they can prevent it.

 

[Yenrak]

I'm not sure they will be considered creditors. Right now they aren't. And I'm not sure they turn into creditors if Diamond are successful with their claim. But I'm not a lawyer so definitely could be wrong, but I'm sure Diamond and the current batch of creditors will not want any more if they can prevent it.

Incorrect. They will almost certainly be considered creditors. But they will be unsecured creditors who will only get paid out of the proceeds from the residual estate after the secured creditors get paid. Which is likely very little.

Diamond doesn’t really have a stake in this anymore. They’re done. They’ll be dissolved and their business is kaput. They don’t really care who gets paid what. At this stage, it is better to look at this as a contest between various classes of creditors rather than anything to do with the debtors’ interest.

 

[Jd Smith1]

That's because no one who likes RPGs will be able to afford to buy them, given that RPG players are mostly creative types, and therefore will be unemployed.

I've been gaming since 1979, and I have yet to have a player who had a job in a creative field. Lots of retail people, but no creative jobs.

 

[Jd Smith1]

Incorrect. They will almost certainly be considered creditors. But they will be unsecured creditors who will only get paid out of the proceeds from the residual estate after the secured creditors get paid. Which is likely very little.

Diamond doesn’t really have a stake in this anymore. They’re done. They’ll be dissolved and their business is kaput. They don’t really care who gets paid what. At this stage, it is better to look at this as a contest between various classes of creditors rather than anything to do with the debtors’ interest.

Exactly.

Its going to boil down to how the court splits proceeds of the sale of assets. Lending institutions, with their in-house legal staff, will be at the head of the line. But no one is going to walk away whole from this; the only question is what percentage of loss you take after paying your lawyer's fees.

 

[Paul Farquhar]

I've been gaming since 1979, and I have yet to have a player who had a job in a creative field. Lots of retail people, but no creative jobs.

I suspect it depends on your social circle. No one in my circle works in retail. May also be because all the shops have closed.

 

[Wofano Wotanto]

I've been gaming since 1979, and I have yet to have a player who had a job in a creative field. Lots of retail people, but no creative jobs.

If we're going to pointlessly trade anecdotes, my RPG days started in 1977, and off the top of my head I've three graphic designers, two comic book artists, a quartet worth of musicians who were good enough to get paid for it (all at one table), a person who earned a good income making period clothing/costumes, two self-declared writers, a miniatures sculptor who went on to do museum displays on a professional level, and two people involved in making PC games. Me, I made a living for over a decade painting, customizing and selling minis both on spec and commission.

If there's a single broad category I've seen the most of it's probably government workers of one type or another, but most of my life has been spent near or in a state capitol where the capitol city's population more than doubles when the offices are open. All those commuting workers are easily convinced to do some gaming after work, whether its at an urban game store or at a house in teh suburbs.

No reason to think my experience is any more unusual than yours. You meet a lot of people in this hobby over the course of 48 years.

 

[doctorhook]

It’s frustrating as hell trying to follow a thread where someone is commenting a lot and generating a ton of replies but has also blocked me from seeing any of their comments (including in replies). Jd Smith1, not sure what I said to earn a block from you, but would you do me a solid and unblock me please? I’d love to follow this entire discussion. Thanks mate.