"To be perfectly honest with you, I badly underestimated the duplicity and the disingenuous nature of this business and the people who run it, and it's been a much harder go than I ever would have imagined." That's CrossGen founder/owner Mark Alessi speaking to the Journal in late 2002. A little over six months later, in June of 2003, word broke on the Internet that CrossGen was behind in its payments to freelancers and that work was being taken away from freelancers and given to on-staff creators.

As it turns out, CrossGen has been in a freefall since May 2003 from which it has yet to recover. While the company continues to hint at ambitious plans for the long-term future, finances are dire enough in the short term that CrossGen's core comics titles are being shut down and many of its on-staff creators have been laid off. In November, the Journal learned that CrossGen is for sale, with Alessi soliciting investment deals, including offers for the purchase of a controlling interest in the company.

Former CrossGen Senior Writer Ron Marz told the Journal Nov. 24, "It hasn't been a pleasant experience for anybody. It's been a gut-wrenching two or three months now. It's unfortunate when the real world of business catches with the fantasy world of comics."

CrossGen Director of Marketing and Communications Bill Rosemann responded to the intitial reports of unpaid creators with a July 14 statement acknowledging that the company had run into a cash-flow crunch as a result of a shortfall from "some outside sources that owe us money." Alessi and CrossGen Art Director Bart Sears reportedly contacted freelancers in July to assure them that all would be paid within 45 days. In a statement issued Aug. 19, the 45 days had become "as soon as possible." In an interview with Beau Yarbrough for the Comic Book Resources Web site, Alessi said some in senior management at CrossGen were going without pay but he expected everyone, including freelancers, to be paid by Oct. 1. (See TCJ #255, "Complaints from Unpaid Freelancers Shine Spotlight on CrossGen Cash-Flow Problems" for a full report on the unpaid freelancers.)

Oct. 1 passed, as did Nov. 1, and freelancers remained unpaid. Instead the company retrenched further, laying off a number of on-staff creators. Word continued to leak of resignations -- including Chief Financial Officer Mike Beattie (who was replaced by Brett Sears) -- and as many as 25 layoffs. None of this was confirmed officially by CrossGen, which ceased issuing public statements.

In the meantime, the ongoing storylines of the company's core titles began to culminate Oct. 1 in a crossover event called The War, effectively bringing to an end Crux (with #33), The First (with #37), Meridian (#44), Mystic (#43), The Path (#23), Ruse (#26), Scion (#44), Sigil (#43) and Solus (#8). Alessi confirmed that for economic reasons, the series were being brought to an earlier narrative closure than was originally intended.

From all appearances, the company -- which had defied the odds by successfully launching a line of comics in early 2000, one of the lowest ebb points in the industry's history -- seemed to be gasping its last breath. Publishers Weekly reported Sept. 22 that CrossGen's trade paperback program to the bookstore market, on which the company had placed strong hopes, had "gone missing." Collections of Ruse and Way of the Rat, which had been scheduled for July and August releases, respectively, had failed to appear. CrossGen Director of Marketing and Sales Chris Oarr told Publishers Weekly's Douglas Wolk, however, that the company would be back on track as soon as a second round of financing was completed. The CrossGen Web site promised a "New CrossGen" would arise from the ashes of The War.

NewCo

Indeed, a new entity, identified as NewCo, has already emerged, at least on paper. According to documents the Journal has obtained, NewCo has been set up as a repository for CrossGen's movie-licensing rights and is being used to entice investors to complete CrossGen's financing. As CrossGen cuts a deal for development of a property as a motion picture or television series, the rights to that property end up in NewCo. NewCo has been set up to hold the rights for up to five developed properties. Once rights to five properties have been licensed, the balance of all unsold properties revert to CrossGen proper.NewCo Way of the Rat (a Crouching-Tiger-esque mix of martial arts and comic fantasy) and Route 666 (a supernatural teen-in-jeopardy series) have been optioned. A third option for Mystic (fantasy adventure) is in negotiations with another production company.

Hollywood options have been a dime a dozen in the comics field over the last few years -- just ask Rob Liefeld -- but CrossGen's overture to potential investors includes an exhibit showing recent box-office figures for movies like Spider-Man, The Matrix, Men in Black, X-Men, The Incredible Hulk and Daredevil. "There is a frenzy in Hollywood to acquire properties in this genre," CrossGen's proposal assures investors. What is meant by "genre" here is a little fuzzy, especially considering it has always been a point of pride for CrossGen that its line-up included no superhero titles. But Hollywood players communicate more through buzz words than through English and they understand what the term speaks to in this context: special-effects-friendly comic-book properties.

In Hollywood-speak, Way of the Rat and Route 666 have been "set up" at Dreamworks but not yet "green-lit." Way of the Rat, according to CrossGen, is mere "weeks" away from green-light status, and Route 666 is "approximately six months" behind that. Assuming it gets its anticipated green light, Way of the Rat is projected to begin filming in the first quarter of 2004 with a $75 million budget. The Scorpion King director Chuck Russell is slated to write and direct. If Way of the Rat is to begin shooting in the first quarter of 2004, the most optimistic interpretation of the "weeks" it will take for Way of the Rat to be green-lit, would leave Russell less than four months to finalize the script, sign a cast, assemble a crew, and have sets built and locations scouted. According to CrossGen's calculations, "The projected revenue [to CrossGen] from each and every movie could range from $2 million to $4 million."

It's clear from its drastic payroll cuts, however, that CrossGen needs money now, and even if Way of the Rat succeeds in living up to its lightning-fast pre-production schedule, it could be months before the movie revenue that CrossGen has projected for itself materializes in full. It may be an indicator of the urgency of CrossGen's cash-flow problems that it is prepared to give up a large chunk of tomorrow's anticipated movie income in exchange for hard cash today. CrossGen's proposal asks for $2,750,000 from investors. In return, investors will receive a total of $500,000 per movie upon the closing of the purchase of the property through NewCo. Investors will also get a total of 50 percent of additional revenue beyond the purchase price, including CrossGen's share of adjusted gross revenues and merchandising net profits and bonuses for exceeding certain box-office targets. The deal extends to cover the first five properties developed for movies or television through NewCo. The risk to investors is that the five properties may never be developed or may fail to bring in the projected revenue per movie for NewCo. So far, CrossGen has realized $10,000 each for option agreements on Way of the Rat and Route 666. The Way of the Rat option will expire in February 2004, the Route 666 option in August 2004.

As the offer is structured, investors are being kept somewhat at arm's length. The deal doesn't give them a permanent claim on CrossGen; it entitles them to certain proceeds from the next five movie and TV projects, after which the properties return to CrossGen. In effect, the movie rights are being used as collateral against an infusion of investment cash.

CrossGen for Sale

But that isn't to say CrossGen isn't willing to put itself on the auction block in a more permanent way if the cash is right. JoAnne Serdar is the broker who is shopping CrossGen and its assets around to potentially interested parties. In a letter to entertainment businesses, Serdar said, "I am writing to you about a possible equity investment and/or merger or acquisition of a similar company, CrossGen Entertainment.... The company has recently undergone a major financial restructuring and is in need of a capital infusion and/or line of credit. It would also entertain an acquisition of a majority interest of the company, provided that the owner continues to be involved."

Despite CrossGen's public assurances that the company was merely going through a temporary rough patch, Serdar's letter clearly sends the message that Alessi is desperate enough to sell not only a portion of CrossGen but a controlling interest in the company, asking only that he be allowed a continuing involvement.

Depending on whether you are a loyalist or a detractor, there are at least two very different ways to interpret CrossGen and Alessi's situation. It's possible to see Alessi as fighting to preserve at any cost his dream of publishing comics based on solid stories and strong character values while treating creators decently and fairly. It's also possible to see Alessi as first and foremost a businessman who has all along had his eye on a profit-making multimedia enterprise for which the CrossGen comics line was primarily a stepping-stone. It's a question of which is the means and which is the ends. Are the multimedia enterprises a means of keeping the comics afloat or were the comics simply a means of gaining entry to multimedia markets? Whichever was Alessi's ultimate goal, it's clear that things have not gone entirely according to plan.

According to a CrossGen document clarifying CrossGen's capital requirements, "Final phase-out of non-profitable products and marketing ramp-up will require 1.5 million-dollar investment in early October 03, with an additional capital infusion of 500k in Nov 03 and Dec 03." With virtually all of its core comics titles coming to an end, the "final phase-out of non-profitable products," seems to be well under way. The company's continuing failure to pay its debts to freelancers indicates that the required capital infusions did not materialize in early October or in late October or in November.

There is a backup plan, however, according to the document: "A 2.5 million dollar line of credit available Jan 04 will provide flexibility for continued production, staff retention and sales initiatives should the timing of incoming revenues occur off projections and as a cushion for management decision making flexibility." Management's decision-making flexibility may not have been as cushioned as expected, however, given the major cutbacks in both staff and production that have hit the company with Jan. 4 still months away.

But then the laid-off members of the creative staff may not be needed if most or all of the comics line is subject to a "final phase-out." According to confidential CrossGen business review documents the Journal has seen, "Intensive research during the initial investigative years indicated that print only based media implementations would not support a long term, growing and profitable Intellectual Property development entity (even Marvel and DC -- the two largest entities in this marketplace receive only approx. 20% of their revenues thru print publishing) due to the increasingly high cost of printing, transport, storage, cost of retail space etc.... This coupled with the continuing release of increasingly low cost digital delivery mechanisms and a growing youth dominated consumer market, not only leaning toward computer based or digital based content delivery mechanisms (smart monitors are available for less than $200 and falling and wireless PC's are becoming relatively inexpensive and pervasive) but far more comfortable with that type of product base (just look at the number of X-Box and Playstation based products) confirmed that while CrossGen needed to enter the market thru the current traditional print delivery retail mechanisms, in the background CrossGen had to develop an entire range of product options for this obviously emerging and growing market."

Under the newly reorganized CGE, CrossGen's comics-publishing enterprises are only one of seven multimedia arms, including the Florida MegaCon, CrossGen Education (which produces materials for schools), Comics on the Web (a Web-based subscription service that delivers online comics to international markets), CrossGen Media (the umbrella company for CGE's movie, TV and videogame enterprises), CrossGen Technologies (which creates, develops and applies computer technology innovations) and CrossGen Intellectual Property (which holds the company's copyrights and trademarks). CrossGen is further divided into CrossGen Productions (which develops movie and TV properties) and CrossGen Interactive (which develops interactive electronic games and other toys). (Make that six multimedia arms -- As the Journal was going to press, it confirmed that CrossGen had divested itself of MegaCon, selling it to longtime con director Beth Widera.)

Fan Boy Heaven

All of this is a far cry from the reputation that has surrounded CrossGen's origins as the labor of love of a millionaire comics fan. CrossGen is the comics company that was born out of conversations about artists, characters and stories that took place between the teenage Mark Alessi and his cousin Gina Villa. Fans can relate to this story because they've all conjured their own comics lines in the course of kitchen-table conversations with their own cousins and friends and with the guy behind the counter at their local comics shop. The difference was that the teenage Alessi grew up to become a young software magnate with all the money he needed to realize his fantasy of a utopian comics bullpen.

Alessi was born in 1952 in Massachusetts to a dental technician mother and a pharmaceutical salesman father. Shortly after the young Alessi's birth, his mother quit working to become a housewife and the family moved to Connecticut. "I had the greatest mother and father in the world you could have," Alessi told the Journal. "I had a wonderful dad who did everything with me, watched me play every kind of sport you could imagine. He was there for every game. And you know there were certain value systems that were intrinsic to the way our family operated. You told the truth. You keep your word. You try and be respectful of other people. You try and understand the implications of your actions on others. And those are the kinds of basic values I grew up with. Am I perfect? Hell no. I'm a pain in the ass sometimes to people, sometimes to the people that care the most about me. But, even in my imperfection, if you're going to do business, you have to do business under the concept of helping everyone be successful. Good business is when both parties win. And I don't see that situation occurring today."

Alessi, who was mostly a Marvel reader growing up, also credited comics with introducing values to his young mind. "My favorite character was Dr. Strange," he said. "I loved Steve Ditko's artwork and John Buscema and Johnny Romita Sr. I thought they told stories best and had a baseline value structure to them, and I enjoyed them. I think comics are about instilling values in light of telling wonderful stories."

Alessi made the transition to college with a wide range of interests. He dabbled in courses dealing with Elizabethan English, ancient history and political science, initially planning to go to law school. He dropped those plans when he realized that, in practice, the law was more about precedent than about the kind of justice Marvel heroes talked about. His academic drift and comic-book dreams were resolved one day, when his mother virtually took him by the ear and plunged him into a 20-year career in computers. "I ended up in computers," Alessi said, "because my mother rousted my ass out of bed one morning and made me go down and take an interview at IBM, where they gave, basically for all intents and purposes, IQ tests to see who would fit in the computer field. And unfortunately for me, I did well, and they hired me. So I spent from the time I was 21 till I was, I guess, 43-44 in the computer field."

During that time, in spite of his apathy for computers, Alessi went from working for IBM to forming one of the many pioneering independent software companies that ended up displacing Big Blue from its one-time dominance of the computer market. By his own admission, Alessi had little facility with the actual technology that drove the computer industry. What he did have, in his estimation and as the record shows, is an ability to organize, motivate and focus workers who had a facility with the technology. Alessi founded The Technical Resource Connection, a software technology company that, in six years, grew from virtually nothing to an enterprise that employed 200 workers and pulled in $30 million annually. In 1996, at the age of 44, Alessi sold his company to Ross Perot and retired with a not-so-small fortune in stock and cash.

Asked if his career had followed the trajectory of a master plan, if he had always intended to use the computer business to generate the cash he needed to enter the comics industry, Alessi said "My goal was always to stop working, and when I ended up getting to the point where I could, I decided stopping working was not nearly as much fun as you might think. It's pretty hard to retire when you're like 44. So I decided to do this because I saw that there were so many things that I as a fan hated."

Alessi had come full circle -- he'd triumphed in the highly competitive world of high technology and now found himself with the leisure to again sit around talking comics with cousin Gina. Only now he had the money and the business smarts to put their ideals into action. Alessi and Villa dreamed up two worlds: a fictional one composed of a galaxy of distant planets, each with a distinct milieu and mix of magic and science; and a real one in which comics creators rather than planets would orbit and interact with one another in the confines of a facility designed for a mix of art and commerce.

The second world was to be the incubator of the first, and Alessi's first action was to have built from scratch a 13,000-square-foot building in Oldsmar, Fla., that would function as a corporate headquarters, a gallery of comic art and a creative design studio. Entering the glass doors at the front entrance of the building, one first encounters a reception area, management offices, a conference room and a computer room complete with its own Web server. Pieces of original comic art from Alessi's collection adorn the walls. Just past the computer room is an internal production facility for printing and scanning functions. Though CrossGen comics are printed at Quebecor, the company is capable of printing and binding its own sample comics on-site. A corridor to the left leads to an area that could almost qualify as living quarters, including a small "cafeteria" (with refrigerator and microwave), a game room (with foosball table and videogame system), a bunkroom (for employee naps), showers and locker-room dressing areas. A corridor to the right leads to administrative, production and creative staff management offices. In between is the massive bullpen area, a courtyard-like central hub divided into large "Quads" where artists and writers work at cubicle work stations. While the rest of the building has nine-foot ceilings, the Quads have seven-foot cubicle walls and a 12-foot ceiling. Each Quad holds work space for a title's team of creators, including penciler, inker and colorist, as well as a central conference area where the art team can confer with each other and the title's writer. Few publishing companies have gotten their start in the comics business at such an elaborately designed ground floor. Creators who joined CrossGen in the early days remember it as a cavernous space inhabited by a skeleton crew of less than two dozen. Eventually it would fill with more than 100 employees. CrossGen artist Jeff Johnson described the facilities to the Journal as "fan boy heaven."

A mystique immediately built up around the CrossGen facilities -- part Stan-Lee-era Marvel bullpen and part Arthurian round table, with Alessi as the benevolent millionaire king. An article on the front page of the business section of the May 14, 2000 St. Petersburg Times began: "A local millionaire has summoned 15 top minds from around the world to a laboratory here. Behind its thick walls, the group discusses plasma-casting weapons and the geopolitical ramifications of the war against the Saurian monarchy. Mark Alessi and his minions are creating an imaginary universe, along with the comic-book characters that will inhabit it."

A key element of Alessi's corporate utopia was his resolve to treat comics creators as employees, who would live in the area, work on-site and enjoy the kind of salaries, benefits and profit-sharing participation that are common in most of the working world but virtually unheard of in the comics industry, where creators are almost universally treated as freelancers or independent contractors. When CrossGen placed its first ads for creative personnel, it was swamped with responses from 6,000 enthusiastic artists and writers who relished the idea of the kind of job security that Alessi seemed to be promising. Starting salaries for CrossGen creators in 2000, began at a minimum of $40,000. All full-time staff were to participate in an Employee Shared Ownership Program, under which 25 percent of the company's overall net profits were to be split among its employees according to a complex formula. The formula determined exactly what share of profits a writer or penciler was entitled to claim versus the shares coming to, say, a secretary.

The applicants were whittled down to a core initial creative team of 14. Villa was rewarded for her role as Alessi's lifelong co-brainstormer with the executive title of CrossGen Chief Creative Officer (later Chief Operating Officer). She was placed in charge of CrossGen comics operations and production, after having worked for the previous 29 years as a physical education and health instructor at Holliston High School in Massachusetts.

Alessi credits Villa with the line's emphasis on strong female protagonists and the female friendly romantic elements that mingle with the action and spectacle of each title. While the superhero genre, including Alessi's fondly remembered Marvel comics, had degenerated into a fanboy-pleasing fight-of-the-month formula, CrossGen eschewed superheroes in favor of complexly plotted fantasy and science-fiction adventures. Its goal was to draw in young readers and female readers, while holding onto comics' aging male fan base. CrossGen also disdained collector-pandering gimmicks like variant covers and foil editions.

Early planning sessions with creators did not go smoothly at CrossGen. A first-day meeting of Alessi, Villa, Barbara Kesel, Ron Marz and Brandon Peterson to discuss flagship title Mystic turned sour when Alessi made it clear that he resented the others' incursions into his personal vision of the CrossGen fictional universe. Marz told the Journal, "I think the rest of us around the table were thinking, 'Uh-oh, what have I gotten into?'" The next day, however, Alessi apologized to his creative collaborators for his thin-skinned possessiveness. It was an apology that was heard by everyone in the corporate building, because the conference room speaker phone had been left inadvertently connected to the building PA system.

Like most aspects of the CrossGen empire, the CrossGen workspace can be seen in either a negative or a positive light. On the one hand, respect is paid to the importance of collaboration. CrossGen titles rely on more for their appeal than just a star artist and flashy visuals. The company's creative process underscores the importance of character and plot development and caters to the interaction between writer and artist. On the other hand, the cafeteria, showers and work cubicles underscore the factory atmosphere in which CrossGen comics are produced. There would seem to be little or no room for a creator's idiosyncratic self-expression at CrossGen. Each creator labors to reproduce house concepts in a house style using company-owned properties.

At the same time, creators were encouraged to feel that they had input into those house concepts and that they shared in the profits accruing to the company-owned properties. In the heady atmosphere that prevailed during CrossGen's launch, creators said they felt a sense of belonging that was rare in the comics industry. They seemed to be part of something that, if Alessi's flamboyant rhetoric was to be believed, could radically change the comics field. While generic elements varied from title to title, a common feature of each comic was the idea of protagonists who had been invested with a special power to make great changes in their world. Each protagonist bears a "sigil," a sign on their body that signifies their special status and their heroic destiny. In a similar way, the CrossGen creators could not help but feel themselves to be among a chosen few selected for a great destiny in their field.

From the beginning, that destiny seemed to be borne out. CrossGen appeared as a beacon of light in the floundering fin-de-siècle comics marketplace. While Marvel, the industry's top-selling publisher, struggled to pull itself out of Chapter 11 bankruptcy and comics shops closed their doors one by one, CrossGen made its debut with a steady release schedule, relatively strong sales and positive press. That positive press was further enhanced by the fact that it was one of the few optimistic stories the media had to seize on and by Alessi, himself, who promoted his line with an evangelical fervor. While a bunker mentality had settled over most comics publishers who aimed for no more lofty a goal than to survive the harsh economic terrain in which they found themselves, Alessi vowed to do nothing less than dominate the comics marketplace and revolutionize the industry. The Big Two comics publishers, Marvel and DC, had been jockeying for the No. 1 position for the past 50 years, but Alessi assured one and all that CrossGen would soon out-sell them both. And in so doing, it would change the industry's way of doing business. Solid stories would replace collectible frills and creators would share in the fruit of their labors. In 2000, Alessi founded with Jim McLauchlin A Commitment to Our Roots, a nonprofit organization dedicated to helping comics creators who had fallen on hard times. (See next month's News Watch for a full report on ACTOR, its accomplishments and its limitations.)

As late as 2002, Alessi told the Journal, "The only way to change things is to make them profitable so that people will change, because it's profitable. Very few people change because it's the right thing to do. So you have to find a way to create change by making it profitable. And one of our objectives is to make CrossGen the richest and most successful comic-book company in history because we think the values we espouse will be emulated because it's profitable."

But six months into CrossGen's launch, the bloom was off the rose. In addition to an industry-wide downturn that had yet to reverse itself, Alessi's bid for conquest of the comics market was further hindered by the network of sweetheart deals that had already been cut between the principal comics publishers and the sole surviving large-scale distributor to comics shops. With Diamond Comic Distributors setting the terms of sale to comics retailers, Alessi complained that CrossGen found itself with little room to maneuver. Even without chrome and die-cut gimmicks, the relatively high-grade paper readers had come to expect and CrossGen's ongoing payroll costs meant each issue cost an estimated $50,000 to $60,000 to produce. Within a couple of years, Alessi estimated that he had spent $15 million launching CrossGen and keeping it afloat. Meanwhile, CrossGen's good media vibes began to turn sour, as stories leaked to the Internet press from former CrossGen employees who had found the company atmosphere more tyrannical than supportive. Six months into CrossGen, Alessi's wife died unexpectedly of massive heart failure, leaving him a widower and a single parent to his daughter.

Over the next couple of years the public-relations backlash against CrossGen grew until it had assumed the proportions of an urban myth. Creators were said to live on the grounds of a Waco-like CrossGen compound in Florida, where they were brainwashed into pledging undying allegiance to Allessi.

[In the wake of these negative rumors, but before the really negative news had broken of CrossGen's financial crisis and unpaid freelancers, the Journal began a long-term investigation of CrossGen by interviewing Alessi at length. The text of that interview, in which Alessi talks about his problems with Diamond and other obstacles to his industry conquering plans, will be posted here in the near future. See TCJ #257 for the full story of CrossGen's ongoing struggle.]

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