TV Tokyo and NAS Force 4Kids To File For Bankruptcy Protection

More news this morning from the Anime Economatrix:

The master licensing and dubbing company 4Kids Entertainment, best known for bringing Pokemon and Yu-Gi-Oh! to the US, filed for Chapter 11 bankruptcy protection (along with 11 affiliated companies) in federal bankruptcy court on Wednesday. The company listed assets of $23,372,000 and liabilities of $16,526,000 and indicated that it expected to have money to disburse to its unsecured creditors.

The company had warned last week that it might have to file Chapter 11 if it was not able to settle litigation with TV Tokyo and NAS, which terminated 4Kids’ rights to Yu-Gi-Oh! and alleged that 4Kids had secretly hidden moneys on which it should have paid the rightsholders royalties. On March 29, 2011 TV Tokyo and Nihon Ad Systems sued 4Kids Entertainment, alleging that the company entered into illegal agreements with other companies, including Funimation Entertainment and Majesco Entertainment, regarding the Yu-Gi-Oh! anime franchise. TV Tokyo claimed that those agreements allowed 4Kids to collect royalties without paying a portion of those royalties to TV Tokyo, which violates their original agreement. The companies are seeking almost $5 million in "underpayments, wrongful deductions, and unmet obligations." As part of the suit, the companies terminated the Yu-Gi-Oh! license from 4Kids.

On March 31, 4Kids Entertainment filed a shareholder report stating that on March 27 they had informed the licensors that their termination letter was "wrongful and devoid of any factual and legal basis," and that they had not given 4Kids 10 days notice as required. 4Kids further revealed that they had made a good-faith payment and agreed to a March 18 meeting in lieu of a lawsuit, which TV Tokyo and NAS nevertheless decided to go ahead with. 4Kids also stated that even if the termination is found to be valid, they are prepared to do whatever it takes to stay in business, and have filed for Chapter 11 bankruptcy protection as of April 6, 2011.

In the bankruptcy filing, 4Kids listed its debts in the filing. The Pokemon Company International was the largest creditr, with $4.7 million owed. Second was Asatsu-DK (parent of NAS), with $4,221,626 owed. Third was CW network, home of 4Kids’ Toonzai programming block on Saturday mornings, with $1,987,000 owed.

4Kids has been loosing money for several years and the New York Stock Exchange delisted 4Kids (NYSE: KDE) stock in June of last year because they could not maintain the minimum capital requirements to trade on the exchange.

Some background on 4Kids controversial 'localization' practices:

The management of 4Kids Entertainment has stated that it seeks to "localize anime so children in English-speaking countries will understand it...", judging that localization is necessary in order for these titles to be profitable. For most titles, the editing 4Kids performs falls into a few broad categories – 4Kids may seek to "Americanize" a program by changing character names, dialog, music, food, or stereotypes which would be unfamiliar or even offensive to an American audience, as in the series, Pokémon, where rice balls are changed into American food such as jelly doughnuts or submarine sandwiches. The company also may remove some materially suggestive objects such as cigarettes or guns with lollipops, water guns, crosses, or content deemed too violent or suggestive for American children. In an interview with Al Kahn, CEO of 4Kids, when asked how the company decides what properties or anime to acquire, his reply was "..if [anime fans] want this programming to come to the United States then they're going to have to accept the fact that it's going to be available in two styles." A March 2006 study by the Parents Television Council on violence in children's television programs said that the 4Kids dub of Shaman King was still too violent for children. L. Brent Bozell also pointed out the 4Kids-dubbed Shaman King in one of his weekly column as an example of children's media he perceived as having undue "cultural landmines".

Gen Fukunaga and Investor Group Buys Back Funimation - for Just $24 Million

HEH. I had noticed that there seemed to be a lot of selling of NAVR stock over the last few days, because something was driving the price down, and now I'm reading this from the Anime Economatrix over my coffee this morning:

The media distributor Navarre Corporation announced on Monday that it has sold its anime company Funimation to a group of investors that includes Gen Fukunaga, who is also Funimation's chief executive officer. The price of the all-cash transaction is US$24 million. Navarre will continue to serve as Funimation's exclusive distributor in the United States, as well as its logistics and fulfillment services provider. The investment group also includes John A. Kuelbs "who was then instrumental in selecting Darwin and Doug Deason to join the team," according to Funimation.

Gen Fukunaga gave this statement:

"We have a great history with Navarre and we thank everyone there for their longstanding support throughout the last five years. It is due to Navarre's logistical expertise and wide distribution network that we were able to grow our company into the Anime industry's market share leader. Though it will no longer be our parent company, Navarre will continue to distribute our product and we look forward to working with them for years to come. We are very excited about our new partners all of whom understand our vision and will help us develop our initiatives in physical product, digital entertainment and other growth areas."

In January 2005, Navarre Corporation announced plans to acquire from a group of private owners that included Fukunaga and the Cocanaour family . The acquisition was completed in May that year. Navarre initially offered $127 million dollars for Funimation ($100.5 million in cash and $26.5 million in Navarre common stock) and $17 million in performance based earnouts, for a total of $142 million. Adjustments to the value of the Navarre stock and cancellation of the earnout payments brought the total price for Funimation down to $114 million, $90 million more than today's announced sale price.

Funimation's 2004 net sales totalled US$72 million, with pre-tax income of US$29.8 million. Earlier this year business reporter Eric Wieffering estimated Funimation's 2010 net sales at US $35 million and pre-tax income at US $10 million (Funimation's 2010 financial year ended on March 31, 2011).

Last year, Navarre announced that it was considering selling Funimation. In September, the company stated that it had six potential buyers, but announced in January that it had received no adequate offer and was considering halting the sales process.

Gen really is the smartest guy in the room in the R1 Anime biz, and is one of the few people who has actually gotten rich from it. He put together this little Anime company with the help of a some private investment money, built it up with the help of his family connections in Japan, and sells it a few years later at the top of the market to Navarre for $142 Million, and then (with the help of a little more private investment money) buy's it back from the same now debt laden company six years later for $24 Million - 17 cents on the dollar - and got to run the thing the whole time. Unreal. In the end, Gen had to round up a group of investors who could easily afford to loose a few million.

So there is really nothing happening here except that Gen is getting richer and Navarre shareholders take a bath. After all, shareholders usually do - it's always those big money private equity guys that come out roses.

Update: Reid Porter, the COO of Navarre says: "This transaction ends a comprehensive sales process undertaken over the last year. As previously discussed, FUNimation's future strategies and associated risks to execute them are not in line with Navarre's strategic direction." In other words, we no longer have to risk loosing more money in a declining R1 Anime industry.

Cary Deacon, and CEO of Navarre says: "Navarre will be able to deploy the funds generated from the sale of FUNimation to build or acquire new businesses and services to diversify our revenue streams that will support our long-term objectives." Cary, it seems, thinks there are better places to deploy their capitol than in the Anime industry.

The folks at Navarre seem to be pretty happy about getting Funi off their books. NAVR shareholders seem less enthused. Stock is trading flat on the announcement. Looks like all the folks 'in the know' got out already over the past few weeks.

UPDATE 2 (Apr 6): Cary Deacon, the CEO of Navarre was fired today by the board of directors. I guess some of the larger shareholders have had enough.

Status of the Fukushima Reactor Accidents

Herschel Smith over at the Captains Journal is posting some excellent updates on the current status and progress of the containment efforts being made at the Fukushima Reactor plant. He is doing a much better job than the main stream media at assessing the situation given the available information.

As he points out: "The Japanese are performing heroically, and the main stream media will catch up in several days (or weeks). The current efforts are focused on radiological source term and thus dose mitigation, not the prevention of core melt events."

UPDATE: A great chart that brings radiation exposure into context.

Borders Troubles Hit TokyoPop Hard

I've been talking about this a lot recently in our newsletter and blog posts, and have been doing a lot of speculation as to how the Borders failure would effect the US Manga industry (i.e. how hard the publishers would be hit). I think this is a bigger deal than most people realize, but now I'm wondering if perhaps I've been under estimating the impact.

Today Stuart Levy, the CEO of TokyoPop, made this statement to ICv2:

“The facts are simple. Borders—our biggest customer—went bankrupt, owed us a lot money, which they didn’t pay us, and as a result we are in a very challenging situation, and have had to react quickly to the situation. We did need to let a few people go—and it’s horrible for everyone involved to ever have to let people go. We will continue to do everything we can to evolve the manga business and we very much appreciate the support of our fans, our partners, our creators, and out retail customers.”

Borders, believe it or not, once represented about 40% of total US manga sales, but that share has fallen to around 20% last year. Shojo was one of key demographics that helped move the manga market along in recent years at the bookstore level, but this audience is now aging, and many former shojo fans are not graduating to josei (comics for older women), instead seeking out other forms of entertainment. Also, over the last couple of years, new series have failed to replicate the success of older shounen titles such as Naruto and Bleach.

It looks like several of the key people TokyoPop picked up last summer when CMX closed down have now lost their jobs again, plus a few others. The most disconcerting thing in DJ Milky's statement is "we are in a very challenging situation". That's CEO speak for "things are looking pretty bad". TokyoPop is already having enough problems keeping their back catalog in print as well as keeping their front end output up. Actually, that's an understatement, as they have 'already' pretty much given up keeping their back catalog in print. I imagine they are in a situation that will require further cuts to their current release schedule of only 10-12 new issues a month.

Former powerhouses CMX and Del Rey are now gone from the manga market. Dark Horse has already seriously curtailed their manga genre output, which is down to only 1-2 volumes per month now. They are focusing on more US based series now. And Viz will ultimately find themselves in the same position of having to eliminate any 'marginal' series (that they already haven't) from their release schedule and only focus on the things that are the most profitable. This would explain their sudden cancellation of Inubaka, which has left fans of the series (like me) scratching their heads as to why they would do away with a series only 5 volumes short of the end (not to mention that it sets such a bad precedent). I hope this sudden change in the market does not persuade Kodansha to change their plans about their summer release ramp up either, as they are the only hope for the continuation of many of those former Del Rey licenses that dropped out of print last year.

The reality of Border's troubles is that there will probably be more such cancellations in the coming months as the publishers try to reorientate their business models to adjust to a 20% smaller distribution network. US Manga output has already fallen from 1513 in 2007, to 1115 in 2009, to about 850 last year. The worst part of all this is that we will never know about the great licenses that now get passed on that might have been picked up in a better market. And given the current environment, we might end up down in the range of 500-600 new issues this year. At that rate there will be many more weeks that go by with few or no new manga arrivals here at RACS. That hasn't been the case for at least 8 or 9 years. ~sigh~

Borders Store Liquidations Underway / Barnes & Nobel Suspends Dividend

ICv2 reports that the Borders book store liquidations have begun:

"Borders has obtained court approval of its store-closing plans and has begun liquidating inventory at the 200 affected locations. DJM Realty is assisting with the store closings and lease assignments. The store closings are part of the restructuring Borders is undertaking under Chapter 11 bankruptcy protection.

Inventory liquidation on site, if successful, will reduce the amount of inventory publishers, wholesalers, and distributors can expect to get back as returns as Borders closes nearly 1/3 of its stores. Whether that’s good or bad for the individual company varies, depending on whether the receivable risk resides in the various relationships."

The Borders here in Winchester (VA), the only real bookstore in our town of 28,000 residents, is one of the stores that is on the chopping block. It's also the only retail location in our town that had any real selection of manga, so unless we decide to open an RACS retail store* here, manga fans in our area will be relegated to mail order only.

All the manga publishers and distributors are going to take big hits in varying degrees due to the Borders bankrupcy. Word on the street is that they owe Diamond Comics $3.7 Million for the few TP lines they distribute directly to the bookstore trade. Viz and TokyoPop are too small to distribute directly and thus go through middlemen to get their manga into the bookstore market, so it's hard to know the level of financial hit they are going to take, only that they are unlikely to ever see whatever monies Borders owed them at the time of the bankrupcy filing.

Borders isn't the only one having problems keeping the doors open though. The other big bookstore chain, Barnes and Nobel, has suspended the dividend to their shareholders to conserve capital:

"Barnes & Noble announced that it has eliminated its dividend to conserve capital; and will no longer give guidance for the current year, citing Borders’ Chapter 11 filing “and the potential short-term impact that their announced store closures may have in the marketplace.”

The dividend cut will allow the company to conserve capital 'to continue investing into its high growth digital strategies, while simultaneously allowing the company to take advantage of any other market opportunities that may present themselves.'"

You would think that Borders going away could only be a net positive for B&N, but they clearly have their own problems too. No matter how they 'spin' suspending their dividend to the media, that's a huge negative signal that they are not doing well cash flow wise.

Even Best Buy is no longer the shining star of entertainment retailing as can be noted here and here. The bankrupt video rental chain Blockbuster is in the process of auctioning off their worthless assets.

Any way you cut it, being a Brick and Morter retailer in the entertainment business is a tough proposition these days. Online and digital is the future.

*The prospects for an RACS retail store are unlikely. Sorry folks, I already have 2,000 headaches. Anyway, if we ever do open a big Anime retail store, it will be in Grimes, Iowa. -_^

Navarre Says No 'Adequate' Offers for Funimation Yet

From Navarre's earnings report released this evening:

"Discontinued operations includes the results of FUNimation Entertainment. Net income from discontinued operations during the third quarter was $1.8 million, as compared to $928,000 in the prior fiscal year. Strong earnings performance in discontinued operations resulted from solid year-over-year sales growth. Cash flow from discontinued operations contributed strongly to the company's year-over-year debt reduction.

The company has not yet received an adequate offer in connection with its efforts to sell FUNimation Entertainment. Although this sales process continues, if the company does not receive an adequate offer in the fourth quarter, it anticipates that these efforts will be halted."

The full report can be found here.

It's late and I'm tired, but I would add a couple things real quick:

1) Here's my blog entry from the last quarterly report.

2) Navarre's 'third quarter 2011' is actually the forth quarter, 2010 (Oct to Dec 2010). That's the holiday quarter and should be their best performing reporting period of the year.

3) 'Discontinued operations' is just financial lingo to separate out the Funimation business segment. It doesn't mean they are discontinuing Funimation, just that they are trying to sell the division and have to report it's earnings separately. This is required by GAAP if you are a public company.

4) Funi has pulled out every card in the deck over the last two quarters to get their revenue up in anticipation of a possible sale. I'm not sure $1.8 Million in quarterly revenue for the holiday quarter of a company that owns 60% of a national market can really be characterized as 'solid sales growth', but they certainly managed to beat their previous, and truly dismal year over year quarter, in 2009. I'm not knocking them here, 2009 was absolutely terrible for everyone.

5) One of Navarre's stated business objectives is now listed as "expanding our products and services beyond digitally downloadable products". That means they want to sell more stuff that can't be downloaded online. Hey, don't we all!

6) During that period I had made them an offer to swap companies, but apparently Gen's office was already bigger than mine and he doesn't like cold winters, so they didn't go for it. He also said something about "wouldn't give a squirt to be on the retail end right now", or something to that effect, but I probably misunderstood... HEH.

If anyone is interested, Navarre's earnings conference call will be at 11:00 a.m. EST tomorrow (Tuesday, Feb 1). The call can be accessed by dialing (866) 831-6243, and entering pass code "83066830" ten minutes prior to the start time. It will also be webcast live and can be accessed in the "Investors" section of their website here.

Listen in if you can, it might be very revealing. More later, I'm pooped.

FUNimation Shifts Digital Strategy - Sues Downloaders

FUNimation Sues 1,337 Downloaders. From ICv2:

Anime distributor FUNimation Entertainment has filed suit in Texas against 1,337 individuals who it accuses of using BitTorrent sites, including isohunt.com, kickasstorrents.com, and nyaatorrents.org, to download copies of One Piece #481: Ace Rescued! Whitebeard’s Final Order!. The suit identifies the individuals only by the IP address used to download the episode, and seeks to use the discovery process under the suit to find out who was using those IP addresses.

The lawsuit was filed under the U.S. Copyright Act of 1976, and seeks injunctions to prevent further downloading, actual or statutory damages, costs, and attorney’s fees.

Lawsuits against end users have not had great success at slowing downloads in the past. The Recording Industry Association of America sued around 18,000 individuals between 2003 and 2008, when it ended the strategy. Most of the sued parties ended up settling with the RIAA for amounts of a few thousand dollars per person.

Litigation against end users has now shifted to independent film-makers, who began suing thousands of BitTorrent users last year.

Although such litigation affects only a small fraction of the individuals who download copyrighted content, those that bring such suits hope that a deterrent effect will slow downloading by others who hear about the suits.

I really don't have much to say about this that hasn't already been said. This issue is like a shirt that has been through the wash cycle 14 times and is still dirty. Retailers will weakly cheer, paying fans will yawn, and downloaders will be outraged and defiant. Same old, same old. Clearly free legal streams of Anime content hasn't done a thing to deter fans from going to torrents, and has probably only hurt DVD and digital sales.

As the R1 market continues to fall apart, Funi has been trying to sell themselves for nearly a year now with little success. Potential buyers looking to invest in this industry, and trying to peg a valuation on any Anime companies intellectual property, are going to be very concerned about what studios are doing to combat torrent downloaders and how effective those efforts are. They are probably finding out the answers are 'lot's of things' and 'nothing's working'. It's got to be hard to find any group of savvy investors willing to put up serious money to enter an industry where such a huge portion of the potential customer base is unwilling to pay for ANY content and has so many options to view Anime outside any venue that can be monetized by anyone. The phrase "how the hell do you compete with free?" must daily resonate down the halls in the HQ of every company that participates in the US Anime business from studios, to retailers, to digital content providers.

But all that said, torrent users have been getting pretty cocky lately, even going as far as to give paying Anime fans nick names like 'buyfags'. What else is left that anyone in the industry can do to try to protect their market other than start kicking in doors and cracking skulls. That's what Apple does when you fuck with their intellectual property. And it's not like anyone in this industry is some big money corporate son of a bitch like the big music studios were - we've all been living hand to mouth in this business going on 3 years. We only stay because we love it.

Moves like this certainly won't stop torrent downloaders, in fact, they probably won't put a dent in it long term, but maybe it will take them down a notch for a little while - especially the folks that, rather than buy legitimate Anime releases, put hundreds or thousands of dollars into extra computer equipment to seed torrents. I mean they seem to need it, and to date they have gotten off easy. Either way, the studios simply have no where else to go except out of business.

UPDATE: Oh, by the way (Toren brought this up in the comments), 1337 = Leet. That number was not picked at random, it's definitely sending a message to the hard core hackers and torrent geeks. I thought the number looked familiar, but I haven't heard anyone use the term for a LONG time.

Gantz Live Action Movie Coming to US Theaters!

Just FYI, the new Gantz live action movie is going to playing at theaters in January:

NEW PEOPLE and NCM Fathom are bringing the world premiere of GANTZ to movie theaters nationwide for a one night live event on Thursday, January 20th at 8:00 pm ET/ 7:00 pm CT/ 6:00 pm MT/ 8:30 pm PT (tape delayed).This live-action feature, based upon the popular Japanese manga and anime series, is the ultimate survival game. It will be English over-dubbed exclusively for this big screen event.

Following the feature, the two stars, Kazunari Ninomiya and Kenichi Matsuyama will participate in an exclusive live interview that can only be seen at this event.

Showing is for one night only on January 20th. Here is a full list of participating Theaters!

Navarre May End Up Keeping Funimation

Navarre's 3rd quarter (Q2 fiscal) earnings call earlier this week was quite revealing. They reported a quarterly profit of $1.7 million for the FUNimation division (now reported as “'discontinued operations'), vs. $435,000 in the year ago period. Now while that looks pretty good, keep in mind the year over year is up against the truly abysmal Q3 numbers everyone was turning in last year, and that during the 3rd quarter Funi has been doing everything possible, like liquidating a lot of surplus inventory, to help make their short term numbers look better in advance of a potential sale. Still, not too shabby.

Anyway, after going over the numbers, most of the questions asked during the Q&A were about Funi and how things are coming along with the proposed sale. Cary Deacon (CEO of Navarre) when asked about progress, said this:

"Yes we have had offers and indications of interest. We have gone through management presentations with those parties and some of those parties have come back with further rebids. At this point we’re analyzing those rebids and expanding our look at it."

After listening to him, it's clear to me that they are really not too far along with the sales process. Cary went on to say:

"The predesigned strategy that we’ve talked about earlier was to sell that asset and move forward with our distribution expansion strategy. However, we’re analyzing the value of selling that asset and whether that makes sense at this time based on the price levels and the indications of interest that we have. We’re not final in that process but we will very shortly decide whether the indications of interest and the ability to close a transaction is valid or whether we should continue to run FUNimation.

I’m pleased to tell you that (I think you’ve seen in the quarter) FUNimation continues to be run as if we’re going to own it. We’ve said from the get go that nothing is certain in life and we can’t just let FUNimation slide so we’ve done a good job of running FUNimation.

Would we like to sell it? That answer is yes, it’s part of our strategic plan; but we’re going to be very selective in that decision and decide whether it’s best to keep it or to sell it at the current levels of indication."

Cary said that by the end of December there would probably be an indication of whether or not Navarre will (or rather can) sell Funimation .

I don't think they are having much luck finding someone willing to make a big investment in this industry, and I repudiated the whole 'strategic plan' thing last May. The economy is still terrible, and raising money to fund a purchase like this has got to be next to impossible. Taken as part of the whole, Funi has gained truly impressive market share carving out about a 50% slice of the US Anime market. If you count only dubs, Funi is probably 85% of that market. But the days of the DVD business are waning, and when you ask someone in the industry how they plan to monetize their licensed content digitally - in a way that will show similar results to former DVD sales - well, no one has a clue. There are some bright ideas about how it 'might' be done, but it's going to cost a lot of money testing markets and delivery methods in order to figure it out. In fact, a lot of us (including me) are rather doubtful that it can ever be done. Right now, everyone's digital strategy seems to be to give the content away for free, hoping that the audience they are building will someday be converted into paying customers. Don't count on it.

So unless they find themselves willing to give Funimation away for a song, I think Navarre is going to be stuck with them, whether it plays into their 'strategic objectives' or not. Frankly, I still question to original premise for trying to separate the company. Rates are at 50 years lows, so Navarre should be able to refi it's debt through the market and let Funi keep adding to the bottom line.

And as a final thought, if they do end up keeping Funi, I want to just thank Cary for creating an incredible atmosphere of uncertainty in our business. As Funi goes, so goes the industry. We have been keenly aware of that more than ever in recent months, and so has the fan base.

TokyoPop Hires former CMX Exec

We all are aware of the declining fortunes of manga publisher TokyoPop. They have gone from a 40 issue a month company to a 10 issue a month company over the past 3 years, and have recently allowed much of their manga back catalog - even for ongoing series - to go out of print (to the consternation of fans and retailers alike). ICv2's Q3 2010 list of top selling manga properties show TokyoPop had only 2 out of the top 25 spots, with Alice in the Country of Hearts coming in at #11, and Fruits Basket at #15.

We'll, they have just announced that they have hired Asako Suzuki, who was formerly the Director of Manga for the now defunct CMX imprint, to be their Manga Line Editor. Suzuki will be handling most of the new Japanese licensing work at Tokyopop, including acquisitions. She will apparently also be involved in marketing as well, and will communicate with fans via Facebook and Twitter - you know, because there is no other freaking way to do it anymore. My suggestion is that she also talk to a retailer or two from time to time too, because up until now, TokyoPop has mostly ignores us - or at least tries to. Coming from working for a real company, hopefully she won't have too much trouble getting acclimatized to working for TokyoPop's schizophrenic culture and for DJ Milky (seen above) - who's ideas about manga (in spite of his massive ego) have always been well meaning but usually not well thought out.

WTF is up with your hair Stu? Dude...

So what does this all mean? How will things change at TokyoPop? When asked by ICv2 if TokyoPop might try to rescue some of CMX's unfinished properties, the answer didn't look good:

'Hopefully there’s something that will fit into Tokyopop’s line' Diaz-Przybyl said. 'We’ve had a very mixed track record with rescuing series, like the ADV titles we picked up: Tactics, Peace Maker Kurogane, Aria and Aqua. Fans loved it and we were really hoping to make some hay with them. They did fine, and there are different reasons why each performed a little differently. But those have not always been hugely successful.'

That's industry speak for 'no, re-releases don't sell well, so stop asking me...'

She also said something that I think sums up what TokyoPop is all about now:

'We need to pick the right titles at the right point in their life cycles.'

In other words, they will probably not pickup many new licenses in the future unless they think they will be big sellers. The days of a small percentage of hit titles subsidizing lots of marginal ones are over, and that's a real downer for fans who don't want to just read mainstream series like Fruits Basket.

Cat Shit One - If RACS can't ship it, you should skip it!

Production company IDA Entertainment (another brilliantly run Japanese managed Anime firm) has announced that they intend to release Cat Shit One - at least the single episode that has actually been produced - on DVD and BD here in the US in December.

The big downer? It will only be available from Amazon. IDA says because they wanted to handle international distribution for this video on their own:

"that unfortunately means we are currently not interested in collaborating with other television, Internet distribution, DVD, or Blu-ray distribution related companies."

In other words, they're not really interested in market penetration, just turning a fast buck on the small amount of series content they've already produced.

Well IDA, for that (just like AniPlex) YOU CAN SUCK IT!

Actually, the problem with IDA's production of Cat Shit One seems to be a chronic lack of funding or investment interest in the project. It has taken them a year to produce one episode of the originally promised full TV series, and while they gave it away for free to Japanese audiences on YouTube, they initially blocked the video for viewing by North American fans - but will now be making it available (with the dub) in November. All hail IDA.

I suspect they are going through Amazon for distribution so they can utilize Amazon's 'press on demand' service, in which the DVD or BD is not actually produced until it's ordered. It's the ultimate poor mans video production service, but it would allow them to offer the existing episode on DVD without having to invest a lot of money in replication. If not, I bet the R1 version will be close the Japanese price, and if it is - well, epic fail.

IDA says they are still working towards a full 12-episode series, but considering their track record so far I'm not too hopeful they will be able to pull it off.

As for the 'Amazon only' DVD release? For this one, I recommend you catch it on YouTube and skip buying it on DVD until a complete series is produced. I think it's really time to stop rewarding companies for these stupid distribution decisions.

Hey, I just had a thought about what out new mantra should be:

If RACS can't ship it, you should skip it! :-)

HEH, I like that. Maybe we should start putting that in our advertising...

Media Blasters / Allegro Media Partnership

Media Blasters made the announcement this week that they have struck a deal with Allegro Media (a small entertainment media firm that hasn't updated the news section of their website since January) to handle sales and distribution of all Media Blasters Anime and movie labels starting in December. That includes everything published under the Anime Works, Tokyo Shock, and their other live action movie labels. Interestingly, Kitty (their adult Anime line and no doubt their most profitable) will remain in house and will not go out to Allegro.

Most of you guys probably don't know this, but Media Blasters closed up their New Jersey distribution warehouse over the summer (and sadly layed off all the staff there), and outsourced all of their retailer fulfillment to Brand X's wholesale warehousing and shipping service. That was shortly after they shut down their manga division. This transition has been one of the big causes of all the MB backorders and stockouts since July. Now, it seems, they will be moving their inventory again out to Allegro's warehouse over the next few weeks - all of this going on during the busiest selling season of the year. While MB was making a lot of promises to us back in September that weren't filled , I now expect the major stockouts and shortages to last well into January, which can't been good - especially over the holiday selling season.

Regarding the move, John Sirabella (President of Media Blasters) said that this arrangement:

"frees up Media Blasters to focus on localizing properties for the US market, developing new features and series, and producing the highest possible quality DVD, Blu-ray, and digitally distributed releases."

Really? And it has nothing to do with cost cutting due to declining revenue and market share? We'll, no one can ever say THAT publicly - except me - it seems. I've been around this business for a LONG time, and have seen a lot of Anime companies come and go. One thing I would make an observation about is that when a studio outsources their retailer fulfillment, it just means they are trying to cut costs, but when they outsource the outside sales function too, it usually means the company is either going down the tubes, or is no longer planning to pursue that aspect of the business. If you are interested in staying in the Anime business, you keep your sales function IN HOUSE. Period.

We were informed of Media Blasters deal with Allegro last Friday afternoon, before it went public on Monday. I was tempted to fire off a quick blog post to 'break' the news, but I decided to hold off for a few days - frankly because it was a little depressing and I just didn't feel like writing about it at the time. At the end of the day, I hope Media Blasters is not ending up just another casualty of the R1 downturn. Hopefully this is not the case.

Nowadays, MB is the only company left with the guts to license titles like Kanokon or Queens Blade. Come on John, stay with us man, the Anime community needs you.

Stuff

I do have some comments to make on Media Blasters deal with Allegro Media, with the new regular/limited edition packaging for Funimation releases starting in January, and on a few other recent news events. Should have some posts up about them in the next couple of days.

Taki Corp Goes Bankrupt

Just an FYI, many of you have probably already heard about this, but I didn't want to post anything until we got some word on what was going to happen to their assets.

On August 25th it was reported in Japan that Anime figure maker Taki had gone bankrupt. That is correct. Here in the states YamatoUSA was their import partner and master dealer, and we got the word from them today that they are liquidating their remaining small inventory of Taki products and canceling all pending retailer pre-orders.

Taki had gotten a bit of a reputation in the industry for making some of the ugliest Anime figures ever produced. Some of that reputation was deserved.

There is a rumor in Japan that Taki's figure business may be picked up by another company, but I have not been able to confirm that. Frankly, we really don't need anymore Ikki Tousen figures on the market anyway.

What I do know for sure is that all previously solicited Taki figure pre-orders have been canceled. We're going through the list today but I don't think we had anything of theirs up for pre-order anyway. I'll update this post later today if we do end up having to cancel any pre-orders.

RACS 'Sustain the Industry' Video Challenge

In last weeks newsletter I highlighted how a small movement has appeared via YouTube titled "Sustain the Industry," in which fans detail their monthly anime-related purchases in an attempt to encourage fans to purchase anime DVDs, manga volumes, and/or merchandise.



We've decided to take the original concept to the next level, and offer a $25 merchandise coupon to any RACS fans who posts a YouTube video in that thread highlighting what they purchased from the Anime Corner Store. We're calling this our RACS 'Sustain the Industry' Video Challenge.

The rules are very simple. All you have to do is place an order on the Corner Store, create and post your video (remember, you have the show the receipt in the video - and make sure to show your stuff too!), and then e-mail me with your NAME, the video's LINK (the URL) AND your RACS ORDER NUMBER and I'll e-mail you back with a $25 Anime Corner coupon code that can be used on your next order.

One code per customer please. Order highlighted in your video must have been placed on or after Sept 1st, 2010. Offer is good for video's posted through the end of October, so crank up those video cameras and get some free Anime from RACS!

UPDATE: Obviously, in exchange for the coupon credit we want you to plug what you purchased at our store - AND ONLY OUR STORE - in your video. Please do a separate video for stuff you might have purchased somewhere else - you know - at one of those lesser establishments. Thanks! :-)

Media Blasters Update

With all the date pushes and missed street dates recently,a lot of you have been writing in asking me about what's going on at Media Blasters. Well, the rumors floating around of their demise (like those of mine) are grossly exaggerated.

What is actually going on is that they have outsourced their warehouse operations, and moving their huge inventory plus ramping operations at the new facility is taking longer than they expected. Not only is this the reason for the recent date pushes, it's the reason for the late arrivals of several titles. Moves like this are supposed to be transparent to the customer base, but I can tell you (having done them) they NEVER work out that way.

I know this has been very frustrating for some of you, but I talked to the folks at MB in length yesterday and got a pretty good idea of where they are at with the move and what's going on with some of the titles you have been asking about. The two current late titles Genshiken DX and Ikki Tousen Dragon Destiny, Vol #3 are both scheduled to start shipping late next week. Also, titles that haven't been available for awhile like the Bludgeoning Angel Dokuro-Chan Special Edition and the Ah My Buddha Complete Boxed Set are finally back in replication and should all be back in stock by the end of the month. Considering the difficulties they have experienced changing over their warehouse operations it's probably a good thing they did it mid-year so that everything will be back up and running before the holiday season kicks off next month (that's around mid-October for us).

So please continue to be patient a little longer while they get their schedule back on track.

Japanese and US Publishers Declare War on 'Pirate Scum'

Finally waking up and smelling the impending doom, manga publishers both here and in Japan have suddenly realized that the proliferation of scanlations and illegal content posted online for free is a direct threat to the survival of the manga industry.

From the Anime economatrix this week:

"The 36 publishers in Japan's Digital Comic Association and several American publishers are forming a coalition to combat the "rampant and growing problem" of scanlations — illicit digital copies of manga either translated by fans or scanned directly from legitimate English releases.

The coalition asserts that "scanlation aggregator" sites "now host thousands of pirated titles, earning ad revenue and/or membership dues at creators' expense while simultaneously undermining foreign licensing opportunities and unlawfully cannibalizing legitimate sales." Google lists one site on its list of the 1,000 most-visited sites on the web. An unnamed spokesperson for the coalition also pointed to smartphone applications designed to read such sites as an escalation of the problem.

The coalition is reportedly threatening legal action against 30 scanlation sites, whose names were not revealed. The organization currently includes Square Enix, Viz Media, TOKYOPOP, Vertical, Inc., the Tuttle-Mori Agency, Yen Press, and the members of the Digital Comic Association: Akane Shinsha, Akita Shoten, ASCII Media Works, East Press, Ichijinsha, Enterbrain, Okura Shuppan, Ohzora Shuppan, Gakken, Kadokawa Shoten, Gentosha Comics, Kodansha, Jitsugyo No Nihonsha, Shueisha, Junet, Shogakukan, Shogakukan Shueisha Production, Shodensha, Shonen Gahosha, Shinshokan, Shinchosha, Take Shobo, Tatsumi Shuppan, Tokuma Shoten, Nihon Bungeisha, Hakusensha, Fujimi Shobo, Fusosha, Futabasha, France Shoin, Bunkasha, Houbunsha, Magazine House, Media Factory, Leed sha, and Libre Shuppan."

Yep, that's just about everyone of consequence in the manga industry. But this story has been brewing in Japan for awhile. The staff of the Japanese edition of Shonen Jump published this editorial a few weeks ago:

"To our readers,
The Internet is now overflowing with illegal copies of manga. All of these illegal copies run counter to the wishes of mangaka. They also ignore the wishes of the creator as to how the manga should be read. It may be done without much thought, but in reality it hurts the mangaka who pour their creative talents into these works, and it is also against the law. When we discover such illegal copies, we discuss possible measures with the mangaka concerned and try to tackle the problem, but there are so many heartless people around that it is just impossible for us to tackle them all. This is a plea to our readers. Illicit copies of manga harm manga culture, infringe the rights of mangaka, and most importantly of all they deeply wound the souls of mangaka. Please also understand that it is illegal. From now on Shueisha will, in collaboration with mangaka, deal more harshly with any illegal copies circulating on the Internet. We hope we can count on the unchanging support of all our readers in this endeavour".

I could make my usual day late and a dollar short argument, but not this time because the stakes are too high now. I can tell you that the last thing these companies want to do is piss off fans, but they are all guilty of ignoring scanlations and bootleg content in the past when they were deemed to be helpful to the industry's overall exposure in creating new interest in the medium. That was a big mistake. The US manga publishers, in particular, have always been benign to pirates and slow to take action even when circumstances were blatantly biting them on the ass. From what I hear on the street this new move is no gesture to intimidate bootleggers, and that they will soon begin prosecuting all available legal actions against these sites.

And it's just as much the fault of the folks that use these sites to get their manga fix, because if these 'entitlement fans' were not so damned greedy for free content that they have stopped purchasing licensed product all together, this phenomenon would have stayed in the background and been happily ignored by the industry. The publishers would not be taking this action if these bootleg sites were not an existential threat to their existence. Bootleg sites like MangaOne get an unbelievable amount of traffic and need to be shut down.

And it's about time they were.

Navarre Can No Longer Afford Funimation's Great Results...

If CMX's announced exit from the Manga market last week was equivalent to a hand grenade, this is a tactical nuke from orbit. From the Economatrix earlier today:

"Navarre Corporation has announced on Thursday that it has hired the investment bank Houlihan Lokey "to assist it in structuring and negotiating a potential transaction for the sale" of its Funimation anime arm. The plans may not result in an actual sale.

Navarre emphasized that "Funimation's recent results have generally met expectations," but CEO Cary L. Deacon said that Navarre will be focusing its strategy on its distribution and software publishing businesses. According to Navarre, Funimation plans to grow its business through "co-productions of original anime content, social networks and digital broadcasting," and those plans are best executed with another owner that has assets or expertise in those areas.

If the sale goes through, Navarre plans to present Funimation as a "discontinued operation" — a financial term for a segment of a company that has been separated from the rest of the company, or has been approved for separation — starting in the first quarter of the 2011 fiscal year. The first quarter runs until the end of June. Navarre will discuss its strategy in more detail during its June 4 year-end conference call for the 2010 fiscal year."

[Robert Bangs Head on Table]

On the upside, this could be interpreted as a 'Navarre Problem'. Funi is probably one of the few detachable divisions that Navarre could sell off to raise cash, so on the surface this move does not have to be about any sort of fundamental appraisal of the future of the R1 business.

But of course, it is.

I wish they had not said the thing about 'considering the directions Funi is going, it would be better off in someone else's hands'. That thought seems like pure spin. If digital content is the future, that should be exactly where they would want to be. So what if it doesn't jive with their other business units? Top management's job at any company is to look into the crystal ball and decide what they think the best allocation of available capital will be in the current business environment to maximize future returns.

So I think this is all about Navarre management's view of the future prospects of the R1 Anime industry (in any capacity - media, digital, etc.) against the deployment potential of that capital elsewhere - for them. And they will surely be selling Funi at a fraction of the $125 Milllion in cash and stock they paid Genji for it back in 2005.

Currently in the R1 industry, Funimation is the 800lb gorilla in the room. They own maybe 55-60% of the total R1 Anime market, with all the other players together carving up the scrapes. Plus, this move will put fully half the current available Anime catalog 'in play'.

Can they even complete a transaction in this market?
What will they do if they fail to sell it?
Will Genji stay once it's sold?
Will the business focus of a new owner be different?

I've got a headache this evening the size of Kansas.

Signs Of The Apocalype - CMX Manga Shutting Down in July

From ICv2:

"DC is closing down its CMX manga unit, effective July 1st. The company will cease publishing all CMX titles other than Megatokyo (its OEL title) which will continue under the DC Comics imprint.

We asked DC whether U.S. publishing rights would revert to the Japanese publishers or if DC was planning to try to sell or sub-license the rights, and received a 'No comment' from a DC spokesperson.

In a statement on the shutdown, DC Co-publishers Dan Didio and Jim Lee said, 'Over the course of the last six years, CMX has brought a diverse list of titles to America and we value the books and creators that we helped introduce to a new audience. Given the challenges that manga is facing in the American marketplace, we have decided that CMX will cease publishing new titles as of July 1, 2010.'"

The news story speaks for itself, but this one has really caught us by surprise as CMX is one of the few imprints we considered 'large' and 'safe'. It's not just the little guys that are getting hit hard by the economy now, and this news comes on wake of last weeks announcement that Viz was reducing their staff by 40%, and that both the Video Game and Domestic Comic sales crashed in April. Sadly, there are other layoffs and down sizing's going on in the industry that you aren't hearing about.

The folks at CMX said that they will ship the following June volumes:

Musashi #9 Vol 17
Orfina Vol 8
Polyphonica: Cardinal Crimson Vol 1
Stolen Hearts Vol 2
Teru Teru X Shonen Vol 7
Two Flowers for the Dragon Vol 6
Venus Capriccio Vol 4

These will be the final volumes published by CMX, and I think we can assume that their entire back catalog will effectively fall out of print as of July. We'll be updating those items to 'stock on hand' on the store site as warranted, but we will continue to restock them from distributors and other sources until replacement stock is no longer available.

So again, where is that economic recovery I keep hearing about in the news?

FBI Shuts Down Comic Scan Site

From ICv2:

"The FBI has shut down comic scan site htmlcomics.com and seized its servers in a raid supported by a consortium of comic publishers, according to an announcement by Katten Muchen Rosenman, the law firm representing the publishers consortium. Marvel, DC, Dark Horse, Bongo, Archie, Conan Properties, Mirage, and United Media were involved. Htmlcomics.com was the largest site offering scanned American comics, according to the announcement, with an average of 1.6 million visits a day and over 6.6 million pages of comics from 5,700 series. The site was “…producing rampant copyright infringement on a daily basis and depriving artists and publishers of hard-earned and much-needed revenue", according to the publishers’ attorneys. The FBI investigation was conducted by its Tampa Field Office, which led to the search warrant served in the raid."

Can you believe that a bootleg site was getting that kind of traffic? 1.6 Million hits a day is crazy traffic, probably puts it in the top 1% on the web.

Of course these were mostly US comics, and the raid was instigated by a group of US publishers on a US bootleg site. Huge companies like Marvel and DC have the resources to go after these folks. Most bootleg Anime download and scanlation sites are overseas anyway, and thus are not touchable by US law enforcement.

Still, does the kind of traffic that site got tell anyone how huge the bootleg problem really is?