A Drive Through Fukushima

A drive through Fukushima:



Just FYI, the reading they take of 112 microsieverts is roughly 350 times normal background radiation. I'm pretty sure that's still under the current (twice upgraded) legal limit. Still, I'm not sure anyone would want to live in those areas. Wow.

UPDATE: The published IAEA limit is 5,700 nanoSieverts/hour. 112 microSieverts/hour = 112,000 nanoSieverts/hour, but that reading is coming from only 1.5 km from the plant.

The 'Anti-Sale' Promotion - HEH

We make a few mistakes on the store site from time to time - and fans NEVER fail to immediately call us out on them, so when I saw this from Mr. Perfect's site circulating around the Anime webs, I thought it was funny. Seems Brand X was recently having an 'Anti-Sale' on Gilgamesh boxes:

Damn, you can't even get an affiliate commission or club discount on that one. Looks like they are returning to their old pricing strategy. HEH. -_^

My World - Overconfidence

Something to be avoided at all costs...


...though it doesn't seem to stop others.

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.

My World - Reset

Sometimes, you have to realign your perceptions.


"You're not your job. You're not how much money you have in the bank. You're not the car you drive. You're not the contents of your wallet. You're not your fucking khakis. You're the all-singing, all-dancing crap of the world." -Tyler Durden



I am Jack's raging Anime dealer.

Questions from Kayla & Japanese Quake Relief Donations

Kayla from Texas sent these questions over today, and I decided to answer it here. I don't have that much time today, but I'm going to bang out a few things so hopefully this will help collectively answer some of the questions folks have been sending in over the last few days.

"hello, this is Kayla again. Just placed an order for Working, and looking forward to it. I know you sometimes place customer emails and topics in your blog, and I wanted to pose a question to you.

"As a longtime RACS customer, I first wanted to say thank you for the continued superior service. Your customer service, along with your all your multiple offerings make me return to your store instead of others over and over again. The recent events have caused me not only to send multiple emails to friends still living in Japan, but also started a strong desire to purchase more anime and Japanese goods during the last week."

Anyone who really wants to offer immediate help to the people in Japan effected by the recent crisis should give a generous donation to the Red Cross or another disaster relief agency directly involved with the relief efforts. Aside form the Nuclear plant problems that are getting 24/7 coverage on the news, there are hundreds of thousands of displaced people in Japan that desperately need food, water, medical supplies and other basic needs items like blankets and fuel for heating and emergency transportation.

Aid agencies, in conjunction with the Japanese government are in the best position to help deliver these supplies quickly. I suggest that people take a step back from their weekly Anime purchases and instead make a generous donation to a relief agency like the Red Cross - we have.

 Here are more agencies directly involved with relief efforts that need our help:

Red Cross - Text REDCROSS or 90999 to make $10 donation.

Save the Children - Toll free: 800-728-3843 or just text JAPAN to 20222 to donate.

Salvation Army -  Toll free: 800-SAL-ARMY or text QUAKE or 80888 to donate $10

International Medical Corps - Text MED or 80888 to donate $10

Doctors Without Borders

Global Giving - Text JAPAN or 50555 to donate $10

World Vision - Toll Free: 888-56-CHILD or text 4JAPAN to 20222 to donate $10

"Items that I've been putting off for a better paycheck seem more scarce to me now. While I've heard from some sellers that business in unaffected areas is doing its best to try to carry on as business as usual, I can't help to believe that certain Japanese goods, figures, and foods that I used to order from online might become scarce as Japan tries to focus on rebuilding, or if the nuclear crisis escalates even further to a level I'm too afraid to write about. I've already read online that some scheduled anime blu-ray releases (in Japan) have been understandably delayed to dates TBD. I keep reading about the mass Exodus from Tokyo and international residents leaving the country for home, even if they don't live in the affected areas."

I don't think anyone knows how this crisis will affect industry and business in Japan yet. Most Anime good created and sold in Japan are not produced in Japan, but are shipped in from factories in China. At this time all available resources of the country, including shipping, ports, and air fireght should be dedicated to relief efforts and not manufactured collectables.

Also, no one should be the least bit concerned about anything like BD delays, or when more episodes of their current Anime shows will be available. These folks out on the Anime forums bitching about the blackout in new episodes and fan subs going up on torrents and talking about how 'they are victims too' should have their heads examined. What a ridiculous thing to care about at a time like this.

"I read that you've made contact with friends and suppliers in Japan since these terrible events. Have you heard more news in the past week that reflect these fears??"

We have and we have put together a couple of air shipments of items specifically requested by some of our friends in Tokyo which we hope will get through OK. There is great concern in Tokyo over the current situation at the Nuclear plant, but there is also great concern over how this disaster will effect the country long term. The Japanese have one of the most cohesive societies on earth, but they are still very worried. I don't think the conflicting info they are getting from the government and the various news sources is helping the situation any. I mean the emperor addressed the nation yesterday - that's a huge big deal and should reveal a great deal about the current level of concern.

"Have you found that sales at RACS have significantly increased or decreased since recent events??"

So far things here continue as normal. We've been very busy this week, but I don't think it has anything to do with what's going on in Japan. Our markets are almost completely disconnected from the Japanese market other than suppliers for certain specific classes of items. We've had the NHK news feed up on the monitor here at the office constantly since Friday, and I think we have all found it very hard to work this week while watching this tragedy unfold.

"While I doubt US releases will be affected much, at least for the time being, I wonder about figures you receive directly from Japan."

US releases should not be effected at all, in fact, almost every US studio has shamelessly put out their June schedules this week, seemingly oblivious of events in Japan and the suffering of the Japanese people. The show must go on I suppose. The US studios supply of material has a very long tail, and they probably already have enough material in the pipeline to publish for a year without any new material being produced in Japan, so as you can see the two markets are almost completely disconnected.

For Japanese import goods like figures, the answer is interesting. There are two kinds of US dealers for Japanese figures. Businesses like us source only materials licensed for export by the Japanese producers, and order them directly from the producers to be imported through an authorized US distributor (AAA is one of the big ones, and so is Yamato USA and a couple others). The other kind of businesses are the ones that use the wholesale depts. at Japanese hobby shops (like HLJ or HS) to source their figures. These folks are sorta 'grey' marketers who end run any export restrictions or license obligations by buying (at a small discount) directly from Japanese retailers instead of wholesalers or producers.

Our figure business likely won't be affected at all. Almost all Anime figures are produced in China, and when we order them from the producers they usually ship to the US directly from the factories in China (generally through Hong Kong) and never see mainland Japan. The folks that source from stores directly in Japan may have months of supply headaches ahead of them, but I think our supply chain is fine.

The other thing about our supply chain is that it has a very long tail. We order figures 6-8 months in advance of delivery. At the time of the disaster in Japan, our next shipment was already in CA clearing customs, the one behind that is currently on a container ship crossing the Pacific, and the one behind that is being collected at an export warehouse in Hong Kong for Max Factory or Good Smile. Most likely the folks that source directly from Japanese retailers encounter the bulk of the supply problems for new products like these.

One last business point. We fix our pricing several months in advance of delivery to protect ourselves from currency fluctuations. Folks that pay in Yen as they go and don't have price protections in place are going to get creamed while the Japanese repatriate Yen for relief efforts making the Dollar/Yen exchange rate deteriorate even further. You see the Yen get down to around 75 to the dollar and you'll see a lot of smaller US based Japanese goods businesses checking out of this market because the goods (whatever they are) will just become too expensive. I guarantee we won't be in a position to place any significant orders for import good like CD's or Japanese BD releases until the exchange rate improves, but fortunately this is only a tiny portion of put overall business.

"I also wonder about how much effort will be vested in making new anime down the line as the country tries to put things back together?? Any thoughts??"

That will depend entirely on the Japanese economy and how quickly they recover from this disaster. Anime demand in Japan will likely be suppressed for some time to come as a large portion of the country focuses on buying basic needs. The Japanese economy may even also face another recession, and many of the Anime producers in Japan are not in strong financial positions as it is. But Anime will be solely dependant on the Japanese market as to what happens. We'll have to wait and see, but no one should be focusing on this sorta thing at this point anyway. If it was CA, and LA was effected, the last thing on anyone’s mind should be how soon Hollywood will be making movies again.

I'll make some more comments when I have more time. In the mean time, please think about those donation links I posted.

Japanese Earthquakes

As you probably already know, there was a terrible earthquake in Japan over night our time this morning, and I've been pretty much glued to the news this morning and exchanging e-mails with some of our friends and business associates in Tokyo, so this weeks newsletter is going to be a little short. If you have been following the situation and want to help, please make a donation to the Red Cross. You can follow the situation in real time on the Red Cross's facebook page here. Our thoughts and prayers will be going out to everyone effected by this terrible disaster. Some folks are saying this may be the worst earthquake ever recorded in Japan, and they are going to need all the help they can get.

In the mean time, take a look at this short video of the skyscrapers in Tokyo swaying (as they are designed to) during the earthquake. Kudo's to Japanese engineering, is it any wonder that commercial space in Toyko is so expensive to build!?



Even the giant 60 foot Gundam in Tokyo didn't make it:

UPDATE: Live feed from NHK World News.

UPDATE 2: The situation at the Fukushima Nuclear plant seems to be deteriorating. This is really bad.



UPDATE 3: We've been glued to NHK World news live feed all weekend. It's hard to really comment on this. The level of damage and devestation is just staggering. Some of those areas hit hardest by the Tsunami look like an atomic bomb went off. Total devestation. I can't begin to comprehend how many people in Japan have probably lost their lives, and how many survivors have lost everything. Our hearts go out to everyone in Japan who is suffering through this terrible catastrophe.

UPDATE 4: This is a thing of beauty:

UPDATE 5: Staggering before and after photographs. More here.

My World - Expectations

Back in 2005-2006, even I started to think this thing might end up bigger than all of us. That was when we were sinking loads of money into building out our infrastructure.


I was wrong too.

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~

High Gas Prices By County

While one would think gas prices have nothing to do with Anime, I can assure you that they are actually quite important - at least if you are sitting on our side of the computer screen.

If anyone is interested, here is a neat zoomable tool that shows average gas prices nationwide by county. Not that it will do us much good to know what gas is selling for two states over, but it might help give us all a little solidarity that we are not the only ones feeling the pain at the pump.

And of it's any consolation, some of our customers in Britain are reporting gas prices around £1.30 a litre, which in our terms would come in at something like $9.50 a gallon.

Yikes!

My World - Simplicity

One of the primary concepts behind the design of the RACS store site:


After 12 years I'm still not sure if that's right.

My World - Happiness

Something very important that took me a long time to learn:


This is why we keep doing what we do.

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. -_^

My World - Collaboration

I am a micro-manager (but I've quit 1000 times...) and I like to carve my own path, but my best decisions are usually made after extensive collaboration with others. Sometimes when you think we're just chatting, I'm actually putting an idea or concept through the wash cycle a couple of times.


I need to remember to do that more often.

My World - Planning

When we first started out (years and year ago), I had this concept upside-down for a long time.


"If you build it, they will come" no longer works. Our product no longer sells itself. Everything now revolves around incentives.

Tron Legacy Coming as a 3D BD / BD / DVD / DC Package - Wow!

Just as a follow up for my recent post about Tron Legacy, they have finally announced the DVD / BD release for April 5th (I think).

I've been curious as to how this big Hollywood release was going to be packaged, and the great minds at Disney's media sales division have not disappointed us - at least in their creativity for taking our money.

It looks like we will have 5 choices:

Tron Legacy DVD - $29.99 MSRP

Tron: Legacy (Two-Disc BD Blu-ray/DVD Combo) - $39.99 MSRP

Tron: Legacy (Four-Disc Combo: Blu-ray 3D / Blu-ray / DVD / Digital Copy) - $49.99 MSRP

Tron: Legacy (Five-Disc Combo Blu-ray 3D / Blu-ray / DVD / Digital Copy + Tron: The Original Classic Special Edition Blu-ray) - $79.99 MSRP

Tron: Legacy Limited Edition (Five-Disc Combo Blu-ray 3D / Blu-ray / DVD / Digital Copy + Tron: The Original Classic Special Edition Blu-ray) - $99.99 MSRP

Wow. And some fans complain that Anime releases are too expensive?! OK, let's see - regular DVD @ $30 bucks, then the lowest price economy BD/DVD option @ $40 MSRP. Then we have a 4 disk pack that includes every conceivable version someone might need @ $50 bucks MSRP. The next step adds in a very desirable BD version of the original Tron movie - but @ $80 bucks MSRP (about the same price as buying it seperately), and then finally we can choose the glorious 'Limited Edition' version in special packaging for $100 bucks MSRP.

OK, they've already fleeced $34 out of us to see it in 3D at the theater, and another $8 for the excellent Daft Punk soundtrack. So am I going to pay up again and buy it on BluRay? Of course I am. Now must... resist... buying... 3D TV set... ugggggg!

My World - Focus

Some things you can change, and some you can't. Some activities are productive, and some aren't. In times like these Focus is really, REALLY important.


In the Anime business, unlike most other businesses, we have the unenviable task of having to compete with 'free'. So you have to focus like a laser beam on what works.

This goes a long way to explain why we do some things, and don't do others. Sometimes we just don't have the luxury.

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.

My World - Synergy

This is the 'synergy' I'm looking for (and haven't found yet):

Dilbert on Tax Policy

This strip seems to, um, fit a lot of different narratives that have cropped up over the last couple of days:


Funimation Sues 1337 Bittorrent Users Over One Piece...