ADV Implodes, Funimation Picks Up ADV's Former 'ARM' Licenses

Well folks, stuff is going down. And this is supposed to be my day off! :-)

Funimation announced yesterday that they had finalized a deal for many of Geneon's former titles. We knew that was coming. What we didn't expect was this:

Today Fun answered all the questions about what the heck is going on down at ADV. Funimation has now officially signed a deal with ARM corporation for the following former ADV titles:

009-1
Ah! My Goddess: Flights of Fancy
Air Gear
Air movie
Air TV
Blade of the Phantom Master
Comic Party: Revolution
Coyote Ragtime Show
Devil May Cry
Guyver: The Bioboosted Armor TV
Jing, King of Bandits: Seventh Heaven
Jinki:Extend
Kanon
Kyoshiro to Towa no Sora (Shattered Angels)
Le Chevalier D'Eon
Magikano
Moeyo Ken TV
Moonlight Mile
Murder Princess
Nerima Daikon Brothers
Pani Poni Dash!
Project Blue Earth SOS
Pumpkin Scissors
Red Garden
Sgt. Keroro 1st & 2nd
Tokyo Majin
UFO Princess Valkyrie
Utawarerumono
Venus Versus Virus
The Wallflower
Welcome to the NHK
Xenosaga

So we're going to be making a lot of changes to our store catalog over the next few days. Any ADV stock we have on the above titles will become 'limited to stock on hand', and we will await further info from Funimation on how and when they plan to start re-releasing these series. I think we can also assume that the successive volumes of Kanon, NHK, Wallflower, Tokyo Majin, Devil May Cry, and Shattered Angels that ADV failed to release are in fact 100% canceled. I doubt Funimation will be reusing any of ADV's old ADR and will likely re-release these series in the future starting from vol #1 again or more likely as boxed sets.

I feel terrible for everyone who invested in these series in anticipation of ADV finishing them, but unless you have been in denial I think everyone knew ADV has been hanging on by a thread since January - and I have not made any secret of their problems in my weekly newsletters this year. The failure of ADV to finish these shows will hurt us also in terms of lost sales and unsold inventory on the incomplete shows, so the pain will be felt all around.

I read through the threads on ANN and AOD regarding this briefly today, and a lot of fans and wanna be business scholars are speculating on exactly what happened, but I think it's very simple. ADV has been plaged by serious cash flow problems this year. When your business partner becomes unable to make regular royalty payments, you pull the plug and look for another one that can, and Funimation is currently the strongest player in the R1 industry. They currently have 30% of the US Anime market in terms of sales. Genji has always been the smartest guy in the room in this industry, and has Navarre corporate financing backing him up. He's clearly looking to give Fun a 50%+ market share by next year, and in the process do in a few competitors. That's just good business. Personally, I don't see how ADV will survive after this. There is no way they can make it on re-releases for any length of time. Who will give them financing now? How can their revenue stream ever recover? If they do, they don't have much chance to be a significant player in the industry anymore.

I think fans would have more sympathy for ADV had they been more forthcoming about their problems earlier on, but that's not the way they do things. It's been well known in retailer circles for the past 3 months that none of ADV's new releases have sold well as many fans no longer trusted them to finish the shows. Moonlight Mile, Project Blue Earth, and Shattered Angels all came in with abominable initial sales. Kanon did well with the directs like us, but was a disaster in retail chains like Best Buy and Amazon. I have always felt deep down that they have tended to carry a certain hidden contempt for the fan base (and their retail partners) that has been built into their corporate culture. Gary Steinman (he was the former head of NewType) told me once (in 2006) that he felt like the Anime fan base were mostly 'a bunch of whiners' (a comment that shocked me, mostly that he said it to ME), and there was no love lost between me and him when we heard he was out last January. While we have always have excellent relations with Bandai, Funimation, and Viz, our relationship with ADV has had a lot of bumps over the years. They have always found it difficult to work with us whenever a situation would arise when we were more concerned with the fans wants or needs than with just selling whatever priority they had at the time. I have never felt their strategy to dump excess inventory into the marketplace was wise, and we have showed that by not becoming an outlet for their unsold junk like so many other retailers. There are some really good people over at ADV, but the guys in charge have never run that company the way it should have been. We had the a similar experience with Geneon in that once Denstu took over, they became all about 'pump and dump', and never cared too much about the fans concerns. Looking back, it's not hard to see how these companies end up where they are.

I hope everyone has a great July 4th. Jamie and I are heading out this evening to see the fireworks.

UPDATE: For the last couple of years I have heard execs at both Funimation and ADV blame much of the industry's profitability problems by pointing the finger at each other for bidding up licenses too high. It would seem that Funimation is out to finally solve that problem. By consolidating more than half the R1 market into one company they will finally have some pricing power in negotiations with Japan, so I see this as a net positive for the R1 market over the long run. It will also give Funimation a lot more contract flexibility in choosing how titles are released, and when, and will put pressure on the other healthy studios (Viz, Bandai Ent, and Media Blasters) to handle their businesses better.

UPDATE 2: Our local fireworks show has been rained out until tomorrow. ~sigh~

UPDATE 3: Gen Fukunaga's (Funimation) confirmed at his keynote address at AX that they now indeed have all rights to the 30 titles ADV produced in the last 2 years, but he also said that "for the ARM titles, we are in talks with ADV for continued production", so that means they are looking to finish ADV's ADR on the incomplete titles and then probably re-release them with dubs completed by the original ADV voice actors. Why shouldn't they, it would be the quickest and least expensive way to bring these titles back to market and please the fans at the same time. Kudo's to Funimation for this.

UPDATE 4: Ledford's (ADV) keynote address at AX was a prepared speech, and the mood was quite somber. He said this has been a very tough year for ADV, but that they are working on a deal with another Japanese partner for new licenses and additional financial backing. They are going to wait until Otakon to make any announcements about that to "wait for the blood to dry". ADV's characteristic 'tower booth' at AX this year has been replaced by a simple DVD sales table being run by an ADV employee who also owns a local DVD shop. Ledford said their partnership with Sojitz has been very difficult from the beginning because they tended to concentrate "on the spreadsheets", which means they were worried about unit sales and ROI on their titles. It's clear ADV was not producing for them in a satisfactory manner, causing them to pull the plug.