Economics 301 - Keynes vs. Hayek Rap - Part 2

As many you know, when it comes to economics I've always been a Hayek guy, so here's the next brilliant installment in the Keynes vs. Hayek Rap. Watch it, and learn:



Because you can't really learn economics from a college course. And for those of you that might have missed it, Part #1.

TokyoPop Shutting Down All North American Publishing Operations

Here, sadly, is a big one today from the Anime Economatrix, posted a couple hours ago:

Tokyopop Senior Vice President Mike Kiley has confirmed that the company will shutter its Los Angeles-based North American publishing operations on May 31.

In a post on the website for Tokyopop's America's Greatest Otaku reality web series, the company's CEO, Stu Levy, announced that he will spend the next year in the Japanese prefecture of Miyagi, making a documentary about the effects of the Great Eastern Japan Earthquake disaster of March 11. The proceeds of the documentary will go to support the victims. He also posted a farewell message on the official Tokyopop website.

The company's film and European operations will be unaffected by this closure, and its office in Hamburg, Germany will continue to handle global rights sales for the company.

May 31 is less than three weeks after the first major feature film based on a Tokyopop property, Priest, will open in American theaters.

Last month, Levy commented that the February bankruptcy of the Borders bookstore chain had played a significant role in its decision to lay off a number of the company's employees.

The bankruptcy of Borders, a key retailer of manga, and the associated disruption of cash flow and likely losses, was undoubtedly a final nail in the company's coffin.

Not much I can say here. So that's the end of TokyoPop manga (and BLU). It's not like we didn't know it was coming, and I think making movies is a much better endeavour for Stu than publishing manga. He's a creative person but he never really did know what he was doing in the manga business. His business ideas for Digital? DOA. Print on demand? DOA. Concentrating on bookstore channels and alienating your directs? DOA. Selling direct from TP's website and alienating ALL your channels? DOA. On and on and on. From what we've seen going on in the supply chain for over a year, we're surprised they lasted this long. Stu "fought the good fight", but in the end, he lost - and now so do we.

So I'm sure everyone will be wondering what will happen to TP's licenses and what previously announced upcoming manga will be published and won't be published. Don't know yet, but I'm sure there won't be much good news if any - only 2,000 headaches. I'll post more info when we have it.

UPDATE: Well, it's official. All TokyoPop and BLU titles scheduled for release after May 4, 2011 will be canceled and not published. We'll begin removing these books from the site shortly, and all pre-orders for them will automatically be canceled. Sorry folks, I'm just the messenger.

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~

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.

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...

Borders Troubles Are a Problem for Manga Companies Too

A couple of weeks ago is was reported that Borders, the big book store chain, was in such financial peril that they were suspending payment to vendors and trying to renegotiate their credit lines. That was also around the time when Borders started shedding top execs who were leaving en-mass to look for greener pastures.

Today ICv2 is reporting that Borders account has been frozen by Diamond Booksellers, and that they will no longer make any shipments to Borders until they can get their account back in good standing:

"Diamond Book Distributors has troubled book chain Borders on hold, and is not shipping it any new products or restocks from its client publishers, publishers and Diamond confirm. Diamond has been talking to its client publishers about the situation and reports that they are supportive of that decision.

DBD represents a number of important mid-range graphic novel publishers, including Dark Horse, IDW, Image, Dynamite, Oni, Top Shelf and Udon. Three of those publishers, Image, Oni, and Dark Horse, published 12 of the Top 20 Graphic Novels in the adult fiction category in bookstores in December, according to Bookscan."

None of the big book chains are doing well, but Borders is especially relevant to Manga fans because they account for about 20% of the total new manga sales in the US, and are one of the most important customers to US manga firms like Viz, Tokyopop, and others. Even with all the online retailers put together (even Amazon), bookstores still account for more than 75% of total manga sales, so it's bookstores that overwhelmingly make the industry as it exists today possible.

ICv2 has a good article on this here, though frankly I'm not drinking the coolaid regarding the big manga sellers being able to recoup their looses because they sell through big distributors. When Circuit City was in trouble, everyone though someone would buy them out and all the vendors would be made right, but when they went under, all the big distributors got hosed and all the stores just closed up. Not all Borders customers will just go somewhere else, a certain percentage of sales from these bigs chains is always lost somewhere in a bankruptcy.

I don't think the failure of Borders could be as devastating to the US manga industry as the failure of Suncoast's parent was to the Anime side a few years back, but it would certainly give the US manga industry a haircut at a time when it's already struggling to maintain it's market.

I guess we'll see what happens.

It Takes an Irishman to Tell it Like it Is (PNSFW)

What does an Irishman think of the current global ecomonic situation?

Well, I'm glad you asked, because this is what he thinks:

Business: Competing for a Future

Man, I'm am right there with this guy. Even though our businesses are so different, everything he says is right on target, especially what he says about 2009, how his income taxes are structured, and about 'privilege', because we've been there too. WOW.

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.

Namco Bandai of America Lays off 90 Employees

Via ANN,

"The game company Namco Bandai of America is laying off 90 staff members and relocating a part of game development from San Jose, California to Japan. The cuts are a result of the merger between the company's mobile and online game businesses into a single division. "We are partnering with external development studios out there because that is where the game business is going," Namco Bandai Vice President of Marketing Carlson Choi said to the VentureBeat website. As the industry shifts away from traditional game consoles only to developing for phones and other devices, Choi added, "our goal is to move into digital games and broaden to different platforms."

The only thing that surprises me about this statement is that Namco Bandai (not directly related to Bandai USA (anime)) ever had 90 employees to lay off. I hope those folks are able to find new jobs quickly.

Media Blasters Cancels Kanokon DVD #2 & #3

Ahhh shit.

Media Blasters, in a surprise announcement via their twitter account yesterday afternoon, said that they will not release DVD volumes 2 and 3 of Kanokon. They are now planning to release the series only as a complete boxed set, probably next March.

In the statement they said that the box set will be "priced low enough so not to punish folks who picked up V1." I would assume that means it will probably carry a $30 or $40 MSRP.

I'm not sure what's going on over at MB folks, but I'm pretty concerned. We've been waiting for restocks on Ah My Buddha boxes since July - they have been out of stock so long Amazon isn't even taking backorders for them anymore. What they are telling us, and what we see happening seem to be two different things.

Anyway, all pre-orders for Kanokon #2 and #3 will be canceled, and we'll put the box set up for pre-order whenever they put it on the release schedule.

Maybe you folks should be thinking about picking up any MB titles that you have been looking at but don't yet have. I'm not suggesting anything is going to happen, I'm just sayin - you know?...

Exchange Rate Blues

With the Dollar/Yen exchange rate hitting record lows as many first world currencies circle the drain, Steven Den Beste gripes that the new ¥8880 Asobi ni Iku Yo BD's that he ordered directly from Japan are costing him in excess of $100 each.

Hey, welcome to our world. It's not like there are enough problems in the industry right now, but the exchange rate is making us really take a look at the viability of the whole import business. Any Anime products that we offer for sale that are actually produced in Japan and not under license here (where the manufacture can be exported to Mexico (DVD's) or China (Character Merchandise) or Canada (Manga)) is getting priced right out of the North America market. Character figures (PVC's) are now averaging around $110-$120 (at least if we want to make any profit on them), and will be higher than that by next spring once our fall commitments are delivered. Typical Japanese music CD's now have to be sold for $45-$50. I'm still wavering on our offering 2011 Japanese calendars this year, even though I only have a few days to make up my mind. I just don't know if there will be much market for calendars we will have to sell for $30-$40 each. We probably will, but will just offer fewer choices this year.

Anyway, I digress. Since Steven is an engineer, and engineers (being practical thinkers that see the world in terms of what works and what doesn't) have a hard time getting their heads around irrational concepts like Socioeconomics, I have a macro economic thought for him that ties into his recent micro economic observations:

"There is no subtler, or surer means of overturning the existing basis of society than to debase the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which only one man in a million is able to diagnose."

-John Maynard Keynes

Don't forget folks, we're closed tomorrow for Columbus Day, so I won't be answering any e-mails until we come back. See you all Tuesday!

UPDATE: I'm of the FA Hayek school myself, but Keynes was certainly right about this.

The Great Recession is Dead... Long Live the Great Recession!

HEH.

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.

A Quote from Kentarou Miura

There certainly is enough of economic hardship to go around right now. I keep reading articles about things like 'why small business is not hiring' in the recovery vs. past recoveries, and no one seems to even be making the argument that maybe there isn't actually a recovery at all, and maybe small businesses aren't hiring simply because, on the aggregate, they are still shrinking.

For us, the Anime industry in particular seems to have an awful lot working against it over and above just normal bad economic factors like weak consumer spending. There certainly have been a lot of 'where do we go from here' type conversations going on in the biz lately, and the answers (so far) are not very forthcoming.

So I got to thinking about things this past week and remembered something Kentarou Miura, the manga-ka who writes Berserk, once said and wanted to share it with you:

"With no relation to class or social background, whether it suits them or not, people yearn for a dream. Sustained by a dream, hurt by a dream, revived by a dream, killed by a dream. And even after being abandoned by a dream, it continues to smolder from the bottom of one's heart... probably until the verge of death.

A man should envision such a lifetime once. A life spent as a martyr to his "dream."

Of this, I think many of us who try to make some sort of living in the 'Anime industry' are, ultimately, destined to be martyrs to our dream.

And you know what? That's OK.

Funimation Delays More Titles

In what is becoming a pretty regular event from ALL the R1 studios this summer, we heard from Funimation today who gave us another grocery list of release delays, but most of these are only 1 week pushes so it's not too bad. Here's the changes:

Slayers Revolution DVD Boxed Set (Eps #1-13) (BLURAY) - 9/14 to 9/21
Slayers Evolution-R DVD Boxed Set (Eps #1-13) (BLURAY) - 9/14 to 9/21
Full Metal Panic FUMOFFU Complete DVD Set (Remastered) - 9/28 to 10/5
Full Metal Panic FUMOFFU Complete DVD Set (BLURAY) (Remastered) - 9/28 to 10/5
Eden of the East Complete Collection DVD Boxed Set (Eps #1-11) - 9/28 to 10/19
Eden of the East Complete Collection DVD Boxed Set (Eps #1-11) (BLURAY) - 9/28 to 10/19

Funi cited inventory delays for the changes. We've already made the date changes on the store site this afternoon. As always, if anyone has an order holding for one or more of the above items and wants to make a change, just drop us an e-mail.

Media Blasters Delays More Titles

It's only been three weeks since their last big delay announcement, and today Media Blasters let us know they they will be delaying the release dates of another batch of Anime titles, a few for the second time.

Here are the date pushes that will directly impact us:

Queen's Blade: Wandering Warrior, Vol #2, The Beaten Path DVD (Eps #5-8) - From Sep 7 to Oct 26

Kanokon: The Girl Who Cried Wolf, Vol #2, Wolf in No Clothing DVD (Eps #5-8) - From Aug 31 to TBA
Kanokon: The Girl Who Cried Wolf, Vol #3 DVD (Eps #9-12) - From Oct 26 to TBA

Queen's Blade: The Exiled Virgin, Vol #3, Journey's End DVD (Eps #9-12) - From Oct 26 to TBA
Queen's Blade Complete Collection DVD Boxed Set (Eps #1-12) - From Oct 26 to TBA
Queen's Blade Complete Collection DVD Boxed Set (Eps #1-12) (BLURAY) - From Oct 26 to TBA

Voltron: Fleet of Doom Movie (BLURAY) - From Sep 28 to TBA

Most of the pushed releases have been shoved off the release schedule and thus are now dated TBA until they can be rescheduled. At this point I don't want to speculate but most of these will probably not get back on the schedule before November or December of this year. MB's 'official' statement on the TBA's is 'removed from the schedule until further notice'.

They have also delayed a few Adult titles from their Kitty line including Fleshdance (9/7 to 10/5), Twin Dolls (9/28 to 10/26), Oh My Sex Goddess: Megachu (11/2 to 11/30), and Urotsukidoji: Legend of the Overfiend DVD and BD (10/15 to 11/16). None of these releases are currently up for pre-order on the RACS store site - and won't be until their schedule firms up a bit.

And yes, I know, it sucks. But anyone who is not expecting things like this in this market has clearly not been reading my weekly newsletter.

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.

Clarke and Dawe ask the Million Dollar Questions...

Leave it to our friends in Australia to sum up the entire current global financial crisis in less than 3 minutes: