Friday, October 31, 2008

Happy Halloween Everyone!

Just wanted to Wish Everyone a Happy Halloween weekend! It is always important to be safe and responsible, but it's also important in these rough times to still have fun! :-)

Thursday, October 30, 2008

Funimation's Parent to Report Earnings Today

A reminder to anyone interested in the business side of the Anime industry that Navarre corp., which owns Funimation, will report 3rd quarter earnings after the closing bell today (Thursday, Oct 30th).

While Funi's profitability has been holding up well in an otherwise tough market this year, Navarre's other divisions including BCI, Encore, and the Game Distribution arm have been flagging. The recent severe drop in Navarre's (NAVR) share price below a dollar (not that everything else hasn't been dropping too of course) has had me a little bit concerned, especially since there has been virtually no insider buying this year (the last insider buy was in June) even though the shares are selling at a fire sale price right now (or are they?). Gen Fukunaga (the head of Funi) hasn't bought any stock as the price has gone down over the last year, but of course he already owns 726,000 shares (worth about $550,000 at today's stock price, close to his annual salary of $350,000) so perhaps he doesn't want to take on anymore risk in his personal holdings. Cary Deacon, his boss, only personally owns about 186,000 shares and draws a salary of $453,000.

Navarre took on a lot of debt when they purchased Funi in 2005, and with credit markets frozen I'm mainly concerned with their ability to service that debt short term. Like most mixed home entertainment distributors / producers, they use short term credit for most of their operational funding and have a fairly poor cash position. Their balance sheet as of the 2nd quarter showed them carrying only .03 cents of cash per share, about $1.2 Million in cash on $663 Million in revenue, while they carry approx $49 Million in debt against a $27 Million market cap at the current share price. That revenue figure sounds like a lot, but they have a terrible operating margin of only 2.41% and a razor thin net profit margin of only 0.74% (that's less than one percent). Those numbers imply that the company will be fine as long as they execute, but has absolutely no room for error.

Needless to say, we watch them very carefully because their business directly impacts ours. We certainly know first hand how Funi is doing in the direct Anime market, but I'm anxious to see how their overall numbers come in for the 3rd quarter, and also to see if they will offer guidance for the next 2 quarters. This particular earnings report is important because we are at somewhat of an economic crossroads in the industry, especially now that Funimation represents about 50% of the total US Anime market (and is currently the most financially sound R1 Anime studio). The numbers and guidance Navarre reports will be important in gauging where the US Anime market actually is right now beyond the 'all is well' rhetoric the studio marketing machines continue to spew out.

If you are interested, Cary Deacon (Navarre's CEO) will be hosting an earning conference call Friday (10/31) at 11AM EST, and you can listen in by calling (800) 299-0433 and entering conference passcode "67756564". You'll need to call about 10 minutes before the start time. The call will also be web cast here if you want to access it over the Internet.

Consensus estimates have them coming in at positive earnings of .02 cent per share. I personally hope they beat by a penny. :-) If they miss, it's a problem.

UPDATE: Navarre reported .04 cents per share. Before everyone jumps for joy it's useful to note that the earnings increase was all carried by Funimation, and mostly due to the additional market share Funimation picked up in the third quarter from the Geneon and ADV license acquisitions. Otherwise earnings would probably have been flat or down. They reported a very tough economic environment, and did not offer any forward guidance except that their goal over the next 2 quarters is basically not to go negative.

Looking at the schedule, most of the real honey pot licenses that Funi picked up in the Geneon and ADV deals will be exhausted by the end of the first quarter next year. Hopefully they are looking forward and working on some dynamite new licenses for stuff that hasn't previously been released, which is the only thing that will carry them through 2009 profitably. I work on the inside of this industry. Doing my best to be dispassionate and look in from the outside, and I hate to say this, but I now believe that in the current environment the bad Anime companies are being eliminated and the good Anime companies (including ours) are now getting an increasing share of a shrinking US market, so expect plenty more shakeout over the next 2-4 quarters.

Saturday, October 25, 2008

RSS Feed(s) for Store Updates

A lot of people have been asking for us to implement RSS feeds for various stuff. The staff and I are doing a round table this afternoon working on a few IT issues, and RSS feeds will be discussed. I'd like to solicit a little input from you guys out there on a few things regarding RSS feeds.

Most people that ask us for RSS want it linked to store updates so they can subscribe to a daily new arrivals feed, so that's were we're focusing our attention.

The technical back end for an RSS feed quite simple, and we already have our feed application and server space in place for the XML files and we have a few beta test feeds setup generated from our regular HTML updates. What gets s little complicated is the presentation and formatting of the data, especially considering how many applications there are for reading them and the different ways each application handles the XML coding. I think it would help us quite a bit if you RSS users out there could give us some input on two things:

1) What is your preferred reader program?

2) How do you use the feeds, or how do you typically setup your reader to format the feed data?

For a couple of examples, it could be as simple as setting up an article headline highlighting the section update and linking back to the master updates page section, or we could setup a slightly more complex feed that contains one linked new arrival item per headline, with the item linking back to the order page. That feed would allow our software to setup one feed item per new arrival. This would be most compatible with people who format as headline readers, but would not work well for our typical large posts as most people setup their readers to only see the last 5 or 10 feed items so generating 60 or 70 feed items in one day would not be practical, though that method would allow absolutely real time updates to happen as new items are scanned in through out the day, which would be kinda neat. There will be at least one or two days a week when we can have anywhere from 15-60 new items on average in a single day. We could breakup to product categories into separate feeds (DVD / Manga / Figures / etc) but that would require people interested in several different lines to subscribe to multiple feeds, and make handling the update data more complex on our end by having to generate multiple XML files each day.

We could also setup the feed data by category and include a headline linking back to the relevant store updates page section followed by bulleted lists that break down each item with a link to that item's order page. This is the method I'm favoring, and you can see above how one of our Beta files looks in Google Reader. This method would require the user to setup the feed to display article data (if they use the reader gadget in Firefox for example), and the linked data would not appear on reader applications set to show the headline only.

So there are a lot of ways we could approach it. Any input would be most appreciated. :-)

Wednesday, October 15, 2008

Getting to the 'Root' of the Problem

I lost a filling on one of my back molars a couple days ago, and what I thought would be an in and out routine fix at the Dentist this morning turned out to be a little more complicated and it looks like it's beyond fixing and I'm going to have to have the tooth out. The oral Surgeon got me right in, so tomorrow afternoon they'll be removing the problem tooth. I've never had one out before, and at 38, I still have my Wisdom teeth, so I'm looking forward to the event with quite a bit of trepidation, especially since they told me they would be doing it with just a local.

Now let me tell you - after shoulder dislocations, broken bones, and lots of other traumatic events in my life I think I'm pretty tough about things like this, but when it comes to my teeth, I'm a total wuss. If I was ever captured by the enemy I feel like I could endure days of beatings, but as soon as they started messing with my teeth I'd sing like a canary. Don't tell anyone, OK.

Anyway, I'm just telling you guys this because it means I won't be answering any e-mails tomorrow, and probably only a few on Friday. During that time Jamie will handle any inquires about store business (having to do with orders), but probably won't have time to answer anything else, so don't get upset if I don't reply to any general inquiries for at least a couple of days. Also, this weeks Friday e-newsletter may have to wait until Saturday, we'll have to see how I feel.

Aside from e-mail inquiries and the newsletter, the rest of the operation will run fine without me, and orders will (of course) still be processed and ship normally. And that's good because we've got lots of new stuff for you to checkout this week.

So, what Anime will be good to watch this weekend while I'm recovering.... hmmmm...

UPDATE: OK, all done. They actually took two out since my wisdom tooth next to the other one was impacted and the surgeon felt that it was best to do them both at once. I have Vicodine and antibiotics, and have to go back in a few days to get the stitches out, but I'm doing fine and am actually pretty comfortable. No promises, but if all goes well and I feel good enough in the morning, I'll probably be able to get the e-newsletter done on time as usual.

I want to watch Season 2 of School Rumble, but I think I'm going to wait for the 2nd half box before I start it. Jamie and I already watched Vol 7 of Death Note last weekend, so I think this weekend we'll probably watch vol #5 of Karin, Bludgeoning Angel , and then finally watch the first vol of Claymore which I have been greatly looking forward too (I've always loved the manga). Aria will have to wait for awhile, but Steven Den Beste had been watching it and I've enjoyed reading his blog posts as he goes along, so I think we'll wait to see what he thinks of it before I commit.

OK, enough rambling, I'm going back to bed. Have great evening everyone!

Sunday, October 12, 2008

Update on the Completion of Red Garden, Pumpkin Scissors, and NHK

After deciding to re-release Red Garden, Pumpkin Scissors , and Welcome to the NHK strictly as boxed sets, and leaving customers who previously bought some of the initial volumes released by ADV with no choice except to rebuy the series, Funimation seems to be back peddling and may in fact offer Red Garden vol. 4-6, Pumpkin Scissors vol. 5-6, Welcome to the NHK vol. 5-6 individually. We have passed on every comment and complaint sent in to us by you directly to Funi management, and it appears they are listening.

We've been talking to them regarding this since Wednesday, and I know some news has already slipped out (which is the only reason I'm posting on it at this stage), but right now nothing is firm (there are no exclusive deals set in stone either, despite what's been printed on blogs and forums). I'm hoping we should get a decision on this tomorrow (Monday). It's my hope we will indeed be able to offer the missing single volumes to collectors who need them to finish their initial purchases and complete their boxed sets.

Stay tuned.

Monday, October 06, 2008

Stock Market Giving You the Blues? You're Not Alone...

I know it's really no laughing matter, and believe me, I'm feeling your pain right now if you're a long term investor. I've been around long enough to have been through these sorts of 'crisis' since the early 70's, and the only things that are certain is that they are very painful, they eventually pass, and if you stay calm, make smart choices, are patient, and God forbid - don't take advice from your brother in law or ANYONE on CNBC - you'll come out ahead in the end.

With that in mind, someone sent me this today. I thought it was hilarious and wanted to share:

"Once upon a time, in a place overrun with monkeys, a man appeared and announced to the villagers that he would buy monkeys for $10 each. The villagers, seeing that there were many monkeys around, went out to the forest, and started catching them. The man bought thousands at $10 and as supply started to diminish, they became harder to catch, so the villagers stopped their effort. The man then announced that he would now pay $20 for each one. This renewed the efforts of the villagers and they started catching monkeys again. But soon the supply diminished even further and they were ever harder to catch, so people started going back to their farms and forgot about monkey catching. The man increased his price to $25 each and the supply of monkeys became so sparse that it was an effort to even see a monkey, much less catch one. The man now announced that he would buy monkeys for $50! However, since he had to go to the city on some business, his assistant would now buy on his behalf.

While the man was away the assistant told the villagers, "Look at all these monkeys in the big cage that the man has bought. I will sell them to you at $35 each and when the man returns from the city, you can sell them to him for $50 each." The villagers rounded up all their savings and bought all the monkeys. They never saw the man nor his assistant again, and once again there were monkeys everywhere.

Now you have a better understanding of how the stock market works."

LOL! :-) Seriously though, before you start hording beans, bullets, and bullion - no worries - remember economic cycles are finite, but Anime is forever. :-)

Friday, October 03, 2008

Funimation's December Release Schedule Posted!

This will be a quick post for lack of time, but I wanted to post a couple of things.

Funimation sent us their December release schedule this week, and we've got it all posted on the store site now for pre-order.

First, the announcements have answered the questions about what they are going to do with ADV's former unfinished titles, and I know many fans will be a bit disappointed because it appears that Kanon will be the only series they will finish as single volumes and the rest will all be re-released as full season or half season boxed sets. This applies to Welcome to NHK, Red Garden, Tokyo Majin and Pumpkin Scissors. I'm not sure if this is an ADV problem, or if Funimation has looked at the economics and decided they simply could not afford to carry the cost of these licenses while only deriving revenue from a small part of them, but I think it's important to remember that it was not Funimation who let fans down on these titles in the first place, and that without them it's likely they would never have been completed in any form.

Ok, nuff said about that, now on to the list.

The following December releases from Funimation are now available for pre-order:

Air Gear Complete Collection DVD Boxed Set
Xenosaga Complete Collection DVD Boxed Set

While I'm at it, we also managed to post a few new Q1 2009 figures for pre-order, and they are all pretty spectacular:

Full Metal Panic! Teletha Testarossa 1/6 Scale PVC Figure
And finally, we added four more 2009 Import Calendars for pre-order based requests that folks e-mailed in this week:

Death Note 2009 Wall Calendar (Japanese Import)
Masamune Shiro Saber Tooth Cats 2009 Calendar (Japanese Import)

Due to heavy Japanese demand I've posted a disclaimer on the Saber Tooth Cats calendar:

The Japanese publisher of this years Shiro Masamune calendar has designated it for the Japanese market only, and is not offering any unit to direct exporters. We have a partner in Tokyo that we have ordered them through that will transship them to us once it is released, however, the print run of this calendar is strictly limited and retailers will be filling Japanese orders first before our orders will be filled. This means that we probably will not get the amount that we ordered, so pre-orders for this calendar will be filled first come first served. Also keep in mind that we may not be able to obtain enough units to fill all pre-orders, so please keep in mind when ordering that our ability to fill your order will depend on circumstances beyond our control. We'll do our best, but we cannot guarantee that all orders for this particular calendar can be filled.

I'll be back tomorrow with lots more in our regular Friday newsletter. Have a great evening everyone!