The Top 5 Industry Disasters of The Decade [Updated]

Mike Ferreira (Editor) — December 28th, 2009


    Correction: Section23 Films

    Mike Ferreira (Editor) — 12/29/2009 0:43 EST

    Griffin D. Vance was ADV Films's Senior Vice President of Business & Legal Affairs. He was not one of the company's co-founders, which consisted of John Ledford and Matt Greenfield.

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While it's fun to list our favorites or the rarest shows of the decade, it's best to put the decade into perspective. The anime industry is vastly different than the bustling cottage industry of the '80s, or the booming tour de force of the '90s. The '00s instead will be remembered for the implosions, the disasters, and the misfortunes that befell the industry. Before we say goodbye to the decade, it might be best to look at the biggest industry crises that hit in the past ten years.

1) ADV Films: Died, September 21, 2009

It's impossible to talk about industry disasters without mentioning the most war-torn company to rock the industry. At the beginning of the decade, ADV was in an enviable position. With a large cash reserve, tons of highly desired titles, and a giant amount of fandom goodwill, ADV was one of the mainstays of the anime industry. They made a huge showing at every major convention, from Anime Expo to Otakon, as well as a number of smaller cons such as (at the time) Anime Boston. Few seemed to question ADV's massive growth, and its even bigger number of acquisitions year over year. Be it Keroro, RaXephon, or Azumanga Daioh — if one were to guess the company holding a show, there was a good chance it was ADV.

The good times were quickly coming to an end, come late 2005. Years of fierce bidding wars and foolish acquisitions (Petit Princess Yucie? Really? I love Princess Maker as much as the next guy, but still...) depleted the company's coffers, and output began to decrease drastically. The company's luck seemed to change drastically on June 27, 2006 when they announced that they would partner with Japanese investment firm Sojitz. Through the partnership, ADV would receive an unspecified sum of money in exchange for acquisitions of American content on the company's behalf.

What's a company flush with cash after a crisis to do? Any logical mind would say "invest wisely, and don't extend further than you have to." ADV, on the other hand? They went shopping. The company fell into the same bad habits they had in the early 2000s. For the most part, things seemed great on the outside. In 2007, acquistions were increasing, titles were being released faster than ever, and ADV was even lining up a distribution deal with then-ailing Geneon Entertainment, which they announced in August. At the same time, though, the number of re-releases seemed to be growing by the month.

Karma finally came around in September of that year, when misfortune after misfortune began to hit ADV like a sack of bricks. The first blow was the dissolution of the distribution deal with Geneon. ADV announced that they would assume distribution of all Geneon properties by October 1. The deal fell apart in due diligence, however, which led Dentsu to issue a press release stating the opposite. Dentsu stated that the companies were "unable to reach a mutual agreement" on the matter.

In January 2008, a large number of titles acquired with Sojitz's funding were removed from ADV's website, including the high-profile Gurren Lagann. ADV was treating Gurren Lagann as a major release, and had already mailed test discs out to members of the press, as well as retailers. ADV never gave an answer on what happened to the title until May 2008, when Bandai Entertainment revealed its acquisition of the license. Things grew worse that July, when Sojitz took their ball and went home. They reclaimed roughly 30 of the titles they acquired with ADV Films, and sold the rights to FUNimation in July.

After Sojitz backed out, ADV became a much less vocal member of the community, and began to focus on re-releases, and distribution for the mysterious companies Sentai Filmworks and Switchblade Pictures. Both companies were later discovered to be fully owned by ADV co-founder Griffin D. Vance. As of May 2009, ADV was still claiming to be absolutely fine. At their Anime Boston panel, David Williams continually reassured fans that ADV was not going anywhere. This didn't last long, though. On September 1, ADV Films revealed that they were shuffling all of their assets around. Everything from The Anime Network to the titles to distribution rights were sold to four companies: AEsir Holdings LLC, Seraphim Studios, SXION 23 LLC (Section23), and Valkyrie Media Partners LLC.

Section23 became the de-facto "New ADV", as ADV Films essentially sold itself to itself. The company was split to take advantage of a number of legal loopholes. The company runs now, same as it ever did. However, the ADV monolith most of us came to know and love is now gone forever.

2) Geneon Entertainment: Died, September 28, 2007

Geneon is the other textbook case of Murphy's Law in action. Originally Pioneer Animation, Geneon saw a lot of early success with titles like Tenchi, Trigun, and Pokémon. The company was seeing 20% year-over-year growth, which created a speculative bubble. In the bubble, fierce bidding wars made properties increasingly expensive. However, Pioneer seemed invincible due to the success of the Pokémon license, which was drawing in over a million sales per month.

The landscape began to change in 2004, when the anime bubble was at its biggest. Former Geneon Marketing Director Chad Kime (via Anime News Network) revealed that there was a flip in profitability, combined with a massive delay in the ability to see the writing on the wall. The bidding wars escalated to the point where companies were bidding on titles that weren't even in production. All of the major players were putting money down on titles to secure day-one licenses. According to Kime, nobody in the industry realized that the bubble was bursting because so much was coming through the pipeline, all of which was being absorbed by Best Buy, Musicland, and the like. Before long, the product began to come back.

The company's fortunes worsened in 2005, when they were acquired by Japanese advertising agency Dentsu. Pioneer became Geneon in the eyes of the public. Internally, though, it was an entirely different story. According to Chad Kime, the company was saddled with debt from the date of purchase. Through the terms of the agreement, Geneon had to relinquish its entire war chest to Pioneer Electronics. All of the money that Pioneer Entertainment amassed through the '90s suddenly became a mountain of debt to Dentsu, plus interest. A few months after the acquisition, nearly a quarter of Geneon's sales from the previous quarter were returned. The end result was a liquidity crisis in the corporation.

Few of Geneon's titles going forward broke even. Some shows, such as Cybuster and Rumiko Takahashi Anthology, required 10,000 units to break even. They sold less than 100 units.

Through the bubble, Geneon pushed through far more product than they can handle, in order to stay on par with the budgets set by Dentsu. In order to keep up with budgets, Geneon had to pay too much for titles, which forced them to ship more copies, which led to more returns, which led to Geneon needing to release more titles despite a glut, and so on.

The company gasped its last breath on Sepember 26, 2007. Geneon issued a release to retailers stating that they would not issue new product. All business operations would cease for the company that Friday, September 28. Only orders for back-catalog titles or titles with street dates before November 6 would be honored. Returns would not be honored past November 30, 2007.

Geneon still technically "exists" at the moment, but they will not license new titles. They are a holding company that will only exist until their licenses expire.

3) Dispute Between Central Park Media and Libre Publishing

In March 2007, Libre Publishing started dirtying the business pools with one of its biggest American partners. The company posted the following notice on its website:

Thank you very much for your continued interest in our publications. Please note that we also offer copyright licensing service for translations of our own publications to foreign publishers. These are commissioned by each of the cartoonists and authors.

Recently, it has come to our attention that some translations of our publications have been published and some are to be published by Central Park Media (Label: Be Beautiful) in the United States. We wish to make it known that these publications are considered illegal because they have not been authorized by us. It should also be known that the cartoonists and authors are being victimized by this illegal act, and they are very annoyed by it.

We strongly protest this illegal infringement of our property and issuing a strong order for CPM to cease their illegal acts. We also wish our faithful readers to refrain from purchasing, loaning, or sharing any and all of these illegal publications. Thank you.

Libre Publishing Co.,Ltd.

Further digging by numerous outlets revealed that the notice was posted in the wake of publisher Biblos's bankruptcy. Central Park licensed a number of boys-love titles for its Be Beautiful line from Biblos Publishing. Libre alleged that Central Park never renegotiated the licenses when Biblos folded, and the titles reverted to Libre's ownership. Shortly after the news hit, CPM managing director John O'Donnell revealed that Libre never filed a lawsuit against Central Park. Furthermore, Libre refused to discuss the issue or negotiate with Central Park Media. O'Donnell alleged that CPM's licenses were still legally binding, and that the company was trying to harm Central Park's reputation and sales until the licenses expired.

The issue became moot on April 27, 2009, when Central Park Media filed for Chapter 7 bankruptcy.

4) Musicland Meltdown

On January 12, 2006, Musicland announced that they would file for Chapter 11 bankruptcy protection. Musicland was the owner of a number of retail chains, including Sam Goody and Suncoast. All of them were large retail suppliers for anime. When Musicland filed bankruptcy, they triggered the closing of 284 retail locations. In addition, the company's massive debts were effectively erased, which left companies like FUNimation and ADV Films in the cold. In particular, FUNimation was owed $12.8 million from Musicland, and the fallout was enough to leave Central Park Media particularly vulnerable in the marketplace.

5) Heat Guy J

Chad Kime revealed in a recent ANNCast that Heat Guy J is a title that still makes him cringe. The series was a potential "perfect storm," with an excellent pedigree and a high-profile studio doing the animation. Heat Guy J was the brainchild of Escaflowne director Kazuki Akane, and utilized a large number of staff from the Escaflowne team. Pioneer, at the time, figured that the show would be a gem. The deal was sweetened by the fact that the entire industry was seeing 20% year over year in profitability, and the show was not due for two years. Pioneer bid a high sum of money for the show, which they never saw in return due to the vastly different landscape the show faced when it finally hit. The series saw massive advertisement, but still struggled to perform. Final sales tallies saw Heat Guy J thoroughly bomb, selling less than Ai Yori Aoshi.