More ADV Fallout and Speculation

In an earlier message, Jeff Lawson posted a comment that got caught in my spam filters for a day before I led a commando raid to release it from the dungeons:

…all of the translation, subtitles, dub, packaging design, and DVD authoring is ADV’s IP. I suppose they could sell the rights to Funimation (not like it does ADV much good to retain them if they no longer hold the licenses to the series), but otherwise, Funimation will have to start production from scratch.

As for the existing product stock, I’m sure its fate is explicitly spelled out in the Termination and IP provisions of the contract(s) between ADV and ARM Corporation/Sojitz. Since a single DVD contains the IP of multiple Parties which can’t be separated and physically returned to its Owner, my guess is that the existing stock would have to be destroyed.

I disagree, and as it happens, the news indicates that Funi is in negotiation with ADV for their dubs/subs/translation work. I see no reason why ADV wouldn’t want to sell that stuff. As for prepped and unshipped stock, I don’t think it has to be burned. Yes, IP is a problem but it’s doable if people want to make it happen. Given that Funi’s hand would be fairly strong in terms of pre-arranging just such transfer of IP, it probably went down like this: “Look, either everyone signs off on the transfer or it’s no deal. You’re talking about anime it took ADV nearly a year to prep, and we’ve got all our own stuff plus Geneon’s to put on the street. If we have to go back and re-do all this, it’ll take a year or more and that will cost us market position and sales, not to mention the expense of re-mastering. So we’ll subtract that out of what we’re willing to pay.”

I would assume from last months “production problems”, ADV did not want to be overextended; so if they thought they wouldn’t be able to ship the DVD’s by whatever “final date” resulted from the Sojitz divorce, they just held the masters and stopped production. I’m not happy with how close-mouthed they were, but I do think it was their best option. Had they told the public, “We have lost the rights to these properties, and their production will be interrupted in mid-series,” then they might as well have cut their own throats and be done with it. No one would want to buy the DVD’s at retail, so the wholesale market would likewise have imploded on them. “Hey Robert, you want to buy the first five DVD’s of a series we’re not going to finish?” Yeah, right. It sucks, but for survival’s sake, they had to zip it, wait to see who got the rights after them, and then open negotiations with that party to smooth over the transition of the series to the new R1 licensee. Such would give them the best chance of survival and coincidentally be the best thing for the customers. And it’s what has happened.

From the Funimation panal with Adam “My name is not Cindy” Sheehan:

It was indicated that for the ADV Films titles from Sojitz, they will be working to be consistent with the cover design/artwork for the remaining volumes.

The easiest way to do that would be to buy the work completed by ADV. Otherwise, Funi has to tie up their own assets trying to copy someone else’s style, and they just don’t have time for it. Sojitz and ADV may be divorced, but it’s in everyone’s interest to make the transition happen smoothly. However, where it gets interesting is the ADV panel, with John Ledford and Matt Greenfield:

The two commented that this was a bad year to be sure because of the partnership with Sojitz that ended. They continued on that they were looking for another partner and have found one and are in active negotiations for a number of titles.

That would be the previously mentioned 23 titles. Now, I’d previously discounted it as a statement of “I’m not quite dead yet!” and responded “You’re not foolin’ anybody, you know.” Submitting proposals, and even getting on your knees and begging, “please, Please, PLEASE license with us!” does not a negotiation make, I said to myself. But then there’s the detail that they have a possible partner….this seems odd, if it’s true. If timely payment of the royalties (as we’ve all assumed) was the real sticking point with Sojitz, then no one should want to touch ADV with a ten-foot pole. At least, not with any marketable commodities. Of course, perhaps they’ve decided to stoop to importing nothing but hentai in order to get profitable again, who knows.?

Does this suggest that the breakup was not because ADV wasn’t able to pay royalties? And if not that, then what was it? You know, Toren seems to think that Japanese animé companies are really clueless sometimes, and it’s a fact that the Japanese and American business cultures are a lot different. So taking a fresh look, I notice some things we’ve mentioned before, but in a new light.

Given that there was so little of ADV’s recent stuff I wanted, and their product selection over the last year or so kinda stunk, I have to ask, “How much of that was bad selection by ADV, and how much was being forced on them by Sojitz? Could the real problem all along have been that ARM/Sojitz wasn’t giving ADV enough credit for understanding the R1 market, as ADV was for Sojitz understanding Japan? Could it be that ADV was not in the driver’s seat for series selection, and ARM kept forcing titles on ADV that the latter tried to tell them weren’t going to sell? If you look at their acquisitions, only TTGL and Kanon were top-tier properties. But Gurren Lagen was the first property to escape ADV’s clutches, even though they’d gotten to the point of sending out test disks. And it was at the point of the sudden suspension of their licenses that we found out there was trouble brewing.

We all assumed that TTGL’s sudden transfer to Bandai was a matter of ADV selling their most marketable commodity to raise quick cash. Were we right? Or only partly right? Could the real problem have been that ADV and Sojitz weren’t seeing eye-to-eye on what properties to acquire, and how much to pay for them? ADV has been blamed for running up the licensing costs before, but supposedly learned their lesson. Could the divorce be a matter of the two marriage partners finding that they had different expectations from the union, not that one or the other was being unfaithful or not living up to their end of the deal? Sojitz wanted to license cheap crap in bulk, whereas ADV wanted to go for the good stuff?

If the latter is the case, then relations had to have gotten pretty low between the two companies for such a disorderly split. Remember, Sojitz took a partial ownership stake in ADV. In their view, they probably considered (consciously or otherwise) ADV to be one of their “group” companies. I am no expert on the Japanese business mind, but these have a reputation of being closed shops with minimal wave-making permitted. So along come these boorish Americans who buy into the family, and then try to act like some sort of independent company with their own opinions or something! The Japanese don’t like to lose face, or cause others to lose it, and if ADV was arguing with them over acquisitions, that would upset people in Japan. Not paying their bills? Somehow that doesn’t seem right. “Under-performing” isn’t a fatal flaw in Japanese business; that’s been one of the problems in their economy: they don’t like to kill unproductive divisions and companies because of full employment policies and the loss of prestige. So here comes this hot property called Gurren Lagen, and ADV probably busted ass and insisted on grabbing it. Sojitz agreed at first, but someone was offended by the American boors, and decided to yank them up short.

Thus, I have begun to think that it was probably not money, but cultural differences, that have been plaguing ADV for the last half-year. Sort of ironic that it could happen in a business that is built on Japanese-American cooperation, isn’t it?

On the bright side, this means that ADV may not be about to die, but they’re still hurting badly. They have to raise the money, not to meet payroll and stave off creditors, but to buy back the ARM/Sojitz stake in ADV — or maybe find another partner to buy it out. This talk of a new partner, if it isn’t ADV saying, “I think I’ll go for a walk!” is part and parcel of their rebuilding strategy. No doubt they’ve taken a shot to the nuts, but perhaps it’s survivable.

Ok, at this point, I’m starting to ramble, so I’m going to cut it off here. If I think of anything else, I’ll post updates tomorrow.

Update: From Gen Fukunaga’s keynote address at AX:

For the former ADV licenses, that company will be retained as a sub-contractor to handle dubbing and production duties, with Funimation as the distributor, similar to the arrangement that is already in place for several series.

Update 2: Hmmmmm.

At their panel, the industry representatives from Kadokawa USA announced that their company now holds the North American licenses to the anime series Junjou Romantica, Spice and Wolf, Rental Magica, My Heartfelt Sympathy, Ninomiya-kun, H2O ~Footprints in the Sand~, and Coo ~ Our Guardian (Wagaya no Oinarisama.) …. Generally, Kadokawa USA does not actually distribute anime in North America directly, but partners with other, more established companies. No specific distributor for any of the six series has been named yet.

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11 Responses to More ADV Fallout and Speculation

  1. Your posts #745 and #746 are gone.

  2. AvatarADV says:

    Don’t give them too much credit. We’re talking about a guy who once looked straight at me and told me that Monster Rancher would be the next Pokemon. ;p

    A significant number of those properties were from Red Garden, if I’m not mistaken, so it’s entirely possible that some of the crap was part of a “package deal”. On the other hand, ADV’s never been slow to license pure crap, so the chances are just as good that whatever bizarre criteria John uses to pick titles just futzed out again.

    It’s safe to assume that Kanon and Gurren were not part of a package deal. On top of that, ADV’s got other titles from both of those companies which they haven’t stopped shipping on (one assumes?), so it’s not just a matter of ADV not paying KyoAni or Gainax.

    (With Gainax, it’s tough to say; the story of Eva’s licensing is hilarious. ;p But KyoAni doesn’t have a particular reason to throw ADV under the bus… that I know of, anyway.)

    I’d posit that it’s even more likely that -Sojitz- wasn’t coming up with the funds on its end, then. Given some of the comments about them being “focused on the spreadsheets”, it isn’t too much to speculate that they were expecting significantly more return on their investment than they were getting; especially since the entire sector took a pretty big hit when Geneon folded up shop and retailers got a little twitchy about all anime titles.

    There’s no word of a lawsuit between ADV and Sojitz, which would suggest that either (a) ADV doesn’t want to sue a former investor at the same time as it tries to woo another investor, or (b) Sojitz had an escape clause and took it, and thus this isn’t actually a breach of contract. Why would ADV settle for a contract where its white knight could pull out? Probably because they were desperate for the cash at the time, and it was the best offer they could scrounge up.

    This would also explain some of the timing issues. If Sojitz turns off the money tap, Gainax is a good candidate for “first company to start shopping their hit title around”; doubtless they had other good bids on the show, and their licensing history with ADV… heh heh. I specifically doubt that it represented a transaction between ADV and Bandai, for… er, reasons I probably shouldn’t share, come to think of it, but take my word for it.

    I don’t buy the “uppity Americans” theory, though. We know that Geneon USA suffered a similar fate yesterday – their big Japanese backer decided the market sector was underperforming (true) and pulled out. That it might happen again does not stretch credibility too far. I also -really- don’t buy John Ledford as secret licensing mastermind, sorry; too much experience to the contrary.

  3. Jeff Lawson says:

    Obviously, more details have seen the light of day since I wrote my initial comment. You’re correct that the IP difficulties are workable, but it requires the cooperation of all involved parties. One thing I didn’t note in my comment (because I didn’t think about until afterwards) is that some of ADV’s IP is likely derivative works, in which case they’d have to pay a royalty to ARM in transferring those rights to Funi. If Funi is only planning to hire ADV as a sub, however, there’s no real need to transfer ownership.

    The devil is in the details, of course, and without seeing all of the associated contracts and licensing agreements, I can only speculate as to the mechanics. And I’m naturally inclined to view the situation through the lens of the Contract I manage for a living.

    Like Avatar, I’m not sure I buy the “cultural differences” explanation for ADV and ARM’s breakup. There’s been plenty of evidence lately that ADV is having cash flow problems, what with them shutting down divisions, cutting back on their manga releases, making staff reductions, etc. In light of that, it seems much more likely that ADV defaulted on their payments. Either that, or ARM decided the partnership was no longer profitable and went shopping around. I’m leaning toward the latter explanation; if ADV could no longer afford to license/produce/distribute all of the titles ARM had to offer, it makes perfect sense for ARM to take their business elsewhere.

    I’d be curious to know who ADV’s new partner is, though. When I first heard that they were in negotiations for 23 (!) titles, my initial thought was that they must not be expensive licenses. Either that, or ADV is run by a bunch of clowns.

  4. We don’t know that they’ve found a partner. We only know that they’re looking for one.

  5. Ubu Roi says:

    Jeff: Well, as to your last sentence, is that really an either / or? 🙂

    Steven: They said they found one, but it’s probably a case of they found a potential partner.

  6. Ubu Roi says:

    Your posts #745 and #746 are gone.

    Ok, this is weird. They are and they aren’t. If you scroll down on the main page, they’re there; if you change the number in the URL, they’re there, but if you use the links at the top of each individual article page, it skips those two. I have no real knowledge of why it’s doing that, and since it’s all php functions, I doubt I can fix it. Those two articles were scheduled in advance, and I assume it must be a bug resulting from that.

    One possibility is that it happened because I saved both (as future posts), then went back and made changes to the saved articles.

  7. They’re not on the main page for me. I wonder if you still have them tagged as “future”, so that they only appear on the main page for you.

  8. Also, when I change the post number manually in the URL line to 746, I get told there is no such post.

  9. Ubu Roi says:

    Ok, I may have it now. Apparently when I did the edit after scheduling them, but before they appeared, they got flagged as “private” (it’s either private, draft, or published.) I’ve reset that flag and they should be visible now.

  10. Pingback: Mahou Meido Meganekko » Blog Archive » Another ADV Note

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