We interviewed Tokyopop VP--Information Services Mike Kiley at Anime Expo, and talked about the shifting channels of distribution for manga, as well as Tokyopop's background and plans.
Tell me about the formation of Tokyopop.
Tokyopop was formed as Mixx Entertainment, and the founder and CEO was Stu Levy, who you may have met over the years, and his basic philosophy about Mixx Entertainment was a mix of cultures. Stu had gone to Japan early in his career and had fallen in love with the culture and popular entertainment, and really felt like there was an opportunity to bring that to the States and market it in a way that would position it with hip hop culture and street culture. So that was the founding philosophy.
As it evolved, we've gone in a number of different directions, some of which have been successful, and others of which have been abandoned, but the core of Tokyopop is that cyberculture, cutting-edge, trying to bring the spirit of Asian pop culture to the streets here in the US, and it's actually become more of an attitude than it is primarily focused on just the Asian space. As you may know, we have some very successful Korean titles now, in addition to the titles we're bringing over from Japan. We're also very interested in trying to foster some original content out of the States.
So manga for us is a lifestyle. It's a way of characterizing the world, it's a way of expression that isn't specific to Asia, although it has its roots there, so we see ourselves at the forefront of the manga-ization of the country.
In '98, I joined the company as the founder of Tokyopop.com. That was the point where we brought all the e-commerce business into the Tokyopop fold, we also had the printing business, the magazine business, and it's just kind of evolved from there.
One thing I see is that it sort of breaks down with Viz with Shogakukan and Tokyopop is more Kodonsha. Is that a fair characterization?
I don't' know that I would make the same parallel. It's not an unfair comparison but it's evolving and changing. Our relationship with Kodansha is always going to be incredibly important to us. The licenses from Kodansha formed the company, but things evolve and we branch out.
When was the last round of Tokoypop financing?
I believe the last round was closed in the third or fourth quarter of 2000.
Who was the lead investor?
Softbank.
They've gone through some changes since then...
They certainly have.
Are there any plans to raise more money in the future.
Not in the near future. In March of this year, we became a profitable company. Now, on a month-to-month basis we're making money, which is a very exciting development for us; and based on the way the manga sales are happening, the forecasts for this year are just going nuts.
Is Tokyopop de-emphasizing anime and focusing more on paper?
I think that's a fair perception from the outside, but I'm not sure that's the way it's going to evolve. Our core business right now is publishing, it's the most important thing we do, it's the thing that fans have responded to with unparalleled intensity; but we certainly haven't turned our backs internally on video as a medium, and I think with properties like Initial D especially, which is our tentpole property right now, which will be on broadcast TV, the home video release of Initial D is going to be huge,...
We like to think of our anime strategy as being more targeted, not as many releases as some of our competitors, but we think we can really make a difference in anime. We've got the Marmalade Boy property coming out next year, which is a huge fan favorite, and the response to the Marmalade Boy manga has been a huge surprise.
Is there more competition for anime properties than for manga?
Absolutely. In this country anime is a far more mature industry. It's something that we didn't come late to the game on, but there are certainly other companies out there that have made anime their entire reasons for being. And that's never been us.
Manga, on the other hand, may be less glamorous, but I can't emphasize enough that we've just been overwhelmed by the new customers that are coming into these new channels and picking up these books.
I was in a panel yesterday and one of the points that became clear to me is that there are people in strip malls in Topeka, Kansas and Madison, Wisconsin that are buying these books now that are not part of this core otaku crowd that has always defined what manga is. It's really changing
Our challenge as a company and one of the things that I'm really excited about, because we've always been close to the fans, is that we need to make sure that in addition to understanding this group that we know who those new customers at retail are so we can morph our strategy.
You said you've been profitable since March, but a substantial portion of those sales were through LPC. Do you have a reserve against those receivables and would you still be profitable with that reserve?
Yes, over the past several months we have made significant adjustments to respond to that situation and partly we've been selling our way out of the problem.
So you're still profitable after the reserve?
Yes.
You mentioned Initial D being on broadcast TV. Is that an announcement here?
That is not a formal announcement; that is simply something that I'm telling you with a great deal of assertion that we're going to make it happen. We've trotted it out to NATPE and a couple of other licensing shows, and the response has indicated to us that this is going to happen.
I see that Suncoast is going to get a spinner and I know that you had your R-L displays in there. Is that displacing your displays, or are they going to be there at the same time, or what's going to happen with that?
The standee was part of the April launch and we shipped it as part of that launch. We shipped it full with a particular assortment. They'll sell it out and those titles will find their way into permanent shelving.
Do you have any of the spinner pockets?
I believe we do but that's a real hard -- core sales question and I'd have to get information from our VP of sales.
How many books do you have in print now?
Our sku count now is in the high 200s, low 300s. Our 2003 publication schedule is still in flux, but that number will probably be up to 600 by the end of 2003.
I've seen some complaints on the comic retailer boards that they can't get certain of your titles. Are you having trouble keeping them in print, or is that a distribution problem?
It certainly wasn't helped by the events of the last couple of months -- the LPC/CDS situation. That didn't help things.
What's the relationship?
Simply the confusion about when we could ship and whether we were still tied up with LPC.
But the comic guys are getting their books form Diamond.
The more fundamental problem is responding to the unprecedented demand for our new products.
So these titles are passing out of print?
Some of them are totally out of print, and in addition to the numbers going up on our new releases, the reprint activity has been at historic highs. We just are getting used to this.
Absolutely, I would say certainly by Q4 we should have that locked down. But it's going to take another month or two, maybe three. Partly with a small company like ours it's a cash flow issue as well....learning the right mix, learning the right formula. Of course we had models that we were using, we just needed to ratchet those models up to reflect current demand. But I think that's a very fair observation because I hear it from every retailer that I talk to on the floor, 'This stuff's great, why can't I get more of it?'
Certain titles I've been hearing more that others, and I'll hear Cold Cut will get some and Diamond will be out or vice versa. It's been very spotty.
Yes, I can't disagree with that.
Any other expansion of distribution channels?
We're looking at a few things that we can't announce right now, but I think the obvious next market is some of the mass people, so we're looking at some of the big boxes.
So you're talking about Wal-Mart, Target, that market?
Yes. That will be a challenge for us in terms of what goes in there at what price points, and so on.
I suppose content could be an issue too?
It could be on some of the titles, yes.
The only other thing I would add to that is that we're certainly not content that we're doing even half the job we could with our existing channels. We think we're getting better, but there's an immense opportunity in the comic and bookstore market. We're doing a better job than we used to and we feel we're doing a better job than our competitors, but there remains a significant opportunity in those existing channels.
How does the share by channel break down right now in manga sales?
I can only speak for us, and the action is certainly on the bookstore side. The comic book business was the foundation for Tokyopop and it continues to be very important to us but the leaps-and-bounds gains are totally in the bookstores -- big chains.
So what you're saying is that the share by channel is changing rapidly?
Yes
And are the broader channels substantially larger than the comic stores now?
Sure.
And that's a growing trend?
Absolutely.
Any advice for pop culture retailers that want to get a bigger share of this growth?
People that aren't carrying us now?
Or people that are carrying you now but their sales are going up 5-10% a year and they should be going up 50% a year. Is it just a matter of the number of stores; that you're getting in stores where the comic stores weren't, so more people are being exposed to it; or are those people just walking by the comic stores to go to Waldens?
Let me address the first part of that question first. I think that what could happen in classic comic shops that wanted to increase their market share is for us to work more closely with them, and this gets into sales strategy, and although we've had our biggest increases in the bookstore side and have invested a lot of time and energy into that channel, we have a couple of new initiatives that are coming on line for the comic store market, from things that are as simple as standees and dumps that we've done before to the selling guides -- how to move this stuff, how to position it to customers, how to talk it up. I know this is all kind of common sense sort of stuff, but we think it's incumbent on us to provide that level of material and sales support to people who aren't as familiar with the genre and we're used to doing that at the corporate level with the bookstores because they don't get it. But I don't think it's safe for us to assume that comic shops necessarily get it.
The fact of the matter is that placement is huge. Getting shelf space is huge. And we're hoping that happens by word of mouth. We're hoping that with the success that our titles have in the marketplace that there's buzz, there's pressure on comic book retailers to put more product up, but we think the responsibility's also on us to get out sales material and selling materials that can help them. I don't think it just happens by putting product on the shelf.
Some of our stuff does that because of word of mouth, but we feel that an ongoing commitment to education in both of those channels -- both bookstore and comic book -- will help us do it.
One of the things we've been pushing for independent retailers is to put the stuff that's on TV in more prominent display areas that might attract the customer that might not ordinarily go into a comic store.
I think that's a very fair strategy. We have an As Seen on TV promotion that's being put together right now and it hits the channel in September. As you know, we have a lot of manga properties that have television exposure and that's a major campaign for this fall.
In what channels?
