ICv2 recently caught up with John Ledford, CEO of A.D. Vision to talk about the market, ADV’s changing strategy, and its plans for the future.    

In Part One of this two-part interview, Leford talks about the current status at ADV; ADV’s changing strategy; some new anime announcements; his assessment of the anime market in North America, and the changing licensing environment.

In Part Two, we continue our discussion of the changing licensing environment in Japan, ADV’s strategy for subbing vs. dubbing, and pricing and packaging; the status of its catalogue; the state of anime on American TV including the Anime Network, and ADV’s plans for Blu-ray releases and for its product mix in the future.

How did ADV come through Hurricane Ike--are the people and the business OK?

We came through OK, thank goodness.  The most important thing is that no one was hurt, no one lost their home.  A few of our people lost power for a week or so, but everyone came through all right.

Our business was down from the Thursday before Ike hit until two  Mondays later.  Fortunately the facility didn’t take any lasting damage.  Our studios, our servers, and our offices came through unscathed. 

Pulling back a bit, how is ADV doing as a company (it’s obviously been a tough year, and a lot of people are wondering if you’re going to survive going forward)? 

Well I can certainly understand their curiosity.  It’s been a tough time, no doubt.  Everyone’s been working extremely hard to get our business refocused, and we’re already seeing positive results. 

Clannad

We do!  We’re working with a new partner, Sentai Filmworks, which just acquired a number of anime titles.  ADV is providing localization and some distribution services for Sentai. 

Some of what Sentai’s brought us will be familiar to fans.  Mahoromatic and Mahoromatic: Something More Beautiful had been part of Geneon’s catalog, as was Tsukihime.  Pet Shop of Horrors was first released years ago by Urban Vision.  These are all great catalog titles that we’re going to help Sentai bring back to store shelves, beginning with a Mahoromatic collection in January.

We’re also working with Sentai on a brand new series, Clannad.  It’s a 24 episode teen comedy that did really well for TBS [the Japanese TV network].  North American fans have been waiting a long time for this.  Sentai’s got the license, and ADV will bring out the first of six DVDs next April.

We’ll have more announcements in coming weeks, both from Sentai and from Switchblade.

Has ADV been able to attract any new capital since the breakup with Sojitz?

In the short term, the breakup with Sojitz forced us to reinvent our business.  We’ve reached out to new partners and focused on our core strengths, localization and distribution.  Our arrangement with Sentai Filmworks is an example of this.  There are others we’ll be announcing in the weeks to come.  It hasn’t been easy, but we’ve reached an equilibrium that works and is sustainable.

There are a lot of stakeholders out there rooting for ADV, both here and in Japan.  They realize that you need more than one or two distributors to maintain a healthy market, where the full range of anime gets its shot at retail.  That’s brought some very creative thinking from the business side, some new kinds of licensing arrangements.  I think eventually it will become necessary for ADV to scale back up.  When that happens, the capital will be there.

How many employees does ADV have vs. a year ago, and do you feel like you’ve got the company rightsized for 2009?

Full time we’re at about 30 employees, with a smaller number of contract employees working with us on a regular if reduced basis.  That’s not counting voice actors and translators, of course.

Anime is a strange business.  You need a lot of specialized talent to make it work, and you need people who know the landscape.  I don’t just mean translation or localization, but everything on down the line from licensing to production to sales and distribution.  You can’t just walk into an anime production and expect to get it to market (at least not if you want to do it profitably).  

My challenge over the past year has been to streamline ADV without hurting any of our core competencies.  I think we’re there. What’s more we’re a lot more nimble and scalable than we were before.  Ramping up will not be a problem when the time is right.

How does that compare to a year ago?

A lot less, that’s for sure! 

What’s your assessment of the current North American market for anime, both in general and for DVDs?

It’s the same story:  Anime is popular, more fans than ever are watching, and DVD sales are in the doldrums.  So there’s an opportunity but also a very grave challenge.

The internet has changed everything of course.  Whether you’re talking piracy or legitimate pipelines, the Internet has multiplied the worldwide audience for anime many, many times over.  And it’s only growing.  There are some really interesting legitimate platforms for watching anime online taking shape.  I’m happy with the overall direction on that front.

The problem is that the money generated by legitimate anime streaming and download doesn’t come anywhere close to replacing lost DVD sales.  That’s true for pretty much everyone in entertainment, but it’s particularly true for anime. 

DVDs turned us from a nation of media “viewers” into “owners.”  It’s those purchases that fueled today’s anime market, because they meant we could afford to license a broad range of titles--not just the very top TV-driven franchises.  Now the internet is pushing anime fans in the opposite direction, and the consumer needs a compelling reason to buy.  

Big titles still sell well.  Appleseed: Ex Machina is a great recent example.  It’s a big action spectacle that fans don’t just want to watch once.   They want to own it.  Same with any Final Fantasy release or Miyazaki film.  These are anime events, and everyone benefits when we get one, because they drive fans to the store.

At the other end of the spectrum are niche titles.  Or, since anime is a niche, maybe they should be called ‘super-niche’ titles.  We can make money with these because the up-front licensing cost is low, and there’s a core base of fandom big enough to support them.  With these titles our profit may come from ‘long tail’ sales after a sku has hit store shelves.  But these super-niche titles are reliable, and you can make a good business out of them.

Where things get tricky is in between the big hits and the smaller niche titles.  Series that are strong but may not be world-beaters.  Viewership is larger than ever, thanks to the Internet, but fans just aren’t buying DVDs like they used to.  And when the costs stay the same, you’ve got a lot of solid, quality productions that end up running in the red. 

That’s why right now the best business to be in are the hits and the ‘super-niche’ titles.  Anything in between can kill you.

Are you seeing any impact of the recent credit crisis on sales?

Not yet.  I’m not sure we will.  It all depends on how things play out. 

Like any home media, anime DVD sales are fairly recession proof.  A downturn might keep you from going on vacation, but that’s all the more reason to pick up the boxset you’ve been thinking of for the last few weeks.

ADV has now announced two new imprints--Sentai and Switchblade.  Why are you using these new imprints, and how will the releases sold under those imprints differ from those sold under the ADV brand? 

Well as I explained Sentai Filmworks is a separate company, not an imprint.  The same is true for Switchblade Pictures, which specializes in live action films of the “Asian shock” variety.  Neither of these two companies are part of ADV.  Amusement Park Media [A.D.Vision’s independent production company] does all the localization and production work on their titles.  ADV Films handles their home video functions for them.  We essentially work as a distributor and service bureau for them and we are actively seeking other companies and labels to work with.

The Switchblade Pictures titles have a distinct identity, given what they are and how they’re packaged.  In that sense Switchblade is its own brand.  But from a consumer standpoint the titles we’re distributing for Sentai are indistinguishable from anything else in the ADV catalog.  We treat all the different outside company’s works we work on and represent as if they were our own. Any job worth doing is one which should be done with excellence.

It sounds like a new model.  Does this reflect a change in Japan’s licensing strategy for the American anime market?

A lot of people are thinking very creatively right now on both sides of the Pacific about how we can change the business to put it on a more sustainable footing.  But third party entities like Sentai Filmworks or Switchblade Pictures aren’t new to the scene.  Neither is contracting a partner for distribution or other services.  These days it’s not unusual to see a Japanese producer bypass the traditional licensing process to contract its own US localization and distribution partners a la carte. 

You mentioned that there’s more purchasing of services a la carte.  We’ve seen that before in the U.S., as in the relationship between 4Kids and Funimation on Yu-Gi-Oh!, or on something like Full Metal Panic: The Second Raid, which Funimation distributed and you guys did the localization for.  Is this trend toward a la carte services more a matter of property owners wanting to move more deeply into the market under their own brands, or is it just companies looking for more efficient ways to divide up the tasks that need to be done to get a Japanese property out to the U.S. market? 

One might say that it’s a little bit of both.  Second Raid was one of Kadokawa Pictures USA’s first licenses.  As the name suggests, they’re a US subsidiary of a Japanese company.  It made a lot of sense for them to use Amusement Park Media for the dub, because ADV had already handled the original Full Metal Panic as well as the spinoff Full Metal Panic: FUMOFFU?  We could bring continuity to the English dub quickly and inexpensively.  For packaging and distribution they went with Funimation in a completely separate transaction.  You’d have to talk to them about how that worked out.

Click here for Part Two.