WEA Corp. and Central Park Media announced today that WEA is going to take over distribution of CPM's audio and video products, effective December 1st (see 'CPM signs with WEA').  We talked to CPM Managing Director John O'Donnell about the deal, why now was the right time, and why CPM went with WEA.

Why did you decide to go with an outside distributor?

They made us an offer we couldn't refuse.

Were you evaluating the over-all question and looking at a number of different distributors?

We've been approached by probably eight to nine major and independent distributors over the past several years, and we decided that now might be the time to pay attention to what they were saying.  And of those who were saying different things, WEA was saying very good things, so we went with them.

Does WEA have any other anime lines?

They used to distribute Manga Entertainment (which was purchased by IDT) and they moved their distribution over to Fox.  It left a hole over at WEA, and it also gave us the confidence that WEA obviously knows the anime business cold, because of their very successful years of relationship with Manga Entertainment.  So it was very reassuring to us to know that not only were we working with one of the top four record distributors in the world, but someone that had very in-depth, multi-year experience with a company as close to us in look, style, and feel as could be imaginable, and that was something that definitely gave us a lot of comfort.

At one time CPM sold to a lot of individual retailers.  Are you still doing that?

We do.  We sell right now to a large number of independent retailers; we sell to wholesalers like Diamond, Baker and Taylor, and Ingram; we sell both one-step and two-step.  WEA, of course, will probably be selling to ten times as many direct accounts as we carry, and will also continue to sell to Diamond, Baker and Taylor, Ingram, so they also do both one- and two-step distribution.  This will be for our video and audio products, not our book products, of course.

You mentioned that over the years you've been approached by a number of different distributors, and you decided that now was the time.  Why now?

A couple of reasons, mostly springing from the fact that they made us an offer we couldn't refuse, and they had the experience in the category so we knew that when they were talking to us they knew what they were talking about.  The second reason is that at this point in the industry's growth, it was nice to be able to hire 135 salespeople all at once.    

Do you feel that the anime market is maturing, and that this decision is a reflection of that, or do you feel that there's a lot more potential growth, and that this decision helps you in that direction?

I think there's plenty of growth for the anime category going forward; however, I think the retail environment in the next five or ten year period will be very different from the retail environment of the last ten years.  Specifically, what I mean by that is that a larger proportion of sales for the home video industry is going to a smaller number of retail accounts.  If you look at consolidation at the retail level, think of somebody like Blockbuster.  Fifteen years ago, Blockbuster's share of the video market was lower than it is now.  Fifteen years ago, Best Buy wasn't an element in home video; now it's huge.  Wal-Mart fifteen years ago wasn't doing anything with video, now depending on who you talk to, it's 30-40% of the home video market.  When you have guys like a Transworld buy up a Wherehouse when that goes out, they buy up Coconuts, they buy up FYI, you're getting more and more consolidation at the retail level, which basically means you have fewer buyers to deal with, but each buyer becomes more important to you. 

At some point in time, it becomes a strategically important asset to be able to offer your products in conjunction with a whole line of other products, so when you're dealing with these people, it's more big company to big company.  The consolidation at the retail level over the last couple of years and the expected consolidation in the future is probably a good reason for the indies to consider allying with someone that's got more sales force, more logistics capability, more MIS, things like that. 

Anything else you want to say about the deal?

We're ecstatic about it.  We think the potential is to grow two to three times over the next year to a year and a half; we think that there will be many accounts that will be open to us now for the first time;.we think that there are many accounts that will now do more business with us; and we can't see any reason at all why sales would drop.  So we're pretty excited here. We think that there's just massive growth for our company, and we're very much looking forward to the whole thing.