Breaking Down ICv2’s Interview with Funimation Founder Gen Fukunaga

ICv2 posted an interview with Funimation founder Gen Fukunaga where he was asked about many issues including the state of the US anime market, timing of releases and the impact and future of legal and illegal downloading. What follows are highlights from the question-and-answer session:

• Mr. Fukunaga began by stated the obvious, that “illegal downloads are definitely an issue” and that “the main mode of monetization of the customer [DVD sales] is definitely suffering”. He also thinks that Japanese companies has “suddenly woken up” after seeing “the huge difficulties some of [Funimation's] competitors are having” (read: Geneon) and that they are “talking a lot about this issue”.

• They currently have 3 different download-to-own revenue generators – iTunes (the largest), PS3, and Xbox Live Marketplace – and they expect the revenue from those methods overall to double in 2008. Also, he tried to show how close the company is to the gaming demographic with the figure that “[their] Xbox deal is making at least 80%-90% of the revenue iTunes makes for [them]“. They plan to expand the number of titles offered on each service but Fukunaga said the bottlenecks limiting expansion are the ability of the distributors (iTunes and XBL Marketplace) to handle their respective large media stores and that that was more of an issue than them getting rights to do digital distributions through those channels.
• Probably the biggest headline out of this interview was the company’s plan to move toward more initial boxed set releases. Fukunaga said that they can’t stop single volume releases in some cases due to the contracts they make with the Japanese licensors but other than that, season set only releases are in the works for their upcoming titles. (Funimation is already beginning to do this by putting the first 13 episodes of Aquarion into a box set due to come out March 11 and has been easing into it with their four-part FMA box set re-releases.)
• On sub-only releases: they will producing those in the download-to-own area since “historically, those [type of releases] don’t turn enough to get [them] on retail shelves”. It’s “an unknown” regarding the physical disc market and the company is still contemplating whether they should proceed in that direction. They would rather have “titles that turn enough that [they] don’t have to even think about that — that we can dub them all because they turn enough.” That quote implies an inclination toward licensing more sure-thing titles that are guaranteed sellers like FMA.
• On lag time: Fukunaga pointed out that one of the benefits of waiting for titles to release in Japan is that they “can try to avoid the loser titles – the ones [they] know are going to bomb out because they bombed in Japan”. That “big risk reduction” component of their licensing model erodes if their releases move too close to the Japanese.
• On DVD remaining the dominant format: it’ll be “quite a long time” due to the still prevalent storage and bandwidth issues that would confront a consistent user of download-to-own and that HD will bring around the bandwidth problem anew so he doesn’t see a major change happening “anywhere in the next five years”.
• Shojo titles such as Kodocha and Peach Girl are weak performers because it seems that “females watch anime, but when it comes to collecting a DVD, males are the ones who are reaching into their wallets”.
• On where the market is headed: it “will consolidate further” with difficulties perceived on the ADV side – “who knows what’s going to happen there” (recent troubles include their magazine change and disbanding their club program) – and same goes for Manga Entertainment.

Funimation seems to be the only major company that hasn’t had problems recently compared to Bandai’s disc encoding hiccup and AD Vision cutting Newtype USA for what looks like financial reasons. This, along with being the market leader (share figures announced at Otakon 2007: Funi 31.2%, closest competitor 13.9%), put the company in an interesting observation point in this industry trying to regain part of its footing. They seem to be the most willing to try alternative strategies and have solid properties for the next couple years. Now if they can start putting series-specific manuals in their DVD cases instead of mini-catalogs and charts of upcoming releases, then that would incline me to get more hard-copy releases from them.

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