What Happens When A Japanese Licensor Goes Out Of Business?
by Justin Sevakis,
What could happen if a Japanese Licensor went out of business while their shows are still licensed? Like, for example, back when Funimation had Fullmetal Alchemist, what would've happened if Aniplex went under? Would Funimation have kept the license or would it have been reverted back to Japan?
It's happened a few times in the past: a licensor goes out of business while a show or manga is still in print outside of Japan. What happens then? There's two answers to this: what happens legally, and what happens in real life.
Legally, if a licensor licensed a show or manga to a publisher, and they had the full right to do so at the time, the contract stays valid for the full length of the license period, no matter what happens to the licensor. Most contracts have some sort of provision for what happens if the publisher runs out of money or goes out of business, but very few cover what happens if the licensor goes out of business. So, it's basically business as usual for the publisher. Except, they don't have anybody left to pay royalties or send reports to, and nobody to approve anything they do. Legally, it's sort of a get-out-of-jail-free card for their ongoing obligations.
On the Japanese side, whatever rights the company owned would get bought out or passed on to another successor company. That new company has no arrangement with the publisher, but they own the rights to the title. That ownership has value, and many times, the new company wants to make that known.
At this point, the new owner needs to re-establish control over the property. They will approach the publishers that already had deals to release the series in question, and establish contact. They may opt to honor the old contract, but advise that they are the new point people to ask about renewals and approvals. They may also ask for a contract addendum, to connect the contract to the new company with only minor changes. At that point, things can continue as they had been -- reports get filed, royalties get paid, and assistance with approvals and materials happens like it should.
Or, what has happened in the past, is that the new licensor demands that the publisher treat the old agreement as cancelled, and negotiate a new one from scratch. They don't have any actual legal leg to stand on in asking for this, but if the publisher ever wants to renew the agreement, get approvals, or license anything else from that licensor, the publisher really has no choice but to play ball.
Most of the time things like this are handled quietly, but back in 2006 we got to see what happens when this sort of thing goes completely sour. BIBLOS, the publisher of the yaoi-focused Be x Boy Magazine, went bankrupt after making a bunch of bad investments. The rights to most of its manga was later purchased by Animate Group, and put under a new publishing company called Libre. Several publishers had licenses to BIBLOS titles, including Tokyopop, Digital Manga, Kitty Media and Central Park Media.
We don't know what happened next with most of those publishers, but they seemed to have settled things with the new management amicably. Not so much with Central Park Media; Managing Director John O'Donnell had a well-earned reputation for treating signed contracts as sacrosanct, and was not willing to negotiate a new deal on properties he'd already signed and paid for. After being rebuffed, Libre went to the extraordinary step of publicly announcing that the bankruptcy had nullified the previous contracts, and that CPM's continued releases of the titles were "illegal."
There were no lawsuits or other action regarding these titles as far as I know. If Libre had sued CPM they probably would have lost. (Disclaimer: I am not a lawyer.) And CPM did release a few more volumes of the series in question. But the bridge was burned. CPM never would have been able to work with Libre again in any capacity -- no new titles, no renewals, no assistance with materials. It didn't really matter anyway -- CPM was on the ropes, and had already laid off many of its staff. The company filed for chapter 7 bankruptcy and closed two years later.
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Justin Sevakis has worked in the anime business for over 20 years. He's the original founder of Anime News Network, and owner of the video production company MediaOCD. You can follow him on Twitter at @worldofcrap.
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