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dbzliveaction wrote:

excuse my ignorance but wouldnt the content publisher not do the digital distribution? why would they give it to and pay someone else to do that??

Core competencies and business strategies. Just because you're great at making games doesn't mean you're good at selling them. Think about a car dealership. Ford/GM/Toyota (generally) don't own individual dealerships. They leave the sale of the vehicles they make to someone else. Why? Because Toyota is really frakking good at making cars, so that's what they focus on. Let someone else worry about selling them. Same goes for media. You can be a brilliant screen writer/actor/game designer but not have a damn clue how to sell your stuff. Check out the relationship between Atlus and Nippon Ichi for an example more germane to this conversation.

dbzliveaction wrote:

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You could all save yourselves a lot of time and speculation by going here http://www.navarre.com/Investors/default.htm and clicking on Annual Report. They'll tell you all about why they want to spin off Funimation and what they'd like to get into in their 10K.

hmmmm, didn't save me time, dude thats HUGE!!! don't see them saying what they want to invest in?

See bottom of page 12 and top of page 13, part of their disclosure of risks facing the business:

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Technology developments, particularly in the electronic downloading arena, may adversely affect our net sales, margins and results of operations.
Our products have traditionally been marketed and delivered on a physical delivery basis. If these products continue to be heavily marketed and delivered through technology transfers, such as electronic downloading through the Internet or similar delivery methods, then our retail and wholesale distribution business could be negatively impacted. As electronic downloading grows through Internet retailers, competition between electronic retailer suppliers using traditional methods will continue to intensify and likely negatively impact our net sales and margins. Furthermore, we may be required to spend significant capital to enter or participate in this delivery channel. If we are unable to develop necessary vendor and customer relationships to facilitate electronic downloading or if the terms of these arrangements or are not as favorable as those related to our physical product sales, our business may be materially harmed. {emphasis added}

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My guess is they're looking to sell the company for cash to finance digital distribution, along the lines of Agila has suggested. Credit is still hard to come by.

excuse my ignorance but wouldnt the content publisher not do the digital distribution? why would they give it to and pay someone else to do that??

First, consider that software developers are not always the publishers ~ that is the point of Navarre's remaining publishing division, Encore. As they say in their 2010 annual report:

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Encore focuses on retail and direct to consumer sales by marketing its licensed content, without the distraction and financial risk of significant content development. The benefit to our licensed vendors is that they can focus on their core competencies of content and brand development.

And if they do publish, why would they rely on a 3rd party distributor? For much of the same reasons as many of them rely on a 3rd party distributor for physical media.

thanks for the info, interesting posts from knowledgeable posters

The only thing I am worried about is if this will mess with any of the recent anime's Funi picked up this year.

SilverPhantom wrote:

The only thing I am worried about is if this will mess with any of the recent anime's Funi picked up this year.

Being a "discontinued operation" means they are operating on their own set of books. While its a confusing phrase, its for the useful purpose of making sure that the division being sold is a going concern. And it means that if they are sold, they are in a position to continue their current operations without any disruptions.

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These two statements seem to be confusing capital value and cash flows. If the capital value of Funimation has gone down, its not because Funimation is a drain on cash flow, but rather because expectations of the anime market as a whole in 2005 were over-optimistic..

Just look at Navarre's debt service from the purchase. The Anime biz never produced for them what was promised back in 2005, but we can certainly say that Gen was very smart and sold at the top. Industry insiders expectations of the Anime market back then were so far out of line with reality it wasn't even funny. It was just like all those folks running around flipping houses thinking the good time would go on forever. Then the music stopped and lots of people suddenly discovered they didn't have a chair. The whole R1 biz is in the process of reverting back to the small hobby market like it was 11 or 12 years ago.

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And its the current capital value to Navarre that matters for the sale, not the original purchase price. For where Navarre is going and where Funimation is going, its become a conglomerate division to Navarre, and Navarre has no real interest in being a conglomerate corporation. If there's a buyer with better synergy, Funimation will be worth more to that buyer than it is as a profit center to Navarre, so they'll be able to strike a deal.

That's just the media narrative they are spinning against the sale. You know, to make it out as a positive, which is what they are supposed to do. Just like when a politician says it's a good thing that the economy only lost 33,000 jobs last month. 'Not terrible' is the new good, and all that. Conglomerates that are doing WELL don't usually worry about mis-matched synergies, they just keep cashing the checks.

Bob (aka Robert)
President
The Anime Corner Store

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announced that the company "received six indications of interest" from possible buyers of Funimation. Navarre expects that final offers will arrive within 30 to 60 days, but it cannot guarantee that these offers will lead to a transaction.

Oh, also, the ''6 interested parties" thing doesn't really mean anything. First off, Deacon has got to tell the shareholders something. And that could mean simply that 6 parties have signed the non-disclosure agreement to see the full sales package. I've sold a company before, and your investment banker will find lots of 'interested' parties that will file a non-disclosure agreement in order to see the financial info (the real info), but only a small portion of them actually ever submit an offer. Many of those will be low balls from distressed asset investor groups and get tossed, though the investment banker will try their best to play those offers against each other to try to increase the final sales value.

What I would rather have heard was that they had 6 viable offers. Or 2. Or 1. They should have 100 'interested parties' by now. I guess we'll see what happens.

Bob (aka Robert)
President
The Anime Corner Store

AnimeCornerStore wrote:

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These two statements seem to be confusing capital value and cash flows. If the capital value of Funimation has gone down, its not because Funimation is a drain on cash flow, but rather because expectations of the anime market as a whole in 2005 were over-optimistic..

Just look at Navarre's debt service from the purchase.

Same difference. Whether Funimation is paying for its purchase or not, its capital value to Navarre is whatever it is, and the original purchase price does not affect that.

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The whole R1 biz is in the process of reverting back to the small hobby market like it was 11 or 12 years ago.

This is why developing business models with lower up front costs and lower break even thresholds is important. If its possible to cobble together lots of little niche markets, that is much more sustainable than relying on cross-over successes in a single market ... the more niche markets have been collected together under one tent, the more rolls of the dice you get each year for a cross-over.

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Conglomerates that are doing WELL don't usually worry about mis-matched synergies, they just keep cashing the checks.

But Navarre was never intending to be a conglomerate. Publishing work developed by others is a natural off shoot of distributing work published by others, and localization of foreign media content seems at first blush to be more of the same, publishing work developed by others.

But, of course, its not.

OTOH, you're quite persuasive that only six expressions of interest is bad news for the attempted sale.

AnimeCornerStore wrote:

They should have 100 'interested parties' by now.

This statement is nice for its optimistic tone, but completely unrealistic.

Navarre is trying to sell a company which distributes DVDs (to a market which complains about them incessantly) while being told how to do so from Japanese businesses failing to understand (or care about) a market outside of Japan.

The fact there is only six interested parties, and not 100, is the reality of the situation.

Reality also has me believing FUNimation will not be the same company after a sale unless Gen is the buyer.

J-Head wrote:

Ok, for those who are like "Why does Navarre want to sell Funi?" listen up: Navarre is a software company. They, themselves, have nothing to do with what Funi does. They bought Funi, think it was a good investment, and it was. I don't know where V has gotten his news, but Funi has kept Navarre afloat, because Navarre's real business of software is as poor as can be. Navarre let Funi do what they wanted while providing the distribution back-end and was able to profit. It was a good relationship.

However, Navarre actually wants to re-focus on software, and they recognize that Funi needs someone who can help them tackle some of their larger goals, which Navarre cannot. It is (supposed to be, we will see) win-win.

This is pretty much in line with what I've been reading from their 10Ks and annual reports over the past few years. Unfortunately, despite Funi being one of their top cash inflows, Navarre isn't doing so hot as a whole within their core industry. I think that this is a way for Navarre to get some needed development capital and to divest itself of a unit that doesn't really mesh with what Navarre's long term goals are.

But that's just me.

Funimation is not one of Navarre's "top cash inflows." In fact, Funi is one of their smallest divisions that contribute the least amount of capital. It's discontinued BCI divison was actually considerably larger with higher cash flow, despite being unprofitable.

Funimation has contributed a significant percentage of the company's overall profit in some quarters, and a significant portion of its losses in others. It's an entertainment company and as a result it's performance can be irregular and unpredictable.

Navarre wants to raise money for it's much larger core businesses of software sales and distribution. It makes sense to shed the companies that don't fit in that plan, especially when they are in a declining market, particularly ones with sporadic performance like an entertainment company.

Also, you could only get a limited idea of how Funi was doing over the years from Navarre's 10ks, because they were lumped in together with the much larger BCI and Encore divisions. They never broke down specific totals for each until Funimation was listed as "discontinued operation".

PetrifiedJello wrote:

Reality also has me believing FUNimation will not be the same company after a sale unless Gen is the buyer.

FUNimation will not be the same company after a sale if Geneon is the buyer.

Fixed.

Of course, FUNimation does not aspire to remain the same company. That might reduce the odds that it will be bought by someone who wants to force it to remain the same company despite the view of the present management.

agila61 wrote:

Fixed.

My statement wasn't broken to require fixing.

agila61 wrote:

PetrifiedJello wrote:

Reality also has me believing FUNimation will not be the same company after a sale unless Gen is the buyer.

FUNimation will not be the same company after a sale if Geneon is the buyer.

I think he was talking about Gen Fukunga.

i see funimation has just announced that they are delaying the release of hetalia, east of eden, fullmetal. maybe our buyer friends have has requested that?