TOKYOPOP Inc.

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TOKYOPOP Inc.

5900 Wilshire Boulevard, Suite 2000
Los Angeles, California 90036-5020
U.S.A.
Telephone: (323) 692-6700
Fax: (323) 692-6701
Web site: http://www.tokyopop.com

Wholly Owned Subsidiary of TOKYOPOP, K.K.
Incorporated: 1997
Employees: 100
Sales: $40 million (2003 est.)
NAIC: 511130 Book Publishers; 512110 Motion Picture and Video Production; 512230 Music Publishers

TOKYOPOP Inc. is a leading publisher of manga and anime, or Japanese comic books and animation. Within a few years of its launch, the company had helped turn an Asian cultural phenomenon into one of the biggest publishing sensations in U.S. history. Sister companies are also active in Europe. TOKYOPOP's investors include Trans Cosmos USA Inc., Japan's Softbank Finance Corporation, Mitsui Venture Capital, Nissho Inter Life Company Limited, Nippon Venture Capital Corporation, Tekinvest K.K., Impress Group, and Rentrak. "Manga for us is a lifestyle," TOKYOPOP executive Mike Kiley told online publication ICv2 News. "It's a way of characterizing the world, it's a way of expression that isn't specific to Asia, although it has its roots there, so we see ourselves at the forefront of the manga-ization of the country."

JAPANESE ORIGINS

TOKYOPOP Inc. was incorporated in California in early 1997, a subsidiary of a Japanese parent formed the previous year. Its founder, entrepreneur Stuart Levy, was introduced to Japan's $4 billion comic book phenomenon, called manga, while working as a consultant in the country's multimedia industry.

Manga differs from traditional American comic books in a number of ways. The artwork is highly stylized; characters typically have outsized eyeballs and pupils and spiky hair. Manga also portrays a wide array of subject matter, far beyond the traditional superhero theme. Plots tend to be complex.

Levy had launched Mixx Entertainment Inc. in 1996 with a reported $500,000 raised from Mitsui Venture Capital Corp. and Nippon Venture Capital Co. Based in Japan, Mixx would be the parent company for the U.S. business; it was renamed TOKYOPOP, K.K., in 2003.

According to the Los Angeles Business Journal, Mixx started with a magazine to bring Asian pop culture to the United States. Later, another $2 million in capital was raised from the original investors as well as Trans Cosmos USA and Rentrak Corp.

LAUNCH OF TOKYOPOP.COM IN 1999

Around 1999, the web site Tokyopop.com was launched. It was expanded as a kind of Asian culture portal, offering e-mail and instant messenger services. It had both paid and free levels of membership. It acquired another Asian culture site, GoldenSilk.com, in 2000. TOKYOPOP.com was a product of the University of Southern California's Annenberg Incubator Project (EC2).

John Parker, president and chief operating officer, told the Los Angeles Business Journal the company was not growing entirely smoothly, however. It decided to focus on traditional retailing channels rather than the magazine and e-commerce. TOKYOPOP also got a new investor, Softbank Finance Corp., a major shareholder in Yahoo, which provided about $10 million (¥1 billion).

Sailor Moon was TOKYOPOP's first product to be translated and export to the United States, according to the Nikkei Report. The Japanese language version had been a huge hit for Kodansha. TOKYOPOP was not the first to publish manga in the United States, but it became a major force in bringing manga to the mainstream. Part of the trail to youth acceptance had been blazed by animated video game characters (especially Nintendo's Pokémon).

One of TOKYOPOP's biggest anime and manga titles was Initial D, the story of a tofu delivery boy turned street racer. A phenomenal ($300 million) hit in Asia, it even spawned a remote-controlled model of the hero's Toyota Corolla and other autos from the series. Other huge manga hits for TOKYOPOP included Love Hina and Chobits. Cine-manga, introduced in the late 1990s, would be one of TOKYOPOP's greatest areas of mainstream success. It was based on existing characters from movies and television.

TOKYOPOP expanded into anime (animated) DVDs and video game soundtracks around 2000. However, the diversion pushed the company into red for a couple of years, noted the Los Angeles Business Journal. Revenues were $7 million in 2001, and were expected to more than double as the company accelerated its product releases to one per day. By early 2002, TOKYOPOP was distributing its manga comics and anime DVDs to 100 U.S. retailers, including Suncoast Motion Picture Co., Borders, and Best Buy.

The company experimented with the format of its products before it found a bestselling formula for the U.S. market. It eventually settled on what would become known as the "manga format," according to Publishers Weekly. This was a five- by seven-inch paperback. It helped TOKYOPOP keep retail prices below $10.

An important change was adopting the traditional Japanese layout of books: essentially the reverse of Western style, reading "back" to front (i.e., the spine of the book on the right) and right to left. This differentiated the product and added an exotic feeling. It also simplified production for licensed Japanese books, since they only had to be translated, not reformatted, from the original version. Further, the layout change also tapped into the spirit of adolescent rebellion. "It's something they understand and their parents don't," COO John Parker told the Los Angeles Business Journal.

LAUNCH OF RISING STARS IN 2002

TOKYOPOP was known for licensed productions it imported to the United States from Japan, beginning with those of the publisher Kodansha Limited. It also began to foster American talent with its Rising Stars of Manga contest, launched in 2002 to discover new artists in the United States, and develop an inventory of original English language (OEL) manga. The Rising Stars program was soon expanded to other areas of the world. The company had also found success with Korean comics, called manwha.

By 2002, Mike Kiley told ICv2 News that large bookstore chains were accounting for most of the company's sales growth. Around this time, TOKYOPOP introduced a video game-style rating system to advise readers of potentially alarming content in some titles.

TOKYOPOP had successfully brought some of its titles to hundreds of mainstream bookstores by 2003. The next year, it tried its hand in the mass retail market, testing sales in a handful of department stores including Wal-Mart and Fred Meyer, reported Publishers Weekly.

Manga was evolving to suit different audiences. Shojo, specifically tailored towards "tween" girls (ages 11 to 17), was one of the most popular subgenres. Marmalade Boy, a complicated type of Brady Bunch story, and Fruits Basket were among its biggest hits. The Stray Sheep series of children's books debuted in the fall of 2003.

COMPANY PERSPECTIVES

TOKYOPOP is hailed as a leading youth-oriented entertainment brand and an innovator of manga creation, with a revolutionary artistic vision that transcends countless platforms. From the introduction of the first-ever extensive manga publishing program in North America, to the development of its mangaoriginated intellectual properties into film, television and digital entertainment, TOKYOPOP has changed the way teens experience pop culture.

The parent company, TOKYOPOP, K.K., had revenues of ¥53 million in 2003. TOKYOPOP founder Stuart Levy told the San Diego Union-Tribune that sales had doubled every year since its founding, to about $40 million in 2003. In an interview with Publishers Weekly, Levy estimated the size of the U.S. manga market at about $150 million in 2003, with females making up 60 percent of readership. Manga's popularity in Europe had also been growing over the previous decade. A London subsidiary, TOKYOPOP U.K., Ltd., was launched by 2003, followed by a German unit.

MORE COMPETITION AFTER 2003

By 2004, TOKYOPOP was publishing 500 titles a year. While it was a leader in the manga field, it was not alone in the United States. It faced competition from VIZ LLC, a San Francisco-based outfit with Japanese backers that had been publishing since the 1980s. Major publishers were also muscling their way in, such as Random House with its imprint Del Rey. In 2004 TOKYOPOP was estimated to have a 3 percent share of the total U.S. market for comic books, magazines, and graphic novels. The company had a 50 percent market share of manga exports to the United States, according to the Nikkei Report.

In January 2006, explaining a round of layoffs at the company, which employed 100 people, Kiley acknowledged to Publishers Weekly that the manga market was becoming more competitive. Even Archie Comics and DC Comics had begun to produce manga titles. TOKYOPOP's growth rate had slowed to 40 percent in 2003, according to the Journal of Japanese Trade & Industry.

In February 2006, the New York Times reported several New York publishers were courting TOKYOPOP for its distribution rights, looking for a way to offset lagging sales among traditional publications. Client Distribution Services (CDS) had handled fulfillment for TOKYOPOP since 2002. They apparently understood its business. "We're radical, crazy, teen-pop-culture guys who do a lot of wild stuff and who have to turn on a dime," Kiley told the Times.

In spite of backing from its new parent company, Perseus Books Group, CDS lost the distribution deal to HarperCollins Publishers. According to TOKYOPOP publisher Mike Kiley, the company had grown 800 to 1,000 percent in just a few years and needed a larger distributor. There were also creative synergies involved; TOKYOPOP agreed to produce manga spinoffs of certain HarperCollins titles, including works by teen author Meg Cabot. HarperCollins CEO Jane Friedman told the New York Times that her company was especially interested in manga since it had a larger appeal among females than other types of comic books. TOKYOPOP continued working to put its products in front of new audiences. Its manga was beginning to appear in newspaper comics sections.

PRINCIPAL COMPETITORS

A.D. Vision, Inc.; Dark Horse Comics, Inc.; Del Rey Manga; VIZ Media, LLC.

KEY DATES

1996:: Parent company Mixx Entertainment, later dubbed TOKYOPOP, K.K., is established in Japan.
1997:: Subsidiary TOKYOPOP Inc. is formed in California.
1999:: TOKYOPOP.com is launched.
2002:: Rising Stars of Manga contest is launched to discover new U.S. talent.
2003:: TOKYOPOP manga storms mainstream bookstores; U.K. subsidiary is launched.