After a generous hour of interviewing on July 5th, he returned to the FUNimation booth for some quality time with the cast of Ouran High School Host Club. Jackie Smith, Senior Public Relations Manager also took part in the interview. This interview took place in a busy third floor hallway of the Los Angeles Convention Center. While the interview was recorded, certain sections of the audio were difficult to transcribe due to the excessive background noise.
Part 2 Highlights:
[RQ]- … When you talk to somebody who would love to work in this industry. And they look at you, as one of the pillars [of the industry], saying “this guy made it. I may not have an MBA from Columbia or anything, but I have a passion for it.” What do you say to them?
[GF]- Seriously… there’s really to two routes to this. This kind of a complex answer so you can whittle it down to whatever you want to tell your fans, but I’ll give you the complex answer first.
There’s really two ways of being an entrepreneur, either you go the route I sort of went. Which was: you build up a great track record in regular industry. You know, you get right degrees and that’s where it really helped, I guess. The MBA helped me get the respect from my investors that would make them write me a $2 million dollar check.
You know, if I were a high school drop out, I’m not sure they’re writing me a $2 million dollar check. You know what I mean? So, the question is so if you get that resume built up to some stage where you show that you really can run something… That’s one route, you know. And that route is less risky because if you do it, by the age you get to that point, where people have that confidence, you might be in your 30’s or 40’s or something. They usually don’t even ask you to bring any money into the project. They just fund the whole thing. They pay you the salary, actually. Give you equity, since you have already proven yourself in front of them…
Of course the other route is just go for it. Much tougher route. When you go that route because your concept for something has to be so damn good that somebody is going to put money in just because the concept is so darn good. Well, most venture capitalist people don’t think that way. The way money people think is the lowest risk way to go is you put money into a management team. And you don’t care what widget they’re selling. The management team will find a way to make… of money out of that widget because the management team is so good. Therefore, there is no risk of worrying what the heck that widget is. Because guessing what the right next widget is, you know, making for a darn report, right? So that’s how these people think all the time. I know a lot of them, believe me. And so that why it’s gotta be “but I’ve got the cure for cancer,” you know? Or “I’ve got a patent that’s unbreakable,” or something. So if you’re going to go that kind of route, either you’ve got something like that with the huge barriers to entry or the huge obvious idea. Or you’re just going to have to barrow from friends or relatives and actually prove that there’s a business there. Start selling something, and actually show that there are sales. Investors like if at the end of the day, they’re always concerned about…is there really a customer base like you’re saying there is. That’s the big question. Is there someone that’s actually willing to put money/ give you money for your product? Until you prove that point, that’s why it’s so hard to get money just for a concept. So if you can start a little something going, in your garage, that shows you’ve got sales that’s when you at the breaking point, to paraphrase.
[RQ]- …You mention sales, what other metrics do you use?... What do you, as Gen, what do you look for?
[GF]- Oh, when I look at shows? Well, I strongly look at this. Profits will come out of it, the deal structure. I assume the deal structure is going to work out like one of our standard deal structures. If it doesn’t, then we pass on the title, of course. I look for sales. The way I look for sales, obviously, is I look for what I know sells DVDs in the North American market. First and foremost. That’s still going to be the bulk, 80%, of the revenue sources for DVD’s today. In today’s market and for years to come. I look for DVD sales. And therefore I start looking by genre, you know, action/ adventure, comedy, or whatever. Or I know what genres sell relative to other genres. I look at who the creative team is. You know, if it’s CLAMP it will sell more DVDs than other titles. I look at fan polls. I look at ratings from Japan. I mean, I look at data, data, data, you know? [I’m] an electrical engineer kind of guy. We look at a lot of data, and still at the end of the day, it’s such an inexact plan. With all that data, you still have to have incredibly good subjectives, experience at knowing what titles will sell, through experience. But you’d never get that without the data… Data and instincts, you know, or objective opinion that has to blend really well together to know what’s going to work with your market… We do huge spreadsheets. I have spreadsheets this big for each thing we do, about this tall…
[RQ]- … how to do you attract top talent?... What do you look for?
[GF]- How do we attract top talent? Well, one is that actually being in Dallas-Fort Worth, there aren’t national level entertainment firms that compete for the talent. So, anybody that wants to be in the entertainment industry automatically knows about FUNimation already if they’re in the area, you know. However, the word is out there already, you know. Even though there’s a lot of other work, like commercial work, or plays, theater, all sorts of people are really good at doing certain things. The entertainment space is not national exposure level, companies there. So that helps actually attract the talent because people that want to work and have fun like this…
But then we have a pretty stiff screening process. We’re looking at everything, and to be honest, typical for any company. Whether it’s us, or Hewlett Packard, or Yahoo, or anybody, we look for all sorts of things regarding experience and education. Everything from grades to previous grade outs, reviews you’ve had with previous management at other companies, to just the general feel during the interview can grow on you, for a whole day.
[RQ]- … Honestly, as you were saying, you’re looking at spreadsheets much like theatrical and distribution for a video company.
[GF]- In some ways that’s a big advantage for us. The problem with some in the entertainment industry is that they’re run by people that aren’t business and numbers/ know the numbers, and all those things. They’re run by purely creative people. They like some shiny thing over there, and they’ve got to have it, and overpay for it, or whatever. We tend not to fall in that trap too much because of that. We have a blend of creative, and solid business and numbers people… That strategy really keeps us intact.
[JS]- We don’t always all agree. Everyone makes their best case…
[GF]- You got to have some consensus. No one person’s going to be smart enough to figure this whole industry out, right?
[JS]- You never know who you’re going to find…
[RQ]- Even as little as two years ago, we didn’t know if it was going to be hddvd or blu-ray… Do you see any other technical bumps on the horizon?
[GF]- Now that blu-ray’s won, that’s going to be a big boost, I think… I think the biggest change right now is what’s happening on the digital frontier and the mobile frontier. Mobile is very nascent right now, and so really not much on it. But, because there’s not a lot of revenue there either… We’re just making the right deal structure to have our foot in the door, ready to ride the wave, right? The harder the foot in the door, the more it’s going to carry you, you know?
[RQ]- You have Sprint, and you have AT&T now. That’s not bad.
[GF]- That’s one thing that could take you ten years, or never. Thank God, we got in there now. That’s huge for us. We’re ready to grow with that industry.
In the internet/ digital, we’ve been gearing up for years on that. Our own site gets a million uniques a month. We’ve got our own in house webmasters and everything.
We are ready for digital. We just are now formulating all the pieces and what it… takes to really do each one right. We had kind of a bungled attempt on social networking. Certainly, we don’t want to do another shoe string budget fiasco like that. We’re going to do everything right… At least it will have a real shot. Or, it will be with a partnership with a source who has got it right. We’re all open to partnerships. We’ll get it right this next time.
[RQ]- … [concerning casual fans and core fans] What’s your focus on the box set versus the singles?
[GF]- We feel that the box set strategy will certainly be more attractive to casual fans as well as core fans. Casual fans are too used to buying Hollywood series that way. They go buy their Desperate Housewives, 24, or Battlestar Galactica. It’s always season boxes. That’s what they’re used to from Hollywood. Obviously, Hollywood dominates the industry, not anime. We should always be kind of a follower of Hollywood strategy because we have no choice, more than anything else, right?
I mean, it’s hard to buck that trend, you know? If Hollywood says, “no, we’re going to price everything at $30,” it’s hard for us to go out and say, “but anime should be $80.” You know? I mean, that’s the problem, right? Because a guy sitting at Best Buy has got Battlestar in one hand and he’s got Shuffle! in the other. And one’s twice as much, what’s he going to do? I mean, that’s the problem.
We feel it would help catch more fans again because now they can buy it the way they are accustomed to buying it. They can get it… And not wait a whole freaking year… You know what I mean?
But actually what I think that would be much more helpful to the casual fans is again, the whole digital initiative. … it’s not going to be DVD. Whether it’s box set or not it’s not going to be on DVD…
[RQ]- … As far as the technical aspects of it, are there any other glitches you run into with blu-ray?
[GF]- Yeah, blu-ray is great. There’s nothing wrong about blu-ray except for us the cost of goods. You know, more of an internal business issue… A little more to author, of course, that’s because it’s technically more difficult. But it gives more flexibility.
The biggest, biggest, biggest, biggest, biggest issue we raise is region free. Which I view is not an issue. It’s a perception issue by the Japanese, which makes it my issue. Well, it’s not an issue at all from really, a financial point of view. Because the Japanese have this perception that American blu-ray is going to flood into their market, you know, their issue has just become my issue. You get that perception, [that] incorrect perception, [then] that’s the case.
[RQ]- Do they have any data to support their position?
[GF]- No. Absolutely, none.
[RQ]- It’s just all feeling right now?
[GF]- Oh yeah. Oh yeah.
[RQ]- … Any other announcements we can expect through the rest of the year?
[GF]- We’re going to be announcing probably, I’m optimistic, but you know, slower deals timeframe. The major distribution deals for the FUNimation Channel carriers, I guess you call them. The few other major sites like YouTube, for the internet VOD deals. A few major deals for digital assets and virtual goods. And a few major titles. And I’m very optimistic we’re going to close this summer at one of these cons be able to [share]…
[JS]- And we will have an announcement.
[GF]- Yeah, we’ll have one big announcement… Then we’ll probably have an announcement, hopefully by Otakon.
[JS]- We’ll definitely have new one at Otakon, and hopefully one really big one at Otakon.
[RQ]- … [on the subject of less players in the market] Has that changed your whole management style at all? Has it stayed pretty much the same?
[GF]- No. Style… no. The whole thing that has changed in our industry is just the different mechanisms to get titles now. Digital, mobile, DVD, whatever. Different mechanisms now they’re touch to consumers, you know. That are fighting for consumers’ time, really. So many things fighting for their time.
[JS]- And let me add regarding brand engagement, FUNimation started as a very grassroots organization, and it’s going to remain that way. No matter how much of a market share we have, we still consider [participating in] events like this, and other big anime conventions, and the operation anime program, and our FUNimation films program. We consider all those direct to consumer programs integral to what we do. We like to speak directly to them… or should I say with them.
[GF]- It’s all part of listening… to the fans, so that we can do the right job, you know?
[RQ]- How has your experience been at this AX versus previous ones? Has it been different for you since just because we’re in a different venue?
[JS]- I would say it’s always been packed, it’s always been crowded. Our rooms this year have more space. Those of us that are working it, don’t feel as packed as usual. You know, we’ve had such an overwhelming… not overwhelming, but a very positive reaction from everybody... especially with the Ouran fans.
[GF]- Yeah, Ouran is big.
[RQ]- … Does it really shock you? You’ve seen the numbers.
[GF]- Yeah I have, but that genre is tricky. You know, tricky genre. If that were male action show like Full Metal, I would have had a lot less apprehension.
But I was just shocked. When we went into video that big live room 1 and I saw the size of that room. I said oh no more than a third of it is going to get filled up when we do the Ouran because all we’re doing is announcing the cast.
[RQ]- It was packed, right?
[GF]- Packed! I was like, oh my God, what is this? Oh yeah! Packed with screaming fans! I was like, wow it’s going to be something, yeah. I think it’s going to be big for us.
[RQ]- … You talked about being surprised. Have there been any other titles you have been surprised by over the last couple years like that?
[GF]- Well, I don’t know if I’d say surprised, but Full Metal’s obviously a record breaker. In a lot of ways it broke a lot of records, Full Metal did.
Witchblade, last year. That title didn’t do that well in Japan initially. But because of the, probably because it’s a US IP, and there’s these hundreds of thousands Witchblade fans that exist over here. That crossover is a big difference…
It was the number 1 selling animated series, anime series last year… It was the number 1, non-movie title. Non-movie anything.
[RQ]- NPD, or which database?
[GF]- Nielsen, VideoScan. Yeah but, not by small amounts, you know? Witchblade was a very nice, well, I wouldn’t call it surprise. We counted on that extra group of fans. We counted on getting the anime fans and the listening hardcore Witchblade fans, that read the comics for years. We planned that double dip, and we got the double dip. Full on, double dip…
You know, because they had no buzz coming the US because it didn’t do well in Japan and so nobody knew. No nobody really knew about it. But they missed these really well produced shows, too. Of course, you got to still sell the good content, right? You can’t fool the people, okay? You can’t fool the people, no matter what brand name you slap on it. They just forget about it. But, the guys are good. Thank God that good content matched up with good brand. When that happens, it’s magic. You know?
[RQ]- … Is there anything else you’d like to say to our fans or anything? Anything at all on your mind?
[GF]- Well, obviously we highly appreciate the fans just because that’s how we reason we’re in business. We go to work everyday, of course. So we want our fans to tell us what they want. That’s what we’re here to cater to.
You know, I think right now the issue that’s happening right now is the illegal fansub title has really damaged the market quite a bit. I think a lot of fans don’t even realize that they’re illegally downloading stuff. That they’re [the downloads] illegal, you know? They don’t realize that just because it’s not licensed in the US, that doesn’t make the content free. Somebody still owns it, you know? You’re taking the money away from the Japanese producer, the Japanese writer, the author, creator. Those guys own worldwide rights on that brand, you know?
So just because Disney’s Mickey Mouse, let’s say, didn’t make it into Tunisia doesn’t mean that therefore you can just rip off Mickey Mouse in Tunisia. Disney still owns those rights to Mickey, you know what I mean?
That’s the same thing. Just because it’s not licensed to somebody else doesn’t mean somebody doesn’t own it. That damage, obviously, then when somebody does license it, we have to pay a lot lower price because it’s been damaged, right? Then that creates a domino effect of bad news.
[RQ]- … [on the subject of what it will take to stop the domino effect] Any guess as to how much time we’re talking about? Are we talking about a decade or so?
[GF]- Well, we’re trying to do things like day in day subtitle release with Japan… We’re working on a plan to same day take downs with our licensors. So that even though it’s not licensed to anybody, a group of us can help take down the title. Even though we’re not selling the title, we can take it down on behalf of the Japanese licensor. You know, like we did with Baccano! So, things like that. We’re working on all sorts of initiatives.
But one of the most important issues is to get the consumer what they want legally so they don’t have to go to the net… The Japanese licensors are preventing it. FUNimation is dying to do it. The Japanese licensors just won’t do it…
[on the subject of forming consensus] That’s right, that’s the problem. Several of the smart people know… Certain people know that’s what has to be done and are smart enough to know what it demands. And a certain percentage, well, may not care about it…
[RQ] Certainly, I appreciate your time for the interview. I know you have another interview coming up right after this. Thank you both again for taking a break from your busy schedule to talk…