Artland falls into bankruptcy

  • As of the end of last month, Artland Animation Studio filed for bankruptcy, becoming the latest anime studio to shut down production, after Manglobe a few years ago. Recent titles that they produced were Mushi-Shi and this past spring's Seven Mortal Sins. But they were also involved in the production of a few major classics: the first Macross series and the Legend of the Galactic Heroes OVA.

    Man this really bites; just when LOTGH is finally put on a legal streaming service, this happens.

  • I guess Gainax is next!

  • This must be all chapter 7 bankruptcy. Manglobe suffered the same fate.

  • @Spaceshotx7 Chapter 7 is the most common type of bankruptcy in the United States; I don't know how bankruptcy law works in Japan.

  • Meh, as I stated before... "25% of anime is bankrupt"... Figures this be one.

    Other then Senran Kagura, their titles "are not of my taste" per se; recently they haven't done much, and Seven Mortal Sins a total disaster, tried to watch that....

    Probably went all in that title. Too much boobs, not good looking, not enough "plot". Or something. And, they really just too big. And.... Well....

    Indeed, as the real losers here are the Chinese, because it seems they bought a distressed asset and lost. No matter... It is only the beginning...

    I mean, have you seen Summer 2017? So many titles. No way they are all going to be profitable...

  • I think this is pretty sad for the legacy of the company and the people losing their job even though I haven't seen much of their work. But I guess this is to be expected given how anime production works at the moment, natural selection will have to happen at some point...

  • @the_krock said:

    natural selection will have to happen at some point...

    It happens all the time for smaller studios. Now it's affecting the newsworthy ones.

    @Zethus said:

    I guess Gainax is next!

    Gainax should have died 3 times over. They're stubborn that way.

  • @Nobu said in Artland falls into bankruptcy:

    @the_krock said:

    natural selection will have to happen at some point...

    It happens all the time for smaller studios. Now it's affecting the newsworthy ones.

    Well I guess so, but what I meant is that maybe there is too much big studios too (not that I'm happy about it though).

  • @thegrandalliance said in

    Probably went all in that title. Too much boobs, not good looking, not enough "plot".

    I think it's more along the lines of they were limited to what they could do by offended people because after each recap episode the anime seemed to get more toned down and quality got worse, when you have to constantly be stopped to go and remake stuff it's definitely going to put a big strain on your company. If they had just kept it like it was between episodes 1-4 it would have probably been more successful.

  • Its a co-pro with TNK and funded by Hobby Japan. So there's no way this one single title killed them or had any significant impact here. it probably helped contribute a little bit, but with another studio working on half of the show, and one of the nation's largest figurine manufactures throwing money at this thing, Artland was was doomed well before this project.

  • I don't think it's fair to blame Seven Mortal Sins on why Artland is closing. Studios make their money from Blu-Ray sales which don't normally happen until the end of the season, so for them to go bankrupt now probably means they knew ahead of Seven Mortal Sins' broadcast run that they would be closing and simply played out their obligations instead of canceling it altogether

    Generally studios invest in a bunch of money to make an anime, and then hope that the anime recuperates the losses via the physical purchases afterwards. If the show is a failure, they lose money

    So I would say the three-year gap between Mushishi and Seven Mortal Sins as a lead studio is what did them in, not their latest show specifically. There's more info in the ANN report:

    Teikoku Databank explained that even though the company continued to make popular works such as Mushishi, Artland's outsourcing costs comprised almost 90% of its production costs, and the company continued to accrue debt.

    Mushishi's revival was fine enough, but it didn't have half the success the original series had. They experimented with a niche show like Komori-san Can't Decline which was only two minutes in length per episode to see if they could turn a profit that way, and they also scaled back by putting out OVAs for their more recent shows, but they just kept on piling on the expenses even when they shifted to dormancy

    This trend is going to start happening more frequently as more and more studios struggle to keep up with rising production costs and/or dwindling talent

  • @Riles

    That assumes companies wait until the very last breath to file bankruptcy. However, it is generally the practice that companies file as soon as possible in order to avoid more losses, if the future is generally certain. Plus, the creditors who ultimately control the fate of the company may be able to force the issue.

    It is future expectations of revenue that was the approximate cause of the bankruptcy. Notwithstanding acute liquidity issues, I presume their creditors were waiting to see if their "last stand" anime would pay off. Given the apparent costs, and importantly so, low TV ratings/feedback/consumer response, the company decided/was forced into bankruptcy. It does not need to wait until the Bluray actually goes on sale, if it reasonably projects sales to be horrible. "Preemptive Bankruptcy", if you will.

    If the projected sales of Seven Mortal Sins was markedly considered not enough to keep them alive and continuing to make more titles, then they are already gone. Notwithstanding a miracle, of course...

    Conversely, if they had thought that Mortal Sins was to be a big hit, they would stay open long enough to recover revenues from sales. Indeed, as if a company is doomed to fail, they generally file bankruptcy protection before they actually go bankrupt, in order to avoid more losses.

    If you know your going to lose, you generally give up and don't wait until the very last minute before pulling out.

    In this sense, they don't need to wait to see realized Bluray sales if they already have very negative expectations. And, I would presume their creditors would decide the same and force the issue. They want you to close now, hope that there is still money left, and not wait until literally last moment, when all your remaining money is gone.

    Remember, Artland still owns some IP that is auctionable, so bankrupting now, selling off assests, and avoiding wasting money for another quarter, is advisable. Their equity may still be able to pay off at least some debts, if not in full.

    So yes, it is like the stock market. Things crash well on advance before they do, because people are not stupid and don't wait forever, of course. Or, perhaps simply out of fear. In either case, Seven Mortal Sins, co-produced with studio that does High School DxD, is a very costly title. The animation quality (volume of detail) reasonably well, the character models costly to draw; so they very likely went all-or-nothing on this title. Now, people want to get paid.

    Yes, the mismanagement of Artland could be a long running issue, but this title in particular was very costly to make from appearances. Yes, for last 3 years they could have had financial problems, but them alone was not enough to force it closed. Running losses, but still solvent.

    To argue @Riles that in effect, "they were going to file anyways, but waited to save face", would mean that the eventual performance of Seven Mortal Sins was irrelevant. You would also have to argue that creditors willfully kept them afloat well knowing it would cost them more with passage of time, because they already assumed it was doomed to fail.

    Also remember, a new, Chinese backed investor bought out the company after Marvelous sold it out around 2010. You would have to suggest to your point that the Chinese company bought into a company full knowing they would forced to bankrupt it later, regardless of what they did. Clearly, the investors speculated that they could "turn it around", but it seems their strategies to do so, failed.

    And you would have to argue @riles that, if they had done nothing, instead of dumping money into Seven Mortal Sins, that they still would have gone bankrupt regardless. You would have to argue that the spend on the title had no effect on the outcome, that "the 3 year gap" by itself was enough.

    And, you would have to argue, that revenues from past IP were negligible, unable to maintain simple licensing services.

    And unless, you are somehow arguing that their underlying IP wad somehow a gold mine ("1980s style corporate raiding"), your logic argument presented is disputed. Clearly, the reason they filed now, was in the false expectations of a big hit, not simply a matter of the calendar. Else, they would have shut the project down months ago and filed then.

    Indeed, as there is too much going here to assume a simple production gap is what caused the approximate bankruptcy. Had they not spent money on the title, the likely otherwise remaining funds would have at least kept them alive a bit longer. So thus, the performance of this title is what ultimately did them in. it is no coincidence that they go down upon launch of this title in particular. No matter... The real cause of their bankruptcy is poor project design; making anime most "normal" people would clearly find "problematic". Big Boobs are just not enough...

    They were simply too heavy this time, the ship sunk therefore...

  • Unless the studio attaches itself to the production committee, they don't see home media revenue. Pretty much the only money they see is what the committee pays them in order to make the show and pay employees. So disk sales, which are pretty good at the moment, are irrelevant to this brainstorming on why they failed because its all going to Hobby Japan.

  • @Getchman

    This assumes no performance conditions/commissions were attached to the contract. Being the lead production company, and their only title thereof, I fail to see why a company with 1 product would do so without a reward for success.

    Furthermore, if your claim was true, they were bankrupt ages ago. They would have not been able to last this long, their creditors foreclosed there upon. The reason it happened now, versus 3 months or whatever, was therefore out of expectation of possible positive performance.

    And, like you said, if they are on "production committee", which is sorta a legal wishy washe, then your arguement of course be negated.

    Anyways, I will admit that without concrete documentation, being a private company transaction, being able to definitively prove anything is speculative at best...

    Else, why would they work on a title for 3 years knowing it to be their last? Why don't they do something else, instead? Or simply cancel the project? Why did they insist upon using very high animation quality, from costly sources? Why did creditors continue to dump money into a failing studio? Why did they simply not bankrupt sooner, while cash burn was still lower?

    Clearly, unless you claim gross incompetence, which I admit is possible; this is Japan after all... case in point Toshiba/Westinghouse, there must have been some sort of future profit incentive. Regardless, least I leave you with this last question... If they knew Seven Mortal Sins wasn't going to be able to save them from day 1, why they make it in the first place?

    The logic thereof, puzzling, it is so...

  • Simple answer... If a project can keep you running, producing revenue, for three years (regardless if it will be your last) there is no reason not to do the project. I have to agree doing this as a co-op was likely a bad idea if the cut was as bad as mentioned here, but at the same time, there would have had to be a reason to do the project. The potential to make a dying company last an additional three years seems like one heck of a carrot.

    I can't believe they didn't realize this was coming before beginning their final project. The management of the studio would have to know that a single project will not save them. I would go so far as to expect they had projected the final revenue well before accepting the project provided they weren't contracted for home release rights. If they were contracted for those rights, temporarily reducing work-force (a temporary shut-down of unnecessary portions) till release could have a chance to provide revenue, would have made much more sense.

  • @pleco_breeder

    Perhaps, if this was a native company/founders wanted to hold out into the end, that would make sense. Japanese people die hard.

    But remember, Chinese invested just recently in 2016 yet again in.

    Unless you believe in the "overt generosity of the Chinese", I doubt they would continue dumping money into a studio if they knew it was a lost cause. Chinese investors aren't running a charity, especially one benefiting Japan and not their own people. Nor, one so inefficient, at that.

    So, this goes back to my point above... Given that the Chinese were running the ship, why would they do something stupid and loss leading like this? Just pull the plug 3 years ago, and cut the losses.

    Why would they continue to support, and thus devalue their investment, by adding on more debt because of Seven Mortal Sins? If they filled for bankruptcy 3 years ago, the value of the liquidation minus debt would be higher then then now, would it not? They only lose money by keeping them alive.

    In other words, @pleco_breeder , if your logic is true, and yes hypothetically it could make sense, your logic does not explain the Chinese aspect thereof. You would have to argue that the Chinese didn't care about management, are incompetent, or otherwise "running a charity".

    But yes, it is the Chinese element in this equation, that makes the Artland bankruptcy all the more peculiar, it is so...

  • what makes you believe they were working on it for three years? Also, they have been doing other things since their last lead project. Background work, production assistance, in-between animation. you know, the stuff all studios do to keep busy and pay the bills when they aren't the lead studio of a show

  • This argument assumes that they were taking a loss on production. It is much more likely, when the Chinese element is taken into consideration, that the studio was only recently running into negative numbers. Given the number of studios being excessive, as given in the opening arguments, it's bound to happen that work will run out for some of them and reach a point where effective management will realize it's time to leave the industry. Most of these studios, not being willing to risk potential gains from investing in production committee, operate on a set baseline by contract before beginning a project. If the studio wasn't getting new offers, or too few to operate, it makes more sense to pull out now. I'm not familiar with the structure of the production committee for Nanatsu no Taizai, but am fairly confident that the studio (knowing that it was in trouble before) would not have risked potential gains for after release of a single project if it would bankrupt the company. A risk like that isn't logical when it's so easy to calculate the cost of production and base a contracted agreement in order to continue operating till the well that is available work dries up.

  • @Getchman

    Yes, but as I edited me post above, it was only June last year that Haoliners (Chinese) invested in the company:

    If the "3 year gap" was to blame, why did Artland get bought into only recently? They must have wanted something...

    Yes, whether it took 3 years or not to do Seven Mortal is undefined I will admit; I only use this time reference in relationship to @riles argument, but what is true they did not have a lead project for three years. Yes, they were doing secondary work in that time ad you suggest nevertheless, they must not have been doing too poorly financially... just of last June, which likely Mortal Sins would be in development by then, new money came in.

    Unless the Chinese are simply corporate raiding Artland and stealing their IP and talent, bankrupting the company, I would presume they invested with the expectation of a profit incentive. Else, why would they put money into a losing company last June?

    It makes no sense, otherwise. Good thing I found this ANN article for once, as now me is surely more confused...

  • I have to admit that I was a bit confused also till you mentioned Haoliners. Every Saturday evening, I set aside to specifically watch the Haoliners block on Tokyo MX2 even though it meant having to come home an hour and a half earlier than necessary. For the Spring season, it was your standard Haoliners anime shorts (two episodes crammed into a half hour block). However, the Winter season was more of a focus on the talent and staff of their artists. It was specifically mentioned several times, by their directors and producers on the show, that they were working to build their talent by headhunting in Japan and South Korea.

    Knowing that, and assuming that this studio was in trouble causing the sale in 2010, it makes a lot more sense to me to simply raid the company for any assets, continue operation till it was no longer needed, and allow the company to become bankrupt.

    Haoliners does most of their in-between animation in Korea where it is quite a bit cheaper. Animation isn't the expensive part of production, but cut costs where you can. If they own the company, it only makes sense to make use of your most cost efficient option. Voicing is done in Japan, but that has more to do with the talent agencies and very little involvement in studio work.

    To me this really looks like they were simply trying to gain a foot-hold in Japan for animation, bought the company to do so, and once established gutted it for any remaining valuable assets before allowing it to die.

  • @pleco_breeder

    Perhaps, but "recent" would mean within the last year, as that ANN story suggests.

    That, the Chinese company invested last June, something dramatic happened, that made them illiquid or insolvent. The timeline seems too narrow. Either Chinese didn't know what they are doing, or they mismanaged costs over the last several months.

    I would assume a Chinese buyin in 2016 would give them the working capital to handle such volatility; but perhaps not, as you suggest. Regardless, as to my point, the reason they filed bankruptcy this month vs sooner, was likely because they assumed future revenue would recover if the projected sales would be better. Indeed, if Chinese are running this boat, and they pulled the plug out now knowing that they failed, then my argument is bolstered.

    Furthermore your scenario, @pleco_breeder , which is plausible... Short term cost outsourcing product overruns (just look at how many different studios worked on that project) on Seven Mortal Sins over the last half year, would indeed mean that Seven Mortal Sins was the reason they went bankrupt, as my core arguement is thereof; in contrast to @riles who argues they were going down for years now.

    Else, yet again, why now, why Chinese would invest, and bankrupt, when they did. They could simply have waited until Artland filed on its own inevitably and scooped up assests at a lower price. Or perhaps, some "aggressive competition strategy forced them sooner, IDK.

    So many questions...

    EDIT: @pleco_breeder

    Yes, I think some sort of corporate raiding scenario is possible, but the timing is suspect. Why did they act in June 2016, why the rush... Why did they not shut it down sooner.

    Perhaps, they are not as bad off as implied. You can file bankruptcy simply to do so, of course.

    Indeed, regardless, had Seven Mortal Sins project not have been done, I don't think the otherwise underlying performance was enough to sink them. If Chinese bought them out in 2016 knowing it was a lost cause, it was likely the cost overuns on Mortal Sins that attributed to this cause. Else, I would expect that baseline revenue from licenses of their multidecade long catalog would be enough to keep the lights on.

    And, one would think in 2010, the situation was stabilized to some degree. No matter, I admit at this point, speculation is the best that can happen. Perhaps, if we can find out in the comming months what exactly Haoliners got by buying Artland, a studio that doesn't do much of it's own work, that would shed some light.

    In other words, if Chinese are raiding Artline, what are they getting from it? What assests/people are they getting? After all, there are many studios out there, why Artland? They kinda suck, of course...

    Of course, both arguments could be true. That is, they thought that they could turn around Artland in 2016, and if they didn't, they just raid it. Indeed, so many questions...

    Anyways, me needz to go watch "Fox Spirt Matchmaker" and "A Centaurs' Life" now. All hail, our future new Chinese Overlords!...

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