Atari vs. FUNimation Update: Advertising Shortfalls
Published by 19 November 2007, 5:52 PM EST,

Everyone’s favorite battle in the Dragon World — Atari vs. FUNimation — continued onwards today with Atari’s next quarterly report (also delayed, but quite as delayed as theirprevious quarterly report:


We are a party to two license agreements with FUNimation Productions, Ltd. (“FUNimation”) pursuant to which we distribute the Dragonball Z software titles. On October 18, 2007, FUNimation delivered a notice purporting to terminate the license agreements based on alleged breaches of the license agreements. We dispute the validity of the termination notices and have continued to distribute the titles covered by the license agreements. We and FUNimation are currently in discussions regarding a “standstill” agreement that would permit them to discuss and attempt to resolve the issues under the license agreements that resulted in FUNimation delivering the purported termination notice. There is no assurance that the parties will agree on the terms of the standstill or that they will be able to successfully resolve the issues under the license agreements. While we believe we have valid defenses to the purported termination, in the event that FUNimation is successful in terminating the license agreements it could have a material adverse effect on our results of operations and financial position. We have recorded an additional $2.8 million expense related to the FUNimation dispute during the six months ended September 30, 2007. This amount is comprised of an additional royalty expense of $1.2 million and $1.6 million related to minimum advertising commitment shortfalls. As part of this dispute we have reduced our FUNimation prepaid license advance by approximately $0.8 million during six months ended September 30, 2007 and have a liability of approximately $2.5 million as part of royalties payable as of September 30, 2007.

So what is this actually saying in non-corporate-ese? Basically, their battle is still on-going, they have already put $2.8 million into the fight, and they expect more to go into the whole scenario.

The phrase “minimum advertising commitment shortfalls” is a striking one. Could one one of the reasons FUNimation is going after the license be the fact that Atari has not put enough advertising support behind the franchise? Certainly we have seen the amount of television advertising drop over the years (think back to Budokai 3 ads). Filter was subcontracted and involved with some new-media advertising on Atari’s behalf during the Super Dragon Ball Z era (as shown by our giving away a copy of the game based on their involvement back on Podcast Episode #0045), and we were never able to get in touch with anyone at Filter regarding subsequent games. That being said, Shin Budokai: Another Road Flash banner ads have been all but unavoidable as-of-late.

In a nutshell, it sounds like everyone is still at a “standstill” and money is being pumped into the battle. As you know, Atari has completely bowed out of the game development business; this does not seem to affect Dragon Ball in any way, since the last games they developed (as opposed to simply licensing from Japan and distributing) were Dragon Ball GT: Transformation (GBA; August 2005) and Dragon Ball Z: Sagas (GCN/PS2/Xbox; March 2005). Sparking! METEOR (“Budokai Tenkaichi 3”) for the PS2 is on shelves right now, and it looks like it will still be coming out for the Wii next month.

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