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Inside the asylum

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aa12-oct-nov-2005-inside-the-asylumAll successful niche-market entrepreneurs have one thing in common: an enthusiasm for their work that extends far beyond mere profit-lust. Tim Anderson and Paul Wiegard embody this maxim. As founders and co-CEOs of Madman Entertainment, Australia’s largest distributor of anime DVDs and independent cinema, they understand better than most that setting up shop inside the customer’s head is the best way to earn respect and commercial success in the dog-eat-dog entertainment industry. By Paul D. Ryan.

Monday morning, 1 March, 2004. In a ground floor warehouse in Collingwood, the stickers are designed and the printing presses are ready to roll. In California, it’s Sunday night and the Academy Awards ceremony is about to begin.

To this point, it has been a calculated risk; preparing the stickers, which sport the gleaming gold-finished bust of Harvie Krumpet atop an Oscar statue pedestal, with the words, “2004 OSCAR WINNER” running along the bottom.

It’s a long shot, but the team at Madman Entertainment is ready, huddled around the glow of a television in the filtered warehouse light, banking on a win. As the announcement comes though that Adam Elliot and his quirky animated short film, Harvie Krumpet, are, indeed, Academy Award winners, a muted cheer can be heard outside on bustling Smith Street. The printing machines whir into action. Within two days, 18,000 Harvie Krumpet DVDs, each badged with the triumphant sticker, are in stores around the country and selling out fast on the inevitable wave of pride that swells behind an Aussie Oscar success.

THE EYE OF A CHILD

Tim Anderson is tall and lean, with broad, sweeping shoulders and closely cropped hair. He’s wearing a comfortable grey pullover and slacks, which could be considered formal attire compared to the digs worn by many of his funky young employees who wander the Madman corridors to the rhythm of their own private soundtrack. Anderson has the easy, languid presence of an Olympic rower and the gentle demeanour of an artist. But he’s a big kid at heart.

“As a kid I was a huge cartoon fan,” he says. “I grew up in country Victoria and used to buy comic books with my pocket money. We only had two television channels. One of the great things about coming to the city was being able to wake up at 5.30 in the morning and watch these great shows like Gigantor and Astro Boy, which I later found out were Japanese animation (anime).”

Paul Wiegard sums up his business partner in one line. “Tim’s a 15-year-old trying to get out of a six-foot-seven, 30- something body.”

Anderson leads me on a tour of the Madman offices, distribution warehouse and printing press. It is a far cry from the video mail-order business that he started on the side during his time at Melbourne University in the early 1990s. It was here that he first met Wiegard.

“The mail order thing was just for fun, really,” says Anderson. “I was importing a bunch of anime titles for myself and twigged that there might be a market for them locally. I researched science fiction and comic fan clubs and started going to collectors’ fairs with order forms and mailing lists.”

Anderson officially started Madman Entertainment in 1995, and began negotiating contracts to license the rights to titles rather than import them. He admits that this just covered the rent in the first three or four years. He funded the business through part-time work and reinvested all the revenue from successful acquisitions back into the company.

During this time, Wiegard graduated from university, began a humble “pay-the-rent” job at a CD distribution company and within 12 months had earned a position in upper management. He started a video distribution label within the company, distributing some anime titles referred to him by Anderson, as well as building it into Australia’s first Hong Kong martial arts label and a leading art house/world cinema label. When Anderson moved from mail-order to licensing, he used Wiegard’s label to distribute his titles. When Wiegard’s company closed its doors about five years ago, the two friends went into business together.

A CONFEDERACY OF MANIACS

Madman distributes approximately 90 percent of anime DVD titles in Australia and New Zealand. It’s a Microsoft-like market share. The company has been responsible for distributing anime smash hits such as Dragon Ball Z, Spirited Away, Neon Genesis Evangelion, Akira, Cowboy Bebop and Ghost in the Shell, as well as the classics: Astro Boy, Transformers, He-Man, Fat Albert and Robotech.

The company also has a successful art house cinema arm, largely overseen by Wiegard, and its own onsite print facilities for custom packaging.

In 2004, Anderson and Wiegard were named Southern Region winners in the Ernst & Young Entrepreneur of the Year Award. It was high accolade for a couple of anime and cinema nuts who built a company around the nucleus of their passion.

“I got involved out of sheer love for the entertainment medium and for distributing the works of producers from all over the world,” says Wiegard. “It’s like a drug for me. There’s something different every month. You really never know what’s going to come across your desk. For all sorts of reasons (social, economic, political), certain subject matter has traction and then it doesn’t. It’s an unusual business.”

Central to Madman’s success, particularly in distributing the anime genre, has been the company’s commitment to nurturing close ties with the sub-cultural communities that form the company’s core customer base. Madman’s website is the online hub of the anime community in Australia, with millions of hits per month.

“We are niche programmers, so we’re very much into sub-cultures,” says Wiegard. “If we don’t understand the sub-culture of the specific audience, then it is of no appeal to us. We don’t buy a title just because it seems like it will plug into a certain equation.”

A PADDED CELL

As Anderson guides me through Madman HQ, we bump into several young designers and techies dressed for the street. As they pass us in the long, narrow hardwood corridors, they nod at Anderson and, invariably, smirk and look to the floor, as though Tim has shared the secret with them on condition of confidentiality.

“I believe there are hardcore fans, of which I’m not one,” he confides. “I really appreciate and enjoy the stuff. Then there are hardcore business people who only design businesses to make money. I think I walk a nice balance between the two of those. My entrepreneurial instincts in this case have made this passion something that is a viable business.”

Edgy indie music cuts through the mechanical hum in the print and distribution warehouse on the ground floor beneath the offices. We pass vast shelves holding open boxes of DVDs — John Safran vs God, Spirited Away, Bowling for Columbine, Donnie Darko. A wall is plastered from floor to roof with a montage of colourful, grungy street posters of anime movies and other titles Madman has distributed over the past decade.

“Over the last 10 years of being in business we’ve basically learnt to back our own judgement,” says Anderson. “We’ve taken plenty of risks along the way, but almost all of those risks have payed off. I think entrepreneurs in general are risk-takers compared to the local community. But you have to believe that the risks you take are based on your own good judgement.”

THE QUICK AND THE DEAD

Madman’s organic growth and structure enables it to operate with a level of dexterity that its burly competitors cannot hope to match. (“We’re like agile chimps,” Wiegard observes dryly.) Anderson suggests that the company’s niche is resilient because the major film companies are averse to taking risks. Their obligation to provide shareholders with a steady return on investment means that their products are inevitably homogenised.

“They take out any extreme, jarring elements in their titles so they appeal to the wider community,” he says.

In Anderson’s view, there will always be opportunities for smaller, niche companies to grab cutting-edge content produced by independents. “Once you’re established in these specialty niche areas, it’s very difficult for the big boys to muscle you out without them having to take uncharacteristic risks.”

But Madman doesn’t operate in a vacuum. Some of the bigger film companies are acknowledging that anime ‘works’ on the world market and have begun channelling more resources into content production. Warner Brothers produced Animatrix in 2003 and Sony-Tristar, being a Japanese company, has projects in the pipeline.

The children’s anime market is heavily contested, but as Anderson observes, backing the right release is “like throwing darts at a dart board”. For every Dragon Ball Z and Pokemon, there are 10 other titles that everyone thinks are going to be the next big thing, that lose plenty of money and get returned to the distributor.

It is here that Madman earns its 90 percent market share. The company’s staff and customers are often one and the same. If a release hits a false note with these anime fanatics — or those who post on the Madman website forums — then it is unlikely to sell in the general marketplace and Anderson usually steers well clear. The same system works to his advantage when trying to identify the next big thing. This intuitive connectedness is almost impossible to replicate at a major company.

It’s all about relationships. “Doing business in Japan is a lot about trust and respect,” says Anderson. “Over the past decade, they’ve come to know and trust us. They have faith that we do business honestly and respectfully and that we always protect the reputation of their product. We always put more effort into producing these things than perhaps we commercially need to.”

VOD KILLS THE DVD STAR?

There has been talk lately that DVD is killing the cinema star, just like DVD killed video, video killed radio, and so on. For a profitable company like Madman, whose main revenue stream comes through licensing and distributing DVDs, does the prospect of downloadable video-on-demand (VOD) pose a significant threat?

“Of course it’s a threat,” says Wiegard. “It’s about managing the experience. We’ve always acquired film for fans. Ultimately, the consumer is the judge, based on the quality of the experience. I don’t think we’ll ever replace that instinctive hunter/gatherer urge in our veins. People just like to collect and own things. It’s all about freedom.”

Anderson and Wiegard place great emphasis on the details of each Madman product — like providing bonus DVD content and innovative packaging solutions. It’s based on the philosophy that it is the little things that make the product more than just a movie in the eyes of customers. For evidence of this commitment, you need only stroll around Madman’s buzzing Collingwood HQ, where entire wings of the building are dedicated to refining the Madman entertainment experience – bonus content specialists, web designers, illustrators, a custom print and packaging centre.

Both Anderson and Wiegard believe their niche areas have an intrinsic appeal that will endure beyond present and future challenges, such as the potential rise of VOD. The movie rental industry is far more susceptible, because it relies mainly on the multi-national top ten box office — “the popcorn films”, as Wiegard puts it. Madman works hard to diminish the disposability of its products. When customers feel a loyalty to the products they purchase, they gradually develop loyalty to the brand.

“Ultimately, you need local marketing for any sort of resonance with a film,” says Wiegard. “It would be foolish to think that it will work just because it’s on the net. It’s a very noisy environment out there. To be found takes a significant amount of effort.”

Anderson and Wiegard have no plans to list the company in the foreseeable future. They see no need for a large capital injection and it is Madman’s status as a ‘fast’ private company that ensures its competitive edge in a tough market.

Ultimately, all commercial success begins with the ardour of entrepreneurs and their ability to inspire their staff and customers. For Anderson and Wiegard, this has never been a problem.

Tim Anderson has a refreshingly sane take on the Madman mission. “Paul and I make the decisions that define what our company releases because, ultimately, what we release defines our company. It’s quite simple, really.”

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