For Tim Anderson, pursuing a childhood interest meant starting niche a business, Madman Entertainment, from his bedroom. Together with Paul Weigard, co-director, Anderson has learnt the steps of growing a niche business.
He’s a self-confessed geek, and always has been. But Tim Anderson’s brand of geekiness is a savvy business tool that’s helping Madman Entertainment to bring in an annual turnover of $50 million.
As Madman Entertainment celebrates its 10th birthday, founder and co-director Anderson reflects on how far they’ve come in the last decade. The business got its start after he was on the lookout for anime (Japanese animation) and found the availability and cost of sourcing from local suppliers limiting. Sensing a niche, Anderson decided to import directly from UK distributors, and set up his modest mail order business while still at uni.
With his business firmly established in his bedroom, the next step was to officially license some titles. And with a growing list of contacts with several copyright owners, Anderson managed to get a few licensing deals over the line. These included contracts for exclusive distribution rights, so instead of importing products he used masters and artwork to manufacture the programs locally. When the time came to distribute into retail outlets, it put an end to the mail order business. The bedroom office came to an end soon after.
One of the early turning points for the business was when Anderson borrowed money from his mother to license a big name series, Neon Genesis Evangelion. “Within a few weeks of signing the deal, I was lucky enough to make a TV sale to SBS, which recovered the entire investment.” The VHS sales also went well, funding the purchase of further rights, including their first mainstream hit, Dragon Ball Z, and the business slowly grew.
After further hits, and a few years, Anderson brought friend Paul Weigard in as co-director. Experienced in distribution, the partnership with Weigard encouraged aggressive growth, and Madman Entertainment created its own distribution operation.
This growth also meant the business could diversify into other product offerings, including art house cinema, Asian cinema, and television programming on DVD.
But all this growth required adequate financing. Initial sales funded early growth, but when Weigard’s arrival heralded significant expansion plans—including new labels, distribution channels and greater diversity of product—they needed a boost to the cash flow to make way for this new growth.
Using their bank’s debtor finance facility for around 18 months proved the best method, but Anderson says the key was relying on that method for a short time, rather than as a long-term solution. “We didn’t want to be heavily in debt, we wanted to be cash flow positive, so we gradually shut down that account and we’re primarily self-funded now.”
As the business grew, the duo created more formal processes and strategic planning to ensure the senior team translated their vision across the business. “There’s not just myself and Paul as decision-makers; there are a lot of other people looking after their own areas and they need to know what direction the business is going in to ensure that growth continues.”
When the business first started, distribution was outsourced, but as soon as the business started to grow they acquired the resources to handle this in-house. Control played a big part in that decision. “Paul and I like to see and control the important parts of the business, which is part of the reason we started up our own distribution company. In a lot of instances we believe that if we do it ourselves we can get the best results. And, of course, there’s no margin being added on, either.”
Their roles include travelling the world to licence more products, and managing the internal marketing and publicity team, DVD production, editing, voiceovers, sales and distribution, and printing divisions. “We believe we’ve got a much better product, a much faster turnaround and better prices by doing it ourselves.
“We’ve got a wide variety of product, but we’re still offering product that’s niche-style programming and it’s marketed directly to audiences that are passionate enthusiasts. Whether it’s anime, art house film or martial arts cinema, there are these target markets who are intensely passionate about it.”
Speaking of passion, Anderson says this is one of Madman’s key points of difference. The business was born out of interest rather than a means to make huge amounts of money and this vision has been maintained throughout the expansion. “Of course, in the back of your mind you hope it’s going to be successful, but the motivation was more about working on something you enjoy.”
This is reflected through the 130 staff, who he encourages to package and create the products as if they were selling to themselves. “If we’re passionate about the business and they can see that and we hire people who also have some passion for the business, it becomes its own reward.
“And it’s a fun environment,” he says of the toys and posters decorating the office. “But at the same time we try to have a balance of professionalism and accountability, to make sure we’re running an efficient business, as well as a fun business. So far the balance has been pretty good, and staff retention has been great.”
Staff played a big part in the decision earlier this year to accept an acquisition proposal from distribution and marketing group, Funtastic. When they were initially approached, Anderson and Weigard had little interest in taking up this or similar proposals. Then, after looking at what they wanted for future growth of the business—including publishing and merchandising arms—and strategies to take these steps, Madman decided to reconsider. It was important that whatever offer they accepted, it had to be in the best interests of the business, and it became clear that Funtastic offered the best proposition. “Funtastic were a great strategic fit for the growth of the business, and they were a great cultural fit. We got along well with the senior management team and the whole process has been very positive.”
The conditions of the sale ensure the team remains intact and Anderson and Weigard retain a lot of control and say over direction. “Funtastic are about buying good businesses that fit their strategic vision as well, and good people to run those businesses. They’re not interested in buying a business and then absorbing it.
“It’s really them looking to us to grow the business and us looking to them for support, with economies of scale and other kinds of cost-saving benefits.”
So far, not much has changed with the day-to-day running of the business, “although I’m feeling slightly more responsible!” And while it’s relatively early days, he’s confident it was the right decision.
With more than 90 percent of the market share, competition is not a huge concern for these madmen, not that they’d rest on their laurels. For Anderson, staying ahead of the competition is simple: “Some of these companies are doing it for the wrong reasons,” he says. “The reason we have, at last count, a 97 percent market share is because we do a great job. We understand the products, we buy the best stuff, and we’re in touch with the fan community.
“We create labels or brands and then create communities around them. Our website gets hundreds of thousands of hits, we run the largest online bulletin board for anime and manga fans in Australia, we print a free anime magazine to distribute in stores and we attend conventions Australia-wide. We really are in touch, grass roots, with the people buying this stuff, and that’s the key differentiating part of our business.” The website also offers free movie trailers, wallpapers, newsletters and podcasts, which is essentially all free marketing, Anderson adds.
These days, around half the business is made up of the anime and cult animation and kids’ products, with the cult television, Asian movies and theatrical division making up the other half. This meant becoming experts in all aspects of rights management, including airline, hotel and pay-TV sales, as well as new media formats, such as online and IPTV, to ensure they continue to service the licensors and maximise results for them and the products they represent.
There’s always the regret of the one that got away, the deals that didn’t get over the line or titles that didn’t go as well as they’d hoped, but for Anderson there are few regrets in the 10 years of the business. Especially considering the success of the ones they did get, such as theatrical release, Kenny. This acclaimed ‘mockumentary’, made for around $500,000, went on to make $1 million in box office sales in the first two weeks. And DVD sales are expected to be equally impressive. “Kenny has been a phenomenal success.”
Obviously the aim is for more of the same success, and continued growth into publishing, merchandising, toys and apparel, as well as children’s programming. But one thing is clear for the 2004 Southern Region Ernst and Young Entrepreneur’s of the Year: “I couldn’t possibly see life beyond Madman!”
Tim Anderson’s tips for success:
1. Be passionate about what you’re doing. If you’re in it just for the money, this will show through to your customers.
2. Never be content; keep improving what you’re doing.
3. Try to learn from everyone you meet.
