Earlier today, ANN reported that Anime Expo is currently in debt. The convention’s parent company, the Society for the Promotion of Japanese Animation (SPJA), recently discovered that the company holds an outstanding debt of $700,000 after incurring a $1.2 million loss in 2010. The debt is primarily owed to IDG World Expo, a convention promotion services company, though other vendors are also waiting on payments. Anime Expo is currently reporting a $100,000 profit for the last fiscal year, which they will use to offset the debts incurred in 2010.

The loss in itself is fascinating, if only due to the fact that many see conventions as the safest of all facets in the industry. To have the industry’s biggest show post $1.2 million in losses is something that’s unheard of in the modern market, and it will indeed rattle the faith of some industry observers.

There are a number of factors that could work into such a loss, from the venue, to the costs of business. However, in cases such as this, the answers are often much more simple than they first seem. In particular, the most glaring issues include the following:

  • Anime Expo saw a year-over-year decrease in attendance, from 109,000 turnstile to 105,000 turnstile. In years where turnstile totals were taken, unique ticket sales differed by a factor of 2.47 to 2.72. With this in mind, and estimating a factor of 2.5 for unique-to-turnstile conversions, we can estimate about 42,000 ticket sales – a decline of 2,000 ticket sales.
  • Fewer vendors attended in 2010, due to a number of reasons that mostly stemmed from the recession.
  • The vendors that did attend needed to be reimbursed for loading fees. In 2010, vendors were required to use LACC labor to load in and load out product, which added to their costs and created a number of complaints within the dealer community.

At its most optomistic, Anime Expo 2010 could have pulled in $3.15 million. This is consdiering that every single purchased ticket was at the door, four-day entry (in 2010, four-day ticket prices were $75 at the door, $65 for pre-April pre-registry). Assuming just half were at the door and half were early pre-registrations, we’re looking at $2.94 million. The scale continues to tend downward from here.

Considering the reduced vendor revenues, the reduced ticket prices, and the reimbursements, Anime Expo was already looking at a smaller take than 2009. This doesn’t begin to factor into the fact that the company needed to pay its guests, which included AKB48, Yoko Kanno, Shinichi Watanbe, and Vic Mignogna, as well as outside agents like IDG World Expo and executives of the SPJA. Once the final balances rolled in, it became clear that the company simply grew too optimistic, and over-spent in a number of places.

The upward trend for 2011 is encouraging, as is the deal with IDG World Expo. Through the new deal, IDG would work through the next Anime Expo at their 2011 rates. They will also work with other vendors to ensure that all parties are paid in a timely manner. In exchange, Anime Expo must adhere to a number of conditions, including the following:

  • Adhering to a monthly budget ceiling, that will cap spending growth
  • Relinquishing more control to IDG World. IDG will now oversee more day-to-day operations of the convention, including exhibit hall management, registrations, sponsorship sales, and marketing
  • Retain IDG as a consultant regarding the event’s finances

With the debt, IDG has a stake in Anime Expo as a whole. As the saying goes, “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” Their acceptance of more responsibility shows that it has officially become IDG’s problem. However, this isn’t necessarily bad thing in Anime Expo’s case. IDG is one of the largest event companies on the planet. They handle a number of major events, including E3 and MacWorld. The company’s experience and direct involvement can lead to a number of productivity gains in key areas, such as registration, that will ensure that more visitors will maintain positive experiences. This will (ideally) lead to word of mouth response and growth in the following year.

At the same time, IDG is actively courting vendors and already managed to retain a large number of last year’s sellers. This will ensure that the dealer’s hall is not under-utilized, and that as many possible square feet as possible generate revenue both for the event and for the vendors themselves.

Anime Expo and IDG have gained somewhat of a symbiotic relationship through this debt crisis. Though Anime Expo is on the hook for $700,000, they are showing the drive to improve their systems to evolve into a leaner and more cost-effective venture. Under the new setup, the convention expects to be debt-free within two years. Whether this will happen remains to be seen, though, as anything can happen between now and then.