Madman Entertainment has booked a $6.1 million impairment charge due to a slowdown in DVD sales and is conducting an operational review of its business.
The distributor’s parent company, Funtastic, this week announced that it had posted a $38.21 million annual net loss for the year ended July 31, 2011, largely driven by weak retail conditions.
“Compounding this issue is the fact that Madman experienced a significant reduction in demand for back catalogue product in the second half,” the company said in its annual statement.
“Consequently the business carried higher inventory levels into the year-end than planned and management have elected to provision prudently against the slowest moving lines in order to ensure that it is not cleared at a loss.”
Funtastic's $32.7 million in total impairment charges, restructuring costs and other material items included a $6.1 million impairment for Madman’s "prepaid royalties".
Madman specialises in animation and manga, as well as mainstream films and DVDs. It's next major theatrical release is psychological thriller The Hunter, which will be released on Thursday.
Funtastic said the Madman business is well-placed to tackle an industry-wide trend away from DVD sales to digital downloads due to its extensive catalogue, multi-rights distribution agreements and content arrangements with each of the major digital delivery providers.
“The challenge in the meantime is to ensure that the business manages its transition from physical to digital with the appropriate cost base for a period of uncertain revenues,” the company said.
Madman joint chief executive Paul Wiegard recently said that the entire home entertainment market (DVD and Blu-ray disc sales) had declined by about 14 per cent over the year-to-date, according to GfK data.
Funtastic said the management review was ongoing.
“Management have embarked on an extensive operational review of the business which will deliver process improvements and operating efficiencies and will ensure that the business is structured appropriately for the changing industry environment.”