The recent layoffs at Tokyopop, the U.S. manga publisher founded by Stu Levy in Japan and Los Angeles in 1996 and 1997, have turned a spotlight on the house's decline over the past few years. Battered by the economy, a global decline in manga sales, and now the Borders bankruptcy, Tokyopop is a smaller company, much reduced from the early 2000s when it published as many as 500 books a year and virtually defined the popularity of Japanese pop culture and the rapid growth of manga in the U.S.

Nevertheless, this January, as its five-year copublishing and distribution agreement with HarperCollins came to an end, Tokyopop reached a new distribution agreement with Diamond Book Distributors; the house is slated to publish as many as 100 books this year and is among the few American manga houses to release digital editions of licensed Japanese manga in the U.S. market. Last fall, Tokyopop teamed with digital comics vendor Comixology to release a digital edition of the much anticipated manga series, Hetalia; the house produced an eight-part Web reality series on Japanese pop culture in the U.S. called America's Greatest Otaku, which has just launched on, and in the next few weeks will release an iPhone/iPad app that will debut with digital editions of licensed manga in translation.

Recently Tokyopop laid off longtime editors Lillian Diaz-Przybyl and Troy Lewter, and in a phone conversation with Levy, who was attending the Game Developers Conference in San Francisco, he confirmed layoffs of at least three editorial staff and several others. He said the company's staff is now "a very small team, just a few of us, like in the first years," and includes publisher Mike Kiley.

Levy blamed the layoffs on the Borders bankruptcy. "They owe us a significant amount of money. We're not a big company and with less cash than we planned, we had to regroup to survive." The layoffs, he added, were "the hardest part, because these were my friends and collaborators." But Levy was optimistic about the future of Tokyopop and said the company is focused on "experiments with small projects and finding partners that can finance transmedia ventures" to bring its comics properties to film, TV, Web, and other media—one reason he was at GDC.

He's the executive producer of Priest, a Korean manhua property he worked to license to Hollywood, which will be released in May. He was excited about the new distribution deal with DBD, and cited the importance of the forthcoming Tokyopop iPhone app and the ongoing battle against digital piracy of manga by releasing legal digital editions. "It's our responsibility to make titles available digitally for a fair price," he said. "Japanese publishers don't always want to move on this."