The recent layoffs at Tokyopop, the U.S. manga publisher founded by Stu Levy in Japan and L.A. in 1996 and 1997, have turned a spotlight on the house’s decline over the last 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 days when it published as many as 500 books a year and virtually defined the popularity of Japanese pop culture and the rapid sales growth of manga in the U.S. during the early 2000s.

Nevertheless, in January as its co-publishing 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 a 100 books this year and is among the few American manga houses releasing digital editions of licensed Japanese in the American 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 that has just launched on and in the next few weeks will release an iPhone/iPad that will debut with digital editions of licensed manga in translation.

According to published reports Tokyopop laid off at least three editorial staffers—longtime editors Lillian Diaz-Przybyl and Troy Lewter among them. In a phone conversation with Levy, who was attending the Game Developers Conference in San Francisco, he confirmed layoffs—at least three editorial staff and several others—but declined to name them. He said the company’s staff is now ‘a very small team, just a few of us, like in the first years,” and includes Tokyopop publisher Mike Kiley.

The 44 year old Levy, is a complex figure—a passionate fan of Japanese pop culture, he managed very early to tap into the international frenzy over manga, anime and Japanese pop in general, bringing Japanese culture to an international audience of fans, hungry to learn more about it. On the other hand, some of his ambitious attempts to find a mass-market audience for manga crashed and burned, leaving Tokyopop damaged economically; forced to layoff staff and cancel titles.

The Rise

A graduate of Georgetown Law School and fluent in Japanese, Levy cut a hip figure during the early 2000s when Tokyopop was leading “the Manga Revolution,” with sprawling booths crammed with fans at San Diego Comic-con, New York Comic con, BookExpo America and other shows. Tokyopop was instrumental in establishing the $9.99 paperback manga price point and pioneered producing its books in the “authentic” right to left Japanese reading format; publishing manga in a diversity of genres, and helping to establish comics in general bookstores. Indeed, much credit can also go to Levy and Tokyopop—the manga house initially focused on shoujo manga, or Japanese comics targeting young girls—for helping to attract millions of American girls, long ignored by U.S. comics publishers, into reading comics and going to general bookstores to buy them.

In so many areas, Tokyopop has been creative, aggressive and visionary—Tokyopop was even creating digital comics for cell phones in Japan in the late 1990s. Probably one of Levy’s biggest ventures—and a hot button topic on the consequences of its failure—was the effort to sign young artists to create original graphic novels in the manga style, or Original English Language manga. Tokyopop had been sponsoring a Rising Stars of Manga talent contest since 2002, a contest that uncovered such American manga/graphic novel artists as M. Alice LeGrow (Bizenghast) and Felipe Smith (MBQ). By 2005, Tokyopop had launched a typically ambitious effort to sign and publish more than a 100 such projects. Yet while the effort provided a platform to a slew of young artists, some were more talented than others and sales of the books—with several notable exceptions—were dismal and the program was ended. Many comics industry observers had long complained that Tokyopop was overpublishing. Indeed by 2008, the company was facing a financial crisis and was forced to layoff about 40 employees and cut its title output virtually in half, ending the OEL project and leaving the books and the artists who signed with Tokyopop in limbo.

Levy said that the company had planned on five years to make the OEL manga project profitable, but then the “market changed.” Levy said, “We invested significant money in the original manga project and everyone was paid. There was no such thing as original English manga until we created it. But we remain serious about the content; we own together with the creators; we’ve met our contractual obligations and we remain partners. Like any business, some projects work and others don’t, but we will continue to pursue opportunities [around this content.]." Here’s a link to a PW Comics Week interview with Levy in 2006 and what a difference five years can make.

The Fall and its Aftermath

In the wake of the all this history, a powerful recession, a declining manga market, the Borders bankruptcy and his own managerial missteps, Levy has, understandably, become a lightning rod for criticism over his management and decisions. Levy blamed the layoffs—he said the staff in question received severance and had left weeks earlier—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,” and said, “We’ve had to let people go who were very dear to me. This was 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, gaming platforms and other media—among the reasons he was attending GDC. Levy said “we’re being cautious; we’re not spending gobs of money,” and that “social and casual gaming is incredibly relevant to our market, the teen and youth market.” He noted in particular that “gaming produces analytics,” data that can be used to study how content is consumed. “There’s an algorhithm that determines every move a player makes,” Levy explained, “and game designers receive data generated by the game and the players and they can change content and features on the fly. Traditional analog media—like books—does not generate this kind of data. But this kind of data will change readers, writers and publishers as we dabble more in digital development.”

He’s the executive producer of Priest, a movie based on a Korean manhwa property he worked to license to Hollywood, which will be released in May. While he emphasized, “I arranged the rights to go to Sony, but had no role in shaping the story,” he said his primary role was to visit the set (along with Korean creator Min-woo Hyung) and “learn from the best people in the business.” He was excited about the new distribution deal with DBD, “They know comics, have a better feel for the material and can help us sell it in a manner more appropriate to what the market has become.” Despite the problems in the U.S. manga market, he said Tokyopop Germany is growing and profitable. “The German book market is very different from the U.S., there are more independent stores and Tokyopop Germany is doing great."

He was adamant that illegal scanlations and digital piracy are undermining manga sales. “There’s no question that hundreds of thousands, maybe millions, of fans are reading manga online for free,” he said, “which means we don’t get paid and neither do our artists.” He cited the importance of the forthcoming Tokyopop iPhone app—which he said will offer digital editions of licensed Japanese manga as well as original manga—as one weapon in the battle against digital piracy of manga. “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.”

American Otaku

Finally, Levy and a crew of 6 college-age young men and women spent several weeks in 2010, traveling from city to city in a giant Tokyopop bus videotaping Japanese pop culture fans all around the U.S. The results of the trip can be seen in America’s Great Otaku, an eight-part Web series reality show that features Levy and the Tokyopop otaku crew traveling the countryside in search of genuine American otaku—the Japanese term for an obsessive fan of pop culture. The first episode is available on now and while the show is presented as a competitive reality show, Levy said that it’s really a documentary about Japanese pop culture in America.

“We’re very proud of our role in introducing manga, anime and otaku culture to the U.S.,” Levy said, “We worked our butts off to show that the otaku lifestyle is not just something in a book; that it’s living and breathing people, a passionate group of fans that we used to introduce the world to a positive American otaku lifestyle.”

“We’re very proud of that,” he said. “I’m an entrepreneur, not a corporate guy and this is my baby. I’ve made mistakes and I’ve learned from all this. I’ll continue because I have a passion for otaku culture,” Levy said. In fact, he’s in talks to do a second season of America’s Greatest Otaku and joked, “Yes, I was the host for the first episode, but if it makes people more interested in seeing the series, I have much less screen time in episodes 2-8.”