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7
4 YEARS

'Yu-Gi-Oh!' Distributor Files for Barnkruptcy in Wake of Lawsuit

Yu-Gi-Oh!

4Kids Entertainment has filed for Chapter 11 bankruptcy protection in hopes of preserving its assets in wake of a bombshell lawsuit by the two Japanese studios behind the hit Japanese anime, "Yu-Gi-Oh!"

Last month, TV Tokyo Corporation and Nihon Ad Systems filed suit against 4Kids alleging its U.S. distributor owes millions of dollars for making secret agreements with TV networks and home video distributors. The Japanese companies terminated their licensing agreements with 4Kids, providing the specter that the company would no longer be able to sub-license "Yu-Gi-Oh!" and other shows to U.S. television networks, home video, and affiliated merchandise.

During its height, "Yu-Gi-Oh!" was a cash cow for the company. It's said to have earned 4Kids over $152 million in income between 2001 and 2009. More recently, though, 4Kids has experienced some trouble, reporting revenue of $14.5 million in 2010, compared with $34.2 million in 2009 and $41.9 million in 2008.

In a shareholders statement last week, 4Kids said it would fight the "Yu-Gi-Oh!" termination as not complying with the notice and cure provisions of its agreement with the Japanese companies, and also said it might have to go into bankruptcy. On Wednesday, it followed through with the Chapter 11 plan.

The bankruptcy could mean something to other entertainment companies as well. According to the petition, it owes $4.7 million to The Pokemon Company, its largest creditor. (4Kids was once the major licensor of the "Pokemon" franchise.)

4Kids also lists The CW network with a $2 million claim against the company, although the claim is disputed, according to the petition.