The Economics of Anime

http://www.animenewsnetwork.com/feature/2012-03-05

by michaelpinto • 14 years ago

87 33 14 years ago

I submitted this story because there's been a great deal of talk from tech companies on how to disrupt Hollywood — and I think while anime is a niche (my favorite niche!) that this article gives a very good insight into just how hard that might be to pull off. It a very expensive and high risk market to play in — and this article gives the numbers to back it up...

gwillis133• 14 years ago

:D I already have some ideas for this, especially with the current state of the anime industry and subbing. Bandai Namco closing their U.S. Distribution for anime was an additional amplifier for a need to disrupt it.

The main issue is licensing, and showing the "old guard" the new ways to capitalize on the market instead of relying on the current traditions.

Also wanted to add the "current traditions" are similar to the music and movie industry. More so in the vein of music, with the evolution of how fans can acquire anime. So they see no real need to pay for something that comes out months to a year later.

mikelbring• 14 years ago

I came into the development world via anime (years ago). Would you want to talk about some of your ideas? I have always had a heart in this niche.

mikelbring [at] gmail.com

michaelpinto3• 14 years ago

Crunchyroll has VC backing from what I understand and is very much starting to dominate the space -- to the point where they have a team in Japan that just does licensing. Anime News Network tried to do this but had a bad problem when some dopes pirated a video.

The key is to get some very old school japanese companies to change their way -- but the other issue is have a model to make money in a niche market that isn't too big. The later problem might have a long term solution, but the first problem is really the big issue. The only solution might be if the Japanese do their own version of Hulu, or partner with a player like that.

I've been an anime fanboy since 1980 (I ran the Star Blazers Fan Club) and now I'm CEO of Anime.com so this problem has always been of interest to me...

Dinoguy1000• 14 years ago

It's important to keep in mind, though, that this article (and its follow-ups) is written almost entirely from the perspective of the Japanese industry, not the American one. I'm not saying there would be no benefit to disrupting this industry, or that there are no reasons to do so, but even once you get past the inherent differences in business models etc., you still need to keep in mind that this industry is far more lenient towards piracy than Hollywood, and the American[1] anime licensing industry even more yet: for decades (throughout the 80s, 90s, and a good part of the 00s), American licensors basically turned a blind eye towards piracy, and the Japanese studios largely didn't seem to care about Americans pirating their stuff. Even when the companies started taking action, though, in the American companies' case, it started out with earnestly and politely asking people to stop pirating licensed series (and, surprise surprise, it did work - as it turns out, if you treat people with respect when you ask them to stop doing something, they're far less likely to hate you for it[2]). DMCA takedown notices have only been used as a last resort, and to my knowledge, no one has been taken to court over anime piracy (and certainly not random unemployed teenagers being sued for hundreds of thousands of dollars).

[1] I talk about the American licensors, industry, and fanbase here, but much of what I say is more-or-less directly applicable to the same in other countries, as well.

[2] Just so we're clear, I'm being sarcastic here. There's absolutely no reason to believe that if you treat someone with respect, they're going to turn around and hate you for it. There are cases where this happens, of course (and this response may be more or less likely then normal depending on the nature and reasons for your interactions with them), but it's by far the exception.

roryokane• 14 years ago

If you finish reading this article and want more, don't forget to go back up to the top and click on the links to Part 2 and Part 3.

ginsweater• 14 years ago

Especially of interest to HN readers is Part 3, which is about the economics of streaming anime - the ad-revenue numbers they present are shockingly low.

chrischen• 14 years ago

How does Anime make money from the US? It seems everyone I know in the US who watches it does so illegally.

gwillis133• 14 years ago

1) Merchandise 2) Popularity (how popular the anime is, can warrant sales in the US). 3) Licensing (check: Crunchyroll.com)

marshray4• 14 years ago

Surely there's a lot of money changing hands for the ones on Cartoon Network (not to mention the Studio Ghibli releases distributed by Disney).

naner• 14 years ago

I always found Anime piracy kind of impressive since they not only have to rip the material, they have to provide English subtitles, too. Which requires special expertise and is extremely tedious. And people do this work for free.

chii• 14 years ago

I find them amazing too - the tools (last i looked) weren't all that impressive, so a lot of manual work is involved.

in my eyes, these fan sub groups aren't classified as pirate (nor are the peopel downloading them), because as far as i m concerned, the anime is recorded off free to air tv, and thus is meant to be freely available to watch. Add to that the fansubbing + cute karaoke, its a product it itself. The american distributors barely make the mark when it comes to anime distribution, and so no one i know buys anime dvds, and only ever watch fansubs.

lolilives• 14 years ago

It's a lot of work and there's something to be admired in people putting in that amount of work and effort to spread anime/manga that they really enjoy and think other people should experience (and wouldn't otherwise normally be able to experience).

dangrossman• 14 years ago

There's an enormous amount of it on Netflix, Hulu Plus, Crunchyroll and other legal streaming subscription sites. And usually a full movie aisle in every Best Buy in the country.

Natsu• 14 years ago

My cousin's kids are addicted to Cruncyroll. They also like to buy manga and other merchandise.

michaelpinto3• 14 years ago

That's the problem! The reality is that most anime doesn't make money. The anime that does make money are the shows that do well on television and can support merchandise. So for example Bakugan Battle Brawlers is a terrible show, but it sells toys and makes money. And sadly a show like Lucky Star which is quite good can't even get on TV and won't move merchandise so it dies... : (

marshray4• 14 years ago

I went to our regional Anime/Manga conference with my kids last month.

One of the more interesting panel discussions was with an American voice actress. The economics for such a profession are discouraging of course, and she couldn't hold back the opinion that watching anime from the net was "stealing".

But you look around the audience and clearly the great majority of the fans are too young to have real jobs. Still, many of these young people have put untold hours of work into making these incredible costumes.

Then you go to the vendors (or anywhere) to look at a licensed DVD for a season or two of a popular anime: $60 !

1. It's outrageously priced.

And the hardcore fans don't even like the product as much as the "fan subs" available online. E.g.:

2. It's usually overdubbed instead of subtitled.

3. Often it's edited down for more commercial slots for US cable TV.

4. Where there are subtitles for the opening and ending songs they don't have phonetic Japanese (romaji) or karaoke effects (words exploding into pink flowers are hugely important to a certain set of customers).

5. The translation is often not accurate, all the Japanese idiosyncracies are ironed out to make completely bland English. (Was said to be usually at the insistence of the Japanese studio).

EDIT: Of course I forgot the most important parts:

6. The video quality of the fansubs is often much better at 720p.

7. The fansubs are often more available, sometimes within hours of something appearing on TV in .jp. Official DVDs may drag out for years of on-again off-again rumors.

8. The fansubs of course have no DRM. They're just files that play on your computer and can be shared among fans. (Though sometimes they require codec downloads from sketchy looking sites).

pixelcort• 14 years ago

Precisely. When there are multiple fansub groups competing to produce the highest quality release, including subtitles, translator notes, video encoding and MKV metadata, subtitle timing and placement, the bar gets set higher for official licensed distributions.

Some fansub groups go so far as to provide signage overlays that move and scale as the scene itself moves. It's so subtle sometimes that I only notice it after the fact.

One idea I had was for there to be a way for fansub groups to distribute their translations in such a way as to layer on top of a licensed distribution. So you'd get the DVD/BlueRay for a particular Anime, and then layer on top of it your favorite fansub group's translations and translator notes, and somehow they'd line up.

This would require the licensed distribution to provide the original audio track and scene timing to match the original version, of course. US pricing and in some cases even US availability are another issue.

marshray4• 14 years ago

> So you'd get the DVD/BlueRay for a particular Anime, and then layer on top of it your favorite fansub group's translations and translator notes, and somehow they'd line up.

That's a really cool idea.

But how does this represent an improvement over what's available now via torrent? I can't help but be skeptical about a plan that involves riding on top of a DVD that's already priced out of the market by the studios.

How about just an improvement over the subbing tools? Many of them are simply immature software. Can you fan-source it? Make it collaborative, interactive? Link it with Japanese lessons or a native speaker somehow?

There are whole conference centers filling up on a regular basis with teenagers who, out of love for this aesthetic, have taught themselves to sew. There has got to be a business model there for someone!

Right now it's being won by the guy who lugs cardboard boxes of $40 t-shirts from state to state in his van.

kalleboo• 14 years ago

The way I've had it explained to me is that the pricing is high because the Japanese market will bear it, and so lowering the prices on the Japanese market would hurt profits. When they've experimented with selling U.S. DVDs cheaper, Japanese fans have imported them at the lower price, killing sales of the more profitable Japanese region version. One way they've attempted to mitigate this is to make the DVDs unattractive to Japanese buyers using the methods you describe such as having dubbed audio with no Japanese sound option, or delaying the release.

edit: the japanese market's willingness to pay high media prices is explained on page 2 of the article

ZeroGravitas• 14 years ago

This is part of a general pattern where producers actively choose the level of piracy that maximises their profits, then complain about it in the hope of further increasing profits via politics and social engineering.

w1ntermute3• 14 years ago

> sometimes they require codec downloads from sketchy looking sites

I'm not sure where you got this idea from, but it is patently false. Although the recommended software for playing anime fansubs is Media Player Classic Home Cinema, which is open source[0], I have had no issues using MPlayer either. And as of 2.0, VLC is supposed to have the requisite subtitle support as well.

0: http://mpc-hc.sourceforge.net/

marshray4• 14 years ago

It's been a few years since I went spelunking in the anime torrents, perhaps things have changed. But back then, for 32 bit Windows, it was definitely the case that the occasional anime would require an oddball codec. Usually it would be open source but still not be practical to build yourself (if you wanted to watch any anime that evening too).

patio11• 14 years ago

A corollary to this is that resources are eventually going to get diverted to produce the kinds of things which appeal to hyperconsuming outliers who actually spend money on anime rather than e.g. a broader demographic which prefers to steal their anime. That is a large portion of the reason why the Akihabara crowd gets what they want in Japan -- they actually plunk down $X00 for a boxed set of Young Geek Improbably Surrounded By Beautiful Women Who Suffer Wardrobe Malfunctions Around Him with some degree of regularity, though that market appears to be drying up in recent years. (For obvious reasons I don't follow it, I just hear things on the IP grapevine.)

More mainstream audiences can't get things done for them without e.g. a cross-subsidy from Nintendo who can afford to treat the anime as a loss leader for the video game or collectible tie-in.

This is a shame for folks who care about distributional access, by the way. For example, there exist people who think that shoujo manga is a Good Thing (TM) for the U.S. comic books industry because it provides young girls with stories they can relate to and helps counteract the insanely rampant hypersexualization and misogyny of the US comic industry. Unfortunately, shoujo manga has fairly few crossover hits and hasn't had a commercialization success in the US comparable to e.g. Disney's line of princess products, which means that the industry is largely a) not willing to devote marketing muscle to promoting it as much as Bleach / Naruto / Pokemon / etc and b) some would argue that the old guard justify their marginalization of the genre and its fans by saying that (because of their marginalization!) it failed to sell well.

n.b. I'm neither a fan of shoujo manga nor a great lover of women's studies but someone who was both had veto power on my degree, so you can bet I at least listened for the more credible claims.

Kuiper• 14 years ago

I think that a lot of westerners fail to realize the impact of the "otaku as superconsumer" effect on the Japanese media industry, in part due to the way that anime is priced in western territories. In Japan, anime blu-ray volumes are tremendously expensive; right now the latest volume of Madoka is selling for over ¥9,000 (>$100), and that's a fairly typical price for a single volume containing three 25-minute episodes. In the west, $300-400 will get you several hundred 45-minute episodes of Deep Space 9 on DVD. In Japan, $300-400 is the amount that a hardcore fan can be expected to spend on the blu-rays for a dozen 25-minute episodes. On top of this, there is merchandising galore; CDs for OP/ED, insert songs, character CDs, along with physical goods like figures.

On top of this, sometimes hardcore fans will buy multiple copies of their favorites to inflate sales numbers. For an extreme example, see this man who bought 5500 copies of a single AKB48 CD: http://blog.esuteru.com/archives/3347822.html

To put things into perspective, the Bakemonogatari blu-rays sold around 50,000 copies per volume during the release window, which catapulted it to the status of "most commercially-successful anime since Evangelion." Based on this, it's not hard to see how a base of several thousand really dedicated fans could be enough to justify an anime production.

yardie• 14 years ago

I've seen the inside of a typical Tokyo apartment, I gotta ask, honestly, where do they keep all this stuff?

cinquemb• 14 years ago

This was a interesting read! Thanks for sharing! I wonder if there is something like this that speaks to manga.

jonnathanson• 14 years ago

"The hope is that the remaining 30% that will never make back their budgets will get paid for by the successes. This is a gamble, but it's the most essential one of every entertainment industry: a few huge hits that subsidize tons of losers."

If this figure is accurate, then it represents a far better hit rate than what the US movie and TV industries usually achieve. (The rule of thumb in the US entertainment industry is that less than 25% of TV pilots makes it to the airwaves, and of those, a very small percentage last a full season; an even smaller percentage of those last more than a full season; a fraction of those, still, last enough seasons to become financially successful. I can't recall the film industry hit rate off the top of my head, but I believe the going theory is that 4 in 5 films will fail, and the remaining 1 must subsidize those failures).

In fact, I think the US entertainment businesses will need to learn a lot from the anime business. As distribution techology becomes more sophisticated, we're going to enter a world where two things happen: 1) opinion leaders within a certain genre (superfans, otaku, loyalists, diehards...whatever we want to call them) will discover new content via collaborative filtering as seen on Netflix, iTunes via the Genius algo, etc.; and 2) those folks will, in turn, share their discoveries with linkminded friends via social networks. These distribution patterns will be less than kind to the mass-market, "shotgun" approach as it's been practiced by Hollywood firms for nearly a century. Conversely, they'll be much kinder to niche-portfolio production and marketing. To patio11's point, this will mean resources being devoted to product differentiation: basic stuff for the casual fans, and more limited-edition, souped-up stuff for the otaku (where the real money gets made). It'll also mean that entertainment firms will need to get very serious about high-involvement CRM with their otaku bases, as video game companies currently do. (To some extent, this has already been happening in recent years, i.e., with everyone in Hollywood's annually bending knee to the kingmakers at ComicCon).

The Economics of Anime

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