Digital Distribution?
This may be tl;dr, but the short of it is simply put by two observations, and two predicted fan reactions.
- Fansubs don’t make the industry any real money. It may have a secondary effect but LOLs.
- Legitimate digital distribution in vein of near day-date release (eg. Strike Witches) seeks to replace fansubs and monetize that market segment, but it’s not going to make any real money either because it seeks to follow the same release format as fansub–cheap to produce, cheap to buy, easily obtained.
- If you want to see the latest and greatest anime legitimately distributed in your local region, you need to show them the money. In other words, don’t expect things to be any cheaper than buying it on DVDs.
- It becomes a catch-22 because collectors are the only ones who would pony up, and they’re already buying the stuff anyways. Worse case scenario in this situation would be the average fansub-viewing, DVD-buying fan and not your nothing-buying fans.
The long spiel is more like this, so relax:
For what it is worth, digital distribution of video media is going to be prolific in the future; one could even say the future is today. Let us put aside the question as to how to maximize the profit of such a venture for now, and focus on the big picture in terms of the question “is it going to be economically worthwhile for existing anime publishers?”
You don’t have to take Sirabella’s word for it, but on the whole digital distribution of video is something that is done for the cheap, on the cheap. The profit various middlemen and artists make from that is relatively small compared to more traditional venues. The iTunes Music Store is a successful example of such a model but what does that mean for music publishers and more importantly, musicians? I think as applied to anime, the iTMS example is closer to a bad omen than glimmer of hope once you plug in all the variables to compare.
Still, that’s the way everything is going today. How can digital distribution of anime be healthy to the industry and the fan community? I think it is important to see this clearly as fans so we understand what is good for and what isn’t.
First and foremost, fansubs are a great way to share a show. That’s why they were created in the first place. It’s free (like both free speech and free beer), it’s translated, it’s relevant; it’s for some passion (for love or for Serious Business). Even today, there are stuff that would probably not have been licensed if not were for passionate fans who fansubbed.
(To take a step back, though, not all fansubbers are the same. I think this is a good way to look at fansubbing for most people, but you still got your old school guys hacking away at obscure stuff. In a related note, I’m almost happy for Xam’d’s (I always wanted to write that…) rampant piracy at this point–so many more people have now watched the show and I have people to chat with.)
Personally fansubbing helps me to get a good feel about a show after a few episodes, and it helps me decide what happens next–drop, recommend, watch it without saying anything, and/or buy. It’s how I shop. And I shop import and domestic, CD, DVD and BRD and poster and figures and what have you, just in case you think something like Netflix alone is going to cut it.
Now that I mentioned Netflix I think it’s good to take a minute to talk about that. In the big picture, Netflix and other rental systems are an end-destination, and not so much a promotional/profit-driver. In short, when people say “it’s a rental” they mean they won’t go out of their way to buy it. Sensibly speaking, why rent something that you will buy later? It isn’t to say that doesn’t happen, but odds are low and it isn’t the main purpose of a rental system. Psychologically speaking it is not the same as “yet another channel of broadcasting” even if technically they are similar to say, a PPV TV channel or a premium cable channel.
And I think the profit structure for Netflix mirrors the reward structure for pay-for video distribution–in a word, minuscule.
What’s worse, when it comes to term with fansubbing, the point of legit digital distribution venues is to replace it, and not compete with collectors who are still buying the physical media and paying the same high costs they always did. But just like how fansubbing does replace people who would go out and buy the DVDs (and we can argue the % or number in a different post), you really aren’t doing any better by letting rental and pay-for DTO services cannibalize your sales. At least with fansubs you can guilt them into buying the stuff; you can’t with these legit venues. We are just hoping that those people who would buy all of, say, Tsukuyomi Moon Phase online are choosing that over pirating it. At least if I wanted to try a few episodes of an older, domestically available anime, whichever digital distributor can make a couple bucks if I wanted to watch the first 3 episodes or something. That would be way more than a month of Netflixing. (But, if you think about it, it’s probably worse value for the end consumer–is Netflix also a source where American anime licensees are bleeding out?)
A closer look at how much money studios and publishers make on R1 DVDs probably shows you just how much money is at stake. Let’s say a sub-only release like Marimite from Rightstuf; Deepdiscount cuts their margin to the bones for you and releases it for about $28…and that’s still more than $2 per episode. It’s a dub-less, obscure yurilicious anime in a sexy (in a Catholic kind of way) thinpak boxset. I suppose, sure, far majority of the cost of production for Marimite is in the making of the DVD (and the license), and if we reduced that and pretend the retailer’s cut is the same as the digital distributor’s cut, Rightstuf stands to make reasonably more money per episode.
But at the same time, they’re just selling you something less and you’re not paying bang-per-buck less for it. If we choose a different title, as an example, where the episode count is much lower per SKU, then you can see how much more money DVD sales make compared to equivalent digital distribution, and how much more DTO prices has to be in order to match ($3 to $4). And we’re not even talking about dubs and things like that which can kick up the production cost by a lot more.
Anyways, I might be comparing apples with oranges anyways since timing is still an issue. The standard Hollywood model of media sales is in tiers, where prices is higher when you go see it in the movie theater or buy it when it first come out on DVD, and it drops with rentals and bargain sales of DVDs and boxed sets and ends with cable, then network television. The same progression is now well-established with anime DVDs as well, except that regional screening on cable networks has a promotional effect, which is the opposite of what’s happening with well-advertised Hollywood films. Instead of theater screening (well, we have those in rare instances), we have really pricey collector editions and single releases (Deep Discount prices of $15-18 per 4 episodes on average for the non-collector editions), and things end with cheapo box sets that’s like the Rightstuf Marimite box.
(Doesn’t it make you wonder if ADV’s move towards cheap boxsets years ago were a major blow to their bottom line?)
The way I see it, there’s two prong where you can attack and make digital delivery work.
1. Xam’d’s way (I just had to do it again): Exclusivity is a powerful edge. Looking at the sales number on PSN video store this past week, even after 3 episodes of “build up” we are still seeing Xam’d episodes on the top 20, episodes 5 and 6 occupying the 10th and 12th spot, respectively, for the week up to August 22nd. It’s “expensive” as some would argue, but I think they’re all just talking out of their asses. Sure, it would be much better if it was cheaper but I don’t go out and demand free stuff, right? I think the price as I calculated up there is close to with what we’re seeing here, for an exclusive, first look title. In fact it’s probably a tad low given it is an exclusive first and not something that has been out for years, so maybe that is what is suppose to make up for being a rental. The down side to this approach is that, well, it’s very hard. According to Lance Heiskell, it’s just very difficult to get it all together and get Japan’s approval. There are many contracts and delays and risks and things that potentially can fall through.
2. Gonzo’s way: Free (as in beer) is always a good thing, if who’s giving it to you can afford it. Of course in this case they’re giving you as little as they can as a time-limited stream with a DTO option. It makes fansubbing a moot exercise and that’s fine for far most people. But they aren’t going to make any more money than if they just let someone fansub their stuff…I just don’t see how. Oh look advertising…10000 page views zomg :rolleyes: It’s all good fan press and promooooootion but that just means the ball is in our court and we gotta step up and have Gonzo’s back before they file for bankruptcy :(
Okay, enough is enough.
Recommended reading:
Of course there are people like me who will pay for Strike Witches on BOST and then gladly (gleefully) pay for it a second time when it comes out on R1 DVD’s.
But then there’s the hundreds of other people who will just download BOST releases illegal on bittorrent or stolensubs releases (the groups of which I will not name). Bastards.
Yeah, in a way what BOST and Gonzo is doing is facilitating the effects of fansubbing. I just hope it helps to get the word out better than if just some everyday subbers did it themselves.
@anonymous Dark Horse’s Carl Horn once told me that it’s not the downloaders that are the problem, it’s the people who download and don’t buy. And let’s face it, no matter how many people SAY they buy, the vast majority don’t, or don’t as much as they ethically “should” anyway.
That said…IMO how well digital distro does for anime companies will depend heavily on a couple of factors, i.e. how innovative the companies are, and how– or if –the Japanese companies evolve to allow said innovation.
For example, wouldn’t it be interesting if a system got set up where a US company could buy a very basic set of same-day digital subs release rights cheaply before a show came out, with a supplemental contract should both parties decide that the digidistro version did well enough to warrant an actual packaged release? That way companies wouldn’t have to spend tons of money on every license and cross their fingers as to which ones will actually make the money back, they can experiment with a wide variety of titles and see what sticks at any given time– AND they can provide those digital downloads quickly, easily, and cheaply for fans (and ideally a first-episode-free deal too). I kind of imagine it as get the first ep free, then $.99 to $1.99/ep afterwards (no DRM ideally, of course), and if you buy a package of all the episodes then you get little discount coupon for IF they release a DVD version someday (and if they don’t, you still have the digital version).
That’s probably a pipe dream though– from the grumblings I keep hearing the US industry will be happy if the JP companies stop *balking* at digidistro, much less embracing it like that.
Yay TV licensing! My job!
The standard Hollywood model of media sales is in tiers, where prices is higher when you go see it in the movie theater or buy it when it first come out on DVD, and it drops with rentals and bargain sales of DVDs and boxed sets and ends with cable, then network television. The same progression is now well-established with anime DVDs as well, except that regional screening on cable networks has a promotional effect, which is the opposite of what’s happening with well-advertised Hollywood films.
Another big difference is in terms of the money. The money that Hollywood gets for licensing a movie to a basic cable channel so that it can air that title for a month is minuscule compared to what the movie earned at the US box office, international box office, DVD sales, licensing deals, and so on. We’re talking a couple hundred thousand dollars. And the ad revenue on a per-title basis on Hulu is pathetic. The CPM for Hulu is only about $20, so even if someone watches the whole movie and sees about 6-8 ads, 100,000 viewers would only generate about $16,000, so that’s basically non-existent. Hulu makes money from the sheer quantity of stuff available (like watching all the sex scenes), but per-title it’s tiny.
But if you can get your anime onto TV, the licensing fee that the channel is paying you is a huge, huge chunk of your licensing fee paid back. And that’s even before the promotional effect.
Then again, part of the reason that this discussion is tricky is because viewers and distributors keep switching between whether they’re thinking in a TV paradigm or a movie paradigm. Movies have the tiers that get cheaper, but TV has tiers that get more expensive (free show on broadcast, but gotta pay to buy/rent DVDs). Or cheaper. Watching HBO shows gets cheaper as time goes on (monthly subscription fee for the broadcasts, but DVDs are fairly cheap as is Netflix), but that’s not TV. It’s HBO. Anime’s free, then expensive, then cheap/free again. Shrug.
jp, I’m not entirely sure that licensing fee always applies to anime in the US. At least, I’ve been told– by people who would know –that some companies have paid channels to get their anime on certain stations.
Of course, they still get the massive publicity kickback from that, which is WHY the companies would be willing to pay…and I’d guess they get some of the advertising money as well. But I’m not sure they always get much of a licensing fee, depending on the channel and the show anyway.
IFC most certainly pays Funimation for their titles.
I do agree that digital distribution is a good way to go, but I cannot really say for sure how that’s going to go down. Digital distribution needs some clear thinking through.
Like you said, exclusivity is one way to go (and in fact, I support this way), perhaps THE way to go for the future. Having something as exclusive to a medium would provide serious incentive, even to the average guy. I don’t know how the situation goes over there, but other places (like my own) do manage to secure relatively current and in-demand anime for digital TV airing.
And on a added note, it would, given enough time and business relations/exhanges, perhaps Japan’s industry itself would be more open.
It’s not that TV networks don’t pay to air anime on TV in the US. It’s just that they don’t pay much. The anime that you see on CN, especially, isn’t there because CN laid out a big wad of cash; it’s there because the licensors were willing to put it on TV for a pittance. In other words, it’s competing cost-wise with all those crappy original animations like Squidbillies. (Which is an even scarier point - as far as the networks care, -there is no difference- between that and anime…)
Honestly, I don’t know if I have a good solution. Hopefully with the consolidation in the US market, we’ll see fewer bidding wars and thus smaller licensing fees, which will reduce some of the pain. But the way the market is looking, only the top titles get enough sales to justify their budgets, which is going to make securing those licenses more important than ever…
@gia: the main reason, as I see it, as to why Japan is balking at digital distribution is because they just don’t see the money. I think piracy is a concern but one of my main points is that the commonly advocated models of digital distribution doesn’t bring in any additional money. Giving companies an option to do a full-on license isn’t going to give Japan the money that they would have had if the rights are packaged in the whole.
In other words, Japan makes more money by selling bigger chunks of their IP instead of your piece-wise idea, so obviously they will resist. The only way so far is if Japan do things themselves kind of like how Gonzo is doing it.
@JP: Yea, I have no idea what is going on there so I’m talking out of my ass :v I guess it depends on which channel/company arrange things. IFC probably does things different compared to CN or Scifi or who or what, from the looks of it. And it counteracts Avatar’s scariness about Squidbillies to a degree, speaking of quality of programming.
But yeah, the way it is right now, Japan wants the money no less than their licensees do. So we got to balance those sheets to be able to really get the big picture.
Proportionately speaking, the licensing costs for an anime are a king’s ransom compared to say, a movie. A movie that grosses about $100 million domestically, another $150 million internationally, another $100 million in DVD sales, and then some ancillary licensing money (I dunno, Happy Meals and crap). I’ll say $400 million total. A year of a cable TV channel would be like, $1, maybe $1.5 million of that $400 million. That’s a fraction of a percentage point of the revenue. Comparing that to the $70k/episode number that Sevakis used, that would be like CN paying like, $250 per episode. A 2 minute interstitial to show between programs costs way more than that.
So how much is TV rights when they’re actually exercised? Must be a lot.
It’s a good year for Bandai :x
LOL if I actually said how much, I’d get fired :P
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