Originally Posted by monir
This is something I didn't know. How exactly does this work? Does the branch company gets most of the profit? What does Bandai get out of this? If I read Relentless right, this licensing procedure involving a branch company from a parent company that originates in Japan, is a fairly new practice. I admit I haven't paid much attention on the subject, so will appreciate any enlightenment thrown in this direction. :)
Well, from an accounting perspective (which is all this really is, the accounting) whichever company they want to show the profit is the one that shows the profit. There isn't really a hard and fast rule, if they want the subsidiary company to look more profitable they will show the license as being extremely cheap (the Chicago Cubs do this in reverse for the license to broadcast their games to their parent company, WGN), if they want the parent company to look more profitable, they'll make the license extremely expensive. As for Bandai (in the MoSH deal), they're probably getting paid. Most importantly, as I recall they're getting paid for distribution, but they're probably not absorbing much (or any) of the risk of the venture. Risk is a much more significant factor when doing something like this than potential profit. For example, let's say I told you that you could license two titles, one has a 50% chance of making you $1000 and a 50% chance of costing you $1000 and the other has a 100% chance of making you $600. The rational decision is to choose the $600 one. It cannot make as much as the first one, but it cannot lose as much as the first one either. MoSH was going to be an expensive license. While I think most people expect it to do well, it's quite possible that "doing well" wouldn't even be enough to break even. This is particularly true in the R1 anime industry where (supposedly) the market has become very flat. According to most of the reports, the difference between a series that sells well and a series that sells poorly is only a few hundred DVDs (and even the better selling titles only supposedly sell in the one to two thousand range).
Personally I don't think there was much of a "bidding war" to begin with. I think what actually happened is that a couple of companies (my guess would be Geneon, ADV and/or possibly Funi) called about the license, were either turned off by the asking price or offered a much lower figure than they (Kadokawa) were expecting. Kadokawa leaked the news of the "bidding war" hoping to drum up more interest. When they couldn't get an offer that they liked, they decided to assume the risk themselves and that's why they brokered the deal they did. Unfortunately, licensors never discuss things like this, and so the chance of finding out what actually happened is exceptionally low.
As for the why all of this happens, we're in the middle of a market correction. When anime was exploding and everything was getting licensed - most of the licensing fees didn't seem that expensive. Now that the companies know that only the rarest of the rarest shows are going to enjoy the kind of shelf life Evangelion or Cowboy Bebop has in R1, they're less interested in paying tons of money for something that is supposed to be big. Add into that the lack of a direct correlation between something's popularity in Japan and it's popularity in the U.S. and the fact that fansub popularity does not seem to directly correlate with R1 popularity. While the U.S. companies seem to have adjusted to this (note how many mid-tier titles have been licensed in the last couple of years, the Rozen Maidens and the KGNEs), some of the Japanese companies still think that they are going to get whatever they ask for in the licensing deal. When they fail to get it, they look to release it themselves (convinced that the money will be there). Whether or not it will actually be here is another story, but we won't find that out until later. For all we know, they may have a magic touch that can get more disks sold. Even if they can't, they'll make more money than the R1 company would have because they're skipping a step in the chain.
I don't know if original companies licensing stuff to US subsidiaries is a "new" practice exactly, but it's becoming a very popular practice. Viz media (which releases Inuyasha, Naruto and Bleach) is co-owned by Shogakukan and Shueisha (two Japanese publishers). This is one of the reasons why some Viz manga is cheaper than equivalent Tokyopop or Del Rey or whomever manga, it's almost exclusively manga that was published by either Shogakukan and Shueisha. Even if the companies aren't directly subsidiaries of Japanese companies, it's obvious that some production companies are simply more likely to work with particular companies. GONZO stuff has pretty much all been licensed by Funimation, Del Rey has some kind of arrangement with Kodansha, and from a business perspective, this makes a lot of sense. It's easier to work with people that you've worked with before.
Anyway, hopefully my inadequate rambling skills answered whatever questions you might have had. Unfortunately since no one involved in this process usually talks in terms of numbers, I think it's impossible to be definitive on anything. However, I think this covers most of the issues involved in a relatively unbiased fashion (at least, I was trying to be unbiased). :D