Lines are being redrawn for Japan's anime industry

[cyth]

Originally Posted by Sackett

My understanding is that the anime industry is a very low profit industry. Occasionally an anime studio will have a hit show that becomes a cash cow, but more often shows break even, and sometimes are duds.

Well, if you're going to place the entire industry's value on the success/quality of anime properties, then I guess it's easy to ignore why keeping the anime industry alive is very much in the interest of the Japanese government. The anime industry isn't limited to anime studios, but anime is an important medium that ties together a number of different industries that have created a whole lot of jobs. And just because animators get paid very poorly doesn't mean the otaku industry as a whole doesn't turn around a lot of cash, it just means the licensing model gravitates in favor of merchandise manufacturers. Add to that the importance of anime as a cultural export. Just as restorations of old temples and castles have to be funded from the pockets of Japanese taxpayers, anime along with the rest of Japan's pop culture places Japan on the world map, creating millions in revenue for the tourism and other local industries.

[0utf0xZer0]

Originally Posted by xris

Sadly, this figure is way, way off.

Let's take the BSG Season 4 release. List price is $50.

The Retailer purchases the item from the Distributor for approx $25 and sells it on to the public for $50. This explains why online shops can sell it for $34.20 (example DVDPacific). The brick and mortar shops need to sell it at closer to full price since they have larger overheads.

The Distributor purchases the item from the Studio for approx $12 and sells it on to the Retailer for about $25. The Distributor has to pay for the storage and transport costs so it's not pure profit.

The Studio (by this I mean the company that releases the DVD, be it Fox, Disney, Sony, Funimation, Bandai, whoever) has to have the item manufactured (DVD manufacture, case and liners, printing costs, storage, etc.) which costs about $6 (this is for a boxset release of 4 DVDs).

This leaves about $6 which goes towards the production costs (actors, writers, producers, advertising, staff salaries, office rental) Out of this $6 comes some profit, which is maybe $1-2.


Sadly, this is nonsense. The Japanese business model is a bit different to the US one (due to their retail prices being higher but it is unlikely they make much more than $3 or $4 profit on a DVD sale. Profit is likely to be under a $1 per episode. So maybe $7733 profit, not $347,985.

Heh... my bad. I really have no idea how makes what cut of particular DVD sales.

But to be honest... I don't actually need to know who gets what cut of the sale to prove my point here. What I'm trying to say is that the American pricing model doesn't necessarily pull more money from fans than the Japanese one relative to the amount of content produced and the domestic market size.

While BSG lists for $50, I remember getting my copy for $40. And the Amazon Japan price for Katanagatari is about $50 (or would be if the yen was closer to the 100 to 1 dollar average right now), but like BSG that's probably lower than the official retail. So both prices are discounted.

$50 X 7733 copies (average of current volumes) = $386650
$40 X 244,000 copies = $9760000

So the total amount of money the BSG set is pulling is like 25 times as much... but it also contains 10 times the content and is being sold to a market 2.44 times the size... so it should be pulling 24.4 times the revenue.

My point is simply to show that as ridiculous as it sounds, the Japanese anime DVD pricing model actually seems to work pretty well from a sheer "this is what people are shelling out for DVDs" perspective.

[bayoab]

Originally Posted by xris

Sadly, this is nonsense. The Japanese business model is a bit different to the US one (due to their retail prices being higher but it is unlikely they make much more than $3 or $4 profit on a DVD sale. Profit is likely to be under a $1 per episode. So maybe $7733 profit, not $347,985.

$200000 production costs per episode / 3000 units to "break even" = $66.6/episode

Math works out that they have to be making a lot more than $1 per episode.

[0utf0xZer0]

Originally Posted by bayoab

$200000 production costs per episode / 3000 units to "break even" = $66.6/episode

Math works out that they have to be making a lot more than $1 per episode.

Yeah, the question is... where does the rest of the per episode profit come from, since nobody actually sells shows at $66 an episode? My guess is that a lot of it has to do with increased sales for source material (which explains a lot about why certain series get adapted IMO).

[Sackett]

Originally Posted by TinyRedLeaf

Excellent post by Sackett, but given my particular environment, it's not surprising that I would disagree in principle that government intervention is inherently bad.

Unfettered free-market capitalism, in my opinion, is likely to do more harm than good because competition, in practice, is not fair. People do not enter a market on an even playing field and, if there were no intervention, all factors of production would inevitably end up under the control of a tiny oligarchy, making it ever harder for those on the bottom to climb up via what is supposed to be a meritocratic system.

That being the case, the government does have to step in at times to redress the injustices created by an imperfect system. But that is another topic for debate altogether, not directly related to the pros and cons of outsourcing with regard to Japan's anime industry.

Hmm... our disagreement probably comes from differences in our nations historical experience- particularly in relation to land ownership.

Early North America was primarily settled by the losers of the economic system in England (and to a lesser extent France and Germany). Later immigrants were also predominately losers in the European economy. Additionally the political systems of most of these European governments were along the lines of absolute monarchy with weak nobles. The exception being England- yet in England (due to certain quirks of history) the nobles tended to ally with the commoners against the King more so than the other way around.

Because of this Americans were drawn from a culture in which the winners (ie land owners) tended to be winners because of their connections to the central government. Additionally, by moving to America the immigrants escaped control from the central European governments and gained access to the main limiter on economic advancement- land. There was so much land in America that anyone could just claim it by squatting on it, and the lack of central control meant that no one could easily seize more land then he could use. (This is also where N. American history diverts from much of Latin America). Because of this Americans were able to achieve economic success through independence.

The American Revolution was in many ways triggered by the King of England's attempts to gain control over the economic independence of Americans. School books have simplified it into a Tax Revolt, but in fact there were also grave concerns about corruption of local government by the King, particularly his attempt to control the distribution of land (this especially enraged Marylanders and Pennsylvanians if I remember right).

From this history Americans have fashioned a self image as the Self Made Men who triumph through hard work, Yankee ingenuity, and bit of luck and/or divine providence. In their minds there is always some self anointed King wannabe out there who wants to take their land and their independence away. Because of this, even day laborers tend to identify with individual business owners, particularly small business owners, and tend to suspect that big corporations and the central government are conspiring against him. Since that is our historical experience.

However, I can imagine a different historical experience. One in which the local nobles and/or local business bosses have enormous power because they control all the land. They use this power to abuse and mistreat the commoners, and the only relief provided is through intervention by the King and/or central government. Perhaps the conflict between the King and Nobles tended to break down with the King siding with the commoners in common cause against the nobles.

Such a history would lead to viewing government intervention more favorably. Notably a European country that has this kind of history is Sweden- which might explain why central government intervention is so successful there.

A most interesting path of thought.

Perhaps this suggests that effective government intervention in the market place is not only driven by cold economic incentives- but also influenced by cultural and historical forces.

Thus while government intervention might be effective in other countries it would not be effective in America because of the historical collusion in America between large business and the government.

And vice-versa- the more free wheeling nature of American economics might be considered too rough and unstable in other countries.

Of course, the historical strength of the American economy (despite the recent recession) compared to the European economy (who lets be fair, started out well ahead of America) suggests that there is some long term competitive advantage to the decentralized nature of economic power in the USA.

[Sackett]

Originally Posted by cyth

Well, if you're going to place the entire industry's value on the success/quality of anime properties, then I guess it's easy to ignore why keeping the anime industry alive is very much in the interest of the Japanese government. The anime industry isn't limited to anime studios, but anime is an important medium that ties together a number of different industries that have created a whole lot of jobs. And just because animators get paid very poorly doesn't mean the otaku industry as a whole doesn't turn around a lot of cash, it just means the licensing model gravitates in favor of merchandise manufacturers. Add to that the importance of anime as a cultural export. Just as restorations of old temples and castles have to be funded from the pockets of Japanese taxpayers, anime along with the rest of Japan's pop culture places Japan on the world map, creating millions in revenue for the tourism and other local industries.

Except I don't see how any of those interests will be harmed by a consolidated anime industry.

Anime isn't going to die out in Japan, it just might see half the studios go out of business. The remaining anime studios will become profitable, and will continue producing those "downstream" jobs- most of which will not be lost. (Since only popular anime shows tend to support those downstream jobs).

[krko]

Originally Posted by TheFluff

...the music industry may not sell as much now as they did in the 1990's because they can't sell people all their old LP records on CD again, but as a general statement it doesn't make much sense.

To be more accurate its the recording industry that's making less money. If you take into account the music industry as whole (concerts, sponsorships, etc.) and not just CD sales,in the UK at least, its actually growing PDF, BBC.

[karice67]

Originally Posted by Xion Valkyrie

xris: This is why digital distribution will be the inevitable future. Cut out the middle men entirely.

　Problem with this is that most consumers now expect digital media to be so cheap that, even with the extra customers that come from having a cheaper end-product won't be able to cover the cost of producing the show in the first place. I haven't seen any analyses for the anime industry, only for the publishing industry (can't find them atm though), but given that people seem to want HQ episodes for a couple of dollars (vs. $5-10 for an eBook), I'd say that the problem is worse in the anime industry.

Originally Posted by Reckoner

Whatever they decide, charging 50 dollars for two episodes of anime just doesn't fly with me. I would like to see the price of anime come down close to the price of typical American tv shows. I and I know many others would buy a lot more anime if that were the case since I'm not bled to death for every anime I choose to buy.

Originally Posted by 0utf0xZer0

...every time I hear this “Japan needs to drop domestic market anime prices to match American TV shows” stuff, I have to wonder if the poster has ever actually done the math concerning how profitable the Japanese pricing model for anime is. *snip*

I also tend to roll my eyes (and debate about whether to reply or not) whenever I see someone with this particular demand...but for different reasons.

@Reckoner, comparing anime to the average American tv show is ridiculous. Firstly, we're usually talking about late night vs. prime time. Secondly, you shouldn't assume that the Japanese market and the American market are all that similar - here, people simply don't have enough space to own too many things, not to mention that we can borrow a lot of it from rental video stores, so we don't buy as much. There are probably other arguments, but to me, these are two of the more pertinent ones.

[Vexx]

I find it hilarious that the same people who blithely plunk down $15 for a movie, $60 for a concert ticket, and $10 for crappy fast food will whine and moan all the way down the street at the idea of paying a remotely decent price for an average of 12 hrs of entertainment called anime. Yeah, the japanese anime industry model is high (because its got a VERY small audience) but the American expectations of it being priced like a Target special on a season of House is just ridiculous. For a better idea, you might check a PBS catalog of DVD prices (another category only watched by small audiences).

I realize there's a "peanut gallery and patron" situation... but you have to have ENOUGH patrons for the entertainment to even happen.

[Xion Valkyrie]

Originally Posted by karice67

　Problem with this is that most consumers now expect digital media to be so cheap that, even with the extra customers that come from having a cheaper end-product won't be able to cover the cost of producing the show in the first place. I haven't seen any analyses for the anime industry, only for the publishing industry (can't find them atm though), but given that people seem to want HQ episodes for a couple of dollars (vs. $5-10 for an eBook), I'd say that the problem is worse in the anime industry.

The thing about digital distribution is that with a solid platform, you can cut down costs significantly, making it much more likely to turn a profit.

Look at PC games for example. Under traditional publisher deals, a dev must find a publisher, or else they'd have no way of getting their game out there. Usually what happens is that the publisher will take care of the distribution and marketing costs, but end up taking all the royalties, we're talking about like 80-95% here. If the dev is in house to the publisher, its possible that the dev team would get NO royalties, although their development costs would be paid for. The publisher definitely doesn't sell the game for the $60 price that store spay for though. I believe Kotaku did an article on it, and the publisher gets something like 15% of the $60, with the other 85% going to distributors and retailers. The publisher would only give to the devs from that remaining 15%, and usually it's pretty lopsided.

Now look at Steam. From what has been revealed, generally a developer gets anywhere from 50 to 70% of how much their product sells for on Steam, with Steam taking the other portion. Even if their product doesn't sell as much, they'd still make significantly more money because of how much more profit they'd be making. Also, they don't have to worry about physical inventory. With traditional physical media, you'd have to order a set number of items for manufacturing, and you have to estimate how much you can actually sell. If you order too much and get left with a lot of inventory, you pretty much just lost a lot of money. There's also a limited shelf life, especially for niche products, as retailers will want to put up newer, more popular items. This means that there are a lot of situations where you'll a lot of lost revenue simply due to unmovable stock. However, with digital distribution, you don't have this problem. You essentially reduce your costs to 0 after the initial development costs, and every sale from that point on is pure profit, no matter how much you lower the costs. This is why there are ridiculous steam sales all the time, because the companies are making profit from it.

[Reckoner]

Originally Posted by Vexx

I find it hilarious that the same people who blithely plunk down $15 for a movie, $60 for a concert ticket, and $10 for crappy fast food will whine and moan all the way down the street at the idea of paying a remotely decent price for an average of 12 hrs of entertainment called anime. Yeah, the japanese anime industry model is high (because its got a VERY small audience) but the American expectations of it being priced like a Target special on a season of House is just ridiculous. For a better idea, you might check a PBS catalog of DVD prices (another category only watched by small audiences).

I realize there's a "peanut gallery and patron" situation... but you have to have ENOUGH patrons for the entertainment to even happen.

Perhaps not necessarily directed at me, but I'm going to respond to this. I do not pay 60$ for a concert ticket, I do not pay 10$ for crappy fast food, and I rarely go to the movie theaters unless it is a truly spectacular movie such as the recent inception. All the things you listed are truly overpriced.

Originally Posted by karice67

　
@Reckoner, comparing anime to the average American tv show is ridiculous. Firstly, we're usually talking about late night vs. prime time. Secondly, you shouldn't assume that the Japanese market and the American market are all that similar - here, people simply don't have enough space to own too many things, not to mention that we can borrow a lot of it from rental video stores, so we don't buy as much. There are probably other arguments, but to me, these are two of the more pertinent ones.

I'm not arguing against the price models developed or what is profitable. I'm just saying the fact, I will not purchase something as severely overpriced as anime DVD's are. The same that I won't pay for overpriced concert tickets, overpriced food, or anything that's overpriced.

Telling me why something is priced a certain way does nothing for me. I already know why. Corporate greed and laziness being key contributors.

[Vexx]

@Reckoner: Heh.. no I wasn't pointing at you. I also think everything is over-priced but then I remember when gas was 19 cents a gallon. Now, the pricing IN RELATION to other forms of entertainment should be considered (and the basic cost of living). Looking at that, there's clearly some disconnect between the greed of the corporate machines, the salaries of the actual worker/creators, and the wallets of the audience.

However, we also have a certain crowd out there that whines at the concept of paying someone at all for their hard work, meanwhile they're hurling wads of cash at other things thoughtlessly -- I've got a fairly evil eye towards that sort.

[karice67]

Originally Posted by Xion Valkyrie

The thing about digital distribution is that with a solid platform, you can cut down costs significantly, making it much more likely to turn a profit.

Look at PC games for example. *snip*

You might want to look at how anime is funded (and thus who the main distributor is) before you make any comparisons with the PC game market. Not to mention that the markets have hugely different consumer bases in the first place...

Originally Posted by Reckoner

Telling me why something is priced a certain way does nothing for me. I already know why. Corporate greed and laziness being key contributors.

This kind of statement makes me wonder if you're the kind of person who buys $1 chocolate that really rips off the actually producers but puts money into the pockets of Hershey's stockholders and CEO's? Before you label anything "overpriced", I suggest looking at why so many things are underpriced, especially in the States. You might be surprised at how "corporate greed" is practiced these days.

[Reckoner]

Originally Posted by karice67

This kind of statement makes me wonder if you're the kind of person who buys $1 chocolate that really rips off the actually producers but puts money into the pockets of Hershey's stockholders and CEO's? Before you label anything "overpriced", I suggest looking at why so many things are underpriced, especially in the States. You might be surprised at how "corporate greed" is practiced these days.

How is this relevant?

[KholdStare]

Well, at least now I know that I'm not an asshole by not buying anime. I don't buy go to concerts, the movies, or pay more than $5 for any kind of meal. So in fact, I don't buy anything at all. I'd like to see if I will buy anime when I get money.

[karice67]

Originally Posted by Reckoner

How is this relevant?

Do I have to spell things out?

You call anime DVDs "overpriced", with "corporate greed" being an important factor.

Based on where you live (Santa Barbara), I'm guessing that the rampant underpricing of goods in the States - not just DVDs, but food, clothes etc too - has influenced your expectations of how much things should cost.

From what I've read, if we were to pay a price that is appropriate to the amount of effort and cost that went into making these products, then many products in the US would see an increase in price.

I'm merely suggesting that you should look into the real costs of these goods in the States (and where any profits go) before you make any assumptions and/or broad statements about costs, revenue and where money goes in industries in other countries.

If you still don't think this is relevant, then forget it. No amount of discussion is going to convince you otherwise.

[Reckoner]

Originally Posted by karice67

Do I have to spell things out?

You call anime DVDs "overpriced", with "corporate greed" being an important factor.

Based on where you live (Santa Barbara), I'm guessing that the rampant underpricing of goods in the States - not just DVDs, but food, clothes etc too - has influenced your expectations of how much things should cost.

From what I've read, if we were to pay a price that is appropriate to the amount of effort and cost that went into making these products, then many products in the US would see an increase in price.

I'm merely suggesting that you should look into the real costs of these goods in the States (and where any profits go) before you make any assumptions and/or broad statements about costs, revenue and where money goes in industries in other countries.

If you still don't think this is relevant, then forget it. No amount of discussion is going to convince you otherwise.

Underpricing of clothes? Are you joking? Underpricing of food? You seriously must be jesting. Please don't talk like you know of the cost of living where I am as if you have lived here. The housing is outrageously priced for really what you get is a POS, food is not exactly any cheaper than anywhere else in the US, and if you go out to eat it's extremely overpriced (They charge like $10 for a simple burrito).

I know what you are saying, but I'm still going to ask if this really is relevant. The underpricing of goods in the US? Does this change the fact that anime dvd's are overpriced? Does it change the fact that there exists a lot of corporate greed?

It also doesn't change the fact that the anime industry is exploiting a small sect of the consumers who are willing to pay whatever for the 7,000 releases of the same product in different forms while most of the consumers are stuck not buying anything since it's too expensive. I doubt you can sit here and tell me that anime DVD's are rightly priced (LOL).

Again, $50 for two episodes of anime will never fly with me. I might as well go see Inception about 4 times and I'd enjoy it lmao 30 million times more for the price.

[karice67]

Originally Posted by Reckoner

Underpricing of clothes? Are you joking? Underpricing of food? You seriously must be jesting. Please don't talk like you know of the cost of living where I am as if you have lived here. The housing is outrageously priced for really what you get is a POS, food is not exactly any cheaper than anywhere else in the US, and if you go out to eat it's extremely overpriced (They charge like $10 for a simple burrito).

'Scuse me, but I have been to the States, albeit only for a trip a few years back, and for the serving sizes, your food is cheap for a first world country. I've also been to many European countries, and have lived in 5 different cities across the world. Right back at you - don't talk as if you know the costs of living in other countries.

Originally Posted by Reckoner

I know what you are saying, but I'm still going to ask if this really is relevant. The underpricing of goods in the US? Does this change the fact that anime dvd's are overpriced? Does it change the fact that there exists a lot of corporate greed?
...
I doubt you can sit here and tell me that anime DVD's are rightly priced (LOL).

All I'm trying to say is that you have no right to say anything about it unless you actually understand how all these industries operate in the first place. If you do, then my bad for making the assumption that you don't.

I'm actually fine with the pricing of anime DVDs. It's not like I'm paying for just two episodes in the first place - the extras are where I'm getting my money's worth. And it keeps me from buying stuff that I really don't need to own.

[Reckoner]

Originally Posted by Vexx

However, we also have a certain crowd out there that whines at the concept of paying someone at all for their hard work, meanwhile they're hurling wads of cash at other things thoughtlessly -- I've got a fairly evil eye towards that sort.

I feel ya. Especially considering my Father works in the entertainment industry and gets robbed everyday of his hard work when kids who don't pay for what they take from him blow it everywhere else thoughtlessly.

Originally Posted by karice67

'Scuse me, but I have been to the States, albeit only for a trip a few years back, and for the serving sizes, your food is cheap for a first world country. I've also been to many European countries, and have lived in 5 different cities across the world. Right back at you - don't talk as if you know the costs of living in other countries.

Once again, I'm going to ask you have you actually "lived" in Santa Barbara? Not visited. And the US is not a homogeneous country, it changes drastically depending on region, and in the case of the state of California it could change in a matter of a couple hour drive.

Food sizes are irrelevant when I can get the same thing for better at half the price somewhere else other than Santa Barbara.

Also nice straw man argument. Did I ever say that I know the prices of other countries? (And btw, don't make it seem like you're the only one who has lived in other countries. I've lived in Germany and Mexico just so you know).

Originally Posted by karice67

All I'm trying to say is that you have no right to say anything about it unless you actually understand how all these industries operate in the first place. If you do, then my bad for making the assumption that you don't.

I'm actually fine with the pricing of anime DVDs. It's not like I'm paying for just two episodes in the first place - the extras are where I'm getting my money's worth. And it keeps me from buying stuff that I really don't need to own.

Again, did I say that the industry's practices weren't profitable for them? I'm sure they are lining their pockets with cash, at the expense of the artists, animators, and of course the consumer .

If you're fine paying that much for those DVD's, go for it. I'll pick and choose what anime I want to buy based upon cost effectiveness. My point still stands, for me it is silly to purchase 2 episodes of anime that at times are even lower quality than fansubs, for a great sum of $50. End of story.

[Kaijo]

While this handy picture is mainly for the music industry, the same thing applies to the anime industry. Greedy corporate fucks are greedy corporate fucks no matter what country they're in.

http://i.imgur.com/VUnO8.jpg