Lines are being redrawn for Japan's anime industry

[AnimeFan188]

"As production houses cut costs by sending animation jobs to South Korea, India and
Vietnam, the number of experienced workers in Japan is shrinking. Competitors in
China are another threat to Japan's cultural icon."

See:

http://www.latimes.com/business/la-f...,7946983.story


Quote:

"For the last two years, she has spent up to 100 hours a week at her workstation — a
low-paying, labor-intensive job that helps bring Japan's famous style of animated
cartoons to life. Although the 26-year-old earns only about $10,000 a year and lives
with her mom to make ends meet, she and a few thousand Japanese artists like her fill
a crucial role in the technical process of creating this visual entertainment form, known
as anime."

Hmm, $10,000 a year and 100hrs a week. I guess being an anime artist really is a
labor of love. Or maybe the economic situation in Japan has something to do with it.

[Reckoner]

Yo, do you go to UCSB by any chance? lol.

Forget it. Yeah this is a ridiculous article that misses the point completely.

[Vexx]

Its a Los Angeles Times post.... they frequently have poorly constructed articles. There really IS a problem with not building up experienced animators due to outsourcing.... but its one that all corporations seem to fall prey to in the last 10 years or so. They outsource all the stuff they used to give to new hires to build a solid work force. So, in the long run, the company cuts its own throat -- BUT the executives still walk off with bags of loot -- and as you can see, the working staff gets screwed. This is the new corporate paradigm that the US has exported and, yeah, it sucks. I watched it happen to many engineering/design firms in the late 90s. Friends who work in other sectors have experienced the same motif.

[solomon]

Interesting, I mean the US already went through this in the 80s, havent the Japanese studios been doing this since the 90s.

I still like Newspapers best out of all major media outlets (aside from Pubcasting) but I NEVER read anything about anime in them, because the subjects are so poorly handled.

[Kaijo]

What someone makes is mostly irrelevant by itself; what's the cost of living there? How does the pay compare? What's the culture?

But yeah, Vexx pretty much hit the nail on the head; corps are outsourcing to save costs, so they can funnel that money back into their pockets. The problem is wall street and nano-second trading. If a CEO isn't showing continuous growth quarter by quarter, then they are doing bad. Long-term viability has given way to short-term profitability.

Japan is just following the trend US corps are doing.

[Triple_R]

Originally Posted by Kaijo

What someone makes is mostly irrelevant by itself; what's the cost of living there? How does the pay compare? What's the culture?

But yeah, Vexx pretty much hit the nail on the head; corps are outsourcing to save costs, so they can funnel that money back into their pockets. The problem is wall street and nano-second trading. If a CEO isn't showing continuous growth quarter by quarter, then they are doing bad. Long-term viability has given way to short-term profitability.

Japan is just following the trend US corps are doing.

Excellent points.

And, long-term, this is entirely the wrong approach for the anime industry to take. An industry rooted in the artistic and creative contributions of many different sources really should be focusing on cultivating that talent as best as possible. But that sort of long-term investment can be costly, and undermine short-term profitability...

[TinyRedLeaf]

I keep getting the impression that there is a lot of knee-jerk reaction to the supposed harms of outsourcing, an assumption that it does more harm than good.

In theory, outsourcing lowers the costs of production, which ultimately benefits the consumer in terms of lower prices. Also, when it crosses borders, it becomes a form of investment in another country, helping to provide employment and, in some instances, acting as a conduit for skills and technology transfer. Without the outsourcing boom in software and call-centre services, for example, India would not be doing as well as it is today. The same can be said for manufacturing in China. With greater employment comes greater disposable income and, eventually, a healthier consumer economy in those currently less-developed countries.

Also, in theory, companies that free up resources from outsourcing are supposed to invest the savings in developing other factors of production to generate future income.

The whole point of outsourcing, in the end, is about achieving greater levels of focus on key areas of competitive advantage. It's about maximising your productivity and hiving off processes that can be performed better by other specialists. The net effect would be an economy that is more productive.

So, in theory, there is nothing wrong with outsourcing as a business and operations-management tool. For those who are so apparently against "outsourcing" and, by implication, "globalisation", I don't suppose they are championing a return to "import substitution" and protectionism, are they?

Rather, I think the disatisfaction here is more about how outsourcing works in practice in some industries and countries. The complaints that companies 1) aren't actually passing on the savings to consumers through anti-competitive business practices; 2) aren't investing the savings on developing the few resources that they do keep; are both valid.

Left to their own devices, profit-seeking companies are not likely to do either. Government regulation is therefore needed in the first instance, to break anti-competitive practices that enable profiteering (this is obvious to most economies except, it seems, that of the United States, which is almost pathologically opposed to any hint of government intervention in business).

Government intervention can also be helpful in the second instance, in sponsoring programmes that bear some of the costs of educating and training a redundant workforce for deployment in other parts of the economy. Preferably, though, this should be an industry-driven initiative, perhaps supported with government subsidy, as companies know better what they want from prospective employees.

Underlying the whole problem, though, is the fact that labour is a relatively immobile factor of production, compared to capital or natural resources. People can't just up sticks and move to where the jobs are, because of social factors like having families to take care of. Even if they don't face such problems, the other country or state might put up various immigration barriers to prevent the influx of too much foreign labour.

But that seems to be more of an issue for manufacturing and construction industries. When it comes to the creation of intellectual property like anime, labour mobility is not as much of an issue. Advances in communications technology make it possible for producers to literally tap a global market of artists. Again, in theory, this is a good thing, because it opens up the competition for talent. In practice, this has the effect of lowering wages, as artists living in places with lower costs of living are naturally able to offer their services at far lower prices.

Hence a bitter irony: We like to say that competition is good, but it seems that when it hurts people's pockets, we don't like it quite as much.

What are the possible solutions? Well, if you are a free-market hawk, you might suggest doing nothing: The market would sort itself out. Eventually, wages would fall so low that they would not offer enough incentive for people to join the industry. Thus, equilibrium is achieved between the demand and supply of labour.

Naturally, though, emotions kick in, as they rightly should: What works for the market does not appear to do justice to workers, let alone to consumers.

So what do we need? More government intervention perhaps, because companies are not likely to take the initiative to reduce their profit margins. For example, minimum-wage requirements (which are, to be sure, not foolproof as companies can then leave altogether and relocate to places without such requirements).

In the end, I can't really think of many good, economically sound ideas. The outsourcing trend is here to stay, adding to the doom and gloom faced by manga and anime artists in Japan. Unless we're thinking of dumping free-market capitalism altogether, there isn't really any sound argument we can offer against the trend. It's just something that industries, markets and people will have to cope with; the artists had best start planning for other jobs. The best that any intervention can do, be it from government or from businesses themselves, is to delay the inevitable.

[0utf0xZer0]

Given what I've heard about the wages and turnover rate for animators in Japan, I'm not actually sure that outsourcing makes much difference to long term cultivation of talent, unless outsourcing is what's actually been driving those problems and I've never actually gotten the impression this is the case.

From what I can gather, I also get the impression that a large part of the problem is that many studios just don't earn enough money to be able to invest it in developing their staff.

[TinyRedLeaf]

Originally Posted by 0utf0xZer0

Given what I've heard about the wages and turnover rate for animators in Japan, I'm not actually sure that outsourcing makes much difference to long term cultivation of talent, unless outsourcing is what's actually been driving those problems and I've never actually gotten the impression this is the case.

Outsourcing in the anime industry probably originated as a symptom to larger problems, such as the need to pare down costs amid declining revenues. To some extent, though, it has also become a problem in itself, as it is a source of competition that keeps wages low, to the detriment of artists who live and work in Japan.

Originally Posted by 0utf0xZer0

From what I can gather, I also get the impression that a large part of the problem is that many studios just don't earn enough money to be able to invest it in developing their staff.

Virtually all sectors of the media industry has been suffering since the 1990s, for obvious reasons. The anime industry is not unique in this regard.

On the one hand, we have companies pleading for more protection against illegal distribution of their work and, on the other hand, consumers who feel that the existing business models simply don't work any more and would rather see the companies die.

Either way, both parties are yet to come up with feasible solutions that would work fairly for both content producers and consumers.

[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.

[Triple_R]

Originally Posted by TinyRedLeaf

I keep getting the impression that there is a lot of knee-jerk reaction to the supposed harms of outsourcing, an assumption that it does more harm than good.

It's not knee-jerk at all. There's valid reasons to be concerned about outsourcing, as it pertains to the anime industry.

Outsourcing, in and of itself, is not necessarily bad.

Your examples of software and call center services may indeed be two examples of where outsourcing works.

This is because neither necessarily removes important skills from the domestic labor force, and its wider population.

In a technological internet-age where home PCs and/or mobile laptops are the norm for people, you're going to need a large number of software specialists virtually everywhere. So, it's not a case where outsourcing some such work to India will necessarily deprive other nations of that talent. I personally know many people good at computer software; none are from India to the best of my knowledge.

As for call centers, they likely deal primarily in the areas of customer service and/or telemarketing. Customer service professions are also very common, and hence exporting call centers to India also does not deprive a nation of any sort of talent at customer service.


But animation is a much more specialized and limited field. If Japan outsources too much of its work related to animation, then it will be lowering the overall talent poll within its own nation when it comes to making animation.

Consider this Japan Times article from a year and a half ago.

Here's a key excerpt dealing with what I'm referring to here:


The study revealed that a single cel on average earns animators a meager ¥186.9. Considering how a grunt worker has to fill in 500 in-between cels per month for a television animation series, this means a monthly wage of ¥94,000 at best — for an average of 250 hours of work — until an artist gets to handle key frames or storyboards.

With an estimated 90 percent of in-betweens being outsourced overseas — a result of the industry trying to squeeze out more content than it can from domestic hands — there are also concerns that opportunities to nurture future generations of quality animators are being lost.

"Drawing in-between cels is hard work and it sure doesn't pay much, but it's still an important skill that every animator should learn," said Masayuki Kawachi, president of the All-Toei Labor Union.

Kawachi, who handles special effects at Toei Animation Studio, said that in the current situation, most of such work is done in countries like China and the Philippines.

"And with the recession eating away at production fees and forcing agencies to downsize or go bankrupt, young and aspiring animators can't find places to work," Kawachi said.

Reflecting such times, animation studio Gonzo, a well-known name in the industry, recently confirmed it plans to pare the number of contracted creators from 130 to 30 over the next five years.

__________________________________________________ __________



Now, should this be of much concern to anybody but the Japanese people themselves? I'm not entirely sure, to be fair. However, there can be little doubt that anime is widely viewed as a Japanese cultural export. To what extent does this "Japanese cultural export" status benefit the quality and style of anime? Would anime be the same if none of its animators were Japanese people?

These aren't clear-cut, open and shut, questions, in my view. At the very least, there's probably some benefit to an anime with a Tokyo setting being animated by people who live in, or at least have visited, the actual real life Tokyo. I think of how Kyoto Animation actually incorporates real life locales into much of its Haruhi work. This adds a nice sense of realism to the Haruhi anime, imo.

[TheFluff]

Originally Posted by TinyRedLeaf

Virtually all sectors of the media industry has been suffering since the 1990s, for obvious reasons. The anime industry is not unique in this regard.

Your previous post was really tl;dr but I noticed this sentence while skimming the thread and I really have to ask what your source for this statement is and what exactly what you mean by it.

First of all, what do you mean by "media industry"? Just the usual movie and music industries, or do you want to include publishing houses? Newspapers? TV stations?

Second, are you speaking globally or just of Japan?

If you're speaking only about Japan then it's not that odd that the music and movie industries have seen lower profits than they did in the mid-1990's, given that Japan has basically been in an economic downturn for the last 20 years and has been through several financial crises since then.

In general, though, it's a very odd statement to make given that we spend more money on entertainment now than ever before in the history of humanity. Newspapers may be suffering, and 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. The movie industry, for example, is doing great; box office profits in the US have steadily been going up for the last 15 years (except a brief dip in 2005).

In other words: please clarify and provide sources for such sweeping statements.

[Sackett]

Originally Posted by TinyRedLeaf

I keep getting the impression that there is a lot of knee-jerk reaction to the supposed harms of outsourcing, an assumption that it does more harm than good.

In theory, outsourcing lowers the costs of production, which ultimately benefits the consumer in terms of lower prices. Also, when it crosses borders, it becomes a form of investment in another country, helping to provide employment and, in some instances, acting as a conduit for skills and technology transfer. Without the outsourcing boom in software and call-centre services, for example, India would not be doing as well as it is today. The same can be said for manufacturing in China. With greater employment comes greater disposable income and, eventually, a healthier consumer economy in those currently less-developed countries.

Also, in theory, companies that free up resources from outsourcing are supposed to invest the savings in developing other factors of production to generate future income.

The whole point of outsourcing, in the end, is about achieving greater levels of focus on key areas of competitive advantage. It's about maximising your productivity and hiving off processes that can be performed better by other specialists. The net effect would be an economy that is more productive.

So, in theory, there is nothing wrong with outsourcing as a business and operations-management tool. For those who are so apparently against "outsourcing" and, by implication, "globalisation", I don't suppose they are championing a return to "import substitution" and protectionism, are they?

Rather, I think the disatisfaction here is more about how outsourcing works in practice in some industries and countries. The complaints that companies 1) aren't actually passing on the savings to consumers through anti-competitive business practices; 2) aren't investing the savings on developing the few resources that they do keep; are both valid.

Left to their own devices, profit-seeking companies are not likely to do either. Government regulation is therefore needed in the first instance, to break anti-competitive practices that enable profiteering (this is obvious to most economies except, it seems, that of the United States, which is almost pathologically opposed to any hint of government intervention in business).

Government intervention can also be helpful in the second instance, in sponsoring programmes that bear some of the costs of educating and training a redundant workforce for deployment in other parts of the economy. Preferably, though, this should be an industry-driven initiative, perhaps supported with government subsidy, as companies know better what they want from prospective employees.

Underlying the whole problem, though, is the fact that labour is a relatively immobile factor of production, compared to capital or natural resources. People can't just up sticks and move to where the jobs are, because of social factors like having families to take care of. Even if they don't face such problems, the other country or state might put up various immigration barriers to prevent the influx of too much foreign labour.

But that seems to be more of an issue for manufacturing and construction industries. When it comes to the creation of intellectual property like anime, labour mobility is not as much of an issue. Advances in communications technology make it possible for producers to literally tap a global market of artists. Again, in theory, this is a good thing, because it opens up the competition for talent. In practice, this has the effect of lowering wages, as artists living in places with lower costs of living are naturally able to offer their services at far lower prices.

Hence a bitter irony: We like to say that competition is good, but it seems that when it hurts people's pockets, we don't like it quite as much.

What are the possible solutions? Well, if you are a free-market hawk, you might suggest doing nothing: The market would sort itself out. Eventually, wages would fall so low that they would not offer enough incentive for people to join the industry. Thus, equilibrium is achieved between the demand and supply of labour.

Naturally, though, emotions kick in, as they rightly should: What works for the market does not appear to do justice to workers, let alone to consumers.

So what do we need? More government intervention perhaps, because companies are not likely to take the initiative to reduce their profit margins. For example, minimum-wage requirements (which are, to be sure, not foolproof as companies can then leave altogether and relocate to places without such requirements).

In the end, I can't really think of many good, economically sound ideas. The outsourcing trend is here to stay, adding to the doom and gloom faced by manga and anime artists in Japan. Unless we're thinking of dumping free-market capitalism altogether, there isn't really any sound argument we can offer against the trend. It's just something that industries, markets and people will have to cope with; the artists had best start planning for other jobs. The best that any intervention can do, be it from government or from businesses themselves, is to delay the inevitable.

I was grateful to see a post that pointed out the benefits of outsourcing. The concept of competitive advantage is not given the amount of credit it should for our rapidly improving quality of life.

However, I disagree with your positive assessment of government intervention. Perhaps this is no surprise as I'm an American- and a Western American at that, which tends to be the area of America that most objects to government intervention in the market place.

My response to the arguments you make that companies:

1) aren't actually passing on the savings to consumers through anti-competitive business practices; 2) aren't investing the savings on developing the few resources that they do keep

Left to their own devices, profit-seeking companies are not likely to do either. Government regulation is therefore needed in the first instance, to break anti-competitive practices that enable profiteering (this is obvious to most economies except, it seems, that of the United States, which is almost pathologically opposed to any hint of government intervention in business).

1) In general, most companies simply don't naturally have the market power necessary to extort monopolistic profits or to engage in collusion. Companies do attempt collusion every now and then, but these arrangements rarely last because of the large financial incentive to cheat.

This is not to say that there isn't a lot of collusion and market manipulation to divert savings from consumers into the pockets company stockholders. Rather that such manipulation is almost always buttressed by government intervention and regulation. Regulations by their very nature create barriers to entry that prevent new startup companies from challenging existing companies - this makes collusion easier as you only have to have collusion among existing companies instead of having to worry about newcomers. Additionally regulations are commonly written by the industries being regulated- and therefor are written to benefit the largest of those companies, enabling them to extort monopolistic profits.

This perverse nature of government regulation is demonstrated by a recent example. In America there was a case of lead poisonings caused by toys manufactured in China by Mattel (the largest toy making company in America). This caused a public outcry that led to new regulations requiring children toys be tested for lead at government labs. The effect of this was to raise the cost of manufacturing toys - and the smaller you are the greater the cost increase per a toy, which means that Mattel gained a competitive advantage due to it's size allowing it to test larger batches at a time. Additionally, Mattel received a special waiver allowing them to test their toys in their own labs, further reducing their costs per a unit. Other toy companies do not have the size necessary to do something similar. So Mattel has a price advantage allowing them to expand their market share, and extort some monopolistic profits. So despite Mattel being the offender in the matter of lead poisonings, they have actually benefited from the new regulations, while the honest companies have been harmed.

And that is only due to unintended consequences. In addition, Government bureaucracies are vulnerable to corruption- as most clearly shown by the corruption in the Mines and Minerals division of the American government- leading to an almost non-existent enforcement of current safety regulations on deep sea oil rigs. If the government had been enforcing current regulations, the BP oil spill would have been far less likely to happen.

These are the general reasons for American suspicion towards government intervention in the market place. We tend to perceive the government as incompetent, and likely to make matters worse. We also perceive the government as prone to engaging in malicious regulation that deliberately benefits the largest companies at the expense of consumers and small companies.

This is not to say that the government should never intervene. There are natural monopolies that occur- most obviously utilities such as sewage, water, electricity. These industries are heavily regulated in America. Additionally I think computer operating software (ie Microsoft) is a natural monopoly, and government intervention to prevent abuse is warranted. (In particular Microsoft violated several laws during it's successful attack on Netscape to protect it's monopoly.)

However, I doubt that Anime is a natural monopoly. It is very unlikely that anime companies are not passing along their saving to consumers. 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.

2) As a whole, companies are actually pretty good about investing in future revenue producers. Companies that aren't tend not to last very long. The main problem occurs when there are skills or investments that do not lead to future revenue, but are also producing "positive externalities".

Again government intervention is not the answer. Consider the American boondoggle of subsidizing the Ethanol industry. This "investment" is not driven by any realistic chance for corn based Ethanol to become a competitive fuel source, but instead by the lobbying strength of the corn industry. It has also had the unfortunate side effect of increasing the cost of grain- and thus the cost of food. Again Government incompetence and government corruption tend to make positive government intervention impossible.

An exception might be in general scientific research which then produces general knowledge that private industries can develop in applied research. Additionally, subsidizing general education of children is another way the government can have some positive intervention. Notice that this is already done in America. I think that future improvements of government intervention in "investment" should be focused on improving these areas. Not in attempts to pick specific technological winners for the government to invest in.

Anime does not strike me as the kind of industry to benefit much from government intervention. No doubt some government bureaucrat would insist on subsidizing the anime style that he personally prefers, regardless of the preferences of the market. Harming the industry more than helping it.

In conclusion:

The outsourcing by anime studios is more likely driven by competition, and keeping costs down so the company doesn't go bankrupt. While I understand the concerns by anime fans about the low pay to animators and the long term effects on anime, I don't see how studio bankruptcy would help matters.

Eventually competitive pressures will either cause the anime industry to shrink to a more sustainable size (with only the "best" anime companies surviving- probably those that continue to cultivate talented animators). Or perhaps those competitive pressures will force them to figure out how to harness the internet distribution possibilities to expand their market - probably with a corresponding decrease in price for the consumer.

I don't see anyway to prevent these pressures from occurring, so we just have to accept it and hope for the best. The most we can do is to support the anime studios that we feel produce the best work - thus improving their chance for survival in the coming consolidation.

[ChainLegacy]

Great explanation, Sackett. Government shouldn't be involved, not because regulation is inherently bad, but because they are inefficient and corrupt.

[Kaijo]

Originally Posted by TinyRedLeaf

Rather, I think the disatisfaction here is more about how outsourcing works in practice in some industries and countries. The complaints that companies 1) aren't actually passing on the savings to consumers through anti-competitive business practices; 2) aren't investing the savings on developing the few resources that they do keep; are both valid.

This is it. Corporations do NOT lower prices if they can help it, and all the savings and cash flows mostly to those at the top. Wealth is then more concentrated in the hands of a few, instead of spread out to more people. Corporations(and their CEO's and board members) are inherently inefficient, sociopathic, and greedy. Government regular is needed, in the form of tariffs. If you want to outsource, then we'll charge you extra when you want to import those goods and services back in so that prices remain equal for those companies remaining inside the country.

Also, outsourcing wouldn't be bad if it worked both ways. A company can outsource it's labor and production... but all manner of roadblocks are thrown up to the consumer who wants to outsource their buying. Licensing, region-locked media, and bought laws make it difficult for you to take advantage of different prices in different countries to buy something overseas. Wanna buy cheaper medicine that's made and distributed in India? Too bad; you have to buy the more expensive version in the US.

Yes, there are ways around it, but not easy ones such that everyone can take advantage of it.

Also, as jobs are outsourced, the unemployment situation worsens. As production is shipped out of the country, the US grows weaker. The main thing we have left is IP, so we're now trying to bully other countries into accepting our draconian IP in order to keep our power. If you reject our IP, it's gonna get worse. A lot is based on the US dollar, so if we tank, the global economy suffers. At the rate of China's growth, China is gonna over take the US in another 10-15 years, so you'll have to ask yourself who you want as the dominate economic superpower.

Outsourcing, while helping the general population of the country it goes to a bit, only serves to concentrate money in the hands of the upper echeolon again. Corruption is the name of the day in places like India and China. Bribery is a standard practice. Life dramatically improves for those on top, while the lower guy continues to suffer. In short, outsourcing isn't helping them much.

Things to think about.

[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.

And, in that respect, I actually agree with Sackett: The outsourcing of anime production to cheaper countries is a natural business trend, and if we claim to believe in free-market competition, then there is little we can do about it.

Either the industry dies out in Japan, or the surviving companies find some other way to balance their costs against their revenue.

Originally Posted by TheFluff

In general, though, it's a very odd statement to make given that we spend more money on entertainment now than ever before in the history of humanity. Newspapers may be suffering, and 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. The movie industry, for example, is doing great; box office profits in the US have steadily been going up for the last 15 years (except a brief dip in 2005).

In other words: please clarify and provide sources for such sweeping statements.

All the above is true. I made an off-the-cuff statement without factual basis. It happens, mea culpa.

I would clarify that I was thinking primarily about the newspaper and music industry when making the statement. In saying virtually (meaning, almost) all, I already had in mind that figures for book publishing suggest that this part of the media industry is actually stable, at least in the United States, although it remains to be seen how digital books, now easily consumed via e-book readers, will affect the sector. That, in turn, makes me wonder how manga sales have performed in Japan over the last 10 years, in spite of what is happening in the anime industry.

As for movie revenue trends in the US, I am surprised. I haven't looked into them before and now that I have, they raise a lot of other questions. Thanks for pointing them out.

[Xion Valkyrie]

It's okay, once the anime industry explodes, some genius will look at the untapped market and find some new way of making anime that utilizes the new economical landscape, and there'll be a new golden age.

[0utf0xZer0]

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.

I don’t want to single you out specifically, but 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.

I take it everyone would consider Sci-fi’s remake of Battlestar Galactica to be a good example of a major American “geek” TV franchise? Let’s compare the revenue from a typical volume of Katanagatari and the American DVD set for the first half of season 4 of BSG.

Cost: I’m going to use a historical average for yen to American dollars here of about 100 to 1 rather than the current 80 to 1, just because I figure it’s a little more fair. So about $50 for Katanagatari on Amazon Japan versus what, around $40 for a BSG season 4.0 set? (The other half of the season is called season 4.5)

If we assume the retailer takes a $5 cut in each case (and I’ll admit I’m pulling that number from my ass), then Katanagatari is pulling $45 per copy and BSG $35. However, the BSG set contained 10 one hour timeslot episodes to Katanagatari’s one episode. So on a per episode basis, it’s $45 of profit versus $3.5.

The average volume of Katanagatari so far has sold 7733 copies, meaning the average profit per episode from DVDs is $347985. Meanwhile, according to American DVD sales charts BSG season 4.0 sold 244,056 copies in its first two weeks before dropping off the top 30. So about $854196. So far BSG looks to be doing great… until you consider that the American market is much larger, with 310 million people versus 127 million. So 2.44 times the market size. Divide BSG’s revenue by 2.44 and you get… $350080.

Now, I know that my BSG sales number are only for the first two weeks and the show probably has pretty good sales over the long run too, plus anime DVD sales tend to drop over the course of the show and Katanagatari is only like halfway through… but BSG is about as big as TV shows for geeks get in the US, whereas Katanagatari is nowhere near as successful as shows like Durarara or Clannad, let alone stuff like Bakemonogatari, K-On!, or Macross Frontier.

[xris]

Originally Posted by 0utf0xZer0

If we assume the retailer takes a $5 cut in each case (and I’ll admit I’m pulling that number from my ass), then Katanagatari is pulling $45 per copy and BSG $35.

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.

Originally Posted by 0utf0xZer0

The average volume of Katanagatari so far has sold 7733 copies, meaning the average profit per episode from DVDs is $347985.

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.

[Xion Valkyrie]

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