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How to anime companies make money?




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manicli



Joined: 16 Jun 2012
Posts: 180
Location: Toronto, Canada

PostPosted: Sun Oct 14, 2012 4:42 pm Reply with quote
I've been wondering a few questions about how the industry works.

1) When you buy a product, does part of the money go towards the Japanese producers?

I know that there are licensing fees initially but what about afterwards when a product comes out?

2) Do retailers (like RightStuf) buy the products or do the distributors (like Funimation) send them to retailers and sell them.

I'm wondering if retailers buy the products then attempt to make money off those products or do distributors like Funimation send stock to such companies and have them sell it on their behalf?

3) If the answer to question 2 is that the distributors send retailers stuff then does the distributor set the price and allow/disallow any sales and discounts associated with that product?
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Vata Raven



Joined: 21 May 2007
Posts: 695
Location: TN

PostPosted: Sun Oct 14, 2012 5:05 pm Reply with quote
1) I'm unsure, but FUnimation, Sentai, NISA, ect do have to pay a licensing fee, that money goes to Japan.

2) RightStuf, I hardly doubt they put up the money for 300 limited edition sets. Like Walamart, they pay the companies when ideas sell, not before hand. Funimation has said they make about...I think was about $15-20 for each set being sold.
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potatochobit



Joined: 26 Aug 2009
Posts: 1119
Location: TEXAS

PostPosted: Sun Oct 14, 2012 8:08 pm Reply with quote
most retailers buy the products at wholesale prices I believe
I think that is why righstuf always has a monthly sale for a 'specific' brand
like 40% off funimation this week - means they are getting ready to place an order
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EricDent



Joined: 28 May 2008
Posts: 987
Location: Round Rock, TX

PostPosted: Mon Oct 15, 2012 1:23 am Reply with quote
1) When you buy a product, does part of the money go towards the Japanese producers? Not unless you buy it directly from Japan.

I know that there are licensing fees initially but what about afterwards when a product comes out? Then whomever licensed it gets the $.

2) Do retailers (like RightStuf) buy the products or do the distributors (like Funimation) send them to retailers and sell them. The companies that got the license make the product & the other people just sell it.

I'm wondering if retailers buy the products then attempt to make money off those products or do distributors like Funimation send stock to such companies and have them sell it on their behalf?
I would guess the companies like Right Stuf have a buyer who buys copies of the series. Then re-sells them on Right Stuf.

3) If the answer to question 2 is that the distributors send retailers stuff then does the distributor set the price and allow/disallow any sales and discounts associated with that product? They do make something called the Manufactuers Suggested Retail Price (MSRP). However since most buyers get the shows at pretty much cost (IE what it costs to make the show on DVD/Blu-Ray) they can set the price to whatever they want.
Of course they usually mark it up at least 20% so they make a profit.

At least I think that's how it works.
From my experience in several retail stores, the cost to the store is usually a lot less than what the price on the shelf is. However with movies & games there really is not that much of a markup (maybe $2-$4).
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Kruszer
Space CowboySpace Cowboy


Joined: 19 Nov 2004
Posts: 6735
Location: Minnesota, USA

PostPosted: Mon Oct 15, 2012 1:45 am Reply with quote
manicli wrote:
I've been wondering a few questions about how the industry works.

1) When you buy a product, does part of the money go towards the Japanese producers?

I know that there are licensing fees initially but what about afterwards when a product comes out?


No, not usually. The domestic distributor, Funi for example, will license the show which is basically buying the show. They can do whatever they want with the product unless the contract they signed for it stipulates conditions that they agreed to by signing which would also include how they pay for it, I assume; whether it's all up front on monthly installments or whatever.

Either way Funi buys the show and your money only goes to and effects the retailer you shop at (Rightstuf in this case), the retailer's money goes to the distributor, and the distributor uses their money to license things from Japanese companies. Other companies like AniplexUSA, which is a sub-company of Aniplex might even just skip that whole licensing thing because they're sort of the same company anyway, thus your money might go directly to Aniplex without the middlemen.

Quote:
2) Do retailers (like RightStuf) buy the products or do the distributors (like Funimation) send them to retailers and sell them.

I'm wondering if retailers buy the products then attempt to make money off those products or do distributors like Funimation send stock to such companies and have them sell it on their behalf?


Retailers like Rightstuf buy a large amount of the product they want to sell (like whole truck loads, multiple boxes of various products from a single distributor). Usually retailers get discounts when they order in bulk like that which allows them to sell you the product for more than they bought it for but still less than MSRP and make a profit in a process called a markup.

Quote:
3) If the answer to question 2 is that the distributors send retailers stuff then does the distributor set the price and allow/disallow any sales and discounts associated with that product?


Retailers buy at the price set by the distributors. Sales are organized by the retailer, while distributors are usually behind price discounting or rather retailers can discount the price because for some reason they got the prodict cheaper or find some long term advantage in taking a temporary profit loss. Don't take my word for this part though as I'm a little sketchy on that. I work for a store so I can answer the previous questions which are basically the same to a lot businesses but I've never worked in the actual retail section so the 3rd question I'm only making some educated guessing.
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luffypirate85



Joined: 06 Oct 2006
Posts: 2642

PostPosted: Mon Oct 15, 2012 3:52 am Reply with quote
Ya. Gotta buy the Japanese BD if you want the money to go to them.
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Polycell
Thread KillerThread Killer


Joined: 16 Jan 2012
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PostPosted: Mon Oct 15, 2012 3:58 am Reply with quote
manicli wrote:
1) When you buy a product, does part of the money go towards the Japanese producers?

I know that there are licensing fees initially but what about afterwards when a product comes out?
The answer to this is "not at first, but possibly later on". The licensor(s) get a percentage of the sale, but until the minimum guarantee's matched the local company gets to keep that part. For example, if the royalty's 5%, the minimum guarantee $10,000 and the amount the licensee nets from each sale(or whatever the number royalties are figured from is) is $30, then after selling ~6,667 copies each additional sale would send $1.5 back to the production committee.

So this talk about the answer being "no" is true, but not for better-selling titles.
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Saffire
Aria CompanyAria Company


Joined: 25 Nov 2007
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PostPosted: Mon Oct 15, 2012 8:22 am Reply with quote
Justin Sevakis did a fantastic feature on some of this a while ago, check it out for more details.
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Vata Raven



Joined: 21 May 2007
Posts: 695
Location: TN

PostPosted: Mon Oct 15, 2012 4:07 pm Reply with quote
luffypirate85 wrote:
Ya. Gotta buy the Japanese BD if you want the money to go to them.

...no you don't. That's what companies like Funimation, Sentai, Madman are for. They LICENSE these animes, meaning they GIVE money to these companies to handle them.
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shawnek
Accredited Retailer


Joined: 05 Feb 2004
Posts: 633
Location: Right Stuf - www.rightstuf.com - Iowa

PostPosted: Tue Oct 16, 2012 12:45 pm Reply with quote
Vata Raven wrote:
luffypirate85 wrote:
Ya. Gotta buy the Japanese BD if you want the money to go to them.

...no you don't. That's what companies like Funimation, Sentai, Madman are for. They LICENSE these animes, meaning they GIVE money to these companies to handle them.


When a product is licensed, generally a fee is paid upfront (A "Guarantee.") When the US licensee of the product sells the items (to retailers, or someplace like us) they sell the product at a wholesale price, and then we sell it for a little bit more as our profit for selling the items to you and to cover our costs (such as labor, the fee to take your credit card, packaging, business operations, and so on.)

The Licensees for the most part pay ongoing royalties when they license a program, so once the Guarantee is recouped against sales then royalties are payable, generally each quarter. So it is incorrect to state that you must buy from Japan in order for the producers to receive funds, as they receive the Guarantee as well as ongoing royalties after that.
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manicli



Joined: 16 Jun 2012
Posts: 180
Location: Toronto, Canada

PostPosted: Tue Oct 16, 2012 10:10 pm Reply with quote
shawnek wrote:
Vata Raven wrote:
luffypirate85 wrote:
Ya. Gotta buy the Japanese BD if you want the money to go to them.

...no you don't. That's what companies like Funimation, Sentai, Madman are for. They LICENSE these animes, meaning they GIVE money to these companies to handle them.


When a product is licensed, generally a fee is paid upfront (A "Guarantee.") When the US licensee of the product sells the items (to retailers, or someplace like us) they sell the product at a wholesale price, and then we sell it for a little bit more as our profit for selling the items to you and to cover our costs (such as labor, the fee to take your credit card, packaging, business operations, and so on.)

The Licensees for the most part pay ongoing royalties when they license a program, so once the Guarantee is recouped against sales then royalties are payable, generally each quarter. So it is incorrect to state that you must buy from Japan in order for the producers to receive funds, as they receive the Guarantee as well as ongoing royalties after that.


Thanks for your answer Shawnek, I was hoping you'd jump in to answer my question eventually Very Happy

And thanks to everyone else who answered, I'm glad to know that some money is going towards the Japanese creators.
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Alan45
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Joined: 25 Aug 2010
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Location: Virginia

PostPosted: Wed Oct 17, 2012 8:52 am Reply with quote
@ manicli

Also keep in mind that the profitability of a company's current series is what allows them to license future series and pay additional money to Japanese creators.
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