All of Your Streams
by Justin Sevakis,
It's an honor to be here. Answerman, in its various incarnations under different writers, is by far the most popular and longest-running thing on Anime News Network. I'm really excited to be answering your questions about how the anime business really works.
Different writers have brought different styles and points of view to this column. Here's mine: I've been in the anime business for 15 years now, and in that time, have worked in subtitling, DVD and Blu-ray authoring, video editing, content licensing, TV broadcast and internet streaming. I've dipped my toes into theatrical release logistics, movie theater operations, dubbing, anime convention management, film festivals, digital restoration, marketing, television master control, and a host of other oddball pursuits. This puts me in a pretty unique situation: I know quite a few aspects of how this crazy business works, and when I don't know something, I probably know someone that does.
At any rate, I hope you'll consider me an acceptable substitute for those who have come before. I can't wait to dig into the mailbag and see what questions you'll come up with for me.
Poking about the catalogs of the streaming channels on my Roku, it seems like there's a huge difference in the anime offerings on Netflix and Hulu. Netflix has a smattering of not-terribly-recent shows from Funimation and Sentai (all dub-only), while Hulu seems to have fairly deep access to stuff from Funimation, Sentai / The Anime Network, Crunchyroll, Manga (including some Right Stuf shows like Kimba and Gravitation), and Viz, with some shows available as subs, dubs, or even both. Why would there be such a profound difference in the anime streaming catalogs between these two services?
While Netflix and Hulu seem like they operate pretty much the same way from the consumer point of view, when it comes to acquiring content, paying the show's owners and making money in general, the two are very different. In fact, Netflix operates more like a TV network, while Hulu operates more like YouTube.
When Netflix acquires content, and anime specifically, they don't take just anything. They pay a license fee up front for as many shows as they can get at a time. It's in Netflix's interest to only acquire the bigger hits -- they only have so much money to blow on anime, after all -- so they will naturally go after dubbed, big-name shows from companies with a big catalog, i.e. the Funimations and Sentais of the world. Their game is all about trying to get the most eyeballs on whatever content they buy, without blowing their budget. The streaming rights they buy last for a specific amount of time, and once they expire they'll have to try and renew that content, which requires a new license fee and probably more negotiation. Netflix doesn't share viewership information with the rights holders, so it's anyone's guess what does well on Netflix and what doesn't. And it ultimately doesn't matter to the rights holders, because they already got paid everything up front, and no more money is coming even if the show does exceptionally well.
Hulu, meanwhile, actually WILL take just about anything. They don't pay any money up-front for any of the rights -- the content owner just gets a healthy percentage of the ad revenue that their shows bring in. So rather than quibble over what they'll take and what they won't, Hulu simply opens the flood gates. Once a rights-holder is authorized as a Hulu content partner, they can upload whatever they want, and as long as it's professionally-made, and it's not sports, news or porno, Hulu will take it. Once it's up on Hulu it simply becomes a meritocracy: the hits make a ton of money, while the bombs just sit there unloved. If the whole thing is just not working out for them, partners can either schedule a takedown date, or just delete it off the service immediately, all via the company's fancy partner portal website.
Hulu's flexible business model means that they're much faster at getting content posted than Netflix -- it normally only takes them a few hours. Their infrastructure is made with TV content in mind. And since most anime never gets dubbed, their flexibility suits the needs of the anime market much more. Increasingly, Japanese rights holders are signing up to become content partners themselves, and putting their own shows up on Hulu, without needing an American publisher to acquire DVD rights. And the revenue is surprisingly good: by some estimates, Hulu pays MILLIONS of dollars in royalties to anime publishers every month.
I was reading anime news network like usual and I read the announcement for Naruto receiving an Original Event Anime for the Jump Super Anime Tour. I was wondering what the difference was between that and an OVA? Is it basically the same thing but with just different names? I really just don't know the difference and I just want to know what is different about it and why?
Honestly, I think people get a little too hung up with categorizing anime as being TV, OVAs or movies. The truth is, the method of release has always been a little fluid: late night TV series that get aired censored, and then hit DVD shelves in uncut form are basically intended to function as home video product. They don't get any money from the TV broadcast, and depend mostly on video and merchandise sales to make their money back. OAVs used to routinely get theatrical screenings, even when they were officially labeled OAVs or OVAs, and many of them air on cable or satellite channels as promotion. And now that many people are watching new anime on NicoNico or Crunchyroll as do on broadcast television, isn't every new TV series an ONA?
Meaningless labels aside, I expect the Naruto Original Event Anime to basically be the same as an OAV: a stand-alone, easily-dismissed and otherwise unimportant side story with a fairly short running time. There could also be an extra gimmick, like the characters breaking the fourth wall and talking to the audience, or some physical component that happens with the animation, like smoke effects. I mean, what else could it be, really?
One of the things I've been wondering about for a while has to do with anime sales in Japan. I know that the success of an anime often depends on dvd and blu-ray sales, but why do they have to be so incredibly expensive in Japan? Asking 8000 yen for a two-episode volume of anime is pretty ridiculous, so why do companies only seem to go after the die-hard fans with disposable income when they could feasibly just lower the price and appeal to a broader spectrum of fans and end up making more money in the long run? Also, how many blu-rays and dvds need to be sold in order for sales to be deemed successful?
One would think that lowering the price in Japan would impact sales, but over the years various attempts to sell anime on video at lower prices have mostly failed: sales numbers seem oddly unaffected by pricing. What this tells us is that this owning DVDs of this stuff is just not that appealing to the public at large. It also tells us that the current pricing isn't all that big a deal to current customers in Japan. Basically, there IS no broader spectrum of fans in Japan clamoring for cheaper discs. YOU might find ¥8,000 a ridiculous price, but that's how much new-release home video has always cost over there, so if you weren't a Westerner who was used to going to Best Buy and walking out with a copy of Transformers 4 for $17.99, it wouldn't be such a big deal. The people who want it are, largely, already buying it.
But just for the sake of argument, let's see what happens if you DO try to lower your prices. Say you priced your new series at ¥4,000 instead of ¥8,000. You would have to sell OVER twice as many copies to make the same amount of money. (Remember, you still have to pay the same amount for manufacturing and marketing.) If sales are only a little bit higher than they were at the more expensive price, you've just lost an obscene amount of money. Bad things happen to companies that lose money.
So, from a business perspective, if your sales aren't going to be affected all that much, charging the higher price is just common sense. This pricing structure is such a basic part of the home video business in Japan that new productions simply depend on all that extra money to make a profit. Cutting the price just simply isn't a rational thing to think about.
As for how many copies they need to sell, that is impossible to estimate without knowing the budget of the show we're talking about, and what other income might be coming in from stuff like merchandise. Obviously, a lavishly expensive production would need to sell a lot more to be considered successful. Just like how a low-budget indie movie would be considered a huge success if it made $10 Million at the box office, while insanely expensive The Lone Ranger has made $83 Million as of this writing and is considered the biggest flop of the summer.
For more on this topic, you might want to check out the series of articles I posted on The Anime Economy last year.
And that's it! Got questions for me? Send them in! The e-mail address, as always, is answerman (at!) animenewsnetwork.com.
Justin Sevakis is the founder of Anime News Network, and owner of the video production company MediaOCD. You can follow him on Twitter at @worldofcrap, and check out his bi-weekly column on obscure old stuff, Pile of Shame.
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