Going Corporate

by Justin Sevakis,

Holy cow, did you guys step up. I asked for some new questions and you guys delivered so many great ones that I had a hard time picking which ones to answer this week. Keep 'em coming!

Jonathan asks:

I liked your recent article about working in the anime industry and I couldn't help but think there was another way for someone to enter the anime industry. Namely to start their own company. I have heard you and Zac mention before that the bar to start licensing has never been lower and I am pretty curious what that bar (in terms of dollars) is in order to get something off the ground. I was always under the impression you needed millions or even several hundreds of thousands dollars, to get something going, but now it seems maybe just a few thousand can get it done. With recent developments with AnimeSols and Crimson Star Media, just what would it take to start your own anime licensing company and how much?

In terms of money, it really doesn't take a whole lot to bring, say, a 13-episode TV series to DVD sub-only. Depending on the show and its age, the license fee could be as little as $1,000 to $2,000 per episode (sometimes even less). Subtitles might run you $400 or so per episode; getting the disc authored and designed might cost you another $1,500 or so, then having it replicated another $2,000. So, in terms of startup costs, we're really not talking about a huge outlay of money here.

Now, I must take issue with what I THINK you're actually asking, which is "can anybody with $20,000 become an anime publisher?" To which, the answer is technically yes. But to do so and not royally screw it all up, create a terrible looking disc, piss off your retail partners, burn the bridge with the licensor, lose your entire investment and enrage the fans is a little bit harder.

A lot of fans are hilariously arrogant when it comes to their observations of the existing anime publishers, and even prominent fans and writers that I respect often come to me wanting to confirm or hear about some sort of hilarious perceived screw-up by American anime companies. The insinuation is pretty clear cut: "you guys are idiots, I could do a better job." Seriously, browse the panel schedule of a major anime convention, scroll through our, or any other anime industry-savvy web forum, and you will notice this attitude permeate every discussion. "Psh! I can't believe [company name] actually managed to [perceived stupid decision]! What idiots. It's amazing they're still in business."

The fact of the matter is, to not have a disastrous release that harms you financially, you have to have a pretty major skillset, involving a deep understanding both video and print production, how wholesale works, connections to licensors, the ability to read and go through contracts, know which vendors to use for the things you can't do yourself (like translate), know your way around fulfillment and supply channels, be able to do basic business accounting, and have some idea of how to market your product. That's a pretty wide skill set, and there are simply not a whole lot of people out there who can do all of those things. So unless you also have the money to hire people who can, that is the real barrier to entry, and it's one that keeps most fans well out of the business.

Every once in a while, some hardcore fans with few industry ties or know-how manage to somehow license a show and get it all the way to market. They quickly find out that running an anime publisher is a HELL of a lot harder than it looks, and they struggle to churn out more than a handful of releases before vanishing into the ether. In the VHS era, Star Anime Enterprises was one of these, putting out only an ecchi OAV called Homeroom Affairs and the first two episodes of a mediocre kid-plays-soccer-with-monsters show called Dragon League before fading away. In the DVD era, we have Anime Midstream still slowly churning out Raijin Oh (which I'm assuming they're doing largely as a passion project at this point -- I can't imagine they're selling more than a couple hundred copies per volume). I have my doubts that Crimson Star Media will ever release anything at all.

Not that anime publishers don't make mistakes -- they do all the time -- but they're very seldom the sorts of mistakes fans pick up on. The real problems facing anime publishers tend to take place so far behind the scenes that unless you work there, or know someone that does who vents to you as a friend, you would never know it happened. The stuff that the fans latch onto (packaging decisions, licensing decisions, translation choices) often aren't even mistakes, but just unpleasant circumstances. Unless someone who works there can tell you directly what happened and why, though, fans tend to chalk everything that happens that they don't like up to "stupidity." Which is fun to do, I'll admit, but it isn't really fair. The ones that try to start up their own anime companies usually get a rude awakening as to the realities of things pretty quick.

John asks:

What's up with the North American hentai anime industry? In the last several years virtually no new titles have been licensed and released—only back catalog re-releases, license rescues from other companies, and clip shows made from several series.

It's not just the US. Hentai releases in Japan aren't quite what they used to be. Oh, they still exist -- longtime publisher Pink Pineapple, among others, are still kicking out a couple of filthy OAVs every month -- but several other publishers have been shuttered or refocused their efforts in other directions. The market over there has partially fallen prey to the internet, but more than that, the dwindling number of rental shops (which are predominantly chains now instead of mom 'n' pop shops), combined with the rise of eroge, doujinshi, and censored-to-hell borderline-hentai late night series on cable TV, have conspired to really chip away at the amount of "quality time" fans spend with their dirty, dirty cartoons.

From a business perspective, things are far, far worse for hentai on American shores. Despite being anime, hentai DVD releases were a completely different market: most regular DVD retailers (including Amazon) wouldn't sell it, so most of the units were sold through seedy porn shops, which took a much bigger cut of the revenues -- usually 80% or so. (This is why most hentai releases were a single episode for $30.)

But it's 2013, and most of those porn DVD shops are now out of business, or are in the process of going out of business. People now consume their porn online, and they don't feel even the slightest bit bad about pirating it. Any attempt to license hentai and put it up behind a paywall would quickly be stymied by sites like Fakku posting a fansub or a rip. Would anyone actually pay the money to watch it? That's not a bet I would want to take.

In the mean time, the remaining hentai publishers can usually justify license rescuing an old show that's already been dubbed and/or subtitled, but as far as paying to have something new localized? It's a risky proposition. Hentai just doesn't pay the bills like it used to. Add to that, working on hentai is hard on a company's staff, and the fact that pretty much all of the guys publishing it in the US were just doing hentai for the easy money it brought in, and suddenly there's virtually no reason to put in the effort to release hentai at all.

In short, we are probably seeing the end of legal hentai releases in the US, unless someone comes up with a new business model soon.

Scott asks:

Something I've noticed recently is it seems it's much, much more common to see shows being only one cour or split-cour rather than two or more cours compared to like a decade or so. Why is that?

Back when most anime was actually aired during human waking hours and TV networks actually paid for the honor of broadcasting them, TV anime was beholden to its sponsor. This was often a toy company, or a candy company, or even a record label. The sponsor would commit a large sum of money up front to produce the show, and the anime producer would make it, often integrating that company's products into the show itself.

This way of doing business, where all that money was guaranteed up front, was very slow to react to market forces. Sponsors wanted to get their branding out for as long a period as possible, so naturally they'd want to back a long-running show that would stand the test of time. But if the show bombed, and it often did, the lead time for making anime was so long that work had already started on the second or even third seasons before everyone realized they had a big ol' dud on their hands. The sponsor might want to pull out and stop wasting their money, but with so much of the work already done, they'd still have to pay to finish months worth of anime that nobody would watch. It was a huge waste of money.

Now that late-night anime is the norm, the TV networks treat the shows like infomercials, and production committees making them are mostly interested in selling DVDs and character goods. Since most TV anime are now essentially glorified OAV series, the producers no longer feel the need to plan for a show to be ridiculously long without knowing if it'll be a hit. So this way, they plan shows a season at a time, wait for them to air, and see if they hit. If they hit, THEN they'll do a second and third season. It's just a whole lot less wasteful that way.

And that's all for this week! Got questions for me? Send them in! The e-mail address, as always, is answerman (at!)

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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