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Business Minded

by Justin Sevakis,

Hey, I have a ton of questions in the Answerman inbox! Thanks to everyone that sent one in.

Predictably, many people are talking about the ADV Films website, which has mysteriously been resurrected with the old company logo and a clock flashing random numbers. I got some questions asking what's up, but frankly, I'm as in the dark as you are.

Onto things I actually do know something about...

Craig asks:

With the recent announcement of Evangelion being released this summer on Blu-Ray in Japan for the first time as a complete box set, will this be a huge bidding war between licensees, or will this go to Funimation as they have the current rights to the 4 Eva rebuild films? Also, can we expect them to create and release several limited edition sets if and when it gets released in NA, such as they did with Cowboy Bebop and other titles?

Evangelion's new Blu-ray remaster in Japan is a really big deal. The series is still one of the best loved anime TV series in history, and the new boxed sets coming out are very hotly anticipated. As ADV Films' rights to the TV series expired some years ago, and whatever legal wrangling that was happening between Gainax and Studio Khara in Japan appear to have been resolved (with Hideaki Anno's Studio Khara now controlling everything Evangelion-related), it would appear that international rights, including the US, are up for grabs again.

This will be expensive. INSANELY expensive.

While technically anybody could end up with the series, I would be genuinely shocked if anybody other than Funimation actually managed to get it. Their distribution of the Rebuild of Evangelion movies has nothing to do with it: they're simply the only company that I can see throwing that much money at an older show. What's more, a US release of a show as famous as Evangelion is going to be subject to EXTREME amounts of licensor control and scrutiny, which rules out any company that isn't used to dealing with Japan. My second guess would be Viz, given their recent success (sales-wise, if not quality-wise) with the Sailor Moon reissue. But that's pretty much it. A glance over recent activity from Sentai Filmworks seems to indicate they are simply not in the expensive end of this business lately, and nobody else really is. And there may or may not be bad blood remaining from the stillborn live action project (that ended in a lawsuit).

The other thing is, it's going to take years. We STILL don't have a street date for Funimation's BD/DVD release of Evangelion: 3.33, and that was announced back in 2013. Personally, I already have my pre-order in for the import boxed set. That show is just too precious for me to wait and believe that someday a domestic release will come.

Cesar asks:

After Discotek dropped announcements for a number of shows crunchyroll had dvd rights for, I noticed there were some enthusiastic fans being happy for some pretty good series, especially Free! season 1. I also saw just as many posts griping about the DVD & sub only releases that apparently is a no-go for many would-be buyers. My question is, how do dvd and bd rights differ from one another?

and Deepak asks:

Generally when an anime title is released outside of Japan it is either a high quality release based on the Japanese blu-ray or, a lower quality Standard Definition upscale. On rare occassions though we get high quality blu-rays like the European releases of Venus Wars and Street Fighter Fighter 2 the Animated Movie. These were made without a Japanese blu-ray to work with. My question is how is it possible to release an anime title in high definition without an equivalent Japanese blu-ray?

DVD and Blu-ray rights aren't really "different" except in that a contract can specify pretty much any format and limitation imaginable. Most contracts include the right to release both, but with limitations on them to protect the Japanese market from reverse importation (i.e. the discs must use industry-standard copy protection, must use region codes, must block the Japanese track from being played back without subtitles, etc.). Most specifically state that no other languages can be included other than English and the original Japanese audio. And in the case of the Discotek sublicenses from Crunchyroll, it would seem that only a subtitled DVD can be released. That doesn't preclude additional contracts or modifications from being reached later on, but that's all that's signed currently, so that's all that Discotek can do. Why did Crunchyroll specifically carve out those rights from the agreement? We don't know. Perhaps we will find out someday.

One other common stipulation for a Blu-ray release is that the Japanese Blu-ray release has to come first, sometimes by a specific period of months. This, again, is to make it so Japanese customers don't import the cheaper American discs. Some licensors will go one further, and simply not send HD masters out until the Japanese discs have been released, but in an age of HD simulcasts, that's rather pointless.

But what about for older shows, ones that originated on film? If there is an HD master already, there's a chance that the licensor has already decided that there isn't sufficient enough interest in the show to bother with a Japanese release, in which case that master will be provided to the overseas publishers. On rare occasion, the show won't have been remastered for HD, and the overseas publisher wants an HD copy bad enough to offer to pay some or all of the remastering costs. Opening up the film vaults is a terrifying prospect for licensors, since those film elements are irreplaceable. Very few of them can be convinced to do this.

Finally, if there is no HD master, no of a likelihood a remaster anytime soon, and a decent quality standard definition master (which is the case with many early digital productions), some publishers -- both in Japan and overseas -- may opt to upscale those old master tapes. Sometimes that looks pretty good, sometimes it looks like butt. But when that happens, someone has made the decision that it's the best we're likely to get.

John asks:

With the recent distribution deals of Sunrise and Pony Canyon with Right Stuf. I was wondering what is the difference between a distribution and licensing deals? What entail a distribution deal? And in case of the Sunrise's Gundam deal with Right Stuf could a another company still license those titles for release?

"Distribution," as opposed to "licensing" is an entirely different type of contract for something that might look nearly identical from the consumer's point of view. Licensing works like this: US publisher pays licensor $xx,xxx per episode up-front, makes their own packaging, authoring, subtitles and maybe dub, gets it all approved by the licensor, releases it, advertises it, and then once it makes back all of its up-front license and production costs, splits a percentage of the revenues with the licensor. That arrangement lasts for however many years and covers whatever countries the contract states.

"Distribution," however, is more of a service. In such a case, the Japanese company (in this case, Pony Canyon or Sunrise) pays to subtitle the show, dub the show, puts their own logo on the show, and does nearly everything else that is a publisher's responsibility. Once the final product is complete, they ship the finished product to the distributor, who sells and ships them to both wholesale and retail customers. The distributor takes a fee, but most of the cash goes directly back to the Japanese company. The distributor might offer some additional services to help facilitate a successful release (i.e. hey, we can handle disc authoring for you!), but that's on the side.

Both arrangements have their plusses and minuses for all parties. Licensing puts most of the financial risk on the publisher: if a show bombs, that publisher is out all of the money they spent on a license fee and production, but if a show is a huge hit, the benefit to the publisher is far greater. Many Japanese companies have to go out-of-pocket to create English materials, but get a far bigger amount of control over the release, and more revenue out of each sale. Japanese companies often lack the expertise to produce a faithful dub or decent marketing materials for English-speaking fans, but some of them know what to do. Others just think that they do.

Ultimately, which arrangement a Japanese rights-holder opts for depends on how much they're willing to do on their own, and how much control they're willing to give up. More and more Japanese companies are looking to get into releasing their product directly in the US (at Japanese prices, usually), and are looking for ways to distribute English-friendly product here. Having a distribution partner is critical.

Matthew asks:

We know about the anime boom and bust, where the medium got famous and lucrative, then over saturated by the industry (and possibly pirating) causing it be less lucrative. During the boom I was in middle/high school and parents could buy me anime, and during the bust of anime I was in college with no money and couldn't buy anything. Recently I've been able to settle my life down and have a good amount of income that I can spend on stuff like anime. Do you expect because of this situation there might be a second anime boom and do you know if any of the distributors are hoping/planning for such a situation?

While I highly doubt anybody is building their business model around your personal financial position, the fact is, we are currently in another anime boom. It looks a lot different than the first one, and from where I am sitting, things don't look so precarious this time. But make no mistake: we are in another boom right now.

Let's compare. Back in 2006, the peak of the anime bubble, we were getting a mind-boggling 50-65 new releases per month. Most of those were single disc releases of 4-5 episodes. Take away reissues and multiple versions of the same release, and that resulted in about 80-85 hours of new anime being released every month. Today, we might have only 20 releases on a given month, but now everything is being released as single- or multiple-season boxed sets. Some classic shows are being released in giant, 50+ episode bricks, for the first time in North America. The total hours of anime being released ends up anywhere between 50 and 100 hours every month.

And that's just disc releases. Let's talk about streaming. Japan is still producing a near-record amount of anime every quarter, and we are getting subtitled simulcasts for nearly all of it. Funimation is making dubs of as much as they can possibly make dubs for, within weeks of its premiere. Crunchyroll is simulcasting 40 shows currently, Funimation adds another 12 exclusives, meaning 52 new episodes of anime are being streamed on US shores every week -- nearly 100 hours of anime per month. And while that's happening, Sentai, TMS and Bandai Visual are all dumping as much of their back catalogs online as they can. I'm not even counting everything!

That is an INSANE amount of anime. That's a dizzying amount of anime. There is SO MUCH ANIME being released right now that Hulu has stopped taking everything they're being offered -- old shows are being purged if nobody is watching them, and some new shows are being rejected if Hulu's anime team deems them unlikely to find an audience. They just can't handle that much content. We have too much anime, and there's simply no way for anybody to keep up.

It's a new gold rush -- one where both publishers and licensors alike are trying to get as much content online as possible. Online, unencumbered by things like people's discretionary income, broadcast availability, or the limitations of physical media, the notion has sunk in that, online, anime's audience is practically limitless. The rush to new audiences is driving license fees back up to levels last seen during the DVD bubble. That's the bad news.

The good news is that most of the factors that made the first anime bubble pop so catastrophically are either no longer issues, or have been mitigated effectively. Piracy, while by no means gone, is far less of a problem. The huge retail video chains that once engulfed thousands of copies of every new release, would maybe think about paying for them one day, and then spat most of them back at the anime companies, are largely no longer a thing: publishers only need to print as many discs as customers want. There are few, if any, returns in most cases: only the handful of titles pushed to mass-market retailers like Wal-Mart sometimes come back. License fees are high, but only for A-list shows: the old and the B-list still go for reasonable amounts. If a show bombs online, there might be a financial hit, but it'll mostly be limited to the license fee the distributor paid: there is usually a way to cut their losses before they start spending bank on DVD production and marketing.

I fully expect this market to pop at some point, but when it does, from what I can tell, I don't think it's going to be anywhere near as bad as the last time. There simply aren't as many ways for the anime publishers to eat dirt this time around. Maybe some companies will overspend and chill out for a while, and a few seasons will go by with fewer simulcasts until things get cooking again. Maybe Japan will finally exhaust its tiny DVD market and start curtailing new production.

I can't read the future. The only thing I can see clearly is that things will change, and that we will swing between good times and bad like a pendulum. So enjoy the good times, because we are in them. We are waist-deep in them.

And that's all for this week! 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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