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What's The Difference Between A License And A Distribution Deal?

by Justin Sevakis,

John asked:

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 any of 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 (or, as has become increasingly common, $xxx,xxx per episode), makes their own packaging, authoring, subtitles and maybe a 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.

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.

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Anime News Network founder Justin Sevakis wrote Answerman between July 2013 and August 2019, and had over 20 years of experience in the anime business at the time. These days, he's the owner of the video production company MediaOCD, where he produces many anime Blu-rays. You can follow him on Twitter at @worldofcrap.

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