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Answerman - Why Are Funimation And Crunchyroll Getting Married?

I don't think that he meant that there was no market for cheap releases, just that premium products at a higher price point are more profitable. Selling a much large number of units at a lower price doesn't always guarantee you will make more money. You're overall revenue may indeed up higher, but less profit per unit could end up causing you to have a lower profit overall.

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But as Sentai's Selects and Funi's SAVE and Classics label show you, there is also a market for lower coat releases. However, those generally come out some time after the initially more expensive releases. But another problem that contributed to the collapse of the R1 industry nearly a decade ago was he quick turnover between more expensive
and more profitable singles, and the less expensive box sets. Unsold singles piled up because too many fans just started waiting for the cheaper box sets.

You have to balance the two methods in a market like North America. The industry can't survive on super cheap box sets because the market just simply isn't large enough. While they could probably survive on an Aniplex or PonyCan model, the maket would be significantly smaller and overall revenue would be much lower.

For example, the average cost per episode to produce those shows isn't even $200k, yet the English licensing costs exceed the production cost even before the Japanese home market is factored in.

dragonrider_cody wrote:

I don't think that he meant that there was no market for cheap releases, just that premium products at a higher price point are more profitable. Selling a much large number of units at a lower price doesn't always guarantee you will make more money. You're overall revenue may indeed up higher, but less profit per unit could end up causing you to have a lower profit overall. ... But as Sentai's Selects and Funi's SAVE and Classics label show you, there is also a market for lower coat releases. However, those generally come out some time after the initially more expensive releases. But another problem that contributed to the collapse of the R1 industry nearly a decade ago was he quick turnover between more expensive and more profitable singles, and the less expensive box sets. Unsold singles piled up because too many fans just started waiting for the cheaper box sets. You have to balance the two methods in a market like North America. The industry can't survive on super cheap box sets because the market just simply isn't large enough. While they could probably survive on an Aniplex or PonyCan model, the maket would be significantly smaller and overall revenue would be much lower.

Well, what I mean is that if selling upmarket is more profitable, then why bother selling downmarket at all? Logically, shouldn't that mean every business in an industry that intends to maximize profits head straight upmarket? Using your examples, why do Chevy and Toyota bother staying in their markets and not move up?

I could also point out some examples where someone decided to go downmarket and netted huge bucks for them. Nintendo did so with the Wii, Southwest Airlines became a giant in the airline business practically overnight by undercutting everyone else's prices, and Motel 6 got way bigger than its competitors (though not as much anymore). In all three cases, the people in charge of these companies decided to do away with amenities and other things only a few people really want, and by doing so, are able to drive down their prices and put tremendous pressure on their competitors.

I know there are some industries that cannot survive without an upmarket though. But maybe that depends on a per-industry basis? (Me, I rarely buy any anime unless it's on discount. Heck, a good 60% to 80% of all things I buy are on markdown, on discount, or part of a store promotion. Or things that are already super-cheap to begin with, like Hot-N-Ready pizzas at Little Caesar's. But maybe that's why I feel puzzled by all this. I am a largely downmarket consumer and a bargain hunter, putting me at the direct opposite of the approach of companies like Pony Canyon.)

sure is a big win for the fans. (The ones in North America, anyway.)

Plus is much of this money even going to the studios? Cause if it's going to the production committee, that does not affect the budget of the studio. That just will change the calculus of the companies involved in production committees on how many anime they can feasible make. That will take longer than one quarter let alone one month to take effect.

So what I get from this is that upmarket, midmarket, and downmarket bring in different people (with some overlap, like restaurants), and that the upmarket is the one most likely to be profitable. However, there can be profit to be had with other markets too, and companies can find their ground in a market other than the most profitable one. Do I get that right?

What happens during a market disruption? Is that when a lower market suddenly becomes more profitable? I know that's when a company taps into a lower market that has always existed but not served (or not served properly) by the existing industry

A disruptive innovation, as Christensen defined it, is a new technology that's simpler, cheaper, and — at least initially — lower-quality than the one that came before it. Early PCs were a lot less powerful than the mainframes that were already on the market. Early news websites were markedly inferior to the New York Times. Yet the low cost of these technologies lowered the barrier to entry, permitting a faster pace of innovation. And so over time they've narrowed the gap with incumbent products. In many cases, disruptive firms have driven their older rivals into bankruptcy.