Interview: Tsuguhiko Kadokawa

Publishing company-turned-movie studio Kadokawa Pictures has been producing original anime since 1983's Harmagedon, and since then has churned out many of the genre's best-loved hits, from Record of Lodoss War to the recent feature film Summer Wars.

Chairman and CEO Tsuguhiko Kadokawa was visiting Singapore for the Animation Asia Conference, where Justin Sevakis interviewed him about the different anime markets, where he sees the future of the industry heading, as well as that most controversial of anime series, The Melancholy of Haruhi Suzumiya.

Justin: For anime, what do you consider to be the main differences between the overseas market - specifically the American market - and the domestic Japanese audience?

Kadokawa: Ultimately, I think the main difference is the platform where the content is actually viewed. You have different platforms -- macs, iPods. Also, in America, distribution is quite different - Walmart and other retailers have a lot more power. Those major players can deceive the sellers in terms of how much product gets sold. So sometimes it can feel like those retailers reap the benefits [of selling the content] and the content producers aren't left with much. This isn't a cultural thing, but it is a problem that seems to be a native part of the system in America. It happens in Japan too, so it isn't as if America is evil or anything. But since the Japanese market is smaller than the American one, the problem is even harder to deal with there. If you think it's a little different from how I'm putting it, let me know - I'd love to hear another perspective.

Justin: One thing we've noticed is that Japanese fans could always watch anime on TV, and if they liked it, they could buy it. But American fans have never been able to watch it first -- throughout the "bubble market" years" they had to buy it sight-unseen. Ultimately, some fans gave up, while others turned to fansubs, which are now better [video] quality than DVD. The fanbase is not shrinking, but there's currently no ability for companies to distribute contents in the way that anime fans need. The only way to monetize anime content in the United States currently is DVD sales, and DVD is over.

Kadokawa: That's a phenomenon we're struggling with too. That's actually one of the reasons I attended the conference actually - to figure out how to turn a profit again.

Justin: Kadokawa Pictures recently closed their US office. Was this a direct result of the decline in the anime market?

Kadokawa: Kadokawa Pictures USA was started to take advantage of two markets for us in the United States: DVDs and feature films. In addition to anime, we have the whole Daiei Film catalog. As you know, we also co-produced the American remake of "One Missed Call." Unfortunately both the DVD and the theatrical markets are extremely challenging right now. It's very tough to negotiate with "Big Box" retailers, and it's very tough to negotiate with Hollywood studios.

Justin: Part of your plan has been to kind of give acceptance to MAD videos and other kind of fan creations online, and I think fans have responded- they're grateful for the opportunity. Do you have any ideas for how the same thing could happen with fansubs? Is there a possibility for that kind of new thinking to work with outright piracy, or is that just for fan creations?

Kadokawa: If there is a way to monetize it, then I think the impact of piracy will become smaller. "Piracy," as it were, is always viewed as the opposite of "monetizing" something. If the producers and rights holders for anime content can become rich, that will probably change. If they are satisfied, the negative stereotypes that they cling to - a lot of people resent the change the internet has brought along, right? If that stigma can be changed - if the way such things like IR and MAD can be viewed positively - then changes can be made. Still, it's a problem between content holders on one side and piracy groups on the other.

Justin: What do you think of the Crunchyroll and Hulu-type business models?

Kadokawa: Crunchyroll is working pretty hard to persuade the licenseholders and stream content legally. However, convincing those people can be hard.

Justin: And there's no money yet, really.

Kadokawa: Yes, it's not profitable for them yet. Advertising revenue and premium [subscriber only] content might help profits, but just how much those things will help the problem in the "post-Web 2.0" era is yet to be seen. I think the internet is moving into a new "post-Web 2.0" age, where there is a lot of content online, but people haven't seriously considered how to make that model profitable yet.

What I worry about with Crunchyroll relates to how they construct [their business model]. If it is to be successful, people need to think about and account for the next step in the process. So I think companies like Hulu and Crunchyroll have to reach profitability - perhaps like pay TV. Or utilize advertising revenue like YouTube has. YouTube has expressed quite a bit of confience in this market, that they believe a profit can be made. They've had that confidence from the beginning, when [web video] was just getting started, so I think Google and YouTube have the power to become even bigger. In the case of YouTube, 10 percent of Google's profit comes from advertising, and I wouldn't be too surprised if that balloons to 20 percent. I've been told that this 10 percent doesn't come from the search engine; rather, it comes primarily from video advertising. So I think this form of monetization has a lot of potential in the future.

But going back to Crunchyroll, they need to figure out whether they want to pull operating capital from their user base or from advertisers. I think asking for advertising from the people who produce the content, like us, would be a mistake. For content producers, what we care about is how Crunchyroll uses that content. Regardless of whether the subscription model or the advertising model is profitable, if Crunchyroll can't bring in profit, they won't get content.

Justin: I would like to set this aside for now and talk about more fun things. Let's talk about The Melancholy of Haruhi Suzumiya. I have to say that this is one of the strangest marketing strategies I've ever seen.

Kadokawa: Oh really? (laughs)

Justin: It seems that a good deal of thought has been put into, uh, "teasing" the consumers.

Kadokawa: In the sense that it builds interest? Ah, yes. It's pretty effective!

Justin: So it was intentional?

Kadokawa: Yes, of course. All part of the strategy, which was a thorny issue. Japanese entertainment relies on a lot of single creators - auteurs, people like Hayao Miyazaki and the like. America is more based around group productions. For example, we have Summer Wars as a direct result of [Mamoru] Hosoda directing. He's not part of a team - he always works by himself.

Justin: So that kind of attitude comes from the director of Haruhi?

Kadokawa: I think the way the director paces his work is brand new. I think he was under a lot of pressure with his next work, since he had a lot to live up to. So he had to handle that piece very delicately. In America, I think they would have passed the project to someone else in such a case.

Justin: So I have to ask then: "endless eight", the eight episodes of the last season that were almost exactly the same.

Kadokawa: (Laughs) Yes. His next project will be different, but he did that very deliberately. Wow, you know a lot about this...

Anyways, I think creators realize that people view a sequel with a lot of anticipation, which in turn makes the creators nervous. If a production is your own creation, your approach is different. For example, for Disney, it's a huge company, and I don't think there's room for an individual to stand out there. In the case of Haruhi, I think the creators took more ownership over it. The great thing about the series is that it can't be simply "passed on" to others. Haruhi Suzumiya offered "something else" to Japanese viewers, Asian viewers, and in turn, viewers around the world... though I admit, I can't really explain what that "something else" is! That's the greatest mystery behind Haruhi Suzumiya I think.

Justin: There's been so much "otaku only" anime lately, and it would be nice if there could be more high-quality productions like Haruhi that have the potential to cross over into the mainstream.

Kadokawa: Right now in Japan we call that phenomenon "subculture." These days, that "subculture" is integrating with the mainstream. I don't think that just applies to Japan either; it applies to the whole world. "Pop" artists like Takashi Murakami and Yoshitomo Nara are holding gallery showings in New York and selling their work at incredibly high prices.

Justin: I think there was an exhibition at the Met not too long ago, yes.

Kadokawa: I've heard that the pieces are selling for millions. And those are anime-themed works! Earlier, a fake copy appeared on Yahoo! somewhere. Even though the creators said that it wasn't their work, someone bought it for $400,000 dollars. On Yahoo! Auctions. For that subculture - which Murakami and Nara are a part of - to cross into the mainstream like that and be viewed with such prestige on the international stage is amazing. Japanese subculture - "otaku" anime - things like that are... how do I put this... they aren't beloved by everyone in the world, but they are appealing to a wide variety of people all over the world. Particular groups are embracing their work; it feels like their support has helped this happen.

Justin: So in other words, the line between niche content and mainstream content is becoming meaningless.

Kadokawa: Yes, the subculture is encroaching upon the mainstream. I think it's part of how culture will be defined in the 21st century. Ironically, I think the pirated versions [of content] on YouTube have helped foster that! When YouTube first entered Japan, JASRAC - the Japanese Society for the Rights of Authors, Composers, and Publishers [ed: JASRAC is similar to the American music publishers organization ASCAP] - asked them to remove certain things. The reality is that YouTube isn't promoting piracy; it's that JASRAC needs to get back into the mainstream ways of doing things. It's as if they're wasting an opportunity for promotion, and I think YouTube doesn't fall completely into the realm of piracy. JASRAC has come around since then.

Justin: It's so different from how it used to be - when I was younger and I was trying to make all my friends anime fans, I always used to give them Macross Plus and Miyazaki movies. It's strange to think that something like Haruhi on YouTube is what makes people fans now. It's a huge change.

Kadokawa: Agreed. This ties into what I was talking about [at the Animation Asia Conference] yesterday, I think. People like Miyazaki and Mamoru Hosoda have pioneered "family anime." Anime in general tends to have three genres: The first is family anime. The second is young adult anime, like Haruhi Suzumiya. There are many subgenres within this group, like the 19-25 year old range that's into Gundam, Macross and Haruhi Suzumiya. Then there's kids' anime, things like Pokemon. Those are the titles that adults feel like they've "moved beyond." I think Naruto might fit into that category too, but it might cross over into family anime as well. So I think the "young adult" category can hold a lot of intrigue. Considering the scope of a big event like this one, I'd like it to cover all three - family anime, young adult anime, and kids anime.

Justin: I think in America it's very difficult for anyone over the age of 12 to watch animated things. Everyone still thinks it's for kids, so it's a fight to get them to try [watching it].

Kadokawa: Yes, but then there are things like Up. I think they were following Miyazaki's formula with that one! A complete imitation. Frightfully similar. The house flies with balloons, right? That was just like Laputa: Castle in the Sky! Mr. Lasseter, the Pixar producer, has a lot of respect for Miyazaki, so we can't call that piracy, but rather a gimmick. [laughs, grinning]

Justin: An homage perhaps?

Kadokawa: Yes, yes. I think he's respected for that. He reveres Miyazaki and people recognize that, and they respect his work.

Justin: Actually, Pixar has done more to open American minds to anime, I think, than any anime creator.

Kadokawa: The wall of the "12 years old and under" perception is being challenged by groups like Pixar. I think if you just focus on the "young adult" demographic, it's difficult to break that barrier.

Justin: Last question: I really want people to be able to see Summer Wars. Can you announce any US release plans yet?

Kadokawa: Summer Wars is held by MadHouse, so we need to consult with them.

Special thanks to Akira Sakai and Anna Teo of Dentsu Singapore for on-site interpretation and facilitating this interview, and to Florence Ang of Red Dawn PR. Translation by Evan Miller.