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NEWS: Toei Animation Sues 869 BitTorrent Users Over One Piece

zaphdash wrote:

... No doubt it is very broad to consider ad-based streaming the same basic revenue model as DVD sales, but in the sense that both derive revenue from distribution of the finished product, they are the same.

Except, with DVD sales, its the recipient who pays, and they pay for a good, while with broadcast advertising, its someone other than the recipient who pays, and they pay for a service that attracts the attention of a viewer, rather than paying for a good.

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And the problem here is that there is a competing model of illicit free distribution that undermines any revenue-through-distribution setup.

Except the distribution is not really cost free. When a torrent swarm distributes a file, the bandwidth is paid for by each seeder ~ normally on a flat rate basis, since people paying by the MB rarely seed.

The Toei action may be based on a theory that quality of service of torrent downloads can be reduced if you make people nervous about reseeding their torrent downloads. The higher the proportion of torrent leechers to torrent seeders, the slower the torrent download rate, and a slower the torrent download rate will shift the users on the margin into some other form of distribution.

When a bootleg streaming site distributes a file, they do not host the file, because there is no way a leech streaming site can afford the bandwidth ~ they upload it (in violation of T&C) to some free video streaming site and then leech that stream. That's why they are "leech" streaming sites. And of course, the reliance on someone else to actually provide the service that they are collective banner and click through advertising dollars for is their Achilles Heel.

Meanwhile, in the US at least, streaming advertising dollars are set to grow faster than hours spent watching streams, so ad rates for streaming ads are set to rise over the next half decade.

The question is not whether legit digital distribution can make enough money to keep the legit digital distribution services in business: we already know the answer to that question is yes. The question is not whether legit digital distribution can achieve rapid revenue growth: we already know the answer to that question is yes.

The question is whether the rapid growth will start to taper off before or after the revenue base has grown to the point of being able to shoulder a large share of the original costs of production. That is a question that will be answered sometime in the next five years.

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The survival of the media industries will depend on their ability to find revenue independent of distribution, not just through new modes of paid distribution.

So this is the conclusion that I am saying is not yet proven ...

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It's true that services like Crunchyroll and iTunes are profitable, but right now they just provide one revenue stream of many, they haven't shown that they have the ability to support entire industries.

... and this is exactly why I say it is not yet proven ... while they have not yet shown the revenue levels that have the ability to support the anime industry, they have shown rates of growth[/] of revenue that, [i]if they continue could indeed provide substantial support for the anime industry.

Whether they will continue at those rates of growth for long enough or not is something that has not happened yet, so an argument that rests on the answer either way is a speculative argument.

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Cost of production and ultimate profitability of the studio are, of course, reflected in licensing fees, but the relationship is not very elastic, so what Crunchyroll pays to license a show right now doesn't reflect what Crunchyroll would have to pay to license a show if the studio had no other revenue streams. Unfortunately those other revenue streams are gradually drying up.

Crunchyroll is, however, an international licensee, and international license income would never be expected to provide a majority of rights income.

And part of the reason that "income from distribution" is a misleading category is that the anime industry has been its healthiest when its been relying on a portfolio of revenue streams ... even if television advertising revenue, physical media sales, movie ticket sales and subscription cable revenue are all "income from distribution", the variety of source of income still provides a more sustainable business model than relying primarily on a particular type of distribution income.

So we would not expect that a viable business model that includes substantial streaming income would rely primarily and streaming income. Rather, if it were 20% merch & character rights, 20% streaming (flash, cellphone app, etc.), 20% ongoing rights (BD transitioning to digital downloads once those are developed) and 20% international, that would be a healthy, diverse, revenue portfolio ~ even if, if the domestic revenue streams are duplicated in miniature in the international rights income, 76% of revenue comes from "distribution" and only 24% from merch and character rights.

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... but like I noted above, the music industry continues to make less and less money each year in spite of the advent of pay services like iTunes. ...

Yet musicians have done better than "the music industry", as the classic 1970's relatively low ticket price concerts to promote sales of LP's has turned into low cost recordings to promote sales of relatively high ticket price concerts.

But that is obviously a model that does not translate into the production of complex collaborative works.

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This is a process, and so the old channels haven't completely closed yet -- you can still make money selling television commercials or CDs or movie tickets. But you can't make as much as you used to, and you're going to continue making less and less if you stick to your guns instead of adapting.

And yet, there are musicians that still make money from the sale of vinyl records.

A trend projection in the middle of the transition out of vinyl LP's into CD's would have the vinyl LP market at $0 long ago, but after a long downward trend, the market stopped dropping.

So projecting a downward trend of the "old channels" does not automatically imply that all of the "old channels" will necessarily go away completely. Sometimes the trend pointing to $0 goes to $0 ... sometimes it doesn't. Projecting a trend is always risky ~ except when you have a trend that obviously cannot be sustained, in which case it is safe to predict that sooner or later the trend will be broken.

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We can already see how the major American broadcast networks have tried to meet the challenge in establishing hulu -- a free ad-based streaming service (which more recently also offers paid subscriptions). Of course hulu has also had its problems, for instance pulling in 16% less revenue than predicted last year, and it was only a few months ago that the owners decided not to sell the service because they weren't satisfied with the bids they had received.

Yeah, but as far as anime goes, the hulu channels have been almost entirely fresh revenue, because they were for the most part not being shown on broadcast television, so the decline of broadcast television has little negative impact on the anime industry.

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Innovative distribution models definitely help to some extent, but it remains to be seen whether iTunes or streaming or what have you can really put an industry on its back like the old models did.

Yes, my argument exactly: it remains to be seen, so an argument that assumes that the current exponential growth rates will top out in the next couple of years and will not continue growing at those rates for the five or so years required is based on evidence that has not yet come in.

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I think all things being equal, people would rather act licitly than illicitly, but as long as you're operating against a model of free, high quality distribution of entire libraries (ie every episode of a show, something most streaming sites don't offer), all things are not equal.

And as long as the illicit leech streaming sites cannot offer iOS and Android apps, Roku channels, and the other distribution channels that Crunchyroll, Hulu, and Crackle can offer ... then they cannot compete head to head with legit streaming services for convenience of service.

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Unless media companies can find a way somehow to make money out of replicating the illegal free distribution model, they're going to have to find revenue somewhere else entirely, or their gradual downward slide will continue.

This is a false dichotomy. The illegal free distribution models work on the basis of freeloading bandwidth costs off of somebody else: find a way to force the illegal free distribution models to pay for their bandwidth consumed, and they collapse, since they cannot tap the revenues that legit distribution can tap and they cannot afford to pay for their uncharged distribution.

That is, after all, why Crunchyroll went legit: they had no choice, because they could no longer afford to subsidize the money-losing activity of hosting bootleg video uploads. It was a choice of either go legit, or pull the plug.

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Suing downloaders to recover the revenues you're missing through your own failure to adapt to the evolving technological landscape is like trying to rescue the Titanic with a pail.

Yes, but what does that have to do with this case? You really think they found exactly "Endless 69" torrent seeders? You think that FUNimation really found "L33T" torrent seeders?

They are experimenting. If the joining of the cases under their current claim works, then the lawsuit becomes self-funding, and they can engage in a series of torrent swarm sweeps. If they do, it may be that the seeding rate for the targeted series will drop substantially. If it does, then it will become a tactic that more rights holders will employ. If it doesn't work out, they may decide to scale back their focus on torrent download weeding and focus on some other type of weeds that are infesting their market garden.

As already noted by zaphdash, the seeding is illegal (and has been found to be illegal multiple times)...

That's a lot of if's, and you're ignoring the most important one of all: if this actually curtails downloading in any significant way, it'll be the first time legal action against a handful of downloaders has actually had that effect.

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Quote: And the problem here is that there is a competing model of illicit free distribution that undermines any revenue-through-distribution setup. Except the distribution is not really cost free. When a torrent swarm distributes a file, the bandwidth is paid for by each seeder ~ normally on a flat rate basis, since people paying by the MB rarely seed.

This isn't really relevant either. People pay for their internet access regardless of whether they want to download.

For it to matter that bandwidth itself isn't free, you'd have to find someone whose only purpose in paying for internet access is to download. Even then, internet access is very inexpensive. When I was living in the US I had the fastest internet my ISP offered and my total cable bill (which also included TV, HBO, HD channels, etc etc) was a hundred bucks a month. At MSRP that's 3-5 blu-rays; even if you find good deals, that's probably ten DVDs.

I could download the 40 or 50 episodes you could fit on ten DVDs overnight. So even if you do pay for internet strictly to download anime, making it a legitimate "cost" to consider, it's like an all you can eat buffet: the more you take, the lower your marginal cost, which with enough sheer volume will approach (although obviously, never actually reach) zero.

Setting that aside for a moment, the other point to consider is that you have to pay for internet whether you want to stream/download licitly or illicitly, so in that respect bandwidth is a sunk cost that has no bearing on the cost/benefit analysis of legal vs. illegal.

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Quote: The survival of the media industries will depend on their ability to find revenue independent of distribution, not just through new modes of paid distribution. So this is the conclusion that I am saying is not yet proven ...

How do you want it "proven"? Do you want to see it actually happen first?

agila61 wrote:

Yes, but what does that have to do with this case? You really think they found exactly "Endless 69" torrent seeders? You think that FUNimation really found "L33T" torrent seeders? They are experimenting. If the joining of the cases under their current claim works, then the lawsuit becomes self-funding, and they can engage in a series of torrent swarm sweeps. If they do, it may be that the seeding rate for the targeted series will drop substantially. If it does, then it will become a tactic that more rights holders will employ. If it doesn't work out, they may decide to scale back their focus on torrent download weeding and focus on some other type of weeds that are infesting their market garden.

That's a lot of if's, and you're ignoring the most important one of all: if this actually curtails downloading in any significant way, it'll be the first time legal action against a handful of downloaders has actually had that effect.

"Streaming sites aren't profitable": TV Tokyo says otherwise.

Now, at the level of the streaming service, its too late to argue whether or not streaming can be profitable, since Crunchyroll's ad-supported streaming as self-funding advertisement for subscription streaming has proven to be a profitable model once you pass a threshold level of subscribers. What is not yet proven is whether it can generate sufficient income, both in Japan and overseas, to take over the role that Japanese broadcast advertising revenue and international narrowcoast subscription and advertising revenue once played.

agila61 wrote:

As already noted by zaphdash, the seeding is illegal (and has been found to be illegal multiple times)...

No, it has not. But I digress. When someone like you refuses to accept facts it's pointless to try and educate.

When the defendant tries to negotiate his settlement on his own, the likelihood is that he will probably say something incriminating about his case. (For example, not knowing the case law, he may say, “it wasn’t me; it was probably my son — he uses the internet all the time; I keep telling him not to watch that porn,” or “I let my neighbor / son / guest / roommate use my internet,” or “I didn’t realize it was illegal to download — I thought it was only illegal to upload!” etc.)

As to what effect a single legal action against a handful of downloaders has ~ note that the hope in this business strategy is that it becomes a self-sustaining process of a series of sweeps.

And working out whether these suits are having any effect now is an intrinsically hard thing to establish, because doing valid qualitative research on illegal behavior is tricky. You cannot tell just from the rate of growth of bootleg filesharing, since you would need to compare it to the rate of growth in the absence of these suits, and we don't have an effective laboratory to run two different United States histories, one with the hundreds of these cases going on, and one without.

The upshot is that IANDL ~ I Aint No Damn Lawyer ~ as I have stressed many times ~ but you obviously are not a lawyer either, so rather than play lawyer on the internet, why don't you actually go find the actual lawyers on the internet before you go spreading misinformation that torrent uploading is legal, which can cost people thousands of dollars in settlement costs if they act upon it?

It's impossible to prove a counterfactual, ie how much people would download in the absence of lawsuits, ...

... but if the goal of the media companies is to end illegal downloads, the lawsuits have clearly failed.

Well, the wording may sound like your argument exactly, but what I was really getting at is what I've been saying all along, that the market will favor the higher quality, lower cost option, and so it "remains to be seen" whether the legal alternatives can overcome that.

I'm not a practicing lawyer but I've been through law school and can tell you without a shred of doubt that seeding a torrent for a copyright-protected work is illegal and can subject you to both criminal and civil penalties.

Mesonoxian Eve's argument otherwise is downright puzzling.

What's at issue here is not the (il)legality of the act of seeding, it is entirely a question of civil procedure.

I just called it as I saw it, especially given all other magical girl properties like Precure, Pretty Rhythym, Jewelpet, and etc are also conveniently ignored by simulcasts.

Also the 90% of the shows that don't get licensed every season. It's still a necessity.

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Well, the wording may sound like your argument exactly, but what I was really getting at is what I've been saying all along, that the market will favor the higher quality, lower cost option, and so it "remains to be seen" whether the legal alternatives can overcome that.

But the illegal downloads are not the higher quality, lower cost options for every segment of the market today, so its not valid to assume that illicit distribution has the inside track in every market segment today. Therefore, its an open question.

Quality is, after all, far more than just effective video resolution ~ it includes convenience and accessibility, and there are a number of settings where current legit digital distribution is more convenient and accessible today.

The fact that Crunchyroll subscriptions doubled in about a year and a half would seem to demonstrate that its not every market segment that accepts the pain in the ass of chasing down torrents, torrent downloading and copying files from one device to another, and converting files from one format to another for your various digital devices as the highest quality option. Indeed, if every market segment accepted the torrent downloading as the overall highest quality of service combined with least cost, then a streaming site like Crunchyroll would never have been as popular as it was back in its pirate bay days.

...I get where you're coming from, but the reality is that it's not a pain in the ass to find a torrent of anything you could possibly want. ...

I also don't necessarily put a ton of stock in Crunchyroll's growth rate so far because it's still a relatively new service. Explosive early growth is not uncommon, but I don't think it's realistic to expect subscriptions to continue doubling every 18 months for the foreseeable future, especially considering what a niche market Crunchyroll serves. Crunchyroll needs to mature a bit before we'll really know how successful it can be.

Precure not being licensed for simulcast is understandable. The series typically performs very well in Japan, but is unlikely to garner a similar audience in the United States.

TheAncientOne wrote:

Precure not being licensed for simulcast is understandable. The series typically performs very well in Japan, but is unlikely to garner a similar audience in the United States.

I'm pretty sure the reason it is not simulcast is because they want a large company like warner brothers or cartoon network of 4kids to license it.

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Precure
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The broadcasters normally license it from the R1 license holder.

However, this does at least place the speculation at the feet of the actual decision makers ~ per information from a reddit AMA last summer, Crunchyroll bids for every anime that goes to broadcast every season, so if they do not get a series, its never because "Crunchyroll passed", its always because the rights holder decided not to take Crunchyroll's offer.

If OTOH, you meant only 90% of the shows that went unlicensed needed fansubs, why the 10% exception?

Precure not being licensed for simulcast is understandable. The series typically performs very well in Japan, but is unlikely to garner a similar audience in the United States. In other words, Toei isn't likely to offer it for a price anyone would risk.

Perhaps I misinterpreted this, but did you mean to imply that 90% of shows each season don't get licensed?

For Winter 2012 for example, I count 27 new shows (two of which were one episode specials, not series), 19 of which were licensed. Even if we count those two single episode specials (which were among those unlicensed), that is less than 30% that were not licensed for simulcast.

Precure not being licensed for simulcast is understandable. The series typically performs very well in Japan, but is unlikely to garner a similar audience in the United States.