New York Anime Festival and ICv2 Conference on Anime and Manga

State of the Anime Industry

Panelists: Adam Sheehan (Funimation Entertainment), Ken Iyadomi (Bandai Entertainment), Satoshi Kanuma (Kadokawa Pictures), Chris Oarr (ADV Films), John O'Donnell (Central Park Media), Keisuke Inoue (Think Corp.)
Moderated by: Christopher Macdonald (ANN)

Several industry experts gathered on Sunday for the State of the Anime Industry panel, moderated by Anime News Network's editor-in-chief, Christopher Macdonald. The panelists included representatives from the American industry, as well as media publisher Kadokawa and the Japanese production company Think Corporation.

The panel started by gathering everyone's opinion of the current state of the North American anime industry. Sheehan said that while every industry has its ups and downs, right now, the anime industry is in a transition period between media formats like DVDs, high definition discs, and digital downloads. However, he believes the industry is still strong, and is still pushing; it is simply in a state of changing and adapting. Iyadomi acknowledged that the industry was going through harsh times, but said that anime's overall popularity is still growing. He summed it up by saying, “Anime and manga are not dead.”

Coming from a Japanese publisher's point of view, Kanuma said that while some of their products, like The Melancholy of Haruhi Suzumiya, have seen a lot of international success, there are some titles that aren't doing well, so “our eyes are open.” Inoue said that the industry needs the “next big series.” Past hits like Pokemon and Bleach rejuvenated the market, but now it's ready for something else.

Meanwhile, Oarr said that one of the reasons the second half of 2007 was weak was scheduling. According to him, tentpole releases and event releases mattered a lot and are driving forces that bring people into the anime section at retail stores. He has high hopes for 2008, with big name releases like Paprika and Appleseed: Ex Machina.

A more lengthy answer was provided by O'Donnell, who said that the industry needed to question the current state of affairs and gave two reasons as to why it came it about. The first was retail consolidation and collapse. According to O'Donnell, 35% of the anime retail account was lost last year when Musicland and Tower Records went bankrupt, which rippled through the industry. Target no longer stocks anime, preferring to sell non-anime television series on DVD. Best Buy has decreased the amount of anime they stock as well. As O'Donnell mentioned, there are currently “less players, and less doors.”

The second reason he gave was illegal downloads. According to a web tracker monitored by him and his colleagues, six million anime-related files a week are downloaded just through BitTorrent alone. That alone shows him that there are a lot of issues outside the business that need to be taken care of.

The next question was about sales figures, especially declining boxed media sales, which were down 30% last year. Retail sales were projected to fall from a high of US$550 million in 2003 to under US$350 million in 2007. The panelists discussed what this meant for their companies.

Not too concerned was Sheehan, who stated that Funimation sales are actually going up, though he cautioned that it is something that needs constant maintenance to ensure that his company stays on top of things. A few ways it is trying to accomplish this is by finding new pricing models, new ways of promoting anime, and ways to meet the consumer demand of taking up less shelf space. An example he gave was its upcoming release of Aquarion, which will be released on only two discs, at 13 episodes a disc. They're also trying to find new ways to distribute anime, like using download services such as iTunes and Xbox Live.

Iyadomi expressed the need to continually try to bring in new series. He assured everyone that his company's catalogue sales were doing well, but Bandai Entertainment needed to think about how to bring more animation to the states. In agreement was Oarr, who reiterated that catalogue sales were strong, but new release titles are much more unpredictable.

Focusing more on the acquisition process, O'Donnell stressed the importance of selecting the proper titles. According to him, companies are in less of a position to take risks than they were when many of them first started. In 2003, DVD releases hit a high, with approximately 60 discs coming out every month. Because of the heavy influx of products, buyers became concerned, causing the bifurcation of titles into what retailers consider “Class A” and “Class B.” This is showing itself even in the Japanese market, he said, with the drop in number of new titles. Because of this, less is coming out domestically, which means less selection for fans, who will generally gravitate towards the big hits. However, because only the big companies can afford to license these hits, it generally leads to a pattern of the surefire hits going to them, while independent companies will tend to release niche titles.

These sentiments were echoed by Inoue, who confirmed that DVD sales have gone down in Japan. What it means for his company is that it's harder to release original material, because DVD publishers and broadcasters are more willing to team up with big Shonen Jump titles, low-risk series that have a better chance of doing well.

For publishers, there's an increased need to work closely with companies in regards to new titles, according to Kanuma. This means trying to accommodate requests to have special promotion events, which will bridge the gap between distributors and artists.

The next question followed up the concern about dropping DVD sales by asking how alternate revenue streams are coming into play. Sheehan started the discussion by saying that product licensing and broadcasting were very important. However, it was a double-edge sword, because “who will buy the toys if they don't like the show?” Therefore, picking up the right show is key, as is finding the right person to work with and tying it into the brand. “As a marketing tool and revenue stream, it keeps the anime out there,” Sheehan said. Funimation, he specified, is always talking to broadcasters like IFC and Cartoon Network. While smaller channels will take risks on niche titles, he mentioned that big networks want the big titles that come with a lot of merchandising opportunities.

Both Iyadomi and Oarr stressed the importance of finding different media platforms. Although Iyadomi said that Bandai hasn't had complete success in the past with bracing DVD sales by digital downloads, streaming, and broadcast, it was his personal opinion that they need to find a way to switch to streaming content with ad revenue. Other options include adding more extras to DVDs, and marketing games. Meanwhile, Oarr said that while online streaming and broadcasting enables companies to “keep the whole ship floating,” it's not enough to supplant DVD sales. He cautioned that there are challenges and things that need to be dealt with, like illegal downloads and fansubs.

For Kanuma, who's in the business of managing properties, his answer is generating additional revenue by handling live-action titles and working closely with distributors like Media Blasters. For anime specifically, though, he said it was important to work closely with merchandising and licensors. O'Donnell had similar opinions, saying that electronic revenues aren't able to replace the money lost through lowered DVD sales. Instead, it's important to look at other outlets, such as documentaries and live-action films—products that will keep companies afloat.

From a different perspective, Inoue said that he and his colleagues were trying unique ways of presenting their products, like using online platforms. An example he gave was their effort to make a web-based manga that is only available online. With scenes in which a DJ might be playing music, readers would be able to click on the manga, be directed to iTunes, and be able to download the music and hear what the DJ is playing.

Moving away from the talk of sales, Macdonald next asked the panelists if they ever ran into resistance with Japanese licensors when they proposed trying something new. Although many of the panelists danced around the question a bit, they all stressed that it wasn't so much a matter of resistance, but an issue of communication and misunderstanding. As Sheehan said, “In order to end resistance, we need to further communication.” Iyadomi said that while each country has different business models, more people are starting to understand how business is done outside of Japan, which may eventually lead to more understanding. Right now, he said, it depends more on the person in charge.

In defense and to “avoid being the target,” Kanuma tried to explain the so-called “resistance.” He said that in the case of anime, by the time a series gets to the US, the producers and licensors who have to approve new ideas will already be working on their next project. It was less an issue of being unavailable, but moreso of just being overworked and preoccupied.

O'Donnell framed his answer by first talking about product exports, such as cars, electronics, and other physical items. These could be marketed by giving a list of physical attributes, whereas anime and manga comes from a publishing world, where it's unrealistic for a publisher to “just send their latest book over to Random House.” Inherently, he said, it's hard to export cultural products because the Japanese publishers don't really have a need to export them. Calling it an “insular industry,” O'Donnell said that it takes a generational change for an insular industry to move outwards.

Piggy-backing on that comment, the next question asked how important the US and foreign markets are to the Japanese anime industry. Iyadomi's pithy response: “I hope it's important.” He went on to say that in comparison to 10 years ago, things are very different now. Sheehan said that Japan's increasing look towards global markets could be illustrated with certain co-productions such as Afro Samurai, which was animated in Japan by Gonzo, but was first dubbed in the US. Both Oarr and Inoue reiterated the increase in co-productions as a sign of globalization.

Kanuma responded that the foreign market was increasingly more and more important in Japan, because producers now have revenue coming from the US. However, many of them still largely produce the kinds of series that they want to, and don't care what American fans want. For Kadokawa, though, which has a US office, it is able to get more overseas feedback. Kanuma's personal opinion was that, “they should cater more to what fans here care about.”

The next topic was about illegal downloads, and asked the panelists how much of an effect the delay between a Japanese release and an American release had, and whether there were any ways to minimize delays and effects.

All agreed that there was definitely an effect, and it was almost impossible to compete with the Japanese release. A sensitive issue in the industry right now, Iyadomi cited the three-month broadcast window as one reason why that gap couldn't immediately be shortened. Most broadcasters demand a three month wait before a Japanese DVD release, and within that time frame, won't allow a foreign DVD release of the same product. Iyadomi also pointed towards the language barrier as an issue. Domestic anime companies don't have the manpower to work like fansubbers, a problem for simultaneous release because the Japanese production schedules are so tight that oftentimes they're pushing until the last minute to get each episode out in time for broadcast. However, he claimed that the technology is out there, so eventually someone may try. On another point, “People want to see anime without the delay, but it's important to introduce anime with an English dub to attract more fans and more people. Maybe we'll see a change in the near future.”

Kadokawa's Kamune said that a lot is focused on making sure that there are no rights issues that get in the way. Attempted have been made in the past, but last minute issues caused problems. Immediately following his comment, Iyadomi revealed that Bandai had been approached in the past by companies to simultaneously broadcast a new series in both Japan and America, but they didn't have enough time to properly figure it out. Hearing that, Kamune responded, “I think we're talking about the same show.”

O'Donnell summarized it up by saying, “the longer it takes, the less we're going to sell. People know what the ideal is—we can all see the promised land.” He used Hollywood as an example, and pointed towards their practice of global releases. However, he thinks that it might need a generational change in order for it to happen. “It's going to take a lot of smart people working really hard.”

Interestingly, Oarr said that there didn't seem to be any obvious benefit to shortening the release delay to work with the three-month broadcast window. He used ADV's own Le Chevalier d'Eon as an example, saying that it was brought out in the US even while the show was still being broadcast, even despite all the work and last minute things, results were inconclusive about the benefits.

At this point, the floor was opened up for questions from the audience. The first person asked whether or not there was a strong sense of historical value in the market, and if there was any way to tap that, or if companies were just looking for the next hot new thing.

The consensus was that classics would always sell, but as Oarr said, “anime is front-list driven.” Iyadomi quipped that classics were important, but only some of them, as there were simply “too many shows to remember.” According to O'Donnell, fan attitude has changed as well. In the late 80s, early 90s, when average fans liked something, they would check out everything they could find by the same director or creator. Now, he says, fans are happy with what they're seeing, and don't really look any further.

The last question asked whether or not recent attempts by the Japanese government to promote Japanese pop culture internationally has had any positive effects on the anime industry.

O'Donnell was the first to answer, saying, “My cynical response is that they're a day late, a dollar short.” He questioned where JETRO was when they were needed a couple decades ago: “They used to be embarrassed by their popular culture. They didn't want Japan to be known as the land of big-eyed girls in short skirts. Now they're coming into an oversaturated market… Now it's maybe icing on the cake… It's not as helpful as it would have been otherwise.”

The other representatives from the American companies were more optimistic, agreeing that any communication is going to help, and that good can come out of it, especially regarding the anti-piracy issue.