Anime Expo 2009
Full text of Shawne Kleckner's keynote speech from Anime Expo
by Shawne Kleckner,
Good morning! I'm Shawne Kleckner, President and CEO of The Right Stuf.
22 years ago, when I first started marketing our release of "Astro Boy", the market was completely different. Video stores were primarily rental, and it was tough to even get your titles into the stores, especially with an already niche 25 year old TV show. This is what led us to start our mail order operation, which has since morphed into today's Right Stuf.com.
Our company operates in a fairly unique market location, with us being both a boutique publisher with our Nozomi Entertainment label, as well as a retailer. We also provide a variety of infrastructure support services to other industry firms.
We are all part of an industry that is currently in a state of flux. The amount of content available to the average fan today is immense. The 1990s consumer could buy every single new release each month, and have all of the available licensed anime in their library. Today, to do so even at bargain prices would represent multiple years worth of the average fan's income.. Of course, these customers also consume other media besides anime - they buy video games and music, they buy non-anime DVDs, they have their normal expenses in life. They are overstimulated by the sheer amount of CONSUMABLE-media that is out there to be had. They are also an impatient bunch. We live in an instant-gratification society - waiting a week or more requires patience. And statistics have shown that our marketplace is filled with early-adopters - those who quickly grab the newest gadgets, formats, and so on.
The primary brick and mortar retailers selling our products are also the same retailers selling the current movie hits and TV box sets, and several, I'm sorry to say, are not doing well financially. Anime revenue was down significantly last year, and shelf space devoted to these products has shrunk..
Online DVD retailing cannot address the needs of the younger consumer as they have no easy access to a credit card to make purchases.
Leading opinion last year was that BluRay would be the savior of the home video market. The economic recession has caused BluRay content and player prices to tumble. The high cost of BluRay authoring has kept the number of anime releases to a minimum, and the Japanese licensors often require holdbacks for BluRay because there is no region coding to prevent easy reverse importation.
The Internet was the other savior - but monitization of internet content is tricky at best, and it takes a LOT downloads to even approach the cost of dubbing an anime series, especially when most of these platforms are licensed and deliver only minimal per-view revenue to the US producer. In addition, most require a credit card, which younger consumers again do not have. Unfortunately, due to mostly hesitation on the Japanese side, we are late to market in this area and are playing catch up.
Regardless, the primary revenue source for all industry players remains DVD..
We have to take a look at the buyers in the market. We have a core consitutency of those willing to pay for the products we create, and in the converse, we have those fans who will never pay, no matter what.
The mass market anime phenomenon has made anime available to everyone, made it popular, and made it cheap. However, the current market has made selling anime incredibly complex, as the diverse customer base makes it harder to reach the consumer. Who is buying our product, and are we listening to what they are looking for?
So what is driving our consumers today, and how do we as a market adapt to the needs of these consumers?
To me there are three driving factors:
1. SPEED OF DELIVERY
The fans want the titles right away. There have been a few examples recently of "simultaneous release" allowing the fans to consume the product within hours of the release in Japan. The risk here is great, in that licensing has been a time-consuming process, which involves many members of committees in Japan, all looking to maximize the amount they can make. In the past, there has been time to watch the show and make a licensing decision. On top of this, many times the materials delivered for broadcast come at the very last minute, just as they do for productions here, leaving very little time to localize the program.
In order for our industry to address the fan concerns in this area, we are going to have to engage the Licensors much earlier in the process. They are going to have to modify the way they do business in order to capture these early fans. In addition, we need to figure out new ways of deriving revenue from these quick-turn cases, either through advertising or other means, as there is no physical product to sell during this timeframe. Our tests have shown many of these early-viewers are not necessarily buyers, which means if we cannot monetize their viewing at this stage, we likely won't be able to get them with a later DVD release.
The point I am trying to make is that we're going to have to engage the fans in both areas - that of the quick availablity, and that of the value-add, which I'll go into in a moment. When tape traders in the 1990s were trading the low-grade fansubs of the time, this is what they were doing; technology today gives professional-level tools to create such content and fans have ready access to the broadcasted video. To serve these fans, we have to address this issue, and this will require more effort and coordination from Japan.
2. COST
The $30 anime single DVD price point is gone. We can blame the rise of TV on DVD here for this factor, with cheap DVD box sets of seasons of your favorite television shows -- why would I buy 3-4 episodes of an anime series for $30 when I can get the new season of "Lost" for virtually the same price? (Of course, Lost doesn't need to be translated or dubbed, and the broadcaster paid for the episodes and the advertisers paid the broadcasters, but that is invisible to our buying public.)
The change in this type of selling creates a conundrum for the US distributor - they are in a position where the license fees, generally per-episode, remain fairly high, but they have eliminated the initial revenue stream from the single-DVDs that were released in the past, in a market where total sales per unit are in decline. This has led to some hard decisions having to be made, such as whether titles can be dubbed, the type of packaging to be used, changes in authoring to drop replication cost, and so on. Some fans are not happy with this end result, which I'll get into in my next section. Still, to compete in the market you have to remain lean, and it's tough to do so when margins are in decline. Prices will continue to fall. Something has to give here, whether it be in production costs, licensing costs, or just in overhead.
Still, it's very hard to look at a recent $60 Anime Box set containing 26 episodes, for an average of $2.30 per episode, and complain when only a few years back that would have been an 8 DVD release at $240 retail!
3. QUALITY.
If I'm going to spend my hard earned money, I want to see value for it - value beyond just cost, because I want it to be cheap, but I also want it to be cool.
As I mentioned earlier, we need to be able to bring the products to market more quickly, and by "to market" I'm now talking about the DVD release, not streaming or something that is done closer to the Japanese release. However, the fans will need to be educated that the Japanese firms which broadcast these episodes are not necessarily those that create the DVDs. The delivery of episodes for broadcast may occur the actual day of broadcast.. The shows may not be as complete as the producers wished, or the quality may have suffered due to time constraints. When the Japanese DVDs are released, manytimes quality is improved, scenes are added, other work is completed, and so on, so that these have the "value-add" that the Japanese consumer is looking for - why should they buy the DVDs, when they can watch them on TV for free. (Coincidentally, an arguement made here as well.) This, I believe, is why you see added value interviews, commentaries, and so on for US television box set releases. In Japan, it is common for extra materials such as posters, toys, printed pieces, video extras, and more to be included with DVD volumes. The Japanese licensors are going to have to make such materials available, or the licensees are going to have to create such content. As an example, with our release of "Emma", we included a 96-page booklet about the show. We have done interviews with production staff, included video interviews and extras, and we have created on-disc materials such as character biographies and liner notes.
It used to be said that "Content is King." Now, it's more "Presentation of Content is King." Our customers want a quality release, but they want to also have a value price. This is a difficult fence to sit on.
To address the changing market, we as an industry are likely going to need to change the business model as a whole - from licensing through production, delivery, and sales.
Licensing costs as a whole are dependent upon the Japanese rights holders, who will need to look more to the US distributors as "partners" rather than "licensees." Because the owners of this content are more often organized as committees, this makes this process even more complex. In previous years, the amount of these upfront "guarantees" rose exponentially to a point where it became unprofitable for the US distributors to release the products which were already licensed; years of losses followed when sales dropped and the double whammy of retail bankruptcies dealt a further blow to these companies' ability to do business. Until very recently, these fees haven't really come back into line with market realities. Additionally, money that is spent on these upfront fees could perhaps be put to better use to more quickly bring products to market. However, weakness in the Japanese market as of late may make this difficult, as many of the producers themselves are struggling. It is also very difficult to do such work on all of the new releases at once, given the large number of parties involved in the process.
Dubbing may be relegated to higher profile releases. This cost, which oftentimes even eclipses the license fees, may be the factor that causes a change in licensing. Localization is incredibly expensive, but without it, we lose the mass market appeal and a large segment of the customer base.
Some of the way we handle our changing market will be in addressing the habits of the consumers and what they are looking for - the rest may be in segmenting those consumers to figure out how best to sell to them.
Some customers demand and require the shows as soon as possible - those customers we will need to address with streaming, quick turnaround, and providing an easy way to have access to the content, either supported in an advertising-based revenue model or an easy to pay for subscription model. However, as example, leaving the content up indefinitely will cannibalize sales of other mediums.
Other customers are willing to wait for the DVD releases and are instead more focused on value, or quality. They may be interested in checking out the early episodes, if only to make sure that they will enjoy the type of show that they will be purchasing. Within this market, we also have to segment those titles which can be economically dubbed and released and those which have more niche-appeal, but still have appeal to fans.
Finally, we will have to continue to work to get the product to fans in a shrinking retail marketplace, and inform them of what's coming out -- no small feat when there is so much noise to filter through in most of their lives already!
A wise man once told me that the essence of running a small business could be summed up in the statement "Adapt or Die." The market changes constantly, day by day, week by week, and those who do not adapt their business model are left either to play catch up or to go by the wayside.
I see a return to our roots; the 2010 business model for our market will be similar to the 1990 business model, albeit with new technical challenges. If we can address the needs of our customers' varied damands, and do it in concert with our Japanese partners, there is still plenty of life in the anime market. However, if we continue to ignore the customers and hope for the best, we will be left behind to wonder what happened.
22 years ago, when I first started marketing our release of "Astro Boy", the market was completely different. Video stores were primarily rental, and it was tough to even get your titles into the stores, especially with an already niche 25 year old TV show. This is what led us to start our mail order operation, which has since morphed into today's Right Stuf.com.
Our company operates in a fairly unique market location, with us being both a boutique publisher with our Nozomi Entertainment label, as well as a retailer. We also provide a variety of infrastructure support services to other industry firms.
We are all part of an industry that is currently in a state of flux. The amount of content available to the average fan today is immense. The 1990s consumer could buy every single new release each month, and have all of the available licensed anime in their library. Today, to do so even at bargain prices would represent multiple years worth of the average fan's income.. Of course, these customers also consume other media besides anime - they buy video games and music, they buy non-anime DVDs, they have their normal expenses in life. They are overstimulated by the sheer amount of CONSUMABLE-media that is out there to be had. They are also an impatient bunch. We live in an instant-gratification society - waiting a week or more requires patience. And statistics have shown that our marketplace is filled with early-adopters - those who quickly grab the newest gadgets, formats, and so on.
The primary brick and mortar retailers selling our products are also the same retailers selling the current movie hits and TV box sets, and several, I'm sorry to say, are not doing well financially. Anime revenue was down significantly last year, and shelf space devoted to these products has shrunk..
Online DVD retailing cannot address the needs of the younger consumer as they have no easy access to a credit card to make purchases.
Leading opinion last year was that BluRay would be the savior of the home video market. The economic recession has caused BluRay content and player prices to tumble. The high cost of BluRay authoring has kept the number of anime releases to a minimum, and the Japanese licensors often require holdbacks for BluRay because there is no region coding to prevent easy reverse importation.
The Internet was the other savior - but monitization of internet content is tricky at best, and it takes a LOT downloads to even approach the cost of dubbing an anime series, especially when most of these platforms are licensed and deliver only minimal per-view revenue to the US producer. In addition, most require a credit card, which younger consumers again do not have. Unfortunately, due to mostly hesitation on the Japanese side, we are late to market in this area and are playing catch up.
Regardless, the primary revenue source for all industry players remains DVD..
We have to take a look at the buyers in the market. We have a core consitutency of those willing to pay for the products we create, and in the converse, we have those fans who will never pay, no matter what.
The mass market anime phenomenon has made anime available to everyone, made it popular, and made it cheap. However, the current market has made selling anime incredibly complex, as the diverse customer base makes it harder to reach the consumer. Who is buying our product, and are we listening to what they are looking for?
So what is driving our consumers today, and how do we as a market adapt to the needs of these consumers?
To me there are three driving factors:
1. SPEED OF DELIVERY
The fans want the titles right away. There have been a few examples recently of "simultaneous release" allowing the fans to consume the product within hours of the release in Japan. The risk here is great, in that licensing has been a time-consuming process, which involves many members of committees in Japan, all looking to maximize the amount they can make. In the past, there has been time to watch the show and make a licensing decision. On top of this, many times the materials delivered for broadcast come at the very last minute, just as they do for productions here, leaving very little time to localize the program.
In order for our industry to address the fan concerns in this area, we are going to have to engage the Licensors much earlier in the process. They are going to have to modify the way they do business in order to capture these early fans. In addition, we need to figure out new ways of deriving revenue from these quick-turn cases, either through advertising or other means, as there is no physical product to sell during this timeframe. Our tests have shown many of these early-viewers are not necessarily buyers, which means if we cannot monetize their viewing at this stage, we likely won't be able to get them with a later DVD release.
The point I am trying to make is that we're going to have to engage the fans in both areas - that of the quick availablity, and that of the value-add, which I'll go into in a moment. When tape traders in the 1990s were trading the low-grade fansubs of the time, this is what they were doing; technology today gives professional-level tools to create such content and fans have ready access to the broadcasted video. To serve these fans, we have to address this issue, and this will require more effort and coordination from Japan.
2. COST
The $30 anime single DVD price point is gone. We can blame the rise of TV on DVD here for this factor, with cheap DVD box sets of seasons of your favorite television shows -- why would I buy 3-4 episodes of an anime series for $30 when I can get the new season of "Lost" for virtually the same price? (Of course, Lost doesn't need to be translated or dubbed, and the broadcaster paid for the episodes and the advertisers paid the broadcasters, but that is invisible to our buying public.)
The change in this type of selling creates a conundrum for the US distributor - they are in a position where the license fees, generally per-episode, remain fairly high, but they have eliminated the initial revenue stream from the single-DVDs that were released in the past, in a market where total sales per unit are in decline. This has led to some hard decisions having to be made, such as whether titles can be dubbed, the type of packaging to be used, changes in authoring to drop replication cost, and so on. Some fans are not happy with this end result, which I'll get into in my next section. Still, to compete in the market you have to remain lean, and it's tough to do so when margins are in decline. Prices will continue to fall. Something has to give here, whether it be in production costs, licensing costs, or just in overhead.
Still, it's very hard to look at a recent $60 Anime Box set containing 26 episodes, for an average of $2.30 per episode, and complain when only a few years back that would have been an 8 DVD release at $240 retail!
3. QUALITY.
If I'm going to spend my hard earned money, I want to see value for it - value beyond just cost, because I want it to be cheap, but I also want it to be cool.
As I mentioned earlier, we need to be able to bring the products to market more quickly, and by "to market" I'm now talking about the DVD release, not streaming or something that is done closer to the Japanese release. However, the fans will need to be educated that the Japanese firms which broadcast these episodes are not necessarily those that create the DVDs. The delivery of episodes for broadcast may occur the actual day of broadcast.. The shows may not be as complete as the producers wished, or the quality may have suffered due to time constraints. When the Japanese DVDs are released, manytimes quality is improved, scenes are added, other work is completed, and so on, so that these have the "value-add" that the Japanese consumer is looking for - why should they buy the DVDs, when they can watch them on TV for free. (Coincidentally, an arguement made here as well.) This, I believe, is why you see added value interviews, commentaries, and so on for US television box set releases. In Japan, it is common for extra materials such as posters, toys, printed pieces, video extras, and more to be included with DVD volumes. The Japanese licensors are going to have to make such materials available, or the licensees are going to have to create such content. As an example, with our release of "Emma", we included a 96-page booklet about the show. We have done interviews with production staff, included video interviews and extras, and we have created on-disc materials such as character biographies and liner notes.
It used to be said that "Content is King." Now, it's more "Presentation of Content is King." Our customers want a quality release, but they want to also have a value price. This is a difficult fence to sit on.
To address the changing market, we as an industry are likely going to need to change the business model as a whole - from licensing through production, delivery, and sales.
Licensing costs as a whole are dependent upon the Japanese rights holders, who will need to look more to the US distributors as "partners" rather than "licensees." Because the owners of this content are more often organized as committees, this makes this process even more complex. In previous years, the amount of these upfront "guarantees" rose exponentially to a point where it became unprofitable for the US distributors to release the products which were already licensed; years of losses followed when sales dropped and the double whammy of retail bankruptcies dealt a further blow to these companies' ability to do business. Until very recently, these fees haven't really come back into line with market realities. Additionally, money that is spent on these upfront fees could perhaps be put to better use to more quickly bring products to market. However, weakness in the Japanese market as of late may make this difficult, as many of the producers themselves are struggling. It is also very difficult to do such work on all of the new releases at once, given the large number of parties involved in the process.
Dubbing may be relegated to higher profile releases. This cost, which oftentimes even eclipses the license fees, may be the factor that causes a change in licensing. Localization is incredibly expensive, but without it, we lose the mass market appeal and a large segment of the customer base.
Some of the way we handle our changing market will be in addressing the habits of the consumers and what they are looking for - the rest may be in segmenting those consumers to figure out how best to sell to them.
Some customers demand and require the shows as soon as possible - those customers we will need to address with streaming, quick turnaround, and providing an easy way to have access to the content, either supported in an advertising-based revenue model or an easy to pay for subscription model. However, as example, leaving the content up indefinitely will cannibalize sales of other mediums.
Other customers are willing to wait for the DVD releases and are instead more focused on value, or quality. They may be interested in checking out the early episodes, if only to make sure that they will enjoy the type of show that they will be purchasing. Within this market, we also have to segment those titles which can be economically dubbed and released and those which have more niche-appeal, but still have appeal to fans.
Finally, we will have to continue to work to get the product to fans in a shrinking retail marketplace, and inform them of what's coming out -- no small feat when there is so much noise to filter through in most of their lives already!
A wise man once told me that the essence of running a small business could be summed up in the statement "Adapt or Die." The market changes constantly, day by day, week by week, and those who do not adapt their business model are left either to play catch up or to go by the wayside.
I see a return to our roots; the 2010 business model for our market will be similar to the 1990 business model, albeit with new technical challenges. If we can address the needs of our customers' varied damands, and do it in concert with our Japanese partners, there is still plenty of life in the anime market. However, if we continue to ignore the customers and hope for the best, we will be left behind to wonder what happened.
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