Ask John: How Can America’s Remaining Distributors Stay Active?

Question:
News of Bandai Entertainment ceasing to license or release new anime and manga products has left me really worried about the US anime industry. While I don’t know exactly how or why this happened, it’s left me worried about other companies like Funimation, Viz, Sentai, and Media Blasters. How can these companies avoid the same fate that happened to ADV, Geneon, and now Bandai?

Answer:
Regrettably, to a certain degree the remaining active domestic anime distributors, which also include AnimEigo, Manga Entertainment, Discotek, Nozomi Entertainment, NIS America and to lesser extent Image and Buena Vista, are limited in options by the realities of the Japanese market and corporate perspective and the demands of the domestic American consumer market. In the early 2000s, Japan’s anime distribution industry envisioned America as a massive potential commercial audience for anime. America is many times larger than Japan and, therefore, logically, has many times more potential anime consumers. As the American anime market continued to swell annually, Japan was quick to exploit that seemingly burgeoning market. But simple figures failed to account for the intangible fact that anime is both animation and foreign, two characteristics which inevitably limited the mass market acceptance of anime in America. The efforts to exploit the American audience with excess releases, titles that the domestic market couldn’t support (Human Scramble, Super Milk-chan, Time Bokan, among others), and costs – both corporate and consumer – which the American market either couldn’t or wouldn’t bear crippled the domestic industry, seemingly permanently.

As Bandai Entertainment CEO Ken Iyadomi revealed this week, the decision to downsize the American subsidiary was made by the Japanese parent company despite confidence that Bandai Entertainment could have continued to operate at its present level. Bandai Namco of Japan determined that the minimal returns generated by the American subsidiary weren’t worth the hassle of continuing licensing negotiations and handling royalties and production & distribution expenses. Now that America is literally just a small supplemental revenue stream to the primary Japanese market, and there’s no sign of significant growth potential in the American market, there’s no longer any reason for the Japanese industry to nurture an American market. Allowing streaming and making Japanese releases officially available to American consumers require little extra effort from the Japanese side of the anime industry. Certainly, financial returns from such limited distribution that excludes American TV broadcast and American packaged media home video results in lowered grosses. But the Japanese distribution industry is satisfied with minimal returns in exchange for minimal investment and effort. The American market has shown little interest in financially supporting anime, so Japan’s anime industry has responded appropriately to America. Anime is not cheap. It’s never been cheap. It’s not cheap in Japan. But American consumers expect anime to be cheap. They expect it to be comparable to the cost and availability of domestic TV programming and movies when the media and financial realities surrounding the media are not remotely similar. In effect, we get what we pay for, and now that we’re paying very little for anime, we’re getting very little anime.

Domestic fans can take moderate comfort in the knowledge that FUNimation, Manga Entertainment, Discotek, Nozomi, Media Blasters, AnimEigo, and the assorted companies affiliated with Section 23 are not Japanese owned companies, so they’re not in danger of being arbitrarily shut down by decisions made on the other side of the planet. NIS America is the epitome of a boutique distributor that appears satisfied to maintain its present level of minimal but sustainable revenue and market penetration. Discotek and Nozomi appear likewise satisfied to manage their present small but sustainable market positions. Viz Media is a Japanese subsidiary, but Viz is America’s oldest active anime distributor (provided AnimEigo is considered not presently active in anime licensing and distribution). Throughout its history, Viz Media has always aggressively prioritized business strategy, frequently to the consternation of domestic anime fans. As a result of that acumen, Viz Media is likely to remain viable and active in American distribution.

Viz has arguably been consistently America’s most successful anime and manga distributor because the company has always remained active and has managed the ups and downs of market shift smoothly. Viz’s strategy involves acquiring select, optimum titles without overextending, carefully branching out to supplemental and ancillary mediums slowly, and promptly excising unprofitable endeavors. The result is a company that largely only selects and distributes profitable titles. The downside of that strategy for consumers is a lack of eclectic, niche market anime titles. The upside for the distributor is few risky investments and little possibility for catastrophe. FUNimation and Section 23’s affiliates (Sentai, Maiden Japan, Happy Carrot) seem to partially adhere to Viz’s strategy. Sentai and its companion distributors are careful not to flood the market and devalue their own product with tiered discounted re-releases. The companies are careful to manage costs by excluding dubbing for shows unlikely to significantly benefit from the dramatic extra cost of including a dub. These companies largely concentrate on distributing titles with an assured audience, although recently titles including Loups=Garrou, Himawari, and Glass Maiden, among others, seem like longshot hopes rather than releases assured to generate a profit. FUNimation appears to be doing precisely what AD Vision did in the lead up to AD Vision’s demise: relying heavily on cash cow titles, acquiring a large catalog including titles with no planned release date, multiple simultaneous releases of the same title and tiered discount re-releases that encourage consumers to wait instead of buying on initial release. However, if FUNimation can avoid the mis-steps that AD Vision took, including investing heavily into a live-action feature that never materialized and failing to pay proper royalties to its Japanese licensors, FUNimation may be able to sustain itself indefinitely.

Rumors of ill corporate health at Media Blasters have circulated for the past two years or so, but the licensor, of late, has made deliberate licensing choices and doesn’t appear to be aggressively overextending. Hopefully experience and lessons learned through navigating the 2008 industry crash will allow Media Blasters to continue at its present lean and effective state.