Ask John: Will New DVD Formats Effect the Price of Anime?

Question:
What is your opinion on how you think the impending next generation DVD format war will affect anime distribution in the future, since both Sony and Toshiba are both headquartered in Japan. I would also like to know how you believe the war will affect the anime DVDs already released (I believe that the their prices will drop like a stone, but I could be wrong).

Answer:
I have to admit that I really don’t know a lot about the technical aspects of the forthcoming new DVD formats, so I have to be very tentative when predicting their impact on the anime industry. My response may be useful for stimulating discussion, but it’s merely speculation, certainly not a firm prediction.

As of this writing, the future of the two new DVD standards is uncertain. For a time it seemed as though the HD format might concede to Blu-Ray, but now it seems as though there may be two competing standards released next year. Historically the market has never supported two similar competing commercial media formats. The 8-track was superseded by the cassette tape. Beta video cassettes were rendered extinct by the VHS format. The short lived video disc was replaced by laserdisc, which was replaced by DVD. Especially in Japan, I think that Sony’s Blu-Ray technology has an insurmountable advantage over the HD format- the Playstation 3. The Playstation game console overwhelmingly dominates the Japanese video game console market, and it serves as a DVD player for many Japanese households. The fact that the PS3 will support the Blu-Ray format is guaranteed to give Blu-Ray an automatically Japanese user base of millions of consumers while the HD format will have to start from zero and try to catch up. If millions of Japanese consumers will buy a machine that plays Blu Ray DVDs as soon as the Playstation 3 is released, I must assume that the majority of those consumers will also buy Blu-Ray video discs instead of buying a PS3 and a new DVD player to support HD DVDs.

Among technophiles there’s an eager anticipation for the tremendous data storage potential of both new DVD formats. But I don’t foresee that concern extending beyond computer otaku. The fact that a single layer Blu-Ray DVD can hold 25 gigs of data doesn’t mean that the anime or entertainment industries will actually use that much storage space. Current DVDs don’t always use the full amount of storage space available on discs, and furthermore, actually using the full potential of next generation DVD discs may not be cost effective or profitable. Right now commercial dual layer DVDs usually consume only 6-7 gigs out of an 8.5 gig dual layer disc. Japanese promotional anime DVDs like the Fate/stay night Curtain Raiser DVD that sells for roughly $21 in Japan uses up less than an 8th of the space available on a single layer DVD. (It’s only 7 minutes long.) Since current generation commercial DVDs rarely use the full storage potential of DVD discs, there’s no reason to assume that next generation discs will be treated differently.

Furthermore, putting an excessive amount of content on a single disc may not be financially viable, especially in the Japanese market. Anime is expensive to produce, and most studios earn their profits from home video sales rather than initial television broadcasts. Putting a majority of, or an entire series on a single disc limits the potential profit that series can earn. A single disc is not likely to sell as many total units as a multiple disc release. Especially releasing a single disc at a given price won’t generate as much profit as selling multiple discs at the same given price per disc. Why sell one DVD for $10 instead of selling three DVDs at $10 each? Or why sell one DVD at $20 when two DVDs at $15 each generates more sales revenue?

I don’t think that the new DVD format or formats will have the effect on the cost of anime that you may suspect. The retail price of existing catalog DVDs may drop as their sales dwindle because forward looking consumers are buying Blu-Ray and/or HD discs instead of standard DVDs, but the cost of new anime is unlikely to decrease. Anime isn’t expensive because of the media its released on. Anime is expensive because its market is relatively small, so each purchase has to generate a lot of profit. A mainstream Hollywood DVD can debut in America at $15 because it will sell a million copies. A blockbuster American anime DVD will be lucky to sell one tenth of that figure. Since anime can’t generate big profits from sheer number of sales, it must generate more profit from fewer sales by increasing its retail price. In the era of high definition DVDs, the expense of making, promoting, and distributing anime won’t change, so the retail price of anime is unlikely to change either. Outdated standard format DVDs may get dumped cheap as distributors transition to the new DVD format, but I expect the anime industry’s retail practices to continue relatively unchanged in the era of high definition DVDs. I’m sure that the new high definition DVD standards will have some impact on the American and Japanese anime industries, but not a big impact. Unlike the entire format evolution from VHS to DVD and the revolutions that progress made, the Blu-Ray and HD DVD formats are just a slight technical advance, not a revolution.