Ask John: If John Had a Time Machine…

Question:
If you had a time machine set to 2000 and could use it to address all the heads of the anime distribution industry in America then what advice would you give them to prepare for the upcoming anime crash?

Answer:
The phrasing of the question suggests that the 2008 domestic anime industry contraction was inevitable and if I had an opportunity to do so, I could advise domestic industry executives how to best weather the storm and recover during the aftermath. My perspective, however, is a bit different because I don’t believe that the 2008 market crash was entirely predicated on uncontrollable outside influences. Rather, I believe that the largest contributor to the near collapse of America’s anime distribution industry in 2008 was the domestic industry itself.

If I somehow had the limited ability to travel back in time to 2000, roughly the beginning of the American anime boom, my singular vital word of advice for the studios of the time would be, “Consider long-term sustainability over short-term advantage.” Particularly during the mid-2000s domestic distributors were competing with each other to acquire the largest catalog of titles possible. Granted, part of the desire for a large stable of titles was motivated by a need to establish a market presence. Particularly at the time big box retailers such as Best Buy, Walmart, Target, and Circuit City wouldn’t stock DVD releases from small, independent distributors. So having a large catalog increased a distributor’s ability to get DVDs onto mainstream retailer store shelves. But just licensing every title available wasn’t a death knell for the industry.

Numerous smaller distributors attempted to jump on the anime licensing bandwagon with various titles and varying degrees of success. Artsmagic released Salaryman Kintaro; Hirameki released Soar High! Isami; Pathfinder released Tristia of the Deep Blue Sea; Image released Psychic Force and Hyper Police; Anime Who released Joe vs. Joe; RJP-Pro licensed but never released Tenbatsu Angel Rabbie. Some of these titles simply never had any degree of American commercial potential at all. But even bringing a tremendous number of anime titles to America didn’t singularly crush America’s anime industry.

During the early 2000s the frenetic race to acquire titles, and the multitude of American companies bidding on licenses, encouraged Japanese licensors to seek greater and greater amounts for distribution rights. For example, Manga Entertainment was rumored to have paid a million dollars for the rights to release the three original Evangelion movies in America. AN Entertainment rejected the option to license the Pita-ten television series at $10,000 per episode. The 26-episode show has so little American commercial potential that it’s never been licensed for American release. At over a quarter-million-dollars just for the acquisition rights, before accounting for translation, dubbing, mastering, replication, advertising, and distribution costs, the show could never have been profitable in America. But even high licensing costs didn’t demolish America’s anime industry. American distributors had the ability to negotiate costs and reject licensing deals that were unreasonable or untenable.

In my own recollection and perspective, the biggest contributing factor to the 2008 industry crash was American distributors cannibalizing their own sales potential. Domestic distributors were so obsessed with immediate profit and boosting market penetration and saturation that they focused entirely on immediate effects while ignoring long-term effects. In 2006 a single anime title on DVD could have received as many as four releases at different prices within a two-year span, all from the same distributor. Practically as soon as the initial limited and regular editions were released, the entire series was re-released at a discounted collection price. Then as soon as sales of that complete set began to wane, the complete set was released again at a further discounted price. In some cases, the set was then re-released a third time at a further discounted price. The American entertainment industry’s effort to market retail DVD, combined with the burgeoning HD versus Blu-ray format war, caused consumer exhaustion. Compounding an increasing disinclination among consumers to collect DVDs, America’s anime industry practically trained consumers to boycott initial releases. Consumers quickly learned that if they waited just a few extra months, they could purchase the same anime series from the same distributor at half the cost. In the early 2000s, 2004-2006, I repeatedly pointed out to my own employer and co-workers that the anime DVD distribution industry in Japan very rarely released discount priced re-releases. On the contrary, the domestic industry released as many discounted re-releases as it could. The selection and variety of anime titles released in America didn’t swamp the industry; the sheer number of discs and the tendency to keep undercutting price until anime was practically worthless in the eyes of American consumers is what destroyed the American anime boom.

In the early 2000s a sales representative for a particular influential domestic anime distributor said, privately, that his company’s business strategy was to see exactly where the market saturation point was. In other words, the distributor’s goal was to find out how many DVDs they could push onto the market before their effort began to adversely affect sales. Except, by the time the flood of DVDs became counterproductive, the receding flood of consumer interest was unstoppable because other distributors had also been flooding the market and contributing to consumer ennui. Furthermore, Geneon executives have gone on record admitting that they were so focused on satisfying the irrational whims of their Japanese parent office that they repeatedly invested massive amounts of money and effort into projects that had little or no chance of financial success in America. Once again, the American industry saw only the present, and not the impacts that their actions would have on their future sustainability.

If I could go back in time and give advice to the domestic anime industry, I would warn the industry to avoid devaluing its own product. All the “Complete Collections,” “Anime Essentials,” “Essential Anime Collection,” “Anime Legends,” “Viridian Collection,” and so forth discounted re-releases generated increased sales but also encouraged consumers to stop buying new releases and wait for the cheapest re-release. When domestic distributors adopted the mindset that they were just selling a product for whatever amount they could get, instead of thinking that they were selling a creative art that had an intrinsic value, anime became worthless in America and the distribution industry suddenly became unsustainable. The domestic distributors that successfully emerged from the 2008 market crash have learned this valuable lesson. Discotek doesn’t issue discount re-releases. Viz and Media Blasters now rarely market discounted re-releases. Funimation now releases fewer discounted re-releases than it used to and now spaces them out further apart than it used to. Sentai, unlike AD Vision, does not produce limited edition releases and does not issue multiple discounted re-releases anymore.