Ask John: What’s John’s Opinion of Bandai Visual USA’s Marketing Strategy?

Question:
I want to know what your opinion is on Bandai Visual USA’s marketing strategy. With their recent announcement of titles like Galaxy Angel Rune priced at a $49.99 MSRP and the Freedom OVA priced at $39.99 MSRP for only 1 episode per volume, all with no english dub, it’s clear that they are attempting to release anime in R1 with the pricing and episode counts of a Japanese, R2 release. What do you think of this marketing strategy? In general, do you think that over time the R1 market will come to resemble the R2 anime market? Or maybe the other way around?

Answer:
Judging by reaction I’ve seen from America’s fan community on various message boards, virtually everyone has an opinion on Bandai Visual’s domestic distribution strategy, and virtually everyone disapproves. My personal reaction to Bandai Visual’s marketing strategy is a bit mixed. I’m rather stunned by Bandai Visual’s (henceforth “BV”) strategy and plans, but not entirely surprised. It’s actually your second question, the one about the future of the domestic anime market, that I find more discussion worthy.

In 2005 Toei Animation attempted to distribute its anime titles in America itself. The attempt failed because Toei clearly made no attempt to design its products around the established and successful American industry standard. American consumers refused to purchase Toei’s releases because the DVDs didn’t fall within the bounds of expectation. Toei didn’t consider the expectations and demands of American consumers, and failed as a result. Bandai Visual has, thus far, displayed slightly more consideration of and for the domestic market, but probably not as much as necessary. The planned domestic releases of Wings of Rean, Gunbuster 2, and Galaxy Angelrune are priced significantly higher and contain less content than American industry standard. Furthermore, BV plans to release the first Galaxy Angelrune DVD containing just one episode despite AD Vision having already proven with its release of Gantz that Japanese style series DVD releases with low episode counts do not sell well in America, even if they’re proportionately less expensive.

Bandai Visual has revealed that its policy of not dubbing its releases is an admirable decision to respect the cultural and artistic integrity of Japanese animation. But BV has also revealed that its pricing structure is likewise motivated by a desire to give American consumers an authentic Japanese anime collecting experience. The concept of trying to apply Japanese marketing strategy in America makes no sense because America’s market conditions are totally different from Japan’s. The American releases of Gunbuster 2, Wings of Rean, and Galaxy Angelrune are not identical to the Japanese releases, meaning that BV isn’t actually providing Americans with an exact re-creation of Japan’s anime market. Rather, BV’s strategy appears, to me, to be another example of a Japanese company trying to cut out the middle-man by taking its product straight to American consumers without first researching American market demands and conditions. I can’t imagine that BV could have a clear and accurate perception of the American anime market and still make the decisions that it’s made. Apart from low episode counts and high prices, both of which will drive away American customers, BV seems to be concentrating on marketing its current prime Japanese properties instead of analyzing which titles have significant domestic market potential. Kikoushi Enma is a good title with minimal American market potential because it’s virtually unknown to American fans and consumers. Wings of Rean and Galaxy Angelrune are mediocre properties, at best, which American consumers have no interest in purchasing. Virtually everything about BV’s distribution strategy and recent announcements imply an effort in Japan to promote current Japanese Bandai Visual titles with little or no examination or consideration of American market conditions.

The release strategy for Freedom, Wings of Honneamise, and BV’s pricing strategy and episode distribution do not reflect the typical current and traditional American anime industry, but I do wonder if these characteristics are merely an aberration from a unaware company, or the first signs of a potential change in American trends. The popularity of anime may be increasing in America, but I see no signs that the American anime DVD market is growing. On the contrary, the amount of anime released on American DVD, and the number of American anime distributors are both drastically decreasing. The number of anime DVDs released in 2007 is nearly half of what it was during the same time period just two years ago. Distributors including CPM, Urban Vision, Synch Point, Pathfinder, and Discotek have entirely ceased releasing new anime titles. If fewer Americans are buying anime DVDs and distributors are earning less income from DVD releases, the answer to their survival may be raising DVD prices to earn more from a lesser number of sales. It’s revealing that Right Stuf International, one of America’s largest anime specialty retailers, has inadvertently revealed a telling statistic. As of this writing, Right Stuf has sold just over 500 copies of the 1,000 Melancholy of Haruhi Suzumiya DVD volume 1 limited edition sets it originally offered for sale. Haruhi Suzumiya is widely considered one of the most eagerly anticipated domestic DVD releases of the year, yet even at a heavily discounted price, one of America’s biggest retailers has only roughly 500 reservations. Naturally, additional copies will sell upon release, and bigger mainstream retailers may sell a greater number of copies, but even exponentially multiplying this initial figure does not total a particularly impressive number of units sold. When one of the year’s hottest titles pre-sells only 500 copies, even at a heavily discounted price, from one of America’s biggest anime specialty stores – I think that’s a sign that anime DVD sales are weak in America right now.

The domestic release of HD discs like Freedom and Wings of Honneamise are likely to be simply Japanese discs in American packaging since Japan and America share a common territory for HD and Blu-ray media. Considering that Japan is home to anime and anime distribution, and Japan remains a much larger market for anime than America, it’s logical to assume that domestic HD and Blu-ray releases will adhere to Japanese pricing structure. I’m not predicting that American anime DVDs will drastically increase in cost in the foreseeable future. At the present time, I don’t see any sign of Japan’s home video industry drastically lowering its prices to typical American levels; however, now that BV has opened the door to expensive domestic DVDs, I think that America’s most progressive distributors may be forced to examine the viability of raising prices. If domestic DVD sales are going to be small anyway, they may as well earn as much from each sale as possible. The domestic anime distribution industry is currently on a downward plunge. There may be only two ways to reverse that trend: convince American consumers to begin purchasing significantly more anime, or raise prices to generate a passable level of profit from fewer sales. If domestic sales are decreasing, there’s no way that domestic licensors can indefinitely continue releasing cheaper and cheaper DVDs and still earn enough profit to stay in business.