Ask John: Why is Anime Licensing So Expensive?

Question:
Why is it so expensive to license anime for American release? Many anime do not get licensed because it would be too expensive. Shouldn’t the Japanese license holders be lowering prices? Isn’t less money better than no money?

Answer:
Seemingly logically earning some profit from international distribution is preferable to not earning any profit from international distribution, but American fans may overlook the fact that matters are not quite so simple. Japanese producers and license owners don’t want to under value their properties. And potential profits have to be weighed against intangible expenses. International fans may assume that Japanese licensors are eager to see their anime titles distributed worldwide, but in reality there are priorities worth more than exposure and potential small profits.

Anime productions may cost much less to make than conventional American animation, but even so, anime productions still cost millions to make. Japanese license holders don’t want to invest millions into an anime production, then sell distribution rights for a pittance. Doing so undermines the perceived value of the property, and may have an impact on future licensing negotiations. Furthermore, agreeing to international distribution obligates the Japanese licensor to supply production materials to the foreign licensor, and work with the foreign licensor. An original Japanese licensor may decide that the small profits generated by lowered licensing fees may not be worth the amount of time and commitment that will need to be invested into working with the foreign licensor. And having a title in international distribution acts as a representation of the Japanese licensor.

The obstinacy over refusing to lower licensing fees may have something to do with pride and principle. Even if foreign distribution may generate profits, Japanese licensors may not want to sell rights to a title for less than those rights are worth. And Japanese license owners determine the value of distribution rights based on the production cost of the anime, and its profitability in Japan. Americans may presume that the value of an anime distribution license should be based on its American market potential, but Japanese businesspeople don’t adopt that perspective. Japanese businesspeople approach licensing negotiations from a Japanese perspective. Americans may assume that a show with minimal American market potential should be cheap to license. There’s no sense in paying a lot to license a show that won’t sell well in America. But Japanese license owners look at the money they invested to produce the show, and the show’s popularity and profitability in Japan. Japanese licensors don’t want to accept a small amount for a title that’s very valuable in Japan. Furthermore, accepting a small amount, or lowering licensing fees may reduce profit to the point at which dealing with the title and the foreign licensor at all may be more burden than the deal is worth.

Several years ago AN Entertainment negotiated for American distribution rights to the Pita-Ten anime television series. The negotiations reached an impasse when the maximum licensing fee AN Entertainment was willing to pay did not reach the minimum licensing fee that the Japanese licensor was willing to accept. The Pita-Ten anime is still not licensed for American release, suggesting that other American distributors may have also decided that the show’s asking price was too high. Rather than lower its asking price below a predetermined minimum, the Japanese licensor simply decided not to deal with international distribution at all. Potential profits below expectations may have been too small for the Japanese licensor to deem worth dealing with.

In a different case, Toei Animation has refused to allow the fifth season of the Sailor Moon television series to ever be officially released in America. Money is not the point of conflict. Toei Animation doesn’t want to risk damage to the perception of its Sailor Moon brand in America. So despite the fact that allowing American distribution of the Sailor Stars series may generate additional profit, Toei would rather forgo the additional profit and avoid potential controversy that the Sailor Stars series may create in America. The intangible value of keeping Sailor Stars a Japanese exclusive is worth more to Toei than the series’ potential licensing fees and royalties.

Despite claims that America and the international market are becoming increasingly important primary audiences for anime, Japan remains, and always will be, the primary consumer market for anime. Most anime series recover their expenses or become profitable within the Japanese market alone. So, in many cases, international distribution is an optional luxury rather than an essential necessity, leaving Japanese licensors the option to decide that if their demands aren’t met, they’ll just sacrifice the extra profits in return for avoiding the hassles associated with licensing shows for international release.