Ask John: Will There Be Consolidation in America’s Anime Industry?

Question:
You’ve stated repeatedly that anime is a niche industry, and many anime distributors are struggling. I have little trouble believing this. But at the same time, I recently read in Fortune magazine that anime and manga sales have been increasing steadily over the past few years. This has me wondering, with so many independent anime distributors around, and the industry in a slump despite rising sales, do you expect to see some consolidation in the anime business? It seems to me that the industry and us anime fans would be in better shape if some of the distributors combined forces. Perhaps if it’s not something being considered by the various anime companies, it should be. Better to have a couple strong companies, then several smaller and struggling companies.

Answer:
Ironically although sales of anime DVDs may be increasing, the profit generated from those sales is decreasing because the retail price of anime DVDs is decreasing, but the cost of licensing and localizing anime is increasing. In light of the American industry facing lean income and retailers cutting back on anime purchasing, including significant lay-offs at Central Park Media, Target stores no longer carrying anime, and the Music Land corporation declaring bankruptcy, it would seem logical for some of America’s distributors to consolidate. In fact, the distribution agreement between AD Vision, FUNimation, and Geneon announced in 2004, the Bandai/Manga Entertainment partnered distribution of Ghost in the Shell: Stand Alone Complex, and FUNimation’s distribution of TOKYOPOP DVDs may be interpreted as early examples of industry consolidation. However, I don’t expect to see wholesale mergers within America’s anime industry for two reasons. Many of America’s anime distributors are owned by competing parent companies, and several of America’s anime distributors are privately owned companies which are largely defined by that status.

Viz Media is a subsidiary of Japanese publishers Shogakukkan and Shueisha. Geneon, and Bandai Entertainment and Bandai Visual are subsidiaries of Japan’s Dentsu and Bandai/Namco, respectively. Synch Point is a subsidiary of Japan’s Broccoli company. Super Techno Arts is the American branch of Japan’s Studio A.P.P.P. Manga Entertainment is owned by IDT Entertainment. FUNimation is owned by Navarre Corporation. Mergers between major corporations like these or their subsidiaries is no small or common event. Many of these companies are direct competitors with each other, which makes them agreeing to work together somewhat unlikely.

American distributors including AD Vision, AN Entertainment, AnimEigo, Central Park Media, Media Blasters, and Right Stuf International are privately owned companies. Their independence gives them greater flexibility to make partnerships and mergers. But their independence is also one of their defining characteristics. These companies are run by private individuals who love their work and want to be in the anime distribution industry. We’ve already seen privately owned American distributors Studio Ironcat and apparently Anime Crash close their doors. I think that a similar attitude applies to many of America’s private distributors. It may be a sense of pride and independence that causes these companies to close before selling or merging.

Logically it would be wiser to merge struggling companies or to see bigger distributors buy out weaker licensors in order to ensure the continuance of an American distribution industry. But, for better or worse, ideal logic doesn’t always seem to apply to America’s anime industry. If America’s industry thought about long term stability instead of short term profits, certain American distributors wouldn’t have flooded the American market with multiple, increasingly heavily discounted DVD releases that have devalued American anime DVDs. And certain distributors probably wouldn’t have licensed and released anime indiscriminately just to literally flood the market and build a giant catalog at the expense of market stability and solid investing. I have no doubts that an American anime industry will continue to exist as long as there are American anime fans, but I don’t foresee America’s established distributors merging or absorbing each other. While I won’t discount the possibility of industry shake out, I anticipate that the established, veteran American distributors will simply tighten their belts and press forward.