May 14, 2015

Anime's streaming solution


In Japan, physical media still rules the market. Resale price maintenance rules notwithstanding, paperback books cost about the same as in the U.S. and are better made. The page-turning part of the market remains highly competitive.

But physical electronic media? Here we find the kind of cartel that would make a Robber Baron proud. As a result, expect to pay two to three times or more in Japan for CDs, DVDs and Blu-ray discs.

CDs still account for 85 percent of album sales in Japan. As Monty Python would put it: Not dead yet! Clay Christensen be damned, the market will not be disrupted!

DRM-free MP3s are scarce on Amazon-Japan. But the times are a-changing, with entertainment behemoths like Sony gravitating to the walled garden of iTunes and its own proprietary formats. The Kindle is gaining ground with DRM ebooks that support right-to-left Unicode text.

The anime business is unique among IP exports in that it has a relatively large market in the U.S. Almost all anime DVDs sold in the U.S. preserve the original Japanese audio track (Appleseed: Alpha didn't). This leads to fears of reimportation.

The U.S. and Japan share the same Blu-ray region code, and region-free DVD players are ubiquitous outside the U.S.

Like the pharmaceutical business in the U.S., high prices at home support low prices abroad. Japanese distributors have at times tried pricing titles the same as in Japan. Most of the time: "Mr. Supply, meet Mr. Demand, and some very pissed-off fans."

In the case of Puella Magi Madoka Magica, though, the Japanese studio and distributors have held firm. A DVD "complete collection" that would usually go for $30-$40 dollars on Amazon is instead priced at $150. The "special edition" is twice that.

They are husbanding their hundred-million dollar franchise as a scarce resource, spacing out the spin-offs (such as Puella Magi Tart Magica, featuring Joan of Arc) rather than saturating the market.

They're certainly losing foreign sales, but I doubt those add up to more than a handful of percentage points. If they can sustain interest in the franchise, they can mine gold for decades.

To compare within the magical girl genre: Magical Girl Lyrical Nanoha has so far produced three series, three theatrical releases, with a fourth series in the works. Pretty Cure has racked up twelve series and eleven theatrical releases.

But then why is Madoka Magica available on Yahoo View and Crunchyroll for free? Because streaming really does change everything, without causing undue harm to the "traditional" economic model in the home market.

The other variable in this equation is HDTV. HDTV means that pirates can record a perfect version of a program off-the-air. But they still have to subtitle it and move it onto download sites (and not get nabbed by the DMCA in the process).

By creating a subtitled version in-house and simulcasting it to U.S. distributors, Japanese animation studios get a jump on the pirates and collect licensing fees and ad dollars to boot. Justin Sevakis sums up the effects on piracy in only a few years:

It used to be that fans who wanted to keep up with the current shows on Japanese TV were utterly dependent on fansubs, but thanks to legitimate streaming, most fans don't bother with torrents anymore. Pirate traffic is way, way down.

Regional restrictions are easier with streaming, including locking out anonymous proxies. And capturing (lower-resolution) streaming video in real time is just too big of a pain for most people to bother with. But beware, IP owners, of restricting access just because it's easy:

Most downloaders, I'm guessing, live in countries where legal streams aren't yet available.

Granted, this is the new "long-tail" economy, with revenue not so much streaming in as accumulating in drips and drabs. Internet advertising remains a work in progress (the biggest beneficiary being Google). Low income, yes, but coupled with low costs and low risks.

Hulu and Crunchyroll also offer subscriptions (for set-top box access on Hulu; for set-top box, simulcast, HD, and commercial-free access on Crunchyroll). Crunchyroll reportedly has 400,000 paid subscribers, the kind of numbers that can generate "real money."

"Most of which goes right back to the industry," says Crunchyroll CEO Kun Gao. And that industry is gearing up for more, what with Netflix's entry into the Japanese market and SoftBank's purchase of DramaFever (a distributor of international streaming content).

Streaming works for the same reason book publishers are now keeping an iron grip on their still-producing back-lists. Over the entire span of the copyright, a mid-list book that brings in, say, a mere $1000 a year in ebook royalties will rake in more of that "real money."

Which is a good reason for writers to hold on tight to those rights instead. Because nothing goes out of print anymore. As Mark Coker analogizes it, "the income stream from a [self-published] ebook is akin to an annuity, and specifically a variable annuity."

Thanks to the scalability and efficiency of online retailing, the digital bits and bytes that comprise your ebook can happily occupy an online retailer's shelf forever if you let it. Your book is immortal. You always have another day to find your next readers. You harvest your income over time as the book sells.

That may well soon become true of all published media, if it isn't already.

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