Sunday, January 11, 2009

Perhaps Sales Are Down So Much at Retailers Like Best Buy Because...

Best Buy, like so many other B&M retailers, reported dismal December sales numbers Friday, with same stores sales down 6.5%. I mentioned in Friday's e-newsletter that any R1 Anime studio relying heavy on Best Buy for their sales volume (cough - ADV - cough) is going to be finding themselves in a tenuous situation going forward, but that's a discussion for another post. Perhaps I should say it like this 'If you are an Anime studio and the majority of your revenue stream is coming from Best Buy and not independent dealers, then you already have one foot in the grave...'

The only industry that seems to be doing very well right now is the gun business. In the post presidential election period, I begin to wonder just how much money has been funneled from casual spending on things like consumer electronics and cars into people buying (for whatever reasons) firearms and ammunition. While it's being grossly under reported in the MSM, the fact is that over the last 60 days guns sales have gone up exponentially. In fact SO MANY guns are apparently being sold, that the ATF recently put out this bulletin informing dealers that they are running out of form 4473, which is the form you have to fill out every time you purchase a weapon from a licensed gun dealer. The ATF authorized, for the first time in my memory, that they will now allow dealers to use photo copies of the form. It's seems that people are forgoing flat screen TV purchases to get a couple extra FN-FAL's, a SIG 556, another Romanian SAR2, maybe that pre-ban HK94 they always wanted, or that Mossburg 'Roadblocker' that you were thinking of buying but could never pony up the scratch until it became a priority.

As I travel in gun circles a little bit (hey, I read Xavier's blog), I can report that the experience of visiting any of the local Gun stores in the Winchester VA or Martinsburg WV area in November and December was akin to getting into a life boat during the sinking of the Titanic. Stores were mobbed, and inventory of guns and ammo were mostly sold out. I was told one major manufacturer of AR type rifles has booked a 2 year backlog in just two months. Ammunition is being bought up in record levels as well, and surplus stocks have vanished from all of the major Internet ammo dealers. Prices are going up very fast as well as people make 5 or 10 years worth of gun and ammunition purchases in a period of 60-90 days. And these purchases are not cheap either, with people happily laying out two or three grand to get their hands on whatever is available to take home today. Here's a good example - try finding a Barrett M82 in stock anywhere - and they sell for $9,000 each and are severely back ordered - also the ammo which sells for $4 bucks a round is also sold out just about everywhere unless you are willing to pay a handsome premium. Gun industry retailers, of course, have capitalized on this by fanning the flames whenever possible. Just look at the blurb (highlighted in Yellow) posted on the front page of the popular gun accessory store Cheaper Than Dirt.

It sorta reminds me of how the Anime business was in 2004. -_^ Ahhh, nostalgia...

Anyway, since the gun industry is made up mostly of small independent dealers and privately held distributors and manufacturers (much like the Anime industry) it's really hard to estimate what sort of dollars are being diverted to the gun industry right now, but my guess would be that it's a lot more than most people think. And it would be interesting to speculate on how much of the sales declines that regular stores saw in November and December could be attributed to this.

Even in this terrible economy, people are spending copious amounts of money on something, and this is what it is. I wonder why this is being so under reported by the MSM? Perhaps it's not exactly in line with the message they are looking to get across?

UPDATE: Now that we've had regime change, the MSM is finally starting to report on this. I'm seeing more and more stories about it, and even Katie Couric's getting in on the action.

34 comments:

navin75 said...

Do you know why best buy not stocking bandai entertainments dvds?The reason that I ask is because went to best the buy website type in their upcoming bandai dvds and all of them say not availbe for store pickup !
Also can you for see day that bestbuy gets rid of their anime section

Robert said...

Actually I do. I see the Anime market here in the US shrinking back down to 2001-2002 levels over the next couple of years, and huge chains like Best Buy will always drop product lines that don't meet their high volume sales expectations. The Anime sections in the two Best Buys in our area have been steadily shrinking all year. Best Buy doesn’t give a damn about Anime , the only thing they care about is unit sales. If Anime stops bringing their target demographic, they’ll find something else that does.

I honestly think it would be better for the Anime industry to stop focusing in bulk sales and start focusing more on quality titles delivered quickly. Studios really lost their way back in 2003-2004 when they started to focus on mass market sales, and stopped listening to the fans. Hell, they hardly listen to us anymore. Viz is making a huge mistake contracting with Warner for their HV products starting in April. Warner will relegate Viz to the garbage bin as soon as the first license comes along that doesn’t sell as well as Naruto or Bleach. I’ve seen it happen so many times before, but the enticement of mass market sales seems to seduce these studio execs every time. You can see it in how they hire these high power sales managers who want to do nothing but stuff product into the channel. They never call us anymore to see what our customers think of a title, they only call us to find out how many units we are planning to buy if that title. Then we watch how reactionary and desperate they become when sales volumes drop even a little for a particular title. Some are guiltier of this than others. Some retailers are equally guilty in that regards...

ザイツェヴ said...

I'm in line for SU-16CA myself. Stupid Obama, so much hate. Why did he have to get himself elected when I got around to buying?

Robert said...

I'm in line for SU-16CA myself.

One of the nicer 'CA Legal' packages I've seen, :-) and at a reasonable price. That RFB they make (and in 7.62 even!) is an interesting FN-F2000 alternative. I just don't like they way it spits the spent brass out the front - looks a little strange... -_^ OK, I better stop...

William said...

Back when I was working in the American manga field, there was a period when the smaller companies felt the best way to expand sales was by going newsstand.
Every single company that did it went out of business, every one.
They were suckered, because the newsstand distributors would ask for 100,000 copies, and the publishers (selling maybe 15,00 via direct sales) would go nuts with delight. So they'd print and ship 100k for nine months, until the newsstand distributors send back the accounting:
Shipped: 900,000.
Sold: 90,000.
Returned: 810,000.
Amount you owe us from our advance that you already used to pay the printing bills: $BigBux.
And you couldn't even sell the returns, because you didn't actually get returns. Retailers ripped off the covers and sent those back to the distributors to be counted, then they were discarded.
Comico was wiped out in less than a year by trying to go newsstand.
Me, I kept the heck away from it...and stayed in business, plugging along, making a small profit.
Small beats none.
And as you say, quality titles delivered fast and as cheaply as possible will be the survival mode for the foreseeable future, as tough as that will be for everyone. Dubbing will probably need to be dumped on all but the titles with TV exposure. Hardcoded subs will probably be necessary to get decent titles at acceptable licensing rates (so that the cheaper R1 releases will be less attractive to Japanese fans).
A tough job ahead for the R1 studios, that's for sure. Especially since, with the drop in sales, R1 licensing is hardly worth it to the Japanese companies.
Interesting times, indeed.

Robert said...

Back when I was working in the American manga field, there was a period when the smaller companies felt the best way to expand sales was by going newsstand...

A great example, and some really excellent feedback William. I'd like to see more of that here.

Companies have to be innovative about how they get their product to market, but in our business they so often make moves that are so clearly (perhaps I should intuitively) folly you just have to shake your head. We’ve always taken a ‘steady as she goes’ approach with the Anime Corner, and while we may have missed some supposedly ‘big opportunities’ we’re still here where so many others have come and gone. Back in 2000 I remember when the folks at Anime Depot (the original one) decided that they were going to spend the bulk of their newly minted IPO money on a partnership promoting Anime with the WWF (WWE now?). Sy Picon was obsessed with the overlap between DBZ fans and Wrestling fans. On paper I suppose the fan demographic ‘looked’ similar, but the ill conceived deal burned up a couple Million dollars in marketing capital yielding no results, and sunk the company. They went under in January 2001.

After the Music Land bankruptcy blew up in the face of the R1 Anime industry three years ago, you would think they had learned a hard lesson about the mass market, but the patterns of bad decisions continue. They should have done everything possible over time to reduce credit and market exposure to the big box retailers like Sun Coast and Best Buy, and gotten back to the roots of the Anime biz focusing on the core Anime market and building up the directs. As an ironic twist, Trans World, who purchased Sun Coast from Music land (and also owns FYE and half a dozen other big name chains), is in dire straights and Morningstar expects them to go bankrupt, which I think could chop another 20% out of the R1 mass market (and probably do at least one more US Anime studio).

I do sometimes have the thought that perhaps the R1 Anime industry simply doesn’t attract the smart and savvy management types that seem to be ready available in other venues. Sometimes it seems like in our business, for every gem like Gen Fukanaga, we also get five Ken Lay’s.

Will said...

One of the more frustrating third-hand stories I've heard is that of self-proclaimed Obama voters clogging the lines at gun stores to get in before the poop hits the paddles.

I picked up the Browning Buckmark that's been on my list on Nov 2. The last time I visited that dealer a week ago, their handgun wall and evil-black-gun shelf were empty.

At this point I have all the firearms I should need for World War Z. I'm just looking for ammo. I hate it, but I may have to suck it up and grab some corrosive mil-surp.

Robert said...

One of the more frustrating third-hand stories I've heard is that of self-proclaimed Obama voters clogging the lines at gun stores to get in before the poop hits the paddles.

Oh, the irony!

I picked up the Browning Buckmark that's been on my list on Nov 2. The last time I visited that dealer a week ago, their handgun wall and evil-black-gun shelf were empty.

I have (and love) a very similar Ruger MkIII Hunter. I remember when you could pickup those 500rd bricks of 22lr at Walmart for around $11-$12. I think those packs are like $20-$22 now.

The so called 'evil black guns' just worry the bureaucrats to death... my local dealers' AR wall has been empty since mid-Nov. He says he can't get restocks from any manufacturer for 2 or 3 months - Colt, Stag, Rock River, no one.

Good surplus ammo is becoming a real tough find. I ordered a can of surplus German 7.62x51 from Sportsmans Guide early December (it's was the nice steel jacket stuff) but when it came in a month later it turned out to be pretty low quality. 80's era stuff with lots of rust/corrosion, so I sent it back. It wasn't cheap either. Even plinking ammo for my M1A National Match is running 50 cents a round right now. I keep hearing about how they want to attack the gun community from a different angle this time by taxing ammo, just like they do with cigarettes now. I just hope the day doesn't come when 50 cents a round looks really cheap in the rear view mirror.

Steve said...

I'm building two AR's now, one a "high-end" mid-length AR with a LaRue railed handguard and pretty much every Magpul accessory (Magpul is the Apple of the gun world!) that's available, plus Aimpoint optics.

This is sucking up 2k of my money. It'll totally be worth it, though.

The other is a lightweight build based on a CavArms lower, a very KISS rifle (no rails, A2 sights, etc). That's around $700.

Both lowers (the "firearm" by ATF regs) are already in my possession, otherwise I'd be really screwed right now. I'm SO glad I went into a gunshop and put money down on that RRA stripped lower in 11/04/08 at 12 noon! I've had the Cav lower for months.

The uppers were ordered back in December and should be arriving sometime in MAY.

Good thing I already have three other AR-series rifles to play with in the meantime, that I've owned for years.

One thing about this mad rush: if the Messiah doesn't act on gun control (and I've been hearing credible rumors that his administration is looking for payback against gun owners and the NRA), then I fully expect to see gunshop shelves packed with consigned and "sold at a major loss", all manner of black rifles, and hi-cap handguns.

All still unfired, too.

If Obama does act on major gun control legislation, then he'll get hammered in the 2010 off-season election just like Clinton did in 1994.

He would be a fool to do so, but considering all the controversy he's had to deal with even before his presidency, who knows?

The guy is a real wildcard.

But don't blame me...I voted for Palin. :)

Starcade, now from Leviathan said...

About the guns: Make no secret -- there are a lot of people preparing to shoot stuff up. Give you one example: California's controller has threatened to suspend most state payments Feb. 1 if there's no closing of a $42B budget gap for this and next year. Rioting can easily be forecast.

Vis-a-vis anime: Said it before, say it again: DVD anime is dead, and, with it, at least the North American anime industry and much of Japan as well. Gone. The fansubbers and downloaders did the brunt of the grunt work -- the economy just disintegrated the corpse.

Now, there's word that Best Buy has completely abandoned onsite anime sales (all anime sales, by the Fall, will be done online)...

Places like this will be about the only places to sell anime sooner than later.

Robert: You're presuming, frankly, that there's much of an anime industry left to begin with. Viz doesn't care about anything other than its manga titles and its NarutoBleachcrap.

Funimation is about this close to it's parent collapsing -- can't think this decision by Best Buy is going to help matters.

And Bandai can't seem to give a damn about making a product that actually works -- they have to cut so many corners that people are getting sick of the replicator crap. (This was one reason given that some BB's may already be ceasing carrying Bandai stuff.)

William: The only reason R1 survived at all was because the Japanese needed the American money to survive. Now, they've got two choices: Go bankrupt, or find a buyer like Gonzo and Shin-Chan's studio did. Most will end up the former route.

Starcade, now from Leviathan said...

One of the more frustrating third-hand stories I've heard is that of self-proclaimed Obama voters clogging the lines at gun stores to get in before the poop hits the paddles.

I've been telling my roommate (who was never sold on Obama, but didn't vote for McCain neither) that either Obama finds a quick fix, or it's all over and very damned quickly.

Given developments in California, he might have about six weeks. Tops.

Robert said...

Good thing I already have three other AR-series rifles to play with in the meantime, that I've owned for years.

I have one AR platform, a RRA entry gun, mid-length. Even though RR does not incorporate the M4 feed ramps and the carrier is not properly key staked, the fit and finish is excellent and I have found it 100%. One of the best AR platforms on the market for the price IMHO. I built it with a Wilson CM heavy barrel with a chome lined chamber. The 1:9 twist shoots anything I feed it well, though I don't use anything heavier than 62gr rounds. I love RRA's two stage trigger. I also added a short fixed ACE aluminum tube stock - you know, for close in work. :-)

One thing about this mad rush: if the Messiah doesn't act on gun control (and I've been hearing credible rumors that his administration is looking for payback against gun owners and the NRA), then I fully expect to see gunshop shelves packed with consigned and "sold at a major loss", all manner of black rifles, and hi-cap handguns.

Gun shops risking heavy advanced orders of Black Guns and similar type weapons are probably making about as sound as investment as possible. If I was a betting man, I think the smart money has to go at least a reinstatement of the Clinton era restrictions within a year, possible sooner I also think their will be caveats. I would guess that they will:

1) reclassify .50's and other heavy weapons as destructive devices and require ownership on a form 4 with the $200 tax and extra registration requirements. You may not be have to automatically title weapons you already own, but you would not be able to legally transfer them except through a class 3 dealer.

2) Ammo at all levels will likely be taxed, which will become a device to control consumption (like the cigarette tax), with some types being taxed more heavily than others.

3) the Clinton era 10 round magazine restrictions may be altered to 9 rounds, thus bringing all the 'modified' Clinton era weapons under the new regulations, whatever they may be.

4) they may changes the rules for NFA form 1 and 4 items from a one time tax, to an annual tax, making ownership of these weapons even more expensive.

All just speculation of course. I can think of a thousand ‘could be’ scenarios.

The thing is with people focused on the economy, and all the bailout legislation likely to be passed over the next few months, it will be easier for gun control clauses to be added to these pieces of legislation. We'll probably see lots of rider amendments passed under highly cosmetic titles like 'the Nation Law Enforcement Protection Act' or even something like the 'Nation Child Protection, Health, and Welfare Act' where the gun legislation will be put in right next to enhancements in the nation school lunch program. :-)

Robert said...

Now, there's word that Best Buy has completely abandoned onsite anime sales (all anime sales, by the Fall, will be done online)...

Those rumors are much of what has inspired my comments.

Places like this will be about the only places to sell anime sooner than later.

We’ve been around long enough to remember a time when Anime was pretty much limited to niche retailers like us. While you would think it in our best interest that the hard copy Anime might ‘devolve’ back into only the niche market, it really would be terrible for us and the industry. What’s done cannot be undone, and the loss of 2 or 3 more major retailing channels would probably convince most of the remaining R1 studios (and their investors) to abandon the genre all together rather than downsize to where they were in the 'good old days'.

Robert: You're presuming, frankly, that there's much of an anime industry left to begin with. Viz doesn't care about anything other than its manga titles and its NarutoBleachcrap.

Granted, and I privately have few illusions about what Viz is doing, and why. There is the possibility that Hidemi Fukuhara woke up one day last fall and didn’t see any future in Anime DVD releases for them beyond their current licenses. I for one doubt that they supported the push to release Shippūden so quickly as a download title, think they got railroaded into it. It had a tremendous sales potential on DVD, but now with it being so pervasively released online, it's questionable if it will have a future as a hard copy release - thus, I think Hidemi has decided to divest their DVD operations. I cannot think of any other explanation, since it's clear to me the Warner deal will ultimately kill their DVD division.

Humberto said...

Nice to meet you, Robert. I'm Humberto Saabedra and I posted the original article from which you based your post on at AnimeNews.biz.

While I did post a retraction and correction after meetings with local management, I'm still convinced anime will not last much longer at Best Buy and it wouldn't surprise me if my initial report came to pass.

I originally stated a Fall timeline provided they were going to stage the removal to ease the strain of returns and delisting on the distributors, but with the worsening outlook on retail sales and the figures you posted, I only see an acceleration of the removal of anime from the chain, not a recovery.

No matter how much they shrink the sections to maximize whatever profit they can squeeze out of dead product.

Add channel stuffing the way Funimation is into the mix and you have a financial disaster on your hands not unlike the crash of '04.

I'm of the opinion that the anime industry needs to contract and focus on the few strengths they have while they can, provided they can find more people like Gen and less like the old ADV crew.

There are those that disagree with your opinions when airing your grievances about retailers, certain distributors, and other things, but they understand very little if anything about what you do to get us the shows we want to buy and what you deal with.

In closing, I'd like to state that I'd like to become an affiliate of yours so that I can offer more product for sale at better prices than Amazon.

Starcade, now from Leviathan said...

Robert: The hard-copy anime industry is dead.

Gone.

Kaput.

(Unless you want to talk hentai/yaoi, and that's completely a separate argument.)

Any future that anime has at all is digital distro -- the fans forced that hand by making the value of the animation abjectly zero.

Frankly, Japan should've abandoned the R1 industry altogether some time ago, because it became clear (to the tune of (by at least two sources) 6,000,000 episodes a week) that the fans didn't give two damns about _buying anime_.

What you have seen, especially the last 18 months, can be lain at the feet of an arrogant fanbase who believes in a no-holds-barred environment vis-a-vis anime -- and that's as true about the anime product itself and the conventions and a lot of other things as well.

What may be different between me and you is that I believe this has _already_ been done to the point of not being able to be undone. You may, of course, believe differently.

That's why I fear for the futures of the Vics and Lauras and Travises of the world -- who work so thanklessly during the week and give of themselves so tirelessly when they attend events.

And Re: Viz: It's clear that Viz didn't want to be in the anime industry to begin with. I'm trying to remember the last real involvement they had with the _industry_ that they didn't openly turn their nose up at. It's clear the DVD stuff is gone -- it's just a matter of time before it all is.

Starcade, now from Leviathan said...

Humberto: I've already received information from various fans in the field that the contraction is _already occurring_ -- that there are fans having trouble finding ANY new titles _now_ (even those of the caliber of Ouran v.2) in their local Best Buys.

At best (and you can confirm or deny this as you choose), I think someone wanted to shut this up not unlike the ADV/Sojitz debacle because of the impact it would have on the remaining anime stock at Best Buy.

Private Snowball said...

Hello;

As an anime and manga fan (and part of the fan base being talked about) I wanted to weigh in. As a kid I loved battle of the Planets and Speed Racer from about 1979 (at age 5) to watching Voltron and "Mazinger" on afternoon cartoon time after grade school days were over. Then I graduated in the Mid to late 80's waking up at 600am to watch Robotech on a local cable channel for months at a time. In 1988 I felt I hit the jackpot getting 5 VHS tapes recorded by a friend with all of the Robotech episodes on- replete with commercials! This stoked my fires for more and better material- to OWN as the VHS tape market went from a rental to a buying environment. I first bought anime on VHS tapes in 1992, after buying YES BUYING two VHS tapes of Bubblegum Crisis and Dominion Tank police from a local Comic store in Erie, PA for about $50/each if you can imagine that!

After that, I couldnt even find any nime to buy, but a local comic book store outside of Philadelphia PA had tons of fan sub bootlegs which you could "rent" for $3/ a week or something in the early 90's. Since there was no other source, I gladly rented this illegal bootlegs, and then copied them for myself and to pass onto friends. I then began to find Anime on VHS to buy in the mid 90's to late 90's as well as making my own fan copies.

When DVD became mainstream in about 1999, I began a slow SLOW process of getting all of my VHS store boughts and copies transferred to liscensed DVD copies. I made a master list of what I wanted, what I had and wanted to replace. From time to time I would add a new title that I would discover and BUY IT (Gantz, Black Lagoon etc.). And after about 10 years I have bought about 80 different anime movies, OVA's, and Complete Series of different anime's. I have about 9 titles yet to get right now, and I will add new ones as I see them in the online news or print magazines.

Ive never bought from Best Buy, but did buy some at Suncoast before it went out of business. Now I buy on Amazon and Ebay. SO why did I buy and not steal after they became available to me to actually buy? I like the packaging, and quality of the "official releases" and didnt want to steal them, and wanted to support the creators and studios that were cool enough to get the product to me.

I have noticed the widespread sales of Anime from early 90's to now as extreme, and sort of uncool, and artificial. I miss having anime be a closet underground semi-secret thing to have. And from the information in this Blog- maybe it is coming back to full circle from what I remember 19 years ago when it was secret, hard to get and mysterious.

I hope my thoughts and comments from a "micro" fan viewpoint can give a different point of view to your Macro industry insights which are also very interesting to me to read.

Starcade, now from Leviathan said...

Private Snowball: So you *want* this to go back into the closet?? Am I reading you right??

All I have to say to that is that you better have tons of money (it will go import-only, and Japanese-only with no subs, and fast if digital distro fails -- and that's if anything survives) and hope that something survives.

Humberto said...

Starcade: While I've known about the contraction for quite sometime, last week gave me a sense of just how far it was going to go if sales keep going at the current rate.

I wasn't specifically looking for the information either, as it was volunteered by employees that were personal friends of mine while vetting information on some new cellphones.

It's not that people want to keep me quiet as much as I'm the outsider with no connections to the fan community, meaning I get to be on the receiving end of all the flames and demands for sources.

Truth be told, I make more money blogging about cellphones and gadgets than I do about anime, as my site was a gift for all of the work I put in growing the anchor site in the startup I manage.

The only reason I went ahead with the story was because I believed it to be as close to the truth as I could get, and the retraction was forced by Best Buy, not by anyone else, despite what's being said out there.

I'm perfectly happy being the lone wolf if it means I can break the news no one else is willing to out of some misguided attachment to a company that decides to use outdated business models and does not focus on strengths.

Private Snowball said...

Starcade;

I want the industry to do well, I also miss the underground days of the past. We all know that they will never come back, our age and technology prevents the past from re-occuring.

In this case the market seems to be determining that the Anime industry is going to get contracted whether we want it or not. It expanded too fast and went too big, and now it is coming back to earth. If it has to do that, then I hope it gets some of it's old school flavor back in the process.

Starcade, now from Leviathan said...

Humberto: The reason I went with it on USENET is because it's consistent with other reports already happening (as reported by fans independently), and the almost certain corollary to the death of retail and of the anime industry as a whole.

Private Snowball: It'll die out -- completely -- first. Reason? The expense of creation has no chance, now, to be recovered.

Robert said...

It'll die out -- completely -- first. Reason? The expense of creation has no chance, now, to be recovered.

Going forward the biggest threat to the industry as a whole is ever diminishing returns. If the statistic is correct that 6,000,000 episodes are being file shared every week, then that is disturbing indeed because I could not estimate more than 250,000 or 300,000 episodes being sold per week worldwide between legal download and DVD, with most of those sales being in Japan. That would mean perhaps 5% of the worldwide Anime market is now paid. That number, if in the ballpark, is almost unfathomable.

Many Anime fans seem to fantasize that some model of Anime for free or very cheap legal delivery will come along, and I hear a lot of talk of transitioning Anime to an ad based or a subscription model, but neither of these options have any future. Ad based Anime might provide a way to eeek out a little more revenue from older shows who’s life cycle in retail is spent, but simply will not work long term as the revenue stream provided will never come close to offering any incentive for new production. I’m saying this not from the position of a ‘struggling retailer’ but as someone who is very familiar with Anime advertising metrics and the types of returns available. Subscriptions models will also never work long term – certainly, there will be a small cadre of true fans that pay for subscriptions, maybe a few tens of thousands, but the revenue brought in will be totally eclipsed by file sharers who will continue to reject Anime as a paid venue in any form. Again, that’s a model that will never bring in enough revenue to support new production. At least not the type of productions we’re used to and want to see.

All that said, however, we sold $3.4 Million (US) worth of Anime DVD's last year at RACS, so the industry is certainly not dead by a long shot. And we’re fully aware of home video trends so we’re not operating in a vacuum. Our original calculations had DVD phasing out slowly through 2011-2012 as the trend turned to paid downloads. The troubling thing as a fan is that studios, at least US studios, are running into a brick wall in their experiments thus far trying to monetize paid downloads. It seems that the Anime fans still in the ‘paid’ market do find some value in physical media, but little or no monetary value in downloaded files. The other black swan is this recession, which is ending up being so deep it threatens to wipe out half again the current US studio production on DVD. The Anime industry had it’s own problems going into the downturn, but it now seems like there is a perfect storm forming. 12 months ago all I was ever concerned with was what our indigenous sales were, and how we were stacking up to other players in the market (I’ve always been happy with those results by the way). Now I find myself more concerned with what will be available to sell in the coming months and years. The fact is that video drives the entire business here in the US. Any illusions by retailers or studios that there is a future in Manga and Merchandise alone (you know, once everyone is ‘paying’ top dollar for downloads) is pure folly. As video goes, so goes the industry. It's quite a quandary. :-)

Private Snowball said...

As part of that loyal cadre of hard core anime fans, I wouldnt give you 10 cents for a download,, I would gladly pay $20-$30 dollars for a quality DVD or Blu Ray release with nice packaging and extras. I literally like to have physical media and to line them up on my shelves in my home theater!

Again my two cents from a fan that is only now learning the state of the industry

Starcade, now from Leviathan said...

Going forward the biggest threat to the industry as a whole is ever diminishing returns. If the statistic is correct that 6,000,000 episodes are being file shared every week, then that is disturbing indeed because I could not estimate more than 250,000 or 300,000 episodes being sold per week worldwide between legal download and DVD, with most of those sales being in Japan. That would mean perhaps 5% of the worldwide Anime market is now paid. That number, if in the ballpark, is almost unfathomable.

It's even WORSE than that. At least one of the two sources I have for that figure have that figure US-only AND BitTorrent-only.

The source which does not is this one, with a quote from the Tokyo Anime Center's Kudo-san:

" Currently, 6 million copies of illegal, English-subtitled Japanese animated videos are said to be downloaded from BitTorrent each week (http://animeanime.jp/biz/archives/2007/12/bittorrent600.html)."

(Note that that is December 2007.)

A second source had it being six million _American_-downloaded episodes a week just from BitTorrent.

5% of the audience being paid is probably far too HIGH. It's the only reason, bluntly, that you are seeing any increase in convention attendance at all -- a bunch of stupid little punks going no-holds-barred because they decided to be cool, fansub, and hang out with their friends.

Many Anime fans seem to fantasize that some model of Anime for free or very cheap legal delivery will come along, and I hear a lot of talk of transitioning Anime to an ad based or a subscription model, but neither of these options have any future.

Of course not -- the fanbase, as discussed above, has already decided it will demand a free model, even if none can ever exist. That's why it's dead, and already decided as such. I know you claim over $3,000,000 in sales in 2008 (which would probably be between 1.5 and 2 percent of the entire US anime industry), but, again, it's a matter of the cost of creation, which, for US-side alone (even without licensing), is pushing $50-100K an episode.

The current model is dead in that price range, because of the arrogance of the freebie fanbase.

Frankly, Robert: You're about to become an importer, if there's anything left to import by then.

Starcade, now from Leviathan said...

Private Snowball: You are in the vast minority. Most of the anime fanbase wouldn't even value an episode at the 10 cents you'd want to buy the download for if they got that episode on DVD.

navin75 said...

What Robert said is true about R1 market as come to past. here some distrubing news from animenewsnetwork



The North American anime distributor Bandai Entertainment has confirmed that it is re-evaluating its operations due to the worsening economy and will reduce its full-time staff. The company is currently finalizing its strategy for the next three years, and more details will be available when this process is complete. When asked about how many people would be laid off, President Ken Iyadomi said, "Those details are not final yet." The company currently has 19 full-time staffers, and the layoffs will affect production and other departments. However, many of those laid off will remain on board as contracted consultants to finish their current projects.

Bandai Entertainment will finish its ongoing releases and does not plan on introducing any new delays to its current release schedule. The company plans to continue licensing and releasing "strong titles." However, there "could be fewer titles" released in the future than the company has released in the past.

When asked what situation brought about this restructuring, Iyadomi answered, "The downturn in the DVD market sell through."

Funimation, ADV Films, and Tokyopop have laid off employees within the past 18 months. Geneon Entertainment (USA) Inc. laid off much of its sales and marketing teams in September 2007 before ceasing in-house sales and distribution of its licenses later that same month.

Link: http://www.animenewsnetwork.com/news...-staff-layoffs

Private Snowball said...

Starcade;

I have no doubt that I am in the minority. The industry in your view is deling with a customer base that is willing to pay zero or next to zero for a product. This ultimately will lead to no industry. The question that needs to be asked is two-fold.

1-Who are the customers that are willing to pay, what can the industry learn about them.

2-The entire media community needs to examine and invest in high tech security that would stop what is happening to both the music, anime and other downloadable media style businesses. I know that has been happening, and apparently been un-successful. However I do think in the long run this is key, no business can survive if it's product can be stolen wholesale.

For me personally, I have about a dozen or so titles that I really want to buy, and once I get those locked up on DVD's I'm content if the industry melts down and goes all import. It would suck and be sad, but I would have what I want (and paid for legally!)

Starcade, now from Leviathan said...

navin75: Bandai Entertainment is losing money as long as it continues ANY anime operations in North America. So are the other companies as well.

I'm stunned Bandai, given everything I've heard in the last 18 months, hasn't shut up shop in North America, anime at minimum -- probably completely.

Bandai, as an R1 distributor, is as dead as ADV. Gone. And as delusional to think they aren't.

Saddest thing is: Their former BVUSA division actually published, in their former blog, an article from a Japanese anime industry website wondering why the Hell anyone would want to deal with the US market, given the expense.

Date of the article was late 2007.

Perhaps this might be the end of Bandai Entertainment as an R1 licensor. This would leave us with, basically, just Funimation on the major level. (How much Viz is actually licensing is a question-mark.) We don't know yet, because I think this is still a very fluid situation. They clearly do not have the money to do the product right anymore (see all the replicator issues).

Private Snowball: To your first point, the biggest problem with that is the problem that Robert mentioned when I put the 6,000,000 episodes/week figure to him. Basically, it can probably be demonstrated that 95+% of the anime fanbase does not, (some can not,) will not, and refuses to pay for the product -- under any circumstances. You don't have a sufficient paying audience to even play off of anymore. (Some will say you never did!)

To the second point, that horse is probably five years out of the barn now. You can't do that under the Constitution of the United States (not that that document means that much anymore).

I am all for censorship of the Internet -- but, if not based on content, at the least based on license to access the content. Otherwise, you can kiss all intellectual property-based situations goodbye. The ONLY reason there's a console gaming industry at all at this point is because the hardware cannot be easily mass-chipped. The RIAA is dead, and so is the music industry.

People are not going to pay for products unless, to obtain them, they are forced to do so.

Becky said...

Wow. I'm involved with a couple advocacy groups that are working to stop the decline of the anime industry in North America, and I won't deny that a lot of what has been said on this blog is a bit disheartening. But I still firmly believe the situation can be rectified. I agree with some sentiments on this blog and not with others, but I'll come back and go into further debate later, once I've sought my own information. I'll just end by paraphrasing the FMA quote that repeated in my mind while reading this discussion: "You make some good points, but for the industry's sake, I hope you're wrong."

JWR said...

Well the current climate on firearms is something I have lived through before. As a former memember of the Board of Directors and for several years the Chairman of the High Power Rifle committee here in the "Peoples Republic" of California as well as competing and coaching on a state and national level I went through the whims of the antigun politician.
We had the runs before the "assault weapon" ban took effect and the lack of stock together with the inflated prices it caused.
I'm lucky that like a lot who have been around from that time to have pretty much all of the guns I have wanted. Now the runs on ammo is where a lot are feeling the pinch.

Now adays I have found other things to spend money on which brings me to RAC. My wife and I got seriously hooked into the collecting of anime cels and the dvd's they came from. Through that we have become involved several forums of like minded collectors and even set up an online gallery to share our hobby http://ryan.rubberslug.com
I would venture to believe that most I know do download shows off the internet either in raw form or "fan subbed" and then "claim" that they will buy the dvd's if the shows get brought over to the US market. I personally don't for I have trouble watching on a computer screen and there is a reason for spending money on a good LCD TV as well as being afraid of all the virus problems. So RAC gets my business.

There was even a while back a producer of post production cels from CG anime that was encouraging illegal downloads for anime not R1 so people could preorder specific cels to be produced.

Robert said...

"You make some good points, but for the industry's sake, I hope you're wrong."

It's certainly not all doom and gloom, but people have made some excellent points in this thread, and I wish I had more time to respond to them. It's very heartening for me to know that there are still fans out there who care enough to have intelligent and well researched opinions on the matter.

I'm involved with a couple advocacy groups that are working to stop the decline of the anime industry in North America...

I, and my readers, would be interested to know more about your groups and what they are doing to help the R1 Industry.

Becky said...

I'm co-admin of Support English Voice Actors-Support Anime (SEVASA). We work to educate people about the detrimental effects on the dubbed industry of piracy, bootlegging, and fansubbing and ways in which fans can help. We have branches on Facebook, MySpace, LiveJournal, and Yahoo! Groups. Our Facebook group is the most active at 248 members and can be found at

http://www.facebook.com/home.php?#/group.php?gid=24197612550

I think, however, that our Yahoo! Group presents us and our goals in the most organized way.

http://groups.yahoo.com/group/sevasa

Good ol' Yahoo Groups, I think it's the next best thing to having your own website. :)

I've also recently found the group Save Anime, which is similar to SEVASA. Their website

http://www.saveanime.com

has a lot of useful information and great ideas. They have a Yahoo! Group as well, at

http://groups.yahoo.com/group/save_anime

Now, I have a question: I've read on this thread about the crisis the industry went through in 2004. That was before my time (I've been an anime fan since about '05 and it's been even more recently that I've been up-to-date with industry news), and I'm wondering if knowing what happened then might give some insight into what can be done this time around. So, could someone please enlighten me?

Thanks,
Becky

herbkir said...

Anime is only one among many types of intellectual property that's being rendered ecnomically valueless by the wide-open Internet and users' desire to share whatever they have.

Newspapers, magazines, textbooks, trade publications, books, movies, live-action TV shows and just about every other type of intellectual output gets posted and shared for free within moments of its release.

The paradox of the Internet is that making information easily available for free also makes information economically worthless. That, in turn, removes much of the incentive to create intellectual property.

I forsee a day, not too far off, when the only things being published anywhere will be ego-driven vanity pieces. Real information based on hard facts and figures will become very hard to come by. And quality products of the imagination, such as anime, fiction and music, will become scarce as hens' teeth. (^_*)

Starcade, now from Leviathan said...

Becky: It's not that you guys don't do good work... As I said, this horse is out of the barn for some time, and I'll explain by answering your question:

What happened in 2004-05 that most people believe was the end of the anime industry as it was once done was when Suncoast went down -- then, that was the pre-eminent mainstream chain of DVD stores which had anime prominently. (So there are already parallels to the proposed ending of anime sections at Best Buy.)

Something else happened right about that time -- the explosion of the Internet among a bunch of punks who didn't give a damn about anything but themselves (and that can be said about a lot more than just anime...). What happened is that fansubs and illegal downloading went from a promotional tool to the main means of distribution because, to them, all "ADV" was was three letters of the alphabet that could go to Hell and take Funimation and Geneon and Bandai with them.

Now, most of the companies are going or gone, those still here left hanging by threads soon to be cut.

That's why you are seeing a lot of those voice actors doing video games, Laura Bailey all but admitting to me that there would probably have to be "another area" for us to continue to follow their work (Sac-Anime 2009: http://www.youtube.com/watch?v=gQKZSeVMmmc (right off the top of the clip) -- though I do disagree with her, due to the expense (and the Japanese now getting completely low-balled on all sides (http://www.animenewsnetwork.com/news/2009-01-25/anime-firms-say-they-were-forced-to-take-low-tenders is one good example of the trend)), about the very continuance of anime, certainly not with even the likes of Laura and Vic and the like.

I've never been optimistic, once I realized the damage fansubs do, as to the survival of anime as a genre, of any kind.