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NYAF2008: "State of the Anime Industry" Panel Report

by on September 29, 2008

Ken Iyadomi, Christopher Macdonald, Roland Kelts, Kevin McKeever, and Adam SheehanThe annual “State of the Anime Industry” panel was held on Sunday afternoon at the 2008 New York Anime Festival. In attendance were Ken Iyadomi, President and CEO of Bandai Entertainment; Christopher Macdonald, owner and Editor-in-Chief of Anime News Network; Kevin McKeever, Marketing Coordinator for Harmony Gold; and Adam Sheehan, Senior Events Manager for FUNimation Entertainment. The panel was moderated by Roland Kelts, author of Japanamerica, who opened the panel by joking, “What’s the difference between the state of the anime industry and the state of the financial industry? $700 billion.”

It’s no secret that CD and DVD sales in the United States have been dropping of late, and Kelts pointed out that anime has been especially hard-hit by the loss in sales. However, anime’s popularity has been rising, with conventions breaking attendance records almost every weekend — a fact reinforced by Sheehan, who said that 25% of the attendees of the FUNimation panel said it was their first anime convention. Kelts began the panel by asking the participants what they were doing in response to the loss of home video sales. Iyadomi pointed out that anime companies spent years developing a market for selling anime TV series on single-volume DVDs, only to be undermined when American companies started selling entire seasons of TV shows on DVD. This left them caught between a market that was rejecting single-volume discs for season sets and licensors who are still highly resistant to the idea of selling entire seasons of TV at once. Bandai has been trying to balance between price point and content that can still be profitable, like shipping 13-episode products in 2 disc sets.

Macdonald pointed out that the anime industry is a lot more than just DVDs. He thinks that boxed home media will never be as big as it was in the 1990’s, and that a shrinking DVD market can also mean a growing market elsewhere, but at the moment, growth outside of the DVD market is not overcoming the shrink in DVD sales. The day before, ANN had announced that they had a project in the works to become an Internet broadcaster in addition to being a news site, with the goal of producing profit for licensors, media companies, and themselves without charging the customers directly for content. He did say that everybody has to try lots of new things, and that companies have to start looking more seriously outside of DVD sales.

Sheehan said that FUNimation has been lucky, since their sales have increased in the past few years despite the downturn in the market. FUNimation is definitely keeping an eye on the non-DVD market, pushing their products in many different markets and formats, including season sets, iTunes/Xbox Live, and Blu-ray. Sheehan said that FUNimation is aware that fans want to try before they buy, and that pushing iTunes and other digital formats was the way FUNimation was trying to do that. He said that One Piece is the most downloaded anime in the world, with FUNimation taking down 10,000 streams a week, and that if only 1% of the viewers of those illegal videos bought DVDs, that would be a major boost to their sales.

Ken Iyadomi, Christopher Macdonald, and Roland Kelts The panelists agreed that an entire generation of fans were growing up watching videos on the Internet, to the point where that’s the norm regardless of the legalities. Kelts repeated some statements by Russell Solomon, former head of Tower Records, who faulted his own industry for failing to teach a younger generation of the joys of record shopping. Solomon had said that the $2 45 rpm single was the entry point for kids to buy music, which gradually led to buying purchasing LP records and becoming regular music shoppers. With the changeover to CDs, that entry point was largely lost, and was indirectly responsible for the losses in retail music sales. To some extent, Internet distribution mechanisms like iTunes can serve this purpose for anime.

From there, Kelts asked how you can monetize free streaming content. One audience member joked, “Pizza Hut in-show advertising!” but Macdonald actually said that was basically the answer. He pointed out that most of the comparisons between the United States and Japan over DVD prices and sales aren’t really valid, with no single comparison really geting it right. North American fans may complain that anime DVDs are too expensive, but the counter that Japanese fans pay 2-3 times as much isn’t really valid because the Japanese audience was able to watch the shows on TV originally at a much more affordable rate. The DVD market is thus targeted more at the hardcore collector, while in America, the DVDs can be the only way to watch the anime. “Free” for the consumer almost always means advertising, which is how Anime News Network can give away their content. At the moment, the best way to get content in front of new viewers for free or for very little money is via the Internet, which was a point Iyadomi agreed with. Iyadomi cited another fundamental change in business models, since animation in American was only for kid’s TV and licensing in the 1970’s, but a decade later, animation for teenagers sold on VHS videotapes became a viable business model. He said that Bandai’s goal now is just to at least break even, since many productions lose money because they can’t even make back the packaging costs.

Kevin McKeever and Adam SheehanSheehan said that FUNimation is a public company and their shareholders definitely like profits, but that it was understood that giving away a little can lead to a lot. He touched on the demise of the Toonami block on Cartoon Network, but added that he’s hoping Cartoon Network continues to want anime on the channel (including One Piece — yes, they’re still working on it), and that there are more outlets seeking out anime now such as SciFi, IFC, and Starz, as well as the many competing alternatives on the Internet. On the last point, McKeever added that the major media companies can’t figure out how to make money on the Internet, either, so the anime companies shouldn’t be surprised, but he did say that anime companies needed to figure out more and different distribution methods, including limited theatrical releases, film festivals, and other places where people would normally say, “Anime wouldn’t go there!”

Riffing off that point, Kelts added that a program called Anime Masterpieces was starting up, screening anime classics like Grave of the Fireflies at museums, festivals, and universities. He also noted that theatrical releases make many anime a fundamentally diferent experience, and that this difference can be the draw for anime fans. Macdonald finished the point by saying that normally, niche markets wait for the mainstream markets to solve problems like monetizing free Internet videos, but in this case, that’s not something the anime industry can afford to wait for, even suggesting that the solution for the mainstream entertainment industry may not be workable for anime.

At this point, Kelts opened up the panel for Q&A. The first questioner asked what was being done about the lag time between the Japanese airings and the American ones. Iyadomi stated that there were many discussions at Bandai on how to do this, including an investment in a company that makes subtitling software, but that a lot of things still have to be changed within Japanese TV stations before this can become a reality. Macdonald also pointed out that contracts are a huge hurdle to clear for things like simultaneous international broadcast, and that the consortiums that produce anime in Japan may be composed of up to 15 different companies, and that all of the companies in the consortium need to agree to a simultaneous release, but that this will almost never happen in real-life.

Related to that point, one audience member asked about contextual advertising on Internet video, to which Macdonald replied that “contextual advertising” as it’s commonly used is just a quick-fix solution when a provider doesn’t want to work with a real advertising and sales team, since the best way to make money advertising is to know your audience well in the first place. On a related point about the niches within the anime niche market, Sheehan described the workings of FUNimation’s marketing department, with intensive research on the show and its target audience ultimately leading to a one-sheet that then determines branding, marketing, advertising, and packaging of their releases.

The panel was asked about their feelings about the demise of Geneon as an anime licensor in the United States and of the Toonami block on Cartoon Network. Iyadomi said he felt sad about the loss of Toonami, but that the business model clearly wasn’t working for Cartoon Network. Macdonald agreed, pointing out that the block hasn’t been an anime block for a long time, and that it was also always a demographic block rather than one focused on Japanese animtion. McKeever provided some perspective by saying that the first time anime was broadcast in this country, it was through daily syndication. That petered out before Toonami replaced it, and there are already other avenues that are replacing Toonami. They were all saddened to see Geneon disappear, with Sheehan saying that markets do better when there is competition, and that he always valued the worthy competition that Geneon gave them. He was happy to complete some partially finished Geneon series, although he said he wanted to avoid looking like vultures on a corpse, especially since getting too many titles at once will make all their properties suffer.

Return to Toon Zone News’ Coverage of the 2008 New York Anime Festival.

(CORRECTION: An earlier edition of this article referred to Harmony Gold’s Kevin McKeever by his older title of “Operations Coordinator.”)

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