Testing the Waters

It has been said that one of the reasons that fansubbing has become as “bad” as it has, is that there’s too much demand to wait a year for the R1 license to be announced, and another six-eight months (if not longer, cf: ADV) for the release. Release the R1 version as fast as the Japanese version, the reasoning goes, and demand for fansubs will drop. Japanese companies have been reluctant to do this, because, quite frankly, they gouge their domestic market with high prices, and fear that a simultaneous release outside the country will result in the foreign versions being re-imported back to Japan and undercutting their tidy little profit.

I suppose the question has always been, which would happen first: Would the Japanese studios start failing (or more likely, retrench) due to foreign sales losses, or would they decide that the loss of domestic profit by lowering their prices could be offset by competing with the fansubbers for timely release? It looks like someone is going to go for the latter. From ANN:

Kite Sequel to Ship Nearly Simultaneously in Japan, U.S.

Kite: Liberator, the science-fiction sequel to the 1998 OVA about a teenage assassin, will be released on DVD in Japan on March 21, and in North America only four days later on March 25. The project was originally slated for a late January Japanese release, but that date has been pushed back because of unspecified production issues. Media Blasters, the distributor that holds the North American license to the original Kite, co-produced Liberator and will be distributing the 57-minute film.

Only a few anime have ever premiered in both Japan and North America in the same week. ADV Films officially scheduled its North American DVD release of Akitaro Daichi’s Grrl Power (Makasete Iruka!) DVD two days before the Japanese release. Afro Samurai ran on America’s Spike TV four months before it ran on Japan’s WOWOW channel (in a director’s cut edition).

I should note that this is an OVA, not a series, so the fansubbers never had a shot at it to start with. The cool part? It’s dubbed, not just subbed, since Media Blasters was involved to start with. Obviously, their participation is another piece of leverage; if an American company is going to put money up for a series, then they are going to insist on simultaneous releases in order to minimize DVD rips. In effect, the R1 animé companies are offsetting the lost Japanese sales, and hoping they can make back their investment by increased sales in the U.S. as opposed to fansubs undercutting the market.

This is what’s known as a “market correction.” When the reality on the ground (consumer demands) doesn’t match the money flow (industry practices), things change. (I’m being somewhat tongue-in-cheek here so economics majors please refrain from pedantic corrections.) However, I have doubts if that will work for animé that airs on TV in Japan. Would fansubbers continue their work on a series if it has been announced that it will be released as quickly after the airing as it will be in Japan? It would certainly undercut their rationale for doing so, but I would bet money that 2-3 groups will simply not care. It might reduce the amount of animé being fansubbed, and thereby increase studio profits somewhat, which would be good.

Yes, while I think they’re gouging their domestic market, the fact remains if they don’t make enough money at it, the studios will simply fold or do something else. This is also known as a market correction. It cuts both ways though — fansubbers may be doing it for “free” but unless I’m missing something, their payment is “sticking it to the man” and the accolades of their ‘customers’ — the fansub downloaders. If there is less ego gratification to be had, then there is less reason for the fansubbers to spend a great deal of time and effort doing what they do.

Generally, when an industry decides on a paradigm shift, it does so cautiously. Test products are brought to the market, or a small-scale project is done to test a concept. The experiment is rarely conducted with a big product or project; when it does happen, it’s called “a gamble.” If the company is particularly cautious, it may test several times before committing. Companies, especially Japanese companies, hate gambling, so I think we’re going to see multiple tests over the next year or two as the economic pressure builds from fansubbing. It’s already pretty close to critical mass now in the industry, so I might be too cautious on my guess. If you’d told me that all the major CD distribution companies would agree to drop DRM within a few months, I’d have laughed.

In short, I think we’re going to see more of this, generally with lesser known titles, ending with a fundamental change to how much anime gets financed and made. The whole “just in time” mania of anime-to-TV production might have to change, to allow for simultaneous dubbing in two languages. And of course, as Steven has noted, we’re already seeing one change: Media Blasters importing sub-only titles and foregoing big box retail sales.

We’ll know they industry serious about combating fansubbers through speed releases when we see one of the big, popular TV titles commit to simultaneous release. Until then, we wait… and watch our fansubs.


Of course, some folks are just going to demand their free subs, no matter what. Case in point, part of a message from Leginag on the Baka-Wolf forums, where direct downloads are hosted:

The forum gets 8000+ guests a day now. If 1% of leechers, that is 80 people, donated $10 a month, we could get a 100Mbit dedicated bandwidth solution.

That’s how much it costs, $800/month per 100Mbit dedicated bandwidth ($8/Mbps), and it is upgradeable, so we pay $1200 and get a 150Mbit connection etc (plus the server setup fee). We would also get an awesome server, which would be fast, lots of hdd’s etc. We would then add a LOT more series (unlicensed, so that we don’t get screwed over) for you guys to leech off.

How many people of those 8000 donate? Here’s the list for the last few months:

January Donors
[Target: $545 (Three unmetered servers monthly)]
$10 – Obscure
$12 – strike_freedom
$10 – anon
$30 – Nekojin
$20 – from last month
$100 – Tatsujin Asshat-sama
$10 – anon
$10 – Ace
$10 – Ray
$20 – hoob
$50 – KuroKumo
$30 – Quant
$50 – Blaarg
$10 – Narru
$30 – Ubu Roi
$40 – Striker2s
$10 – MaxCapacitor
$30 – Despk
December Donors
[Target: $530 (Three unmetered servers monthly) + $299 750Gb hdd]
$45 – Optikal
$10 – KendoChev
$50 – Blaarg
$20 – NightL4nc3
$30 – Anonymous
$10 – Obscure
$15 – despk
$15 – infamousjeff
$25 – Ashan-Dono
$15 – Aonoth
$10 – Anonymous
$10 – Narru
$10 – KennethSoulSociety
$20 – KendoChev
$50 – TicTac8745
$150 – Kurokumo
$200 – Blaarg
$30 – lotus7
$210 -mr22774556
$20 – skyechang
$10 – hopatcong321
$10 – smerpy
November Donors
[Target: $300 (Two unmetered servers monthly)] + [$160 vBulletin (once off cost)]
$30 – vadsidm
$10 – despk
$10 – L3g0la5
$22 – sokolov22
$15 – Hoob
$50 – Blaarg
$5 – schnipschnap
$6 – mayid
$11 – micheal676
$45 – Optikal
$5 – Axlen
$45 – Mardukas
$50 – mr22774556
$12 – tiger24lily
$20 – infamousjeff
$20 – General Asshat
$30 – lotus7
$20 – cyph3r
$11 – asura
$15 – elverno
$15 – Smerpy
$20 – obscure
$50 – npcomplete
$20 – Tap Master C

For the last full month, there were only 22 donors out of 8000 visitors, a 0.00275% donation rate. The reason Blaarg and Obscure are bolded is that they’re the only one donating in all three months, although January’s not over yet. Based on this extremely unscientific survey, 99.99725% of downloaders wouldn’t pay, if given the choice. I don’t think that number is correct, however, as other sites require registration and charge an access fee; by doing so they cover their expenses and keep leechers away. Baka-Wolf allows unlimited downloads, no delays, no registration. Naturally, the freeloaders are gravitating to them, which skews the figures.

Yes, that’s me you see in January. I looked at how much I spent on retail anime, how many series I was downloading, and came up with $30 a month. In fact, I just don’t understand the Japanese companies at all; look at what Baka-wolf says they can host for: $545 a month at the current levels, or $800 a month to improve service. Now if they were doing it to make money, how much would be fair? Let’s be generous and say $40k/yr. (Yes, I know you can make more as an admin, but they’re doing it for FREE because they love it. Kinda sucks your bargaining power away, doesn’t it?) I don’t know how many are involved, but let’s say Leginag and two others. That’s $120k/yr, plus benefits of some sort, call it $210k, then if we’re going to be a business, lets up the hosting costs for improved services: $15k yearly. Another $20k for administrative costs and overages. That’s $245,000 a year. Then theres the cost of the sub. Contract that out to the best groups doing it now, for a flat $1500 an episode. In their spare time, these guys are doing the work anyway, and could rack up $1500 x 26 episodes = $39k to split among the members, per series. Note that this also takes the fansub group out of circulation; now they’re part of the “establishment” and getting paid. Free fansubs are no longer to their benefit, reducing the amount of undercutting going on. (Shoe’s on the other foot and all that!)

Now assume a studio produces 2 series at a time, for 104 episodes a year. If high-def subbed animé were available for download within 24 hours of viewing in Japan (because the studios could give the fansubbers the scripts ahead of time), how much animé would they have to sell via online download at $5 a pop to break even?

Answer: 56,800, or 564 copies per episode, without production costs. But since they’re producing it anyway, everything after that is gravy. For $6 an episode, it drops to 456 copies. As always, there’s the opportunity costs; are they making more with the current model than they would with the new one? What about financing from R1? Will that dry up if the studios are in direct competition, through downloads? Would it make sense for the studios to feed the translated scripts to the foreign copmanies and then the raws, so they could have dubbed copies for download within only a few weeks afterwards?

And how long after that until Wal-Mart says “Hey, we want a piece of that action for our download store! We can set up niche markets…”

Food for thought. And I hope they’re thinking hard.

This entry was posted in Anime Industry, Commerce, Fandom, Fansubs, Upcoming Releases. Bookmark the permalink.

11 Responses to Testing the Waters

  1. Andrew F. says:

    It’s not just us gaijin who have to wait a long time for DVDs, though. Compared to the release speed of a typical fansub, even R2(J) DVDs take an eternity to come out. Case in point: the final DVD of School Days (featuring episode 12 in all its blood-splattered glory) is scheduled to be released on February 27. That’s five months after the show ended. Better than most R1 releases, certainly, but nowhere near enough to please the fansub junkie who gets impatient if even one week elapses between an episode’s airdate and the fansub’s release. Would fansubbers stop subbing a series if they knew that subtitled R1 DVDs would be coming within a few months? As you stated, some would, but others would continue, and it doesn’t matter all that much to the R1 companies whether a show is being subbed by one group or five.

  2. IKnight says:

    ‘Would fansubbers continue their work on a series if it has been announced that it will be released as quickly after the airing as it will be in Japan?’
    And what would happen to the Old World? We Must Be Told. I imagine we would wind up faced with the choice of a) becoming even more horrifyingly mired in ethical Bad Faith or b) waiting months. Not that we’re worth much in profit terms in any case. I guess I’d switch to blogging about manga.

    ‘Companies, especially Japanese companies, hate gambling’
    Let’s hope there’s a corporate Akagi out there somewhere. Well, a corporate Akagi with Akagi’s love of gambling, but without Akagi’s love of right royally screwing his opponents over.

  3. It’s interesting that it’s Media Blasters involved in this little experiment. I’m gaining a lot of respect for them recently.

  4. AvatarADV says:

    “Without production costs.”

    Yeah, er, you forgot that little line item…

  5. Ubu Roi says:

    Yeah, but my point is, they’re already eating the production costs, and recouping some or all of that from the TV networks. This is to reduce the costs of producing the DVD’s and recapture sales lost due to fansubbing.

    So I’ve also left out a huge chunk of income.

  6. AvatarADV says:

    Doesn’t work like that, unfortunately. It’s not like the studios sit there and say “well, let’s get the TV network to pay for the entire cost of production, and anything we make off of foreign licensing or DVD sales is profit.” Those TV networks emphatically do not pay for the whole cost of production, and the show is still in the red after it airs on TV.

  7. Ubu Roi says:

    But the network pays a part of the cost; if not up front, when they purchase the broadcast rights, correct? I doubt the studio is just giving it to the network as a loss leader. My point is, this doesn’t really affect the income from the network either way. It’s a matter of maximizing their post-broadcast distribution income while minimizing their costs. Not having to burn and ship (as many) CD’s has got to be worth something — and your inventory, if it doesn’t sell, is nil. And I’m hardly the first to suggest co-opting the fansub groups.

  8. AvatarADV says:

    The network is in on the ground floor. More than that – if you don’t have a network, you don’t have a show. The networks provide the crucial parts of the financing that are available before production starts – the rest is floated until the licensing revenue or the DVD sales revenue starts coming in.

    The specific problem with providing a high-quality, high-definition download service is that it’s going to displace some of the sales from the DVD market (and it will essentially supplant the entire foreign licensing income stream!) So you’re not just having to pay for your actual costs of digital distribution, but also making up for the reduction in your other income streams too.

    That’s assuming you get those sales at all, of course. YOU might think that $5 is reasonable for a quick download every week, but that ain’t going to fly with most consumers. Hell, that’s not really any cheaper than DVD releases over here, when you work it out! So not only are you not expanding the market, you’re dealing with even fewer people – the subset that are currently paying these prices, but who would be willing to trade quality for speed. That’s not a big intersection, man.

    (It also makes the Japanese company obliged to take the risks for each series, instead of passing them off to a US company that’s willing to shoulder that risk. Is your show going to be popular with the American audience? How the hell do you know, you’re a Japanese executive! ;p)

    Finally, what’s the value of co-opting the fansubbers? You can’t possibly use them all (or more to the point, you wouldn’t want to touch most of them). It’s not like what they do is difficult; aside from the translation, I perform every portion of the job. And why pay fansubbers that kind of money when pros work for less? But the real problem is that you aren’t going to functionally reduce the number of fansubs by paying a few fansubbers. The only “rare skill” in there is translation, and even that’s not so rare that you could hire away all the translators who were any good. For that matter, I know at least one pro who runs a fansub group when he’s not working for pay…

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