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.

Update:

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 $5 – ZUNGHN $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.