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Post Reply Approximately 25% of Japanese Anime Studios "Going Bankrupt"; Running Lossess
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Posted 5/26/17
I just hope this isn't leading into a situation where studios feel forced to create a premium-only TV and streaming service to cover the costs. I'm quite sure studios were already aware of the fact that losses are common and by 2017 most studios have already taken measures to cut costs like hiring newbies and shorter seasons. For example, SAO seems like the type of show that should have had 5+ seasons by now, but only has 2 and a half so far (inside joke). What I'm wondering is what percentage of costs are unavoidable, the ones related to work location and space. They say Tokyo is one of the most expensive places to live in, I can't even imagine the commercial real estate competition.
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Posted 5/26/17
I admit I don't know too much about the anime industry but this is my impression of it. The production side of things are too focused on what sells in Japan, and not globally, and therefore doesn't bother with continuing animes that are popular and can sell internationally. They also kill the creative side of things by constantly feeding the lowest common denominators of the market (the anime checklist). On the other hand, another problem is that many of the studios are small, and that means that they can only do a few projects at a time and can't take risks. On the whole I have felt that there is a disconnect between a (possible younger) creative side to the anime industry and a overly conservative production side that is unwilling to change even though the target demographic has grown and become much more mainstream over the years. The fact that the medium in which we view anime has also changed over time adds to the problem. Underpaying animators is but a symptom of a seriously flawed industry that ought to be doing well. Unfortunately I believe the whole set-up needs to be revamped. It worked when anime was a small domestic niche industry in Japan, but it can't handle the business demands of a global industry.
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Posted 5/26/17 , edited 5/29/17
DISCLAIMER / I see most people on this thread are kinda clueless where the anime studio stand both on the production side and Dollars allocated Very poor fact checking on this thread


Anime Production – Detailed Guide to How Anime is Made and the Talent Behind it! Washi's Blog



Pre-production:

This process depends on who’s pushing for an idea and who is backing it up, it can be animation studios themselves along with sponsors, but many anime are adaptations of manga or light novels, in which case, publishers front costs (including the costs of having it shown on TV stations). The production company (e.g Aniplex) gathers staff, sponsors, and looks at advertisement and merchandise. While many people describe studios as being cheap.

only around half the budget is often given to the anime studio, with the rest going to broadcasters and other contributing companies.



The broadcast costs are surprisingly high – according to blogger, ghostlightning – at about 50 million yen for a late-night timeslot across 5-7 stations for a 52 episode series. You can see why anime can be an expensive business. For example, Full Metal Alchemist, which had a 6pm Saturday slot had a total budget of 500 million yen (before additional costs)

Website

https://washiblog.wordpress.com/2011/01/18/anime-production-detailed-guide-to-how-anime-is-made-and-the-talent-behind-it/




Here’s How Money Is Actually Made In Anime Aaron Magulick @ goboiano

Anime for kids and families make bank.

This may come as a shock, but the anime you watch is not mainstream, unless you watch shows made for kids and families.
The truly successful anime air between 8 am to 9 pm.

Late night anime is extremely niche.

Most anime that the international community consumes are “late night anime.” These shows air between 11 pm to 4 am in Japan. They also get laughably low TV ratings and the average Japanese person has never seen them.

I’m willing to bet that International fans of the Rokka anime outnumber Japanese fans.

Since their TV ratings are low, these anime make money from Blu-ray and DVD sales. Merchandise helps too.

The low ratings are explained with Japanese work culture and school hours. The average employee works 12 hour shifts, which doesn’t leave a lot of free time to watch every anime, even with a DVR.

Then there are the school hours and the massive workload Japanese students have. Except for certain holidays, Japanese students only get Sunday off (which is why the weekends are packed with anime). However, the workload for students, club commitments, and general teenage life can get in the way of late night anime viewing.

That leaves the otaku crowd, who are willing to stay up late to tune in to watch these shows. Basically, your favorite anime isn’t making money from TV, but that was the plan from the beginning.

Most anime are infomercials.

This is an open secret for Japanese fans. Late night anime, unless it’s aired on the Noitamina program on Fuji TV, will always be an infomercial.

The average late night anime budget is small (about $2 million to $4 million for the entire series), and that is by design. If you look at the production committee of late night anime, you’ll find the TV station is a committee member.

That is because they use anime as a low budget way to fill in the late night time slot so they can get a low viewership. At that time of day, a low viewership is better than no viewership.

Also sitting in on the production committee are manga and light novel publishers, music production companies, and general advertisers (like Pizza Hut in Code Geass). These members couldn’t care less about low TV viewers or low DVD sales, because they are not trying to sell you the anime.

Manga and light novel publishers are using the anime to promote the source material. If people aren’t watching the anime, but sales of the source material are increasing during the run of the anime, they will be happy. Music companies are concerned with selling image song CDs or promoting their idols (think Love Live!).

If a manga or light novel finishes, the possibility of another anime season becomes nonexistent. That’s one of the reasons a third season to A Certain Magical Index has not been made; the light novel ended in 2010. Unless ASCII Media Works wants to celebrate an anniversary for the series or remake it several years down the line to introduce new fans to the light novels, you’ll be forever waiting.

Original anime works are not free from this either, since they tend to be adapted into manga and light novels. However, they do have more leeway in terms of story.

The crazy thing is that this business model works. In 2014, the manga industry made 282 billion yen (2.3 billion USD) in Japan alone. The anime industry brought in 242 billion yen (1.9 billion USD) in 2013 from the Japanese and international markets combined.

What about the studios?




Anime studios are contractors

Once the production committee forms and decides on an anime to make, they’ll scout out anime studios and offer them the chance to work on the series. The studios are given the budget money to work on the show, and they start their magic.

But how do they make their money? This is where things get tricky. Studios like Madhouse will split the Blu-ray and DVD profits with the distributor who is on the committee (like Pony Canyon). They may split profits with merchandisers too, if a PVC figure uses the anime design created by Madhouse. The amount of profit is low, which is why studios try to save money by hiring freelancers and working on multiple series a season.

Studios like Kyoto Animation and Sunrise are powerful enough to sit in on production committees. They can essentially invest their own money in the shows they are working on, so they keep a bigger chunk of the profits.

Kyoto Animation also does more than anime; they are a manga and light novel publisher and they run their own store in Kyoto. However, it is worth noting that they are the exception.

A complex web of money making

The last way for a studio to make money is that they are owned by members of the committee.

The last way for a studio to make money is that they are owned by members of the committee. Take A-1 Pictures as an example. A-1 Pictures is animating this season’s The Asterisk War and Perfect Insider, but they don’t necessarily have to worry about sales or viewers because they are owned by Aniplex.

Aniplex, in turn, is a powerful committee member for many anime. They sit on the production committee of Gintama, Durarara!!, and Naruto Shippuden as a Blu-ray and DVD distributor. They also produce soundtracks, merchandise, work with food companies for packaging, and video game companies. Aniplex takes that money and puts it into A-1 Pictures, which is essentially themselves.

As a final twist, Aniplex themselves are owned by Sony Music Entertainment Japan.

Sony Music Entertainment Japan is the biggest music label in Japan, making 162 billion yen (1.3 billion USD) this past year in revenue. If you have a favorite anime opening or closing song, odds are it was sung by a Sony artist.

Music produced by Sony Music, distributed by Aniplex, and was in a show animated by A-1 Pictures. They are three parts of a whole. No matter how successful an A-1 Pictures series is, they won’t go under anytime soon due to the business structure.

This structure is fairly common in American and European business. It allows you to make money from different segments without being too specialized. At any given time, Sony can make money from 10+ anime series without taking the big financial risks.

International licensing

The international market helps bring in money through licensing. When a studio wants to localize a series, it pays a licensing fee up front. That money goes to the committee, and is usually distributed to the anime studio as part of their production budget

For example, if I see an anime that I think would be successful here in the United States. I would offer to pay $10,000 per episode to create a dubbed, Blu-ray release. That would give the studio $120,000 USD upfront for a 12 episode series.

If the anime becomes a major hit in the States and it surpasses a certain threshold (like it sells a specified amount of copies or we earned above half a million dollars), the anime studio receives residual checks that can range anywhere between 20% to 30% of future copies sold.

Anime makes money…several years later

It is estimated that an anime series needs to sell around 5,000 copies per volume to break even. Only 20% of anime will reach that goal in the first year they are released.

Keep in mind that the people who rely on Blu-ray and DVD sales are the anime studios and distribution companies (sometimes they are linked together).

However, that doesn’t mean there is an 80% failure rate. Anime is a medium that has long legs, and it’s not uncommon for older shows to break even several years later.

Anime sets are re-released and remastered, series are re-aired on TV on different channels, and long term sales numbers from the international market all contribute to a series breaking even down the line. Remember how Serial Experiments Lain was a flop in Japan? It’s one of the more respected series in the States, and you can bet that the studio has made their money back thanks to Funimation selling it on DVD, Blu-ray, and a re-released Blu-ray set.

The thing to keep in mind is that anime is not a short term money maker.

Website

http://goboiano.com/heres-money-actually-made-anime/
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Posted 5/26/17
I'm not surprised. Animation in general is a harsh industry. When I was working in Halifax one of the main things that kept our studio open were Federal and Provincial tax credits offered to any company that sent work our way. When the Harper government first came to power those Tax credits vanished, and with them so did the work and that was the end for the company.
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Posted 5/26/17

Greylurker wrote:

I'm not surprised. Animation in general is a harsh industry. When I was working in Halifax one of the main things that kept our studio open were Federal and Provincial tax credits offered to any company that sent work our way. When the Harper government first came to power those Tax credits vanished, and with them so did the work and that was the end for the company.


That may be one major factor to explain why Japanese animation is outcompeting Western animation. Anyway, I wonder what is the invisible hands doing in a deperate times like this; at least one of the invisble hands should be fixing this problem in the animation market.
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Posted 5/26/17
My opinion is that too many people just stream from illegal sites or whatever, I don't know if it is the case or not but I feel like its a contributing factor. Because of that they have to price DVDs higher to make even a small profit but then people don't want to buy them because of how much they are. I understand people's circumstances and that's how it is, but it's having a negative impact on the industry.
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Posted 5/26/17

ShadowedShuriken wrote:

My opinion is that too many people just stream from illegal sites or whatever, I don't know if it is the case or not but I feel like its a contributing factor. Because of that they have to price DVDs higher to make even a small profit but then people don't want to buy them because of how much they are. I understand people's circumstances and that's how it is, but it's having a negative impact on the industry.


Which is why people should be able to buy online for download from the source at a more reasonable price professionally subbed episodes in various languages. Besides this would give studios a much better idea of just how much of a market there is for any anime. If the price is low enough, there is no reason most people, even those who first saw the anime illegally, wouldn't buy those animes that they liked and wanted to see again and again. Just my thoughts on the matter.
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Posted 5/26/17 , edited 5/26/17
Just for the sake of more info, from what I understand most anime studios don't stand to gain anything from the profits pie. There are over 400 anime studios in Japan, most of them don't make their own anime but instead handle work contracted out from the major studios and probably game companies. I don't think they stand to make anything past their contract fee. These studios are probably the significant majority of the 25%, versus the ones we'd recognize.
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Posted 5/26/17

Savagely69 wrote:


Arcaenus wrote:

thats what they get when they only make shitty anime.


Exactly. All anime nowadays is 9 year old girls incest with brother or 10 year old girl ecchi like isnt this child pornography? how is this shit legal??


Not even close to all anime produced these days is what you're describing.
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Posted 5/26/17

Insomnist wrote:
There are over 400 anime studios in Japan, most of them don't make their own anime but instead handle work contracted out from the major studios and probably game companies. These studios are probably the significant majority of the 25%, versus the ones we'd recognize.


Yes, I did wonder about this myself... simply because there is a difference between ""major" studios that host production, and "minor" studios that do work for it. Assuming that the problem isn't simply one of market saturation (too many studios bidding over too small amount of work, driving down pricing power), however, it is suggested that this problem is widespread and not specific to only the "failing" ones.

In other words, even if you cut back the number of studios, would the problems still exist simply because anime itself is generally unprofitable? That revenue from only a few select anime would be self-sufficient? Also, it is difficult to assess whether the minor studios receive some sort of commission based upon sales (they get paid a bonus if anime does well), or it is fixed rated as is suggested. Nevertheless, as trying to find more details as to how NHK cited these numbers would be interesting, in either case.


sinoakayumi wrote:
Anyway, I wonder what is the invisible hands doing in a deperate times like this; at least one of the invisble hands should be fixing this problem in the animation market.


You know what they are doing...
Posted 5/26/17 , edited 5/28/17
They dont make em like they used to.
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Posted 5/30/17 , edited 5/30/17

KingKaio wrote:

I think there's a fundamental misunderstanding about the meaning of the word 'bankrupt' here.


Meh, I think "someone" has a "fundamental misunderstanding" of me title. "Going Bankrupt", notice the "". A speculation as to the forward trajectory thereof. The "-ing", a state of present progressive verb tense. Also, notice the grammatical sub-sentence explanatory clause, the semicolon;Running losses. I will admit, few people these days know WTF a ; is actually, so no worries.

You prejudged me statement. The NHK special did not give further details as to the balance sheet of companies, so clearly a firm analysis is speculative. However, the general premise of the report, and thus the purpose of this thread, suggests that at least some significant percent of the industry is experiencing seemingly sustained and accelerating losses, as reflected in the total volume of affected studios and increasing labor cutbacks, at a time when the overall industry is hitting new revenue highs. A contradiction.


There are "winners and losers", in either case. Yes, running neverending losses doesn't guarantee a state of insolvency; nevertheless assuming momentum continues, the idea that it is "going" there is an accurate speculation. Furthermore, yes in perfect hypertheoretical theory scenario they all 25% of them could be simply "going broke", but this state is highly unlikely. Anime studios, media studios in general, are capital intensive and do not generally generate much free cash flow; as the minor studios (which seem to be the ones in question) operate off of fixed or near fixed contract revenue, and may not even be paid until work is done. They spend lots of money, with the expectation of future sales when product is released. And this production is likely therefore funded with credit. And, likely why labor costs are being squeezed; as they simply have little cash left to pay out.

And, if I remember correctly, at one point in the NHK special some workers complained about getting paycheck payments late. Which of course, is lack of liquidity. Just like banks in 2008 were "going bankrupt" supposedly, until they weren't. A speculation as to the future. Which for some, logically, would result.


Yes, there could be "hit titles", but not all the studios will benefit; as suggested above, some contracts could be limited in payout. And, in order for "everyone to be saved", 25% of the studios would all need a "hit title", which given that means around 100/400+, would be a big ask at that. So there will be someone in the end that must lose, gets bought out, or otherwise. Unless, of course, magically conditions change, in some respect.

In either case, without concrete numbers it is hard to speculate further; nevertheless at least ye can agree that assuming this report is accurate, that the trend line is "down", in either case.


No matter.
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Posted 5/29/17
I think there's a fundamental misunderstanding about the meaning of the word 'bankrupt' here.
I don't see that phrase used in the article?
Losing money is just a loss- it's not bankruptcy. Losing money only means you took in less than you spent on a certain product, or as a whole company. This can be bad if you lose money every year, but a loss in one year isn't necessarily bad- as long as that big project (big movie you worked on, 13 more episodes of AoT?) starts to haul in money as it gets licensed.

You go bankrupt when you can no longer pay back creditors who are supporting your business. When the creditor comes back at you for payments on a business loan, mortgage, possibly rent on studio space (I don't know Japan's laws), and you claim you can't pay and end up in court- that's bankruptcy.
If you go bankrupt as a business, there are two outcomes. One is that the creditors effectively own the majority of your business and there's a payment plan that allows you to pay them back under government oversight. This means everything you sell from that point is basically garnished. An overseer is appointed by the government. The second outcome happens when there is no chance of being able to pay back your creditors, in which case the company goes into liquidation. That means the business is shut down, taken apart, and as many assets as possible are sold off- the proceeds of which go to the creditors. So computers, anime drawings, printers, software, all of it hauled out in boxes and auctioned off (turned to liquid, or in otherwords, cash) and reimbursed to the creditors (bankers).

A studio from the above can close shop after three years "in the red" (meaning straight losses) and not owe any money. That's called going broke.
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Posted 5/30/17

bobland wrote:

Wonder where the money goes.

Web traffic and ad revenue from sites like kiss, gogo, watchonline, etc.
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