Bandai & Media Blasters out; Funimation IN--latest for Yomiuri

SOFT POWER HARD TRUTHS / Embattled North American anime industry seeks redemption in digital streaming

Roland Kelts / Special to The Daily Yomiuri

For anime fans in the United States, the new year picked up where the old one trailed off--with news of another veteran distributor shuttering its operations amid industry layoffs and cutbacks.

On Jan. 3, Bandai Entertainment officially announced it would no longer release new DVD or Blu-ray titles in North America after 13 years in the market, canceling all releases scheduled beyond the first week of next month and laying off the majority of its staff and contractors.

One week later, North American anime distributor Media Blasters confirmed it was downsizing its workforce, asking most of its employees to continue working only as freelancers. While the New York-based company said it would proceed with its February and March releases, the combined announcements signal the radical shift under way in the overseas anime industry: The market for physical content is dwindling, and few believe it will return.

Bandai Entertainment President and Chief Executive Officer Ken Iyadomi told the Anime News Network that the decision to curtail its North American business was made in Japan.

"The pricing range for our products kept dropping in Western countries, and people tended only to buy sets with very reasonable prices, which we understand is what fans want, but it lead us to a different strategy than what Japanese licensors wanted," he said. "So we always had a problem [with licensors and consumers having different wants]."

The diminished market for the physical distribution of anime has long been anticipated by savvy industry players, whose efforts to shift to digital are beginning to pay off.

Last year, I wrote in this column about the efforts of online anime portal Crunchyroll.com to expand digital offerings of anime and other Japan- and Asia-related content. I also noted that Texas-based anime distributor Funimaton Entertainment had entered into a licensing agreement with Japan-based online file-sharer NicoNico via its global portal.

"It's all about content windows," says Lance Heiskell, Funimation's Director of Corporate Strategy. 

Heiskell points out that anime distributors now need to offer content through a diverse array of channels. "Simulcasts, DVD and Blu-ray, digital download to own, ad-supported streaming, Netflix and broadcast. It has to be a coordinated effort. Our goal is to have our content on all platforms, devices, retailers and physical media so people can easily get exposed to anime and fall in love with the shows and genres."

While still in its infancy, the Funimation-NicoNico tie-up (called "Funico") has resulted in one big recent collaboration: the broadcast of the Jan. 20 premiere in Los Angeles of Fullmetal Alchemist: The Sacred Star of Milos.

Christopher Macdonald, CEO of AnimeNewsNetwork.com, says the absence of TV broadcasting in the U.S. anime market has made digital delivery essential.

Heiskell sees TV exposure as a key difference between the Japanese and overseas markets. TV enables audiences to sample unique content, he notes, by flipping through channels without making commitments or choices, recalling the way radio used to function for pop music. In Japan, anime is broadcast throughout the day and especially late at night, when more adventurous or provocative series can get valuable airtime.

Despite what Heiskell calls "gloom and doom" reports about physical products, Funimation remains committed to its North American DVD and Blu-ray businesses. He points me to an industry report issued earlier this month mentioning a 20 percent spike in Blu-ray spending in 2011, and adds that despite the shrinking shelf space in brick-and-mortar outlets, Funimation's sales via online retailers such as Amazon and anime specialist Rightstuf.com are increasing.

"[DVD and Blu-ray] are probably 80 percent of our overall business," Heiskell says. "Our fanbase has a collector mindset. They like to collect, display and show physical ownership of the shows they love. Online streaming is actually supporting our physical sales. In our consumer survey, seeing an episode online is the number one reason fans cite for purchasing a DVD or Blu-Ray. You can't display an anime collection that's on your computer."

Still, Heiskell is hardly celebrating the latest crises at Bandai and Media Blasters. Anime industry players don't view one another as opponents, he explains.

"People don't realize that the [anime conventions] are more like summer camps. People that are supposedly competitors are more like friends. Whenever a company struggles, it's not good for the industry. We need that friendly competition."

Kelts is a visiting scholar at the University of Tokyo who divides his time between Tokyo and New York. He is the author of "Japanamerica: How Japanese Pop Culture has Invaded the U.S." (www.japanamericabook.com), and the forthcoming novel, "Access."