The Western Anime Industry WILL Die

It’s my belief that Crunchyroll and Funimation are heading for eventual disaster if they continue on the path they’ve been on.

In an interview with Anime News Network, then president of Aniplex of America Henry Goto gave his perspective on the cultural differences (or lack thereof) between anime fans from different countries.

“One Sword Art Online fan in Japan, one Sword Art Online fan in US, same. Same fan.”

“But, there are people all over the world with the same mentality as Japanese fans. So I think like radio waves, some people “get” it.
Even in Japan, everyone is not an anime fan, right? Anime fans react with the same radio wave. And the US audience, some people feel it too. “

Aniplex of America’s pricing structure, being a lot closer to the Japanese way of doing things, embodies this paradigm. The biggest anime companies in the US, however, treat American fans and Japanese fans as different animals, and it will ultimately be their downfall.

Anime, as a business model, is designed to make money over long periods of time, via many revenue sources. A number of companies form a production committee to invest in and plan the anime. When the anime is made, they all stand to profit from the success of not only the TV run, but the BD release, the figure line, the music sales, and sales of the source material.

They also profit from farming out the international release to companies like Crunchyroll and Funimation. Those companies buy the rights to release the anime on their services, in their countries, in their languages.

We stream anime on services like Crunchyroll and buy anime from companies like Funimation. Those companies don’t profit in the same way as the production committees do. Generally, Funimation will make money off of disc sales and streaming, and that potential has a time limit.

Production committees are prepared to sometimes wait years for an anime to become profitable, but that ends up shaking out to only around 30% of shows losing money.

Western publishers, on the other hand, are incentivized to make as much money as possible off of an anime, as soon as possible. Couple that with the fact that the largest companies in this industry are also beholden to much larger companies above them, and it’s easy to see the misalignment.

That is to say, companies like Crunchyroll and Funimation are trying to market shows toward a goal that those shows weren’t meant to satisfy. And to do that, they have to use different strategies.

Crunchyroll and Funimation have their business models backward. Because they have to show value to their parent companies while having fewer revenue streams than Japanese companies, they have to adopt an active growth model to do so.

Not only is the active growth model antithetical to how native anime fans interact with the medium, it creates an interesting marketing situation. To grow a streaming service, a company needs a constant influx of new users. Theoretically, as time goes on and more users subscribe, it gets more expensive to acquire new users, marketing-wise. The company needs to reach more people and work harder to convince those on the fence.

In a niche like anime, this is bound to become a problem. There are a ton of cultural aspects to anime that are very hard to separate from the medium. Couple that with the fact that these companies aren’t making the shows they’re selling and the marketing challenge is obvious.

If you’re trying to get as many people as possible on-board, how do you sell a show like OreImo or Eromanga Sensei? You have the licenses, so you have to sell them somehow.

Or maybe not, in the case of Interspecies Reviewers.

And it’s a long-standing problem. The infamous ADV Ghost Stories dub was born out of doubt that a children’s anime about Japanese folklore would gain any traction in the US. The dub was popular and a success, at the expense of abandoning anyone who would’ve wanted to hear the actual show in English.

This paradigm occurs because of the active growth model. Streaming is highly scalable and makes lots of money over time, which looks good for investors and parent companies. At the same time, however, a niche like anime can’t reach the level of something like Netflix.

The reason the Japanese use the business model they use is because it allows them to rely on superfans to do exactly what superfans do. It’s a slow growth model, but it permits long-term success. Funimation can’t similarly rely on Western otaku. They have to scale in order to look good for their parent company.

As a result, when you look at Funimation’s dub scripts for shows like Prison School, My First Girlfriend is a Gal, and Miss Kobayashi’s Dragon Maid, and ask “who is this for?” you could argue the answer is “nobody.” That they’ve given up on giving those shows proper marketing because it’d be too expensive to acquire new audiences for those shows.

As a business model, it looks good short-term, but the growth is unsustainable. Anime is a big industry, but it’s big because its consumers are a rare breed, not because it has mass appeal. Funimation and Crunchyroll have their business models backward because they abandon native anime fans in favor of appealing to new fans they have to spend more and more marketing dollars to acquire.

It’s growth vs. sustainability. And when growth runs up against sustainability, sustainability always wins out eventually, and those who pursue endless growth end up hurting bad for it.

5 thoughts on “The Western Anime Industry WILL Die”

  1. but companies have tried to have more of japanese model for pricing and distribution. many anglo anime companies have not made it.

    you can argue that what crunchyroll and funimation are doing is necessary for the shows to get the distribution they get.

    i know that’s a bit of a survivorship bias going on. but i think the proof that classic otaku oriented business model is what best for anime fans is a hypothesis with very little data behind it.

    1. We don’t have data in terms of numbers, but we can look in the past at the history of the market and understand that the quick-scaling, active growth model that companies like ADV went for doesn’t work, and that the multiple volumes model for disc release anime works in Japan, but arguably killed Bandai Entertainment in the West.

      What has been working for most of this decade is Aniplex of America’s business model, which relies on putting out a quality product for savvy consumers, rather than having to keep up a constant influx of new users.

      You could argue that didn’t work for Ponycan USA, who tried a similar business model, but we’d have to look at the difference in titles between the two companies, and Aniplex controls properties that are orders of magnitude more popular than what Ponycan USA put out. Ponycan also couldn’t market what they had.

      Not to mention, if you look at the Japanese industry historically, the otaku industry has proved to be recession-proof precisely because it relies on and caters to savvy, obsessive fans, rather than trying to court the average consumer.

  2. Hmmmm.

    The veritably intriguing part of Western business models is their over reliance on “Western styled” marketing.

    Imo if they did have a shot to even a single show’s pattern of growth like the Japanese do, and hope to God there’s super fans of it… Who knows from that point on.

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