The Business Side View of Yamato 2199

The Kyoto International Manga Anime Fair was graced with a Yamato 2199 presence for the third time in 2014. (Read about it here.) In a unique behind-the-scenes seminar, the curtain was lifted for an inside view of the anime business with 2199 as a focal point. The presentation was given by series producer Mikio Gunji and was covered by two online news sources.

In the interest of expanding awareness of anime production challenges to the English-speaking world, here are translations of both reports.

Understanding of the Space Battleship Yamato 2199 business model
deepens at a Kyoto 2014 business seminar

Published at Anime Anime, October 1 2014

In order to deepen understanding of Yamato 2199‘s business model, a business seminar was held at Kyoto International Manga Anime Fair 2014 as a good example of the event along with various others. This year, a seminar titled The Business Side View of Space Battleship Yamato 2199 was presented by Mikio Gunji, Corporate Executive Officer of the Production IG planning office.

Production IG is the leader of the Production Committee, and Producer Gunji’s position is in charge of general business. Yamato 2199 is a remake of Space Battleship Yamato, which was broadcast in 1974, and Mr. Gunji explained in detail the changes in the environment surrounding Yamato.

In 1974, during the golden age of TV, anime could achieve a 30% audience rating. As a result, it was a time when big companies (national clients) first began to sponsor animation broadcasts.

Differences in the 1970s business model of Space Battleship Yamato and current anime

In the case of a single company that sponsors an entire program, Mr. Gunji said what they care about is reach and frequency. Frequency refers to how many times a viewer sees a commercial. This is an important factor because viewers unknowingly choose a product for which they have an affinity after seeing it several times in a commercial. That’s why a national client desires to sponsor a program with high ratings.

However, it is difficult for anime programs to obtain high ratings because of the variety of available entertainment. According to the latest statistics, the average overall audience rating for anime is said to be 2.8% (according to a media study by Dentsu Communications). In these conditions, works that achieve ratings over 10% are mainstream family programs such as Sazae-san, Doraemon, Detective Conan, and One Piece. It is difficult to raise ratings for any animation besides those made for family viewing. Producer Gunji revealed that it is the same for 2199, which did not achieve the nationwide TV ratings of a family anime.

Production IG’s booth at the Kyoto Manga Anime Fair

Recovery by Blu-ray and DVD is the current business premise of anime

So, how do you raise profit? To illustrate this point, Producer Gunji explained the production committee method that has now become mainstream in anime production. This system is a method by which multiple companies each invest in an anime, and the anime production company itself also contributes finances.

Producer Gunji said that the general mass-media view that animators are hurt when sponsorship funding from big companies is spent on advertising rather than production is in fact a misunderstanding. The main characteristic of the production committee method is to take on both the burden (investment) of production cost and the purchase (sponsorship) of airtime. In other words, he explained, a production committee carries the dual risks of investment and sponsorship when producing an anime.

Producer Gunji quotes the words of his predecessors in the anime business: “It’s like roasting potatoes with money.” The business risk is very high when an anime production begins, and can blow through 100-200 million yen ($1-2 million) very quickly. In other words, making anime is a gamble of hundreds of millions of yen with each work, and if profits do not appear, “you can lose big money if it doesn’t become a hit,” he explained.

In such a high-risk business, the high profitability of DVD and Blu-ray sales supports an anime, and the first profits are made when you purchase these expensive products. Although the opinion on the internet is that “DVD and Blu-ray prices are too high,” it was explained that anime production costs are recovered by the high unit price. Therefore, he specifically emphasized that, “Many anime broadcasts on TV are advertising for DVD and Blu-ray sales.”

According to Producer Gunji, it is said within the industry that there are about 30,000 heavy buyers of Blu-rays and DVDs across the country. Therefore, even if a creator hopes to make an anime for children, the project does not materialize in many cases because it is difficult to recover profits from DVDs and Blu-rays of child-friendly works. Instead, the condition is to adopt projects that appeal to the audience that buys DVDs and Blu-rays.

What are the special points of Yamato 2199?

As mentioned above, the current flow of anime business is to carry out a TV broadcast first, promote DVD and Blu-ray sales, then if popularity takes off an anime can be released theatrically.

The unique point of 2199 was to do the exact opposite, which Producer Gunji explained in detail. 2199 carried out event screenings in various parts of Japan and sold Blu-rays at the theater. Afterward, both Blu-rays and DVDs were sold in stores, and then it finally went to nationwide TV broadcasts on MBS and TBS.

“A variety of chances made this happen,” said Producer Gunji. “Although TV broadcasts tend to be the rail you run beforehand, this time TV broadcasting was undecided at the start.”

As a result, the TV broadcast of 2199 succeeded, and some stations recorded their highest viewer ratings. It is estimated that four million people watched it. In addition, video and plamodel sales were also a hit with about 500,000 pieces, and Mr. Gunji said this amounted to an economic scale of about 10 billion yen (about $100 million). The effect of the TV broadcast was vivid, with sudden increases in plamodel sales. Moreover, though it was initially thought that the main audience would be traditional Yamato fans, it was revealed that more children were watching that expected.

The TV broadcast could be realized this time because favorable conditions became clear in Blu-ray and DVD sales during the screening events, and “Recovery of the production costs, which was the first risk I mentioned, came into view,” Mr. Gunji said. Since a forecast of earnings was clear, members of the production committee made the decision that they could pay the sponsorship expenses needed for a TV broadcast.

Incidentally, it was said that Production IG, a production company, became a sponsor of the nationwide TV broadcast. There were no commercials in the beginning, but some were seriously considered for the pizzeria Musashino Campus, located on the first floor of IG. (In fact, commercials for this pizzeria were not made, and instead commercials were broadcast for IG’s independent production Kick Heart.) Producer Gunji summarized that the ideal outcome of a successful anime broadcast is to go nationwide and recover its production costs.

Based on this, “There is a cost price in anime together with sales like any other industry,” Mr. Gunji said. “If the work doesn’t make a profit, it will disappear. Consumers are surprisingly unaware of this fact,” he stressed. When the work was initially deployed, although he wanted to make great use of mass media for the event screenings, after evaluating profitability, a strategy was adopted to do as much pinpoint advertising as possible.

Yamato 2199 display at Kyoto Manga Anime Fair

When a nationwide TV broadcast was considered part of that pinpoint strategy, it became possible to sponsor the broadcast from the height of profitability, and that’s what lead to the TV broadcast being realized.

Some fans have said they want 2199 to be more heavily advertised, and it was explained that costs are multiplied by advertising, and cannot be recovered unless profits are at least three times the cost of promotion. Mr. Gunji stressed that the work could not continue if business decisions are not made with a keen awareness of cost recovery.

Concerning the cast of a large-scale anime movie project, in many cases film actors are given major roles rather than voice actors. This is done with awareness that it will increase the visibility of the work. In the case of TV anime, since the TV broadcast itself is advertising, it is extremely rare to cast anyone other than a voice actor, but when it comes to anime movies there are many such examples.

Among anime fans, there is opposition to casting anyone other than a voice actor. Mr. Gunji explained that the simple reason for daring to do this is “because it’s important to have it catch on on TV.” An anime movie could be produced only with voice actors, but how it catches on in the mass media is vital when it comes to promotion, including on TV. Mother Theresa’s famous quote was, “The opposite of love is not hate, but indifference.” Mr. Gunji’s supplement is, “First of all, you must be known. Nobody goes to a theater to see something they don’t know about.”

In addition, a special characteristic of the 2199 project was that while there were many in the media who were hoping to turn it into articles talking up “the demise of TV,” making statements like, “TV isn’t needed, no one watches TV any more,” it turned into a reiteration of the clout that TV media still has, saying “the truth is that everyone watches TV for one reason or another. TV is still a medium that has enormous recognition, and an anime film that couldn’t deal with TV couldn’t become a hit.”

The lecture was concluded when Mr. Gunji addressed the attendees who participate in various industries by saying, “Let’s work together in the anime business! If more people participate, the anime industry will grow. With that, various businesses will get interested in anime, so please become an anime sponsor!”

It can be said that 2199 was a work that escaped from the conventional anime business model and demonstrated a new direction of anime business development.

In fact, a special Yamato 2199 compilation movie titled A Voyage to Remember will open October 11 before a completely new movie titled Ark of the Stars premieres nationwide on December 6. Even the development of theatrical works creates new trials. That is reason alone to keep an eye on future development.

Only 300,000 people hold its fate!?
The “high unit price for fans” is the lifeline of anime business

Published at Otapol, September 25 2014

Mikio Gunji at AniLawson, September 28

At Kyoto International Manga Anime Fair 2014, which was held September 20 and 21, a two-part business seminar was carried out quietly behind the activities of sales, voice actors, artists, and fans. Its two sessions were The business side view of Space Battleship Yamato 2199 and The international anime business of TV Tokyo.

The Yamato 2199 presentation was given by Mikio Gunji, the Corporate Executive Officer of the planning division at Production IG. IG is the leader of the 2199 Production Committee, and its subsidiary Xebec was responsible for anime production of the series. Gunji is in charge of the overall business surrounding it. Here, we introduce the content of this valuable seminar that discussed the realities of anime business patterns.

The climax of 2199 was marked by a major surge in which its TV broadcast overlapped with the screening of its finale in theaters. Its total earnings exceeded 10 billion yen ($100 million) and unit sales have topped 500,000 copies. Despite theater screenings, net delivery, and a popular TV broadcast, it recorded the highest anime viewership in rural areas. Although “Its economic scale is 1/15 that of Gundam,” Mr. Gunji said, “its success over a 30-year span is exceptional.” It is also said that 2199 plamodels are also selling well because children are watching.

Extraction by TV stations and advertising agencies is misunderstood!?
The structure of the “production committee” system

Mr. Gunji continued his analysis by mentioning that there is a big difference in the environment surrounding anime between Space Battleship Yamato in 1974 and Yamato 2199 in 2013.

In 1974, anime was broadcast with national clients as sponsors, and anime could earn an audience rating of 30%.

Basically, national clients make decisions based on advertising by asking, “How many people will a commercial reach for this price?” and “how many times will the commercial be shown?” On the other hand, the average family viewing rate of anime has gradually decreased in recent years, down to 4.4% in 2005 and just 2.8% in 2012.

Therefore, the “production committee system” was adopted as the production method of anime. As for the production costs of anime, the major trend is, “A sponsor company pays an anime company through TV stations and advertising agencies,” and the problem of underpaid animators due to “extraction by ad agencies and TV stations” has become a target of criticism on the net. However, this is a misunderstanding since most of the money for an anime does not come from sponsors. Instead, production costs come from investments by various companies. This is called the “production committee system,” and the situation is reversed since the production committee pays the sponsorship expense to TV stations via advertising agencies.

In other words, when an anime is produced under the production committee system, the investment company bears the production costs and broadcast charges, which is a double risk. At the core of this anime scheme, not only anime production companies are involved, but in some cases TV stations and ad agencies may take part. It is thought that only fans will buy Blu-ray and DVD discs, which have a high earning capacity to generate profit. Since it is difficult to recover production expenses, works tend not to be made if discs cannot be sold.

When you look at the overall anime industry, some hit works can generate profits, but the situation is uncertain simply because of the high price of discs (note: the package price of anime is generally higher than for live-action). In addition, if an animator wants to make an anime for children, the current conditions are that if such discs cannot sell, the work will not pass. Within the industry, it is said that fans who buy discs amount to about 300,000 people, which is the first reason anime for children does not appear on a business agenda.

As a metaphor for this, Mr. Gunji comments that the current anime business is “like roasting potatoes with money.” This is based on the old caricature of getting sudden “Well, this should brighten things up” emergency big cash infusions, but with anime there are no such things. “Even when you have money, it’s never enough. You can blow through 100 or 200 million yen in no time,” landing you in dire financial straits.

In the current pattern of anime, a TV series is advertising, and a movie can be made from a popular TV broadcast. According to Mr. Gunji, the 2199 recovery model would be (said in a grand voice) “DVD decision! Determined to appear from the beginning!” which invited laughter from the audience.

The power of “TV Advertising” is alive and well!
Anime creators face a sense of impending crisis

It is said that 2199‘s flow of development was proposed by Bandai Visual. By applying the success of Gundam Unicorn, movie, net delivery, and video sales would be developed at the same time in the reverse of the conventional “maximum risk” of a TV broadcast.

However, there was no telling whether a TV broadcast could deliver commercials if the series had already circulated. Therefore, Mr. Gunji said, “if no other commercials came in, we’d make one for the pizza shop,” referring to a pizzeria which Production IG actually runs on its first floor. This was the inside story of how the pizzeria Musashino Campus almost got a commercial. When MBS finally accepted the strategy of “bringing in the TV broadcast last,” the need to make commercials was avoided.

In connection with the changes in audience ratings, he said the general thinking is that TV itself is in decline. Although this is sometimes called “the end of the TV era,” Gunji emphasized that people still watch TV, and stressed that a work doesn’t gain widespread recognition unless it is picked up on TV.

Recommendations for anime fans are not limited to the purchase of discs. Gunji touched on the particular doubts about other items by saying, “Everything has a cost price, and those that do not pay for themselves do not come up on the agenda in business discussions.”

Citing examples of common demands from fans, Gunji revealed difficult circumstances. “I want you to do more advertising; that costs three times the money that was pumped into production. I want you to do lots of local events; we lose money if we go local. I want you to make these products; some products are subject to soaring labor and crude oil costs in China, like rubber straps, for example.”

In terms of supply and demand, it closely resembles the phenomenon of trains disappearing at night. “Trains wouldn’t vanish at night if fans were always riding on them,” he claimed. [Translator’s note: this is in reference to Japan’s commuter rail system, in which fewer trains run at night when demand goes down.]

Concerning the circumstances surrounding publicity and advertising, Gunji quoted Mother Theresa: “The opposite of love is not hate, but indifference.” In many cases, fans protest the appointment of film actors over voice actors. This is not done to anger fans, but seeks the understanding that something will not get promoted in the news if no one knows about it.

In addition, he also explained about what goes on behind the scenes in the movie industry, how more than the size of the crowd you get to come see each showing of the film, what’s more important is how many seats you fill with each day’s showing. While filling 90% of 200 seats for one showing a day is seen as a success, if you average filling 30% of 500 seats six times a day, it seems at first glance to be less people, but ends up getting you five times as many audience members.

At the end, Mr. Gunji turned to the participants of the business seminar and urged them to, “become a sponsor of an anime program. Let’s work together in the anime business.” Though the seminar had a stark overall impression, if we had learned long ago that anime was made under such a sense of impending crisis, couldn’t the work have been benefited from different perspectives?

(Reported and written by Yuji Makari)

The End

Special thanks to Neil Nadelman for translation support.

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