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destined for failure

37 Responses to “destined for failure”

1. 
   2 Oct 2006 at 1:19:53 AM Alexander

   You sum up the situation perefctly, but the thing is, was there any doubt to begin with that people like us were never the target audience for any of these services? I doubt that we are even considered when they create their business models.
2. 
   2 Oct 2006 at 3:04:35 AM wontaek

   >>> I doubt that we are even considered when they create their business models.

   True, but our number is growing and they are in state of denial, just like the title of a recent book.
3. 
   2 Oct 2006 at 3:07:19 AM Unscrupulous Sousuke

   they don’t care, because there’s suckers born every minute who will buy into this. believe me, i’ve met ’em, and they are the kind of people who will say, “Godanner is awesome!”
4. 
   2 Oct 2006 at 4:03:22 AM Mentar

   Or even enlist the help of fansubbers. Yes, I’m serious. Come up with some kind of 1$-per-episode (or even better, a monthly subscription fee) model and provide proper hi-quality original content to selected trustworthy fansubber circles. They in return would release the hi-quality subs to the subscribers (today, distribution via torrent is trivial and dirt cheap), in very little time. If it has to be, DRM’ed, though I’d contest that this would probably even work without.

   Yes, there are still tons of little detail problems to be solved, with different possible solutions. But these half-hearted “dip toe into ice water” steps will certainly meet economic failure.
5. 
   2 Oct 2006 at 6:15:10 AM ddaedalus

   Sadly, I’ve to agree. There are many people who will buy this crap just because it “looks good” or “the ad was awesome”. And therefore there is the possibility that this technology could spread like a disease.
6. 
   2 Oct 2006 at 7:03:08 AM jpmeyer

   I wish I could remember where I read this, but I remember reading an article which basically said that DRM is also a huge threat to open-source because you can then no longer say, use Linux unless the company whose media you are downloading releases a version of their media player that runs on Linux.

   Also, I assumed that the “destined” in “destined for failure” was going to indicate that this was going to about making fun of GSD.
7. 
   2 Oct 2006 at 7:06:52 AM Kendra Kirai

   That’s what we thought about DivX, remember? And Realmedia? Unfortunately, the iTunes one will probably succeed, even if it is just Disney stuff right now. Everyone and his duck has an iPod.

   Personally, I want my stupid Digital Cable ‘On Demand’ service to have SUBTITLED anime, and more than five episodes at a time..like, maybe, ALL OF THE ONES THAT HAVE BEEN SHOWN ALREADY for example. I can’t count how many series they’ve shown I wanted to watch but they were showing episodes 20-23! And only dubbed!

   But that’s a bit off topic. *cough*. With ADV, it might actually be better off for you to go out, learn japanese yourself, and just import the R2 DVDs. Pretty sure it’d be faster and cheaper, and you won’t have to deal with those awful dubs in things like the DVD menus. (Excel’s dub voice on the DVDs…I know her voice is supposed to be grating, but that’s just too much!)
8. 
   2 Oct 2006 at 8:42:45 AM dm

   The iTunes movies will apparently play in iTunes, which you can download for free for Windows and Macintosh (though I don’t think it’s available for Linux). But it’s still burdened with DRM. I’ve got a Mac, and and iPod, but I’ve never gotten anything from the iTunes store because of the DRM restrictions — I still find myself buying CDs all the time.

   This situation with the iTunes store would change if I could buy from the iTunes Japan store.
9. 
   2 Oct 2006 at 9:09:56 AM Beowulf

   Don’t worry jason. Some kiddie reading your blog will eventually grow up and start a new anime company doing things that aren’t stupid. Well, we can hope.
10. 
    2 Oct 2006 at 9:12:36 AM thenightsshadow

    Heh. You never know, Jason, you never know.
11. 
    2 Oct 2006 at 9:55:19 AM MaverickRonin

    So far most people don’t buy buy digital downloads. Even iPod owners. It may make Apple some money but in the grand scheme of things the iTunes store isn’t nearly as popular as it is portrayed.

    http://tinyurl.com/lnh6c

    I don’t know if it is because people prefer to own something physical or because they prefer getting it for free. One thing I’m fairly sure about it that it isn’t because of the DRM. Most people don’t know what it is or how it will effect them. This will change over the next 5 to 10 years though. As people buy new computers or upgrade their current machines they will find themselves locked out of content that is no longer registered to their computer. Apple will let you transfer you content 3 times I believe, and Windows Media Player 11 will, among other things, lock you to one computer and delete your TV recordings (From MCE) after just three days.

    http://tinyurl.com/qntp8

    The only reason these companies can get away with DRM is because most consumers don’t know what it is. When the average consumer finds out what DRM is it will hit them like a ton of bricks and leave them up a creak with hundreds of dollars of rightfully purchased content, but no way to play any of it without violating the DMCA. They will be outraged. This will most likely lead to the failure of DRM laden products as consumer groups rally against it as if it was a carcinogen in the water supply.

    In the long run DRM is doomed for one simple reason. It only exists to hassle the consumer. So far the only people affected by it are on the bleeding edge. In a few more years everyone will be annoyed by it and then it will disappear. Every time I explain the concept of DRM and its various implementations across multiple platforms to a lay person they are horrified. Soon enough everyone will feel that way and DRM will be gone.
12. 
    2 Oct 2006 at 1:24:36 PM Crusader

    ADV must be under the illusion that they are in prime postion to establish a near monopoly on DRMed anime.

    As for the rest of the stuff while not targeted at otakus I can see some potential for less tech savvy persons especially iTunes given the ubiquity of Apple portables. Currently I am not impressed since even with the absence of anime there is a decided lack of programming that I would be interested in. Still if Apple were to extend their government discount I could see a bunch of single and to a lesser degree of married comrades hogging airport and hotel Wi-Fi to get their favorite TV shows right before mobilizing. In this regard I’d much rather have them staring at a screen than hittng a bottle of Jack. Since there seems to be a steady decline in on base berthing I can see many a reservist in hotel lobbies.

    Still at $2 for eps and $20 for movies I see most of them hacking their TIVO and just lugging their DVDs. If by some mircale this takes off the price may go down or we shall see a greater and more rapid sophistication of DRM tools for the industry.
13. 
    2 Oct 2006 at 2:33:47 PM Spam_vt

    The reason we don’t have an anime download service for $1-2 per episode is that it would be completely uprofitable. The market for anime is just not big enough to support that price point. Most anime dvds go for $5-8 per episode in the US, and the anime distributors still have a hard time making much money at that price. (For example, see the layoffs at ADV in an attempt to cut costs.) The licensing fees by themselves are probably more than $2 per episode.

    You mention offering subtitled episodes with quick turnaround time as a viable business model. I disagree. Even a hugely popular series like Haruhi only gets ~10,000 downloads per episode (and that is for free). Supposed you sold them for $2 per episode and paid $1 per episode of licensing fees. That leaves you $10,000 a week gross to pay your programmers, translators, customer service people, accountants, and any other employees. Add to that money for machines in a data center and to cover a large amount of bandwidth. The money just isn’t there. For example, look at the Apple iTunes store. They have several shows with audiences in the millions (literally 1000x greater than Haruhi), and they still barely break even with the iTunes store. Most of the money goes to licensing fees and distribution overhead.
14. 
    2 Oct 2006 at 2:45:49 PM Pete Zaitcev

    Those who only watch R1 DVDs have no idea how good they have it. I import Japanese DVDs, and they are pretty pricey: about $25 per episode (e.g. Kamichu is a tick lower than $50 per a DVD with two episodes). Compared to that, ADV’s $5 is not much (or it would be not much if I could burn it for storage). But of course, DRM is the deal killer for me. Even if I were masochistic enough to bother, none of my computers runs Windows.
15. 
    2 Oct 2006 at 3:23:06 PM Mentar

    Some corrections for Spam_vt:

    First of all, Haruhi episodes didn’t get ~10.000 downloads, they got ~100.000 downloads via bittorrent alone, not to count bot downloads, p2p downloads and other forms of distribution. On the other hand, of course not all fans would be willing or able to make payments, so the number of single-episode paying customers will decrease again (one more reason in my book to go for abonnement-style subscriptions).

    The “distribution overhead” is absolutely manageable, if done right. Make it bittorrent or any other p2p solution, a small proper data center install with acceptable redundancy, and purchase the billing/clearing solution from an ASP provider – and we’re talking about around 4-5.000 US$ per month, full service.

    It’s correct that you wouldn’t be able to make huge jumps with an armada of website programmers to maintain a glittery web presence, you need to keep it down-to-earth with low expenses. That’s one more reason why I’d recommend to treat fansubbers not as native pirate enemies, but as potential allies in producing subbed animes, because when handled right, they would do pretty much most of the work for free (or nearly free, at least).

    This would also give the DVD distro labels enough data to determine the “worth” and potential of a show – just check the results of the low-level “fansub downloads”, and you can see which ones would warrant DVD production. It would also give the labels hard data to negotiate licencing fees with the japanese studios with.

    So this leaves the fansub licencing fees for the japanese studios and the profit for the fansub label to be paid. Here, it’s simply a matter of critical mass. A single show wouldn’t cut the cheese, but if you were able to provide 10 shows this way, the income should be sufficient to eke out a small profit. Especially if the fansub label manages to form profit-share agreements with the japanese studios (so that the studios don’t get a fixed lump sum for the licence, but rather a share of the sales).

    To cut a long story short, it wouldn’t be glamorous (at least, not at the beginning), but it would certainly be economically feasible. It would be an extra source of income for the japanese studios, and I’d estimate that it would generally benefit them more than it would hurt their DVD licence revenues. It wouldn’t even have to be bad for the fansub labels themselves, because the overhead for DVD production, and the inherent economic risk due to the immense investments which need to be taken, is much smaller and easier to calculate.

    Well – let’s see if they manage to ever reach 4-digit numbers in anime episodes sold this way. I can’t see it and wouldn’t be surprised if those ugly shows would barely break the 3-digits.
16. 
    2 Oct 2006 at 3:24:18 PM Mike Burns

    Every time I see the phrase “honorable fansubbers” I laugh. What, “good” criminals with slightly more scruples than “bad” criminals? And that makes the whole law-breaking thing they do better how? As long as criminals believe they are somehow entitled to something everyone else in the world pays for, any download service will fail. I frankly don’t see why any R1 company even bothers with anime with the increasing number of “fans” who believe paying anything for it is paying too much.
17. 
    2 Oct 2006 at 3:38:13 PM Mentar

    I bet you’re a criminal, too, Mike. Aren’t you? Are you going to tell us that you haven’t watched and aren’t watching fansubs? Hmmm?

    Personally, I’m willing to pay my share for good anime, no problem. However, the product needs to be worth it – reasonably recent, reasonable quality and delivered in a format which is usable. The approaches listed above don’t cut the cheese.
18. 
    2 Oct 2006 at 3:49:45 PM Ragz

    fansub of stuff that not licenced in the states at the time do not break any copyright law

    since none of the stuff are licenced in china, so all chinese fansub are technically legal (not that makes any different, nor i care a slightest bit)
19. 
    2 Oct 2006 at 3:59:27 PM Mentar

    That’s a common misperception, Ragz. ANY encode of anime material taken from japanese TV violates the copyright of the anime studio, even raws. Whether or not an anime is “licenced” or not does not change this fact in any way.

    Here’s the relevant parts to the Berne convention and the TRIPS agreement.

    http://en.wikipedia.org/wiki/B....._Copyright

    The thing is that it’s not _enforced_, particularly not in China. It’s illegal nevertheless.
20. 
    2 Oct 2006 at 7:30:23 PM jason

    The point of my post isn’t the legality of fansubs (a boring and beaten-to-a-pulp subject), but rather pointing out flaws in the current state of digital media delivery.

    As for cost analysis, I did a quick analysis last year:

    http://derailedbydarry.com/arc.....08/30/394/

    Most of the problem stems from anime companies bidding up crappy shows. The licensing costs went from something like $25k a series to $25k an episode very fast.
21. 
    2 Oct 2006 at 8:16:45 PM Xellos-_^

    >Mentar

    The problem with your analysis would be the Japanese Studios. They make most of thier money form (expensive) R2 DVD sales. If there is a legal (cheap) way to get the anime online, the studios are going to be afraid of the online service cutting into their profits. It is the reason we have R1 and R2 dvds. They don’t want cheap alternatives out there to compete with their expensive dvd sales.
22. 
    2 Oct 2006 at 9:22:50 PM Spam_vt

    Ditto what Xellos said about the downloads cutting into the profits from the DVD sales. The Japanese publishers will not want to give up their income from the DVD sales in exchange for much lower income from the downloads. The episodes would need to be priced similar to the cost of the DVDs ($5+ per episode) in order to provide acceptable licensing revenue. Note how the TV shows on iTunes are not any cheaper than the DVDs (e.g. Lost season 1 is $45 at Best Buy, or $1.80 per episode).

    Re: Jason’s cost analysis
    I think you are leaving out a lot of the costs that would go into this type of business. You need to pay your programmers to maintain your website and write the download/player software. You need to license the DRM. (This is a requirement. The anime studios will not agree to unprotected downloads.) You need to have customer service people to answer the phones. You need to hire an accountant to keep track of the finances and make sure everyone gets paid. You need to work with a lawyer to negotiate the contracts. You need to have a budget for advertising. It is going to take a whole lot of $1 episodes in order to make any money.

    Btw, what is the point of ADV’s download site? If they were actually trying to make money off of it, they would need to sell the whole series instead of just episode 1. And if they were instead trying to drive interest in the shows and promote the DVDs, they should have them for free instead of charging $5.
23. 
    2 Oct 2006 at 9:26:45 PM anamesis

    someone for one of those companies needs to get there act together and go out and read some of are opinions mabye then we wouldnt have such a big ass problem like this…well i doesnt really matter cause DRM will fail but there will be clusterfuck more to come…and not all of them are snowballs in hell
24. 
    2 Oct 2006 at 9:26:55 PM Kotetsu

    (*looks around*) Actually, most of the otaku that I know in Japan own R1 or region-free DVD players and import the R1 DVDs. I think this is a pretty recent trend but it makes perfect sense. And I’m living in Japan and I’m doing the same thing. Hell if I’m going to pay thousands of dollars for entire run of Kyoh Kara Maoh on Japanese DVD when I can get it (totally legally) for a couple hundred dollars on R1 DVD.

    As for DRM… That’s the reason that I refuse to even own an iPod. (*waves her iRiver flag*) Although I have to agree with the commenters above who say that most people don’t know or don’t care about DRM. Or else why would iTunes be so popular? iRiver and several other MP3 players are just as good if not better (hardware-wise), comparable or cheaper in price, and not meant to be tied into a specific software like iTunes. Yet they’re not as popular for a variety of reasons.

    There are a depressingly large number of people who think that Godanner is awesome.
25. 
    2 Oct 2006 at 10:25:10 PM extraclassiclite

    iTunes sells $2 episodes, but in my (admittedly limited) experience the image quality is not good. If I was watching a show with fancy art like Mushishi or Haruhi it’d get old fast.
26. 
    3 Oct 2006 at 12:48:31 AM Kodukuu

    The latest slogan for DRM is “Defective by Design”.
27. 
    3 Oct 2006 at 12:50:00 AM Kodukuu

    BTW, you do know today is “Anti-DRM” day. But since you already wrote a post explaining what DRM is (though to a audience who already knows about it), you are scott free for the day :)
28. 
    3 Oct 2006 at 2:36:54 AM Mentar

    Nobody says they’re supposed to stop with their DVD sales. It would be an EXTRA form of revenue. How much this is going to affect DVD sales remains to be seen, I believe the impact is going to be less than you think.

    But of course you two are right that the consent of the licence holders is a necessary prerequisite. It would certainly be a major step in this direction – but frankly, the way I see it, some kind of participation-based flatrate model will probably be the result of the ease of piracy-distribution of modern entertainment content (not just anime, but also music and movies) in 10 years maximum anyway.
29. 
    3 Oct 2006 at 5:10:07 AM kawaiiextreeem

    if they had enough selection, old animes too, very high sub and quality of film I’d buy into it. I would want older animes too though, plus I’m sure I’m not the only one who would say that an adult section would surely get more busness then any other section they could put up. Hentai is big busness.
30. 
    3 Oct 2006 at 6:15:27 AM MaverickRonin

    Actually DRM probably wouldn’t be required by the anime studios. I read on Steven Denbeste’s site that ADV doesn’t even encrypt their DVD’s with CSS. Too bad he doesn’t have permalinks.

    That would suggest to me that the studios would allow it. All they would probably require is to check for an American IP before letting you download. That would protect their R2 DVD profits.
31. 
    3 Oct 2006 at 8:06:27 AM Kodukuu

    @Maverick

    And the rest of us outside the US?
    They would need to just block all Japanese people from downloading. Do you see the ridiculousness of that?

    And anyway, proxy servers would go around those in a nano-second.
32. 
    3 Oct 2006 at 10:52:58 AM MaverickRonin

    @Kodukuu

    Yeah, you’re right. I was being a little US centric. The IP would probably have to be restricted to the country/territory where the studio licenced it. Then the studio’s would probably licenced it to different companies for different regions. The US, EU, rest of Asia, South America, etc.

    They probably wouldn’t worry about proxies though. Its not any harder than ripping an encrypted DVD. It’s just a speed bump.

    It would be more difficult if you had to download to the county-specific IP instead of just authenticate through it. I have no idea how many free proxies there are out there or what their policies are but I bet they wouldn’t give you a very fast transfer speed. There are probably faster ones that you could buy access to as well but I have no clue what it would cost. It would probably be cheaper than the R2 DVD though.
33. 
    3 Oct 2006 at 12:07:26 PM Kodukuu

    If you spend some time on it you can find reasonably fast free proxies. If it becomes a model, there will also be easy guides and even more services.
    Yet again, there’s always the solution of a P2P network, and they really can’t do anything about that. So the less restrictions, the better.
34. 
    3 Oct 2006 at 2:11:17 PM Epi

    It’ll be very hard for something like this to happen. The $1/episode or $2/episode model just isn’t going to work for something like anime.

    Even iTunes sells it’s shows at $2/episode. Unlike iTunes though, ADV doesn’t sell some type of media player. Apple uses iTunes as a way to leverage their iPod player, not the other way around. People buy an iPod first, and then decide to use iTunes for the most part because it’s included, but very few people buy an iPod because they really want to use iTunes.

    The iPod is where the money is. So what if Apple sold 500 million songs? That’s only $500 million, compared to the billions they make every year off the iPod. The actual profit after expenses and royalties off the songs isn’t that much compared to the high margins off the iPod.

    Even Sony’s store sells music at $2/song. This is because Sony doesn’t have the ‘iPod leverage’. Their store doesn’t really sell them more players, and so they can’t afford to charge so little or their margins are almost nothing.

    ADV meanwhile is a media-only company. It has the most to lose from this scheme, because the pricing structure would severely undercut it’s sales. At $5/episode they probably break even with their DVD sales. I doubt their profits are that fat now… it’s hard to see how someone would gamble their entire company on the idea that maybe they will qunituple their sales online and offer their top titles like Evangelion and FMP!.

    The second thing that has made iTunes work so well is because there isn’t such a huge already established community for downloads for things like desperate housewives. Sure there are sites where you can download this stuff, but the vast majority of people who watch that stuff are old people or computer illiterate people who won’t search around.

    Music sales meanwhile have benefitted from a decade of RIAA legal action which has everyone scared and looking for a legal alternative.

    Anime isn’t the same. Because of the nature of the target audience (younger people who use internet and geeks!), anime has a very strong online community. It also has a LOT of people out there advocating for fansubs and so on. You simply cannot have it both ways. Since people who already don’t mind paying a lot DO pay a lot, this site would just siphon those people to be paying less. Meanwhile for those out there used to getting their anime free and in RIDICULOUSLY GOOD quality 1 day after it airs in Japan already, why would they pay even $1?

    Just as paid music failed until legal action was involved, the entire community would have to be destroyed for downloads to be effective. Is this what you really want? ADV probably doens’t have the money to wage such an expensive battle, but even if they tried, there would be so much backlash it would hurt their company.

    That’s why they are starting expensive and starting slow to see if people really will pay more. I figure if the margins work out, they will slowly add more but even then I wonder if such a thing would ever really work without things completely changing from how they are today.
35. 
    5 Oct 2006 at 5:45:37 PM JCTV

    You know, about this profitability thing, I have the 7 NGE platinums I bought at $20 or so each since I’d never owned it before. Thats about $140. Then, not long after that I see an entire box for like $50 or so and now on Amazon.com for $35.
    Just around when I start realizing they’re doing this for all their box sets.Lets see, $140 vs $35. They know a thing or two about profitability. $35 is less than two dollars an episode and I doubt being a digital media is more costly than factory making DVD’s. Whatever. Picked up my copy of Noodle Girl Miki volume 1. Thanks for the tip Jason.
36. 
    12 Oct 2006 at 9:09:49 PM Sailor Spork

    You cheap idiots. “I wanna pay $20 to download a whole season of anime higher quality than most DVD distributions!” That’s not a business model that’ll make a lot of money, its one that would lose a fortune. Anime costs more than that to license for one, and for another, the moment it was released for $1 on ADV’s or whoever’s download site, some hacker would have it available on mininova 20 minutes later. Face it, the internet only model is full of people spoiled by free quick fix speedsubs, and anything LEGAL of commercial quality takes time and money that your obviously not willing to spend. At $1 per download, you merely want a cheap way to clean your concience, and pseudo-solution to throw at anime licensors to say “I’ll do it this way but no other.”

    What would work is if they put their back catalogue up at something under the price of the cost of buying the DVD set in the store, something like Nuku Nuku TV at $3-4/ep… that might work. At least give an inexpensive “try before you buy” if they separated episodes, and make later eps less expensive than earlier ones so make people more likely to download the rest of the series…

    THAT is a doable business model.
37. 
    6 Jan 2007 at 6:06:23 PM ZakAdelman

    I am not cheap in wanting the fansubs.

    1) I would reather have it within weeks rather than in 12~18mos

    2) I still buy the DVD if the show is good and in many cases keep the download since the subs are much more accurate. And just take the DVDs to friends or whatever to share our collection.

    (I do have a lot of shows on DVD that I still have the fansub of)

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