Fun With Numbers: Licenses Matter (If You Know Where to Look)

The Summer 2013 has presented rich discussion fodder, giving rise to a number of interesting talking points. My favorite one is still the one on the merits of the core comedy in high-school life series that Free has sparked. This article is about one of those questions, one which is more complicated than some might think; Why did The World God Only Knows get a sequel? Based sheerly on anime sales, it’s a very risky proposition; season 1 literally just hit the profit line with an average 3000 sales per volume, and season 2 was well below that, averaging only 2117 per volume. If it made any contribution to manga sales, it was one of questionable value. Aside from one special-edition release that came with a bundled OAD, the manga sales don’t show a big jump after the anime airs. It’s a late-night anime, too (aired at 3:20 in the morning), so it’s not getting any help from TV ratings/ad revenue. So why are we looking at the third season of an anime whose second was already on shaky ground?

The answer is that that ground is not, in fact, quite so shaky. Once one considers the additional impact of licensing dollars, some sequels that look like iffy business make a lot more sense.

As always, a bit of background on the sort of sums anime makers work with. A 12-episode show that hits the 3000-per-volume profit line selling 6 discs in a set at 7000 yen/disc can expect to make ~126 million yen. This is the rule-of-thumb qualification for acceptable sales.

How much of that could a license cover? Well, we don’t know a whole lot about the costs involved, as most non-Japanese anime companies aren’t publicly traded. But we do have some numbers, courtesy of documents made available in ADV’s bankruptcy litigation. The costs of the series in those papers varied from $20,000 (~2 million yen) to over $700,000 (~70 million yen). The per-episode cost ranges from $3000 to $30000, with an average of about $17000. Assuming these numbers are close to accurate, that means a studio could expect to pick up around 20 million yen from a typical home video license of a 12-episode anime. 35 million yen represents a cap figure, though that might be more accurate for shows like TWGOK and Bakuman with huge English-speaking fanbases.

If we assume TV Tokyo did a good job negotiating and squeezed max money out of Sentai Filmworks when both seasons were licensed, that 35 million yen per season represents about a quarter of a show’s profit margin, about 800 additional unit sales worth of capital. That’s an amount that probably doesn’t mean much to a big seller like Sword Art Online, but for Manglobe it represents the difference between a season 3 that’s a fool’s errand and one that’s a calculated risk.

What’s written above a nice theory, but it could use some substantiation beyond the one test case. The way this string of hypotheticals worked out got me thinking; it would make sense if shows on the border of profit-and-loss got sequels more often when they had foreign license money as a cushion. Likewise, I would expect the effects of licensing on the presence of sequels to be small when looking at anime with extremely low sales (because even the best case doesn’t make them solid enough for a sequel to be a good idea) and anime with extremely high sales (because you’d have to be an idiot not to make six Bakemonogatari sequels). It might not be absolute because things in the entertainment industry rarely are, but it could show up as a general tendency in a larger sample.

It wasn’t hard to take 2005-2012 sales data and apply it to the problem at hand. I split the non-sequels that aired over that time into six groups, examining licensed and unlicensed subsamples for per-volume-sales<2000, 2000<pvs<4000, and 6000<pvs. I then calculated the frequency for which each group got sequels. You can take a look at the full lists here different samples are on different sheets. Or just check the summary below, which shows the frequency with which anime in each group got sequels.

pvs<2000, unlicensed: 6%±0%, 161 shows
pvs<2000, licensed: 8%±1%, 183 shows
2000<pvs<4000, unlicensed: 8%±1%, 39 shows
2000<pvs<4000, licensed: 22%±2%, 74 shows
4000<pvs, unlicensed: 52%±9%, 31 shows
4000<pvs, licensed: 49%±4%,126 shows

What does this data say? Well, it first and foremost says financially successful anime are a lot more likely to get sequels; they get coin flip odds while those on the wrong side of 2000 get the odds of 4 consecutive heads. It’s also a point in favor of the data in general; unsuccessful shows were getting sequels at a better clip would fly in the face of logic.

More relevant to the topic at hand, though is that the licensed shows on the border between profit and loss see sequels somewhere between 2 and 3 times as often as shows with similar sales that don’t. That figure alone is a strong datapoint in favor of the position that getting licensed matters to the long-term future for lots of animators. There’s also a slight increase in sequel likelihood for shows in the proverbial doghouse, on a level that is slightly significant. Also, the difference in sequel likelihood for the successful anime is one within margin of error (and leaning towards those without licenses), indicating that license cash doesn’t have as much of a role to play when the show isn’t checking under the couch for change.

So there is some truth to the statement that you support the creators and the anime industry in general when you buy products from localizers like Funimation and Madman. It’s certainly inferior to what we’ve seen Kickstarter is capable of, but I would take those extra odds on a Futakoi Alternative sequel any day if I could. Or a Kamisama Dolls sequel, on which I can and have. It doesn’t apply to all cases, but if you’re a superfan and you really want that [insert title here] sequel, it’s something to consider.*

*You could also buy the Blu-Rays from Japan if you just want to hand the creators gobs of cash, but that assumes you have the gobs of cash (and not just a couple of twenties in hand).

10 thoughts on “Fun With Numbers: Licenses Matter (If You Know Where to Look)

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  7. I just randomly happened upon this blog. It’s absolutely incredible and something I been searching for in the anime fandom for years! I hope you keep this going. I would dread it terribly, if you stop writing before I finish chewing through the entire backlog.

  8. Your conclusion looked sound, but I want to point out that licensing costs had fell quite substantially since the numbers you cite. Obviously, we won’t know hard numbers barring another licensee bankruptcy, but Funimation’s semi-annual interviews on ANNCast suggest that even 1~2k boxset sales are now enough for a show to break even. At 20% royalty rate, that comes out to licensing fee as low as $2k/episode. We also have unusual arrangements like Anime Sols that suggest a licensing cost as low as $1~1.5k per episode for very old shows.

    I don’t think these caveats detract from your conclusion, but something worth keeping in mind for your future analyses.

    • This is interesting info, I just have a couple of points I’d like if you could clarify:

      1. The 1-2k sales required for a show to break even isn’t that far from the low-end of Moeyo Ken (2000 $50 box copies for a sub-only) I guesstimated at in this article:

      According to the rough calculations I did with the Time of Eve Kickstarter budget (same article), the costs of dubbing+subbing 25 minutes of anime are going to run about $12500, and make up a much greater percentage of the costs than the license. If we are talking hybrid packs, it’s just as possible that the cost of translation for some of these series went down. Even if licensing were 0$ per episode, dub costs would likely necessitate a break-even point of ($12500/ep)/($70/12 eps)~2100 copies for a dubbed show (if NYAV Post’s costs are typical).

      With that in mind, are we talking about sub-only boxsets or dub/sub boxsets? It’s Funimation, so I’d assume that would be hybrids, but it never hurts to check. If it’s for sub-only, then 2k doesn’t necessarily represent a huge change in the break even point.

      2. According to the same math I did in part 2, the relative contribution of licensing fees to per-episode cost was very different for the ADV series based on whether they were on the $3000 per episode low-end or the $30,000 high end of the fee scale. Are those break-even values the range for not-at-all-popular to Fairy Tail popular? Or are they more for series with a bit less Western popularity?

      3. You mentioned a 20% royalty fee. Is that something that goes to the producers in Japan, or do you mean a premium that retailers charge and mark up before selling to consumers?

      4. Isn’t Anime Sols run by the people who own the properties already and thus don’t have to pay license fees? I was under the impression that it was being run by a Japanese collaboration of people trying to get some juice out of products they already owned, though I may be mistaken.

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