Land of the Setting Sun: Is The End Of Anime As We Know It Imminent?
Not quite sure I’d say that, but as Nicholas points out the industry is in grave danger.
Part II: Anime In Japan – The Studio’s Dilemma
By Nicholas Zabaly
As detailed in the first installment of this series, anime as a whole has had a difficult time in America. The problems the medium has faced here, however, are minor when compared to the systemic issues that fissure the Japanese production industry. Small budgets, low wages, and razor-thin studio profits have had a cumulative effect on the stability and long-term health of the industry which, now threatened with greater economic contraction, has come to a breaking point. While a few select studios, such as Ghibli, Toei, and Sunrise are above the fray thanks to either corporate ownership or massive capital reserves, the majority of Japan’s hundreds of smaller animation companies are on a daily basis forced to confront the harsh realities of being pawns in a business they cannot hope to control. Unlike in America, where animation companies generally create their own works with their own money, most animation produced in Japan is done ‘on commission,’ with the studio paid only a small amount by the financing company, which then reaps the fiscal rewards. Forced to work with a system where their survival depends on a continued series of independent ‘jobs,’ Japan’s anime studios are stuck in a zero-sum game: no matter how hard or how well they work, their continued existence depends on the will of others.
How It All Began
The root of the problem in anime production has historically also been one of its strengths: the low-cost, low-risk nature of the business. Compared to funding a live-action film or an American animated series, anime has always been extremely inexpensive, thereby making it easier for financiers to recoup their investments. A perfect example is Ghibli’s 1997 film Princess Mononoke. Costing an “unbelievable” $20 million US dollars to make, it was the most expensive anime film to date. It went on to become a massive hit in Japan, earning more than $200 million US dollars. Even the failed US and Canadian release, which fell far below the hoped-for estimates, still pulled in $2.4 million, or 1/10th of the entire cost. Meanwhile, for comparison purposes, Disney released a film of their own, Hercules, in 1997. The estimated cost of this animated movie was $70 million, yet it only earned back $99 million at the US box office. It was clear to everyone involved the potential anime could have. Like the once-famed Blair Witch Project, they could be made on the cheap, then come back to earn big for their investors later. Financing companies jumped at the chance to get involved, and publishing giants like Kadokawa Shoten ramped up efforts to turn their novel and manga properties into profitable TV and theatrical anime. Even as the ‘go-go’ boom of the 1980s faded and lavish studio-directed projects like Akira fell by the wayside, millions of dollars continued to flow into the anime industry from other companies that hoped to get rich quick off of others’ labors. And so, the modern business organization of anime in Japan came into being: publishers pay the animation studios to adapt their manga properties into anime, finance the production cost… and then keep all but the barest sliver of the profits. This system resulted in phenomenal returns for over a decade, making anime and the related character goods merchandising business huge growth centers for Japan’s aging publishing houses. Indeed, these were growth markets the companies needed, since Japan’s publishers, like those the world over, have been in a decade-long decline. Kadokawa Group Holdings (parent of the Kadokawa Shoten publisher), in the first half of fiscal 2008, lost nearly $19 million dollars as their core publishing business diminished in traditional markets. The losses would have been far worse, had not one critical area held back the tide: DVD sales of anime. Continued high earnings by titles like Lucky Star (commissioned from Kyoto Animation) and Full Metal Panic! (commissioned from both Kyoto Animation and Gonzo) cushioned the monetary blow. Even bigger business came from cross-promotion between the company’s light novel properties (easy-to-read, short novels which target a youth / fan audience) and the anime series adapted from them. Huge light novel hits like The Melancholy of Haruhi Suzumiya (which again was made into an anime by Kyoto Animation) brought in millions of dollars, even as Kadokawa’s traditional novel business experienced continued decline. It has thus become extremely important to the publishing companies, TV networks, and record companies that invest in and depend on anime for continued earnings to maximize their own profits to mitigate losses in other areas. And massive profits are to be had by these corporations, enough for Kadokawa to even predict an end-of-year profit of $1 million. At the same time, the miniscule amounts earned by the animation studios held them in thrall of their financial benefactors, and kept the animators, directors, and other artists from earning (in some cases) even a living wage. Feast for the corporate giants meant that the creators, and the producing companies that provided them artistic homes, were constantly on the verge of famine and extinction.
A Problem of Ownership
The commission system is at the heart of the problem for the studios. Essentially hired on a ‘per-project’ basis, they must follow the financing companies’ orders in everything from budget to content. This wouldn’t be such an issue for the bottom line, except for that the financing companies cannot always be expected to play fair with compensation, or with understanding the true costs of animation production. Additionally, because they often do not own their work, the studios cannot hope to recoup current losses with future profits. Once a show goes over budget, or the budget contracts to force a loss, there isn’t any possibility of correcting the situation. Instead, all the studio can do is hope that they can do the next show cheaply enough to save a sliver of the allocated money to make up for the loss. This inevitably leads to cost-cutting measures, such as outsourcing or a drop in quality, which may in turn affect the show’s ratings, which then may cause the financing company to further decrease the budget. In this fashion, a perfectly fine show can implode over the course of several months if the production is mismanaged. In other instances, the financing companies can prevent animation studios and directors from changing the content or story of the series, or can force the inclusion of certain types of elements. This has dramatically changed the history of the anime industry on a number of occasions, notably 30 years ago, when the toy company Bandai, which had decided to pay the Sunrise animation studio to make a series for them, required them to make a show with “lots of robots.” The result: the original Mobile Suit Gundam.
Other instances have been less fortuitous. When the Japanese public broadcasting network NHK commissioned the GAINAX studio, at the heart of Japan’s economic crash of the early 1990s, to make Nadia: The Secret of Blue Water, they forced such harsh conditions on the studio (even causing them to deliberately make the series at a continually-increasing loss or risk being deprived of the chance to be hired again) that the director, Hideaki Anno, left the project on the verge of a nervous breakdown. Still worse for Anno was the fact that the NHK had essentially asked him to rip off Hayao Miyazaki’s classic Laputa: Castle in the Sky. Anno had worked with Miyazaki on Nausicaä of the Valley of the Wind and felt a degree of loyalty to his old boss, so being told to take advantage of that had a doubly harsh sting. After Anno left, GAINAX had to outsource entire episodes to the cheapest ‘speed-outsource’ companies in Korea and China to avoid being driven into bankruptcy, resulting in a disastrous string of episodes with quality so bad that even fans of the series cringe at their mention. Pressed into making entire episodes in just slightly over a week, with only a few thousand dollars to pay for everything, the Korean and Chinese artists (some of whom may have been political prisoners of the Chinese government) had to work under extreme conditions. Ultimately, the studio resumed work in Japan, prompted in part due to the fan outcry at the downfall of the show. GAINAX somehow finished the series with a reasonably polished bang, completely drained of capital reserves, battered, broken, but still breathing. They had survived. Other companies were not so lucky.
The lack of ownership also has profound effects on the staff. When even character designers are paid a flat fee ‘per character’ and then receive no royalties when their creations are plastered on fans, playing cards, action figures, and body pillows, resentment can run strong and deep. Even in cases where the studios do own their work, because of the precarious nature of their finances, most cannot afford to pass the profits on to the original designers, writers, directors, and artists via royalties. Everything in the anime industry simply becomes a matter of commissions: designers are paid ‘per piece,’ just like animators are paid ‘per drawing’ and writers are paid ‘per script.’ No one has anything to gain off the future of their labor… no one but the financiers.
A Problem of Wages
Further complicating the matter is the question of the ‘per piece’ payments themselves. It would be one thing if, like during the Disney Renaissance of the early 1990s, the animators being paid (in some cases) $100,000 dollars or more per year, with bonuses included. But the situation in Japan is quite different. Historically, the Japanese have never had the kinds of labor movements that in the past defined the American workplace, and across the country, unions are few and far between. In the animation industry, there have been no unions of any kind, and no protective labor groups until late-2007, when the Japan Animation Creators Associations (JAniCA) was officially established (the group legally incorporated in mid-2008). This group, which currently has about 500 members, includes such prominent industry figures as directors Takashi Nakamura (A Tree of Palme), Tomoki Kyoda (Eureka Seven), Rintaro (Galaxy Express 999 Movies, Metropolis), Toyoo Ashida (Vampire Hunter D), and Satoshi Kon (Millennium Actress, Paprika). JAniCA’s long-term goal is to raise the working conditions, pay, and quality of life of animators and artists in the business, and thus far, their activities have consisted of actively mapping the current conditions among its membership and others willing to participate in its surveys. The initial findings have been stark: the typical key animator (the artists who draw the key poses and determine the movement and timing of the animation) can draw about 200 pages in 1 month’s time, and depending on the ‘per piece’ rate on average will only earn several thousand dollars, with no vacation, health benefits, retirement pension, or social security. Many animators, on hearing the group was collecting stories, came forward with their own personal experiences. Stories of animators who had to give up apartments they could no longer afford and move in with loved ones, of enthusiastic young artists burned out after years of starvation wages, and of elderly colleagues forced to survive on public assistance or live on the streets as homeless became disturbingly prevalent. More concrete are the breakdowns of actual salaries. Of course, none of the artists involved in production at the vast majority (90%) of studios are under contract, but are instead paid as they work.
On average, JAniCA has found, a storyboard artist (who is tasked with drawing all the boards for a 25 minute episode) earns approximately $600 a week, when they are working. It takes about 3 weeks to draw the storyboards for a full episode, meaning that employment comes in $2,000 chunks. This averages to $28,800 a year, with no vacation. Key animators are paid anywhere from $22-$25 per drawing, with the very fastest animators being able to complete perhaps a dozen final drawings per 10-15 hour work day. The average number of drawings, however, has been said by several sources, including animators themselves, to being closer to 8 per day. This means that key animators can, at best, hope to earn between $200-$300 a day, at the industry-high wages. On many shows, however, the animation requires such detail that the per-day drawing count falls to just 2-4 drawings. In such instances, the pay does not increase, and there is no overtime. Being assigned with, or taking on a difficult scene, can therefore mean potential financial devastation in the short term for the artist. In a production budget leaked in 2007 from the AIC A.S.T.A. studio, it was revealed that the key animators of the Bamboo Blade TV series were being paid just $20 per drawing, the bottom of the industry barrel. This pay structure did not provide enough money to live on. Ironically, the show’s plot revolved around a bet that that a suitable girl’s kendo team could not be assembled, with the prize being a year’s supply of food at a pricey sushi restaurant. Undoubtedly, the animators must have wished they had a shot at winning the prize, since their yearly wages (which were far below the industry average of $18,400) would not have allowed them to eat sushi, or to eat out period. One wonders if they can eat at all. Things grow still worse when the in-between animators, who draw the final drawings that provide the base for the digital colored version seen on TV, are considered. While these drawings are less detail-oriented and thus easier and faster to create than the keys, they still require great skill and significant time to do well. It is the in-betweeners who suffer most under the ‘per piece’ pay scale, as for each drawing they do, they are paid just $1.65-$2.80. In-between animators try to clear at least 300 drawings a month, with the faster (or more ambitious) striving for 320-350. One young animator at GAINAX, who was featured in the recent Gurren Lagann Documentary Works film (which profiled the staff of this hit series for two years), said she would regularly shoot for 320 but would sometimes end up with just 280 due to the high complexity of the work. Her salary, as a member of a studio that pays above the industry average, hovered perpetually at just around $1,000 per month. With the cheapest apartments in Tokyo costing about $800 per month, she was not earning enough to live on her own.
The reason for these low wages comes from the budgetary breakdown of each episode. Going back to the Bamboo Blade example, each episode of the series was budgeted at about $95,000. Of this, the episode director, scriptwriter, and animation director were each paid $2,000 for their labor. In terms of the time breakdown on how much per week these lump-sum payments amounted to, the writer would have two weeks to meet with the series coordinator (the equivalent of a US show-runner) and then write the script. The writer could thus expect $1,000 a week. The average writer, meanwhile, might write 20 or fewer scripts in a year, meaning an annual salary of $40,000 or less. The episode director would be involved for the duration of the episode production time, which could be from 1 month to 2 weeks, and would result in a range of weekly pay of $500-1,000. The same conditions also exist for the animation director. Of the remaining $89,000 budgeted for the episode, no less than $45,000 would be spent on the opening and ending credits sequences that run with every episode. The huge cost of these sequences would be spread across all the episodes of the series run. The reason for the great expense is not normally due to the animation (which, although frequently of higher quality, is very brief in duration and therefore more manageable), but instead is thanks to the theme songs used. The musical artists who perform the songs, and more specifically their record company managers, consume millions of dollars of the show’s budget, while at the same time getting free publicity (frequently, the singers are up-and-comers being promoted by the recording companies, who then use the anime to gain public exposure). The remaining $44,000 must pay for the voice actors, the sound recording, the art designs and background paintings, the digital coloring and photography, all the animation, and the day-to-day operations of the studio. Trying to make that money stretch across all those employees and necessities, one quickly realizes how impossible it is to run a profitable studio and pay a living wage.
Earning a sustainable wage is also complicated by matters of age. According to the most recent JAniCA survey, which drew 700 responses and was completed this May, animators and artists in their 20s earned on average $11,600 per year, while those in their 30s earned $22,600. These numbers are inclusive across all fields, including key and in-between animation, digital coloring, background painting, and directing. Meanwhile, according to a survey completed last year, industry veterans in their 40s and 50s earned around $31,000 annually. But between 20 and 30 percent of all animation staffers, regardless of age, still earned less than $10,500 per year. Moreover, 47% of the respondents said they did not have an employment contract with the studio they were working for, and 38% said they had not received a physical health check-up since they were employed. But even with these low wages, the anime industry still could not earn enough to make more than marginal profits. While the aforementioned Bamboo Blade was budgeted to earn 20% profits on each episode, the financing companies, broadcast networks, and other investors took the vast majority of this capital. AIC A.S.T.A. was, like most contract studios, left with between 1 and 2 percent profit, with which they could cover losses (such as episodes that went over budget) and pay for other expenses. Ultimatelythough, earnings for most studios are so small that getting out of the contract system proves to be almost impossible.
So Sue Me
The oppressive contract system can only exist in a climate of fear. It is completely dependent on the unequal relationships between the anime production studios and the financing companies. So long as the people with the money are squarely in charge, they have the power of intimidation on their side. This is not to say that all contracts take this path; in fact, it is likely that the vast majority, although unequal, do not involve any foul play. But from time to time, industry insiders drop hints and rumors, always unconfirmed and quickly suppressed, that the financing companies are deliberately cheating the studios out of what little profits they should be earning.
As was the case with GAINAX and Nadia: The Secret of Blue Water, the reasons for this are complicated. In some instances, the financing company may be under pressure to maximize profits in a bad economy. On other occasions, they may simply want to take advantage of weak studios. Whatever the reason, ultimately the result is the same: the financiers have the power to threaten the studio and say that, in essence, if they don’t make the show for less than the agreed upon amount, they will lose the contract and will be effectively blacklisted by other financing companies. Outrageous as this may sound, it is made all the easier due to the fact that, in as many as one third of the deals to make an anime television series, there is no written contract. Financing companies, particularly when dealing with small studios that have not been around for a long time, may simply refuse when asked to agree to writing down the terms of their production agreement. And without a written contract, there is of course no way in a court of law to conclusively prove that fraud has occurred. The natural reaction, at least from an American point of view, has to be the question: why would any company accept a production order without a written contract? The reasons are, again, complicated. Due to the fact that small studios are completely dependent on the good graces of the financing companies, often working with the same partners over and over again, in order to break into the business at all and gain market share, they have to obey the rules of the game. If they do not, they do not get orders, and they fail. If they protest these working conditions, they are blacklisted. And if they go public with the allegations, a course of action not just frowned upon in the industry, but across all of Japanese society, they are run out of business.
It should therefore come as no surprise that very few anime studios ever take the vaunted legal option of the American company: to sue for lost revenue. For the most part, the cheated studios simply take this treatment quietly, trying to absorb the losses by decreasing the cost of future productions and covertly taking some of the production budget to make up the difference. But when a studio is dealt a blow so massive that they cannot survive without the justice system, the courts and media do get involved, and an exposé on anime’s bad business practices is unveiled. The recent and evolving case of Radix mobanimation versus Micott & Basara is a particularly nasty one, with both participants seemingly ready to fight to the bitter end. The original relationship between the two companies seemed simple enough. Radix mobanimation, known for its original production Haibane Renmei, among other works, was contracted by Micott & Basara to animate a television series based on the popular Appleseed CG films. Micott & Basara had previously produced these films, with assistance from computer graphics animation studios, and had achieved international success through collaborations with live-action film talents like John Woo and popular musicians like Paul Oakenfold. All seemed well until, according to Radix, after three and a half months of work and without explanation Micott & Basara ordered a production halt, in violation of their written contract. To make matters worse, Micott and Basara then refused to pay the production costs, resulting in Radix claiming an extraordinary $400,000 loss. To put things into perspective, this amount is equivalent to the profits from 20 to 40 episodes, or several complete television series, a number potentially higher than the studio could produce in a year. No small studio of Radix’s standing could possibly survive such a financial blow. To try to save itself the company took the case to the Tokyo District Court. Also interested in the outcome is Wedge Holdings, of which Radix is a subsidiary. Due to the loss on the Appleseed contract, Wedge Holdings revised its net profit estimate for the year from $1.4 million to $1 million, or about a 30% drop. Micott & Basara then struck back, countersuing Radix almost a year later for restitution and compensation over the canceled project. While Radix sued for the allegedly unpaid production costs, Micott & Basara have gone for the kill. They are demanding a total of $1.7 million, of which the breakdown is $1.1 million for the cancellation of the production contract, and $577,000 in compensation for damages. Micott & Basara claim that, contrary to what Radix claims, there were no unpaid production costs, and Radix unilaterally ended their discussions on the project. If $400,000 was a potentially crushing blow for Radix, $1.7 million is an annihilating one. The civil suit has literally become a battle for Radix’s life, and a fight to the death between the two companies, with Micott & Basara knowing full well that, if they win, it will almost assuredly drive Radix into bankruptcy (barring a massive rescue from Wedge Holdings). It must also be noted that, since announcing the lawsuit in 2008, Radix has not been given even a single contract from another financing company. As a result, the studio has been at essentially a dead halt in terms of production for over a year. With stakes this high, it is little wonder that few companies try the legal route. And when one considers the massive amounts of money that would be involved if a studio decided to sue a publishing giant, and the power of high-priced lawyers that such powerful publishers can deploy, it becomes immediately obvious to nearly all anime companies that taking on a financier in court is corporate suicide. So, the unequal relationships continue quietly and in the shadows, financing firms continue to cheat the studios, and animation producers, always tenuously looking for slender profits, consider whatever cost-cutting measures they can to remain in business.
The Korea Condition
The modern animation industry in Japan was born through outsourcing. As American TV animation grew more and more expensive to create in-country during the 1970s, producers like Rankin and Bass looked to Asia as a cheap source of artistic labor. Although work went to countries like Taiwan, where entire industries were established around the steady stream of work, Japan provided an especially attractive alternative. The country was politically stable, had an existent (although small) native animation industry (and thus the training system to supply it), and culturally prided itself on combining efficiency and quality. In other words, it was the perfect location for massive outsourcing. As Japan’s industry exploded, American animators lost their jobs in droves. Thousands of artists were put out of work by the whims of Wal-Mart Economics: in the race to the bottom, cash-hungry companies looked to cheap and exploitable labor bases to use for a while, and then dump when they became to expensive to maintain. Japan, as it turns out, was lucky. The outsource animators also worked on native productions, and became the mentors and teachers of the next generation of artists, the ones who make up the ranks of today’s veterans. When American productions abandoned Japan due to rising costs, their industry was capable of surviving, even thriving, beyond any previous levels. In just a few short decades, the Japanese industry became a mature, robust production center, employing as many more animators working in the traditional 2D medium as America, and then surpassing them. Over 300 animation companies operate in Japan today, all interlinked in a massive web of mutually-beneficial production services and rivalries. And at the hub of this wheel are the great spoke studios: Ghibli, Madhouse, BONES, Production I.G, GAINAX, Toei, Sunrise, Gonzo. They hold the wheel and the web together, and down to the smallest strands that are connected, however indirectly, through the degrees of separation, all the other companies in the business somehow depend on them. But in recent years, another group of threads has been woven into the web, ones that, while beneficial, have started to branch off into their own parallel structure. These strands are the Korean subsidiary and outsource companies.
During the 1990s, the more forward-thinking Japanese studios realized that developing a talent base of animators in Korea could provide a tactical advantage for the future. American productions like The Simpsons had, after all, been outsourced to Korea from the get-go, with virtually no in-country work after pre-production. While no one in Japan wanted to go that far, the realization that Korean outsourcing could provide a cheaper source of labor on the time-intensive tasks of in-betweening and (at the time) cel painting, therefore freeing up the Japanese animators to take on more work, made many companies realize the necessity of outsourcing to grow their business. Even though hundreds of outsource companies already existed in Japan, small groups of artists of 20 or less who just worked on production assistance projects, the tantalizing prospect of having hundreds of Koreans under contract for the same money or only slightly more lured production off-shore. The Wal-Mart Economy struck again. In 1991, just a few months after they were established, the Seoul-based DR Movie entered into an exclusive partnership with the Madhouse animation studio. It was a relationship that would last until the present day, with Madhouse ultimately investing significant money in the company in 2001, and in 2006, Madhouse’s corporate parent, Index Holdings (which also owns Nikkatsu, Japan’s oldest movie studio) bought a still greater stake in the company. Although they maintain their own management and autonomy, DR Movie has today become, in essence, Madhouse Korea. And DR Movie has enjoyed remarkable success, becoming one of the highlight players of the new Korean industry. Not only have they had a hand in nearly every Madhouse production of the past 20 years, but they’ve also become the go-to studio in Korea for the other major Japanese companies that don’t themselves own subsidiaries. Among their other honors, they are the only Korean company selected by Ghibli to work on their productions, starting with Spirited Away. And their quality of work has become so high that Madhouse recently entrusted complete production of an entire series, called Claymore, to them. Only the scripts, backgrounds, voice recording, and some of the episode direction were done in Japan; the rest was all left to DR Movie. It would seem no hyperbole to assert that DR Movie’s in-betweeners are among the best in the world, and have likely surpassed many of the Japanese studios that provide this service. Furthermore, DR Movie employs 350 full-time staff, and hires up to 600 at peak production times, a number vastly higher than even the biggest of Japan’s studios. Despite being paid less, the artists of this company have been able to enjoy job security, with some of the staff members having steady work for a decade or more, something that few Japanese animators can boast.
DR Movie’s success led other companies to investigate foreign outsourcing. The Gonzo Digimation Holdings corporation (GDH), an enormous conglomerate formed around a core animation studio but also comprising game development, web and mobile contents, and capital investing arms, launched their own Korean subsidiary, GK Entertainment, in 2006. Within just a single short year, GK Entertainment became a serious challenger to DR Movie, even being selected to provide key animation on the high-profile Evangelion: 1.0 You Are (Not) Alone feature film, the biggest theatrical anime hit of 2007. And elsewhere, other studios are trying different strategies. AIC, the parent studio of AIC A.S.T.A (mentioned earlier as the producer of Bamboo Blade), has in recent years investigated co-production possibilities with art colleges and universities in other parts of Asia, such as Taiwan. Students would be paid a token amount to provide assistance on episodes, while gaining experience in creating animation. Vietnamese artists have recently begun work painting backgrounds for dozens of anime series and films. And Chinese subsidiaries have started to develop as well. All of these efforts have led to Japanese anime commentators describing a potential ‘East Asian Anime Co-Development Sphere’ (borrowing the archaic language of the pre-World War II Japanese Empire) which would involve future productions being produced among all the different Asian countries. A Korean production, for example, might outsource to Japan, while a Chinese co-production with Vietnam could be possible. Even the most inclusive commentators, however, still insist Japan will be the leader. “Japan will provide the concepts and ideas” is the mantra of the commentators, stressing that even as outsourcing grows ever larger, Japanese creators will still have their place in the world secured. Unfortunately, these commentators overlook one key factor: many of today’s top directors, designers, and supervising animators started as lowly in-betweeners, jobs that, due to outsourcing, are vanishing at a record pace from the in-country Japanese production system.
The real result of the Korea Condition is that young animators in Japan no longer have the chance to grow through the ranks. While some of the major studios, like Ghibli, Madhouse, Production I.G, and GAINAX still employ in-betweeners as trainees or keep a small group of them on staff, other companies have basically abandoned having any at all. And as increased outsourcing to other countries in Asia deprives the local Japanese outsource assistance studios of work, young animators have fewer and fewer places to go. Traditionally, the path of succession of a young animator would have been the following: start as an in-betweener, move up to key animator, move up to chief animator, move up to animation director / character designer, move up to episode director, and then finally up to full series / film director. People generally stop at the level their skills will allow them to rise to, or where they want to work (for example, some key animators may be highly qualified to direct, but don’t want to as it would take them away from drawing). But now, under the system that has developed through the realities of outsourcing, new artists must start at the key animation level or higher coming out of art school. The vast majority of animators, however, are not ready for this, or are simply not capable of doing it. Key animation, more than just draughtsmanship skills, requires developed senses of timing, posing, and movement that only the most miraculously talented beginners possess outright. Without the ability to train on the job (and without the motivation of being bumped up to key animator wages), young artists no longer have the opportunity to enter the industry unless they are natural-born geniuses. The result has been an implosion of new talent, and a general aging of the anime industry staff. A decade ago, artists in their late 20s and early 30s made up the norm. Now, few directors are younger than their mid 40s, with most in their mid 50s or older, and animators have a general age of mid 30s or more. The fresh-faced idealists of the past, full of enthusiasm and ideas, have become a sparser sight in Japan’s studios. And the industry’s veterans, including even studio heads like Masao Maruyama of Madhouse, have started to talk of a thinning of talent and an oncoming decline as the business ages and loses touch with its young roots.
Gonzo
Once in a while, all of the factors besetting the anime industry as a whole come together in a perfect storm that envelops a studio with devastating consequences. At this moment in history, the company under siege is none other than Gonzo, one of the largest and most intrinsic to the industry’s general health.
Established in 1992 by founders Shouji Murahama, Mahiro Maeda, and Shinji Higuchi (all formerly of GAINAX), the small studio (which took its name from the Italian word for ‘ruffian’) began modestly, gradually building a name for itself in its first five years by providing animation for minor projects primarily in the video game sector. Their first major production came in 1998, with the OVA (original video animation) series Blue Submarine No. 6. This work inaugurated the so-called ‘Gonzo Style.’ Dominated by hand-drawn character animation mixed with elaborate and extensive CGI, the visual look quickly caught on and catapulted the studio into the limelight. At the time, CG animation was only moderately used even in theatrical films, and always played a background role (usually as a time-saving technique), so the depictions of digitally rendered submarines and ships came as a shock to audiences. Also intrinsic to the ‘Gonzo Style’ were the distinctive character designs of Range Murata. Largely known as a doujinshi (fan-published comic) and graphic artist, Gonzo’s gutsy move to enlist him as the chief designer of what would ultimately become the studio’s most-known look drew many comments from within the industry and its fan base. As a direct result of his work on Blue Submarine No. 6, Murata became internationally known, and (after collaborating several more times with Gonzo) was invited to foreign animation conventions as a guest of honor. Building on this early success, Gonzo started building itself into a strong and aggressive business competitor across several fields, including animation production, digital effects creation, and game design. All was going well, and around the industry, the company became known as a tough competitor in the television anime arena.
There was just one small problem. Like all the other studios, Gonzo was dependent on the contract system to gain the financial reserves needed to produce their works. This did not sit well with the company heads, who wanted to break the cycle and themselves determine what shows they would make. Moreover, they wanted to keep a greater portion of the significant monies their productions were generating. To that end, Gonzo began self-financing productions, laying all their operating profits on the line to become a production committee member with the financiers. This was a huge risk on their part, with the potential consequences of corporate destruction looming larger than ever. But as Gonzo created hit after hit, the gamble paid off. Especially lucrative to the company was the fact that, when their shows were licensed internationally (and particularly for America), Gonzo got a significant percentage of the fees and residuals. Moreover, they could conduct negotiations with the licensors directly, asking for financial terms that were beneficial to them. Unlike most other studios, they were also able to prominently display their corporate logo on DVDs sold abroad, raising name recognition to levels matched only by industry veterans like Ghibli. As the American side of the business mounted in importance, Gonzo put more and more of its cash reserves into self-financing, lifting themselves out of dependence on publishing companies and other partners. The rest of the industry watched in anticipation as Gonzo provided an increasingly valid alternative to financing company domination. Since they were working without such dependence on contracts, the studio created more original productions (versus adopting popular manga), and made anime versions of famed novels and plays, like 2002’s Yukikaze, 2004’s Gankutsuo: The Count of Monte Cristo, 2006’s Welcome to the NHK!, and 2007’s Romeo x Juliet. The crowning achievements, however, came in 2006, when Gonzo released two major and expensive theatrical films, the environmental epic Origin ~Spirits of the Past~, and the fantasy adventure Brave Story. These were their first cinematic works.
But lurking under this veneer of success were mounting problems. In order to drive their business model, Gonzo had to produce ever-increasing numbers of shows in the hope that one would hit big and help cover the costs of others that were more modest in their returns. This is essentially the same strategy employed by Hollywood studios, where the blockbusters pay the bills and cover less successful productions. It is also the model of the publishing companies. But where Gonzo differed from these examples was in the sheer quantity of financial reserves. While a major American studio can afford to lose a million dollars without it being a major issue, Gonzo was by necessity operating under the ground rules of the rest of the anime industry. Even self-financing, if an episode costs $100,000 to make, and it earns $120,000, only $20,000 remains as profit. Therefore, to pay for expensive prestige productions like the theatrical films, or high-profile shows like Gankutsuo: The Count of Monte Cristo, revenue needs to be slowly gathered, saved, and spent at the right moments and on the right expenditures. To ensure this could happen, Gonzo’s parent company GDH (Gonzo Digimation Holdings) created a capital investment arm, taking whatever monies they could and sinking them into profit-generating subsidiaries, including Gonzo Rosso (a game design company), and GK Entertainment (the previously mentioned Korean studio). The capital expenditures, however, were based on the assumption that Gonzo itself would continue to receive a stable level of support from both the Japanese and American marketplaces. This gamble proved to be the fatal mistake for anime’s rising star.
While American anime fans eagerly awaited Gonzo’s new releases through the first half of the decade, Japan was another story. Although the studio had made inroads swiftly and won a name for itself, sales of their titles never rose after the year 2001. In fact, Gonzo’s best selling series of this time period, Vandread, sold just 9,764 copies of its first volume in its first week, and reached just 11,906 copies a week later. These are not good numbers in an industry where the vast majority of DVD sales occur in the first few weeks of release and units sold decline precipitously by progressive volume (for example, volume 2 sells fewer copies than volume 1; volume 3 sells fewer than volume 2; etc.). As for the prestige productions, they did far worse. By first week, first volume sales, Last Exile, the company’s 10-year anniversary series, sold just 6,601 units. Gankutsuo: The Count of Monte Cristo, considered by many to be Gonzo’s greatest show, sold a pitiful 2,732 copies. And the high profile re-imagining of Akira Kurosawa’s Seven Samurai, the sci-fi remake Samurai 7, sold just 1,542 DVDs. While these shows all did better in America, it wasn’t enough to make up the losses, which were substantial on each one (aside from Vandread). With sales for all series averaging in the 5,000-7,000 unit range (again, first week, first volume), Gonzo never attained a position to make adequate money to cover the expensive artistic heights they aspired to reach. Through it all, the financiers the company had abandoned watched and waited. And as Gonzo hit the peak of their spending in 2006, the industry wondered if it was sustainable. It wasn’t. Gonzo stumbled. The films were not hits, and the studio’s television work was being abandoned in droves by Japanese fans. The publishing companies had hit on a new formula: moe, or shows that emphasized cute, innocent, but sexually-desirable girls (usually pubescent). Moe were never prestige series. They didn’t have weighty themes, complex stories, or technically difficult artistry. They had cute girls doing cute things, usually with a minimum of animation frames, and were cheap to make and lucrative for the bottom line. Japan’s anime fans leapt on the moe bandwagon, which had been building strength in the years previous and exploded full-force in 2006 to be the dominant genre in terms of numbers of series produced, as well as sales. Gonzo, which hadn’t made much in the way of moe before, and was identified in Japan by its dependence on the American market, was demonized overnight. With moe particularly popular among the most extreme Japanese fans, who trend male, early to mid twenties, and nationalistic, the reaction was immediate and vicious. Gonzo was suddenly labeled as ‘traitorous’ to Japan for ‘selling out’ to America. Its co-productions with American companies on series like Kaleido Star, a family-friendly show starring a Japanese girl who performs in an American circus, were seen as useless and pathetic pandering. The strongly environmental themes of their first film, Origin ~Spirits of the Past~, came under fire from conservatives. And the lack of moe shows demonstrated to Japanese fans that Gonzo ‘didn’t care’ about them.
In many ways, Gonzo’s 2007 series Afro Samurai reflected this problem perfectly. Based on the violent, cross-cultural manga by Takashi Okazaki, the show follows Afro, a (presumably) African American samurai who duels for possession of the Number 1 Headband, the mark of dominance, with other warriors in a futuristic Japanese setting. Gonzo saw that this title, if mixed with American voice talent and hip-hop music, could be huge in the United States, and immediately set to developing it. The final series, which starred Samuel L. Jackson and was financed by the Spike TV cable channel, became the top-selling anime DVD in America of the year. In Japan, Afro Samurai barely made a dent. Who, the increasingly conservative and nationalistic Japanese fans said, would want to watch a black samurai? In a largely homogenous culture, not only was Afro not welcome, he was hated. More than ever, the moe crowd of fans, who had become the primary consumers of anime DVDs and merchandise, saw Gonzo as ‘selling out’ to America. Domestic sales collapsed. And when the US anime business peaked in 2006 and then began to decline, Gonzo lost the market stability they were so dependent on. In 2008, the company began to run into serious trouble. GDH, Gonzo’s parent company, reported a staggering $35.44 million yearly loss in May. This huge sum was easily enough to sink any other company without massive corporate backing (Ghibli excluded), but due to GDH’s capital reserves, they were able to weather the storm. Needing help, GDH looked to sell more shares of its stock. Iwakaze Capital was looking to buy, and in September of that year $18 million was rushed into the studio as the investment firm took control of 15% of the company. As a result, many of Gonzo’s top managers and corporate heads were forced out, leaving the company they had built. But the money was still not enough to stave off disaster. In November, Gonzo revealed that the lack of funds required them to decrease annual output of new series from 8 to just 4. Three weeks later, the company publicly announced that they were asking 50 of their 200 employees, or about 25% of the workforce, to ‘voluntarily retire.’ The employees who took the offer were given a month’s salary as their severance package, and the knowledge that their sacrifice was helping the company to survive. Unfortunately for Gonzo, only 36 employees took the offer, meaning that the effort was too little, too late. In February of 2009, Gonzo shocked the industry by announcing that they were reducing their remaining 130 employees to just 30. They would, in other words, no longer be able to produce an anime on their own. One by one, the company’s assets were sold off. GDH Capital, the financing subsidiary that had helped the studio produce its works, was sold in November 2008 for $2.2 million. Gonzo Rosso, the game subsidiary which was built around a core company that had existed previous to Gonzo’s purchase of it since 1963, was divested at the end of March 2009. But the worst blow of all came in April, when the vaunted CG department of the studio, intrinsic to their signature look, was sold to a rival company for just $310,000. Literally picked apart, Gonzo flailed desperately, seeking any possible escape from their situation. They had tried, in late 2008, to appeal to the hardcore Japanese fans with their first moe show, Strike Witches. The series, infamous overnight for its fan service (or sexually-related content), was nicknamed ‘Strike Panties’ by fans. It ultimately became Gonzo’s best selling title ever, with 8,720 copies in its first week, and 12,318 by its third. But even this could not help the company turn a profit. Gonzo was delisted from the Tokyo Stock Exchange on July 30. And even with the fire sales of its assets, GDH’s yearly results (which are released mid-year in Japan) noted a $35.3 million loss.According to its auditor, the company now faces possible insolvency.
Gonzo pinned all its hopes on one last batch of shows, the 4 remaining series to be released in 2009. They have not been embraced as was hoped. Shangri-la, the high profile prestige production that brought back Range Murata’s character designs, has languished and been attacked by American fans. Arad Senki - Slap-Up Party, a show based on a Korean role-playing computer game, was skewered in early reviews. Only Saki, a series based on a high school mahjong club with a heavy dose of lesbian fan service, has become a big hit. But because Gonzo had been forced to take this series as a contract, and not self-finance it, the majority of profits that have been rolling in that could save the studio have instead been going to Square Enix, the game company that owns the magazine in which the Saki manga was originally published. After producing 14 episodes, Gonzo no longer had the ability to go on, and animation duties were passed to Picture Magic, a small company that, unsurprisingly, has never self-financed a series. As for the last remaining production of the year, Gonzo has stated that they will try to make a second season of Strike Witches, although whether they will survive that long is, unfortunately, very uncertain.
Quite simply, this is an intolerable situation for the anime industry. The critical life-web that makes up the business is being torn to shreds by the present model, and if Gonzo does indeed fail, the ripple of its fall will spread far and wide. Not only are the remaining employees in Japan and Korea at risk, but so are the dozens of subcontractors, the affiliates, and the other studios that depend on Gonzo for co-productions. In a few weeks, Ghibli’s latest film, Ponyo, will open in American theaters. Animation fans may be surprised to note Gonzo’s name when they read the credits: in order to finish the film, Ghibli relied on Gonzo, as well as other studios, to pick up the remaining work. This is a normal practice that if disrupted by corporate collapse will have terrible, lasting results. Beyond this, if Gonzo is to disappear, other anime studios will be afraid to take the self-funded production route, and will remain firmly under the control of the powerful financing companies. Moreover, there may be consequences that anime fans, both in America and Japan, have not recognized. On either side of the Pacific, Gonzo’s vicious deriders have filled cyberspace with calls for them to “die quickly,” to “fail spectacularly.” Some particularly high-and-mighty ‘fans’ have even declared that “Gonzo’s destruction will help the anime industry.” This comment, even if given the benefit of the doubt, makes about as much sense as the claim that General Motor’s destruction will help the American auto industry. In response to the lawsuit between Radix and Micott & Basara, one contributing member of Anime News Network, a major information source used extensively for this article, said that “perhaps this legal fight will be more entertaining than anything we would have gotten from a functional production [of the proposed series].” This blasé attitude toward the survival of the two participant companies, by a known and knowledgeable member of the American anime community, is disturbing at best. Unfortunately, such sentiments are widespread and regular across the forums, blogs, and even news coverage entities that make up international anime fandom. This is the outgrowth of the Internet’s entitlement attitudes, a situation to be explored in more detail in the third and final installment of this column. But with regard to Gonzo, to Radix, and to the animators, what anime watchers clearly don’t understand is that this industry, until it is reformed and significantly remade, cannot continue to provide content in an equitable and fair way for the people who create it. Whether it is in the abysmal pay conditions of artists, the lack of long-term benefits for creators, the inability for studios to escape the contract system, or the brutality with which fans turn on once-beloved titles and producers, these assorted situations can and will destroy the industry over time if they are not dealt with. If anime as we know it is to survive, fans need to demand better treatment of animators, support the industry with purchasing dollars, and end the hyper-critical mentality that forces studios into corners. There is still much to hope for, but only if people act, here and now, to ensure it. Despite what its critics claim, Gonzo is not dead yet. If you want to see it live, then support it! Purchase their shows! Show your appreciation for what they’ve accomplished! This is what artists want: to be appreciated, to be told they are not “useless.” This is possible, but only if people make it so. The same applies to the animators, the other studios, and the system as a whole. Fans must demand improvements. In great mass and volume, these demands can be heard. In great mass and volume, financial support can save studios from even the worst cases. And in great mass and volume, ordinary people can make real changes possible. Because it is these ordinary people, like the writer of this column and those of you who are reading it, who make up the extended industry, the people who love and cherish the art that emerges from it. Without us, there is no industry. We would do well to remember that.
Next Time, in Part III: Anime Fans – The Worst Enemy?
August 1st, 2009 at 7:11 pm
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