Phil asks:

Is the anime business hit-driven like other forms of media or do people buy it "because it's anime" and that sustains the market?

Anime is, by and large, a hit-driven medium. By that I mean, the majority of anime series do not turn a profit. As nobody is entirely sure what will hit and what won't, the producers of anime have no choice but to keep making stuff, hoping something will make an impression, and when a show hits really big, it makes enough money to keep the whole machine going, effectively making up for the losses incurred from the failures.

That said, every show -- even the ones that completely face-plant, sell at least a few copies on disc. Every season or two, there's a show that is such an unmitigated failure that the publisher quietly cancels plans to release the series on home video. But since publishing the show doesn't cost THAT much money, the show has to be pretty bad -- not just a financial embarrassment but an artistic one, on the level of "I can't believe this even made it on the air." At that point it's not just about the producers cutting their losses, but also about trying to brush the show under the rug and hoping that everyone forgets it exists.

Of course, sometimes the success or failure of an anime series can't be measured by just sales. Oftentimes an anime is made for marketing purposes -- be it for merchandise, or to sell the original manga series or game. For more kid-oriented and long-running family shows, the video sales are a nice bonus, but are far from the main reason the show continues to be made. Additionally, some series are purchased predominantly by Japan's (still quite plentiful) video rental stores, not by end consumers.

Early on in the DVD boom, there were definitely fans that were buying literally everything just because it was anime. I am sure that is no longer the case. There's just too much anime being put out for anyone to watch, let alone buy. And even though there are fans that like a WHOLE LOT of shows, nobody can possibly love EVERY SHOW Japan ever makes. Sooner or later everybody has to start picking and choosing.

The market is largely sustained by three things these days: home video sales, international rights sales, and merchandise. Everybody knows about home video sales, but international rights sales are now a huge, sometimes dominant, part of the pie these days. The huge popularity of streaming services has raised license fees to previously-unheard-of levels, now even higher than where they were during the mid-2000s anime bubble. New entrants to the anime licensing game, like Netflix, Amazon and Hulu, are bidding prices even higher.

Even crazier is the similar bidding war for content in China. Chinese broadband providers have been locked in bidding wars for anime, driving prices ridiculously high. I've had trouble getting exact data on this, but license fees for Chinese streaming rights are thought to be equaling or even surpassing license fees to North America! Nearly everybody I've spoken with seems to be of the opinion that these license fees are probably not sustainable in the long run, but producers are trying to get as much in revenues as they possibly can.

The fact that these license fees are now paid up-front, before anyone has ever seen the anime and few people can say with any certainty as to whether they'll be a hit, is cushioning the blow from failures substantially: since producers are getting paid a lot of money for international rights up front, they don't have to worry so much about not selling DVDs later. This is also changing what shows are being made. Where a few years ago, when anime production was completely dependent on domestic fans buying expensive Japanese DVDs and Blu-rays, we saw a lot more shows being tailored to the tastes of Japanese fans. Now, producers are looking for properties that might be hits worldwide.

Like everywhere else in the content business, things are changing very fast and nobody is sure what's going to happen over the next few years. But for now.... yay, money!

Got questions for me? Send them in! The e-mail address, as always, is answerman (at!) animenewsnetwork.com.