Would a lower price for R2 DVDs actually HURT the Japanese market?

[Quarkboy]

I pose this question after thinking over the consequences of something I posted in response to the year end review of Bandai Visual USA, but this point has nothing to do with the R1 market, only the R2.

In the US, it's simply common sense to say that lowering the price on an item means you will sell more of it. But I'm beginning to wonder if that's the case in Japan at all.

The Japanese consumer is well documented as focusing almost exclusively on value of the product (as in its functionality, capabilities, esteem in the eyes of others) as opposed to its price. Even Walmart, which has opened up successful stores around the world, has taken a completely different approach in Japan and bought a relatively high-scale department store. Why is that? Because the Walmart scheme of lowering costs -> cut-throat pricing would fail miserably in Japan, and they know it. Lowering a price won't make more people buy a product. It might even LOWER the number of buyers because the price of the item factors into people's view of its worth. It's a lot more impressive to your neighbors if your car cost $100,000 than if it cost $20,000, even if both have the same horsepower and features.

One might wonder what the original source of this "unique" consumer behavior is, and if I might hazard a guess, I'd say it was rooted in remnants of the Edo-era caste system. In that old system, the lowest level caste you could be was "merchant". As a merchant, you could make a ton of money in your business and still have to suck up to some out-of-work samurai with not a penny to his name. So to make up for this societal inequity, you used your money to buy things to make you feel like you had a higher place in society.

So, basically there is a damping effect on lower price: The lower the price, the less "worth" it has to the Japanese consumer and the less one is willing to buy it. Of course, too high a price and people simply cannot afford the product at all, no matter how much they might want it.
So in effect, for the Japanese market, you price something based on what you believe its value is, and produce something of the highest value your consumer can afford.

If the R2 anime companies were to suddenly lower their prices, say by around 20%, to MSRP ~$35, would that actually increase sales at all? Our american common sense says "Of course!", but perhaps that is wrong.
After all, if it really would make the anime companies more profit, wouldn't they have done that already? By simple logic, one can only deduce that the price of R2 DVDs is set at the maximum point of profit.
The "casual buyer" of anime simply doesn't exist in Japan. Even shows with mainstream popularity sell horribly on DVD. Ever see Naruto or Pretty Cure or One Piece DVDs in the top ten? That's because they sell something like ~4000 copies per volume (according to numbers I've seen). For the entire country. Those types of shows are essentially only rented and watched on TV, and almost all the profit is made off of merchandising, advertising, and licensing.

So I pose a simple question to the experts here in the R2 forum:
Do you think that lowering the prices on R2 DVDs would actually make the Japanese anime companies more money, or less money?

P.S. I am not addressing digital distribution here, as I think that's a very separate question with quite a different answer. (to answer it a bit, though... I seriously wonder if digital distro for anime will be accepted AT ALL in Japan. Digital manga works great, but that's because manga itself is not considered "ownable" property. Most people read it and throw it or give it away, it's disposable. Anime DVDs are the complete opposite. Whether people will accept a "disposable" method for anime distro in Japan is a deep question)

[Njr Scrawl]

So I pose a simple question to the experts here in the R2 forum:
Do you think that lowering the prices on R2 DVDs would actually make the Japanese anime companies more money, or less money?

I'm not an expert but don't think that asking less will help too much. In Japan shows are watched from TV & rental first, DVD sales are probably more a supplement, perhaps equal to rental. More (25 min) episodes on a same-priced disc would be much better for helping sales IMO. 2 e.p.d. is just acceptable, 1 e.p.d. is ridiculous.

If the Japanese reduced DVD prices, they'd probably reduce the deluxe packaging & extras quality (I'm now fearful of BV cheapening their quality for R1 more. If they do that, all appeal for their titles goes).
The Japanese might make some more sales from lower prices, but loose buyers as well.

[Quarkboy]

Would increasing the ep/disc count really increase the sales enough to offset the smaller number of releases? Say you put 4 eps on DVD instead of 2... you'd have to DOUBLE the amount of sales you make to compensate. Plus there would be whiners about lower bitrates and encoding quality from the high-end people.

In a way, increasing the ep count is no different than lowering the price, if you consider the price as how much it costs to buy one entire show.

[Skywise]

Well in Japan you have a huge second hand market, and rentals are incredibly cheap and available as well. While you'd see a shift from some people buying used to buying new, that would most likely be temporary as you'd see a comparable drop in price on the used goods, with people shifting back to getting them used again. When you add that all anime is shown on TV first, you don't have casual buyers paying for DVDs just to watch a show - Japanese buyers of anime know exactly what they're getting.

In short, no I don't believe lowering prices will cause a long term shift in buying patterns to compensate with a higher volume. The JP market is thus quite different from the US one.

[Quarkboy]

Just to clarify, renting in Japan is about the same price as renting in america. It's just that if you consider the percentage of the MSRP it costs to rent you are getting "more" for your money.

For example, at Tsutaya, renting a older release will run you 300 yen for 1 day, or up to 550 yen for 5 days. That's about the same as Blockbuster or wherever. Also, there aren't any cheap netflics-like services in Japan, they are all pretty expensive and only 1 DVD out at a time. I think Tsutaya has an online rental site, but it was $20 a month for 1 disc out at a time.

[Gatts]

The problem isn't the quality of the release. The problem is that many people in Japan rent movies and TV shows. When you have a premium on space, you can't just buy every DVD that's out there. If there was more living space on average in Japan, you would see more people buying items and thus a drop in prices on for sale items.

Quality is always a concern, because who would want to rebuy an item over and over again because it breaks? This is not the case for DVDs. A cheap DVD release, Nana volume 1 for example which was released on July 7th, 2006 for 707yen. Nana was a completely barebones release, but sold extremely well. Meanwhile the follow up release (volume 2) which was at a standardized price with more content did not sell half as many copies.

Quality is a concern. Price is a concern, but space is a very large concern. One that many people tend to overlook.

[Quarkboy]

I don't think the issue would be with the current buyers not buying any MORE dvds... it would be with the new people buying anime that may or may not be created by lower prices. Since their houses probably aren't filled already with stuff.

It also seems like space concerns end up secondary to the "I want it" concerns, usually. If they want it, they buy it, and then sell something that they had later to make space for it. So I'm not sure how that concern relates to my question: If lower prices did increase sales, wouldn't it just correspondingly increase the size of the rental market as well?

[treatment]

So, let me get this straight.

You're asking about the Japanese suddenly changing one of their traits/habits/practices?

You're talking about changing their rather strict mindset on stuff, e.g. consumables and other stuff.

That issue is rather separate regardless of whether it'll help or hurt their dvd-industry.

[Quarkboy]

Nonono... I realize that the chances of the industry changing are slim to none. That's not the point.

I'm asking a theoretical question, mainly because outside of the people who post on this subforum nearly all anime fans who hear what Japanese DVDs cost think "That's outrageous! The companies are charging WAY too much!"

Maybe I should have worded it "Should the Japanese companies lower prices on R2 anime DVDs?" than "if they". But whether they do or don't is irrelevant to the intellectual exercise I'm trying to perform. I'm not asking about the companies here... I'm asking about the consumer behavior in R2.

[treatment]

Nonono... I realize that the chances of the industry changing are slim to none. That's not the point.

I'm asking a theoretical question, mainly because outside of the people who post on this subforum nearly all anime fans who hear what Japanese DVDs cost think "That's outrageous! The companies are charging WAY too much!"

Maybe I should have worded it "Should the Japanese companies lower prices on R2 anime DVDs?" than "if they". But whether they do or don't is irrelevant to the intellectual exercise I'm trying to perform. I'm not asking about the companies here... I'm asking about the consumer behavior in R2.

You're kinda confusing me further, dude. :sd:

Firstly, from what you just posted, are you talking about japanese consumers or non-japanese importers like most of us here in this particular forum?

[Quarkboy]

Japanese consumers. Importers like those in this forum aren't statistically significant enough, I don't think.

But the people here are well educated about the R2 market and anyway, this is the most appropriate sub-forum for the question. I really don't see what's so complicated about it.

What's so confusing about answering this question: Do you think that lowering the prices on R2 DVDs would actually make the Japanese anime companies more money, or less money?

It doesn't ask "what are the chances of them doing this" or who the buyers are (but logic would dictate that the only buyers whose actions really matter for R2 releases are the Japanese consumers).

[The Great Bear]

Logic dictates that if you lower the price, more people would be able to afford the product. But as you have noted, the Japanese have a cultural mindset that values quality and status over price.

Regardless of whether they ever will change their pricing structure, my opinion, not particularly informed, is that it would depend on how much of a drop in price is proposed, and whether there will be any corresponding decline in the quality of the product.

Gatts however brought up good points and examples. Space for putting junk (I know, some of you are going to get angry at my calling your precious DVDs junk, but let's face it, whatever is not essential for required bodily functions is essentially junk; I have a large amount of junk myself) is at a premium in Japan. So, regardless of price, space is a consideration.

But the Nana example shows that when something is priced low enough, a broad market can be tapped into.

Had they followed it up with further volumes with more features but at a still lower price than normal, they might have been able to maintain that broader market to some extent. But by going back to the "normal" price range, sales shrank back to the collector market core.

Of course, we don't know how Nana v.1 performed in terms of profit. If the distribution company lost money, even with the increased sales, then I think they are not about the consider lowering prices, even if a larger buyer's market does exist at a lower price point.

[Quarkboy]

But the Nana example shows that when something is priced low enough, a broad market can be tapped into.

Hmm, I've done some research which seems to give a tight example of how well price compares with sales.

Three popular (always in top 10 anime ratings) shows, all from the same animation studio, all with 3 episodes per disc: One Piece, Yes! Pretty Cure 5, and Gegege no Kitarou.

One Piece is priced at 4800 yen, YPC5 is being released for "only" 4000 yen, and Gegege is being released at 3000 yen per disc. (Bandai visual USA would not approve).

So, considering they get approximately equivalent ratings over about the same age groups (one piece is a bit older), how are their sales?

Sales Figures for 2007:
One Piece:
2007/01/10 *1,969 Piece 1 (Three episodes up to Piece 11)
2007/02/07 *1,945 Piece 2
2007/03/07 *1,874 Piece 3
2007/04/11 *1,921 Piece 4
2007/05/09 *1,850 Piece 5
2007/06/06 *1,758 Piece 6
2007/07/11 *1,799 Piece 7
2007/08/01 *1,621 Piece 8
2007/09/05 *1,748 Piece 9
2007/10/10 *1,855 Piece 10
2007/11/07 *1,820 Piece 11
2007/12/05 *1,962 Piece 12 (Two episodes)

Yes! Pretty Cure 5
2007/10/17 *1,788 Vol. 1 (Three episodes up to current volume)
2007/10/17 *1,455 Vol. 2

Gegege no Kitarou
2007/08/11 *4,378 Vol. 1 (Two episodes)
2007/09/26 *2,312 Vol. 2 (Three episodes up to current volume)
2007/10/26 *1,569 Vol. 3

Note: Gegege's first DVD was specially priced at 2000 yen! (but for only 2 episode instead of 3).

So, what are the results? They all sell the same, about 1500-2000 copies, pitiful, awful, terrible, even though Gegege is priced 50% what One Piece is.

Maybe comparing a show like Gegege and One Piece is unfair? But I would think the nostalgia factor would have boosted sales for Gegege, but after the first 2 DVDs the sales dropped right back to the normal levels.

[The Great Bear]

Those figures definitely show that it does not work for shows aimed at the younger audience.

But Nana is aimed for an older audience, one where it would be young adults (with presumably, some discretionary funds of their own) as against parents buying for their children for the shows you mentioned.

It would be interesting if there were figures to compare shows aimed at various demographics (children, teenagers, young adults) segments, and see if there are correlations between price and sales.

Of course, I'm happy enough to suggest the idea, but not about to do it :sd:

[Skywise]

The local Geo to me when I was there (4 years ago) charged 100 yen per disc, and you could keep it for like a week. They also had a decent selection of titles. For an idea of how large the rental market is - 20% of Bandai Visuals revenue last year came from rentals.

[Orihara_Kaoru]

I have an issue with your assumptions of Japanese consumer habits. Yes, it's true that there are many consumer goods that are much more expensive in Japan than they are in the West. The 10,000 yen melons and 5000 yen laundry detergent gift sets (アタック！) are all true. And there are certainly many high-end department stores (Daimaru, Tokyuu, Maru Imai, Mitsukoshi, etc).

However, I think there's a significant portion of the consumer market that is dedicated to inexpensive products. The rental market has already been touched on (I personally found renting DVDs from my local non-chain shop was much cheaper than Blockbuster back home), but there is also the second-hand market, the Hyakuen (100 Yen) Stores, and the discount department stores.

I especially disagree with what you said about Walmart-type stores. Japan does have these types of department stores. Seiyuu is a chain that sells everything from clothes to toys to groceries. I got a great frying pan there for less than 300 yen. And of course the Hyakuen stores sell everything - nice stuff, too! - for 105 yen including tax. And some of them are as big as department stores!

Getting back to Japanese DVDs specifically, one thing I was quite floored with when I was in Japan was the price of non-anime DVDs. New Hollywood DVDs sell for less than 3000 yen. That's practically the same as here! It blew me away, because I was expecting *all* DVDs to have crazy prices. I don't know how anime DVDs can get away from it.

And I think the answer is: they don't get away with it. We've already established that R2 anime DVDs don't sell many units. Basically, they're catering to the otaku fanbase who *has* to buy them. How many sales are they losing to rentals and the used market? The Japanese are savvy consumers. They know if they wait a few months they can get that new 6000 yen DVD for 1900 yen down at Book-Off.

So I think lowering prices on their anime DVDs would be great for the R2 industry. I personally think there's a huge market for cheaper-priced goods (as evidenced by the prevalence of stores noted above). The Japanese aren't "used" to paying top-yen for everything. They know there are deals to be had, and many would rather avoid the high prices by renting or buying used. It would be an interesting experiment anyway.

[treatment]

Japanese consumers. Importers like those in this forum aren't statistically significant enough, I don't think.

But the people here are well educated about the R2 market and anyway, this is the most appropriate sub-forum for the question. I really don't see what's so complicated about it.

What's so confusing about answering this question: Do you think that lowering the prices on R2 DVDs would actually make the Japanese anime companies more money, or less money?

It doesn't ask "what are the chances of them doing this" or who the buyers are (but logic would dictate that the only buyers whose actions really matter for R2 releases are the Japanese consumers).

I don't think anyone here is anywhere even near qualified to even hazard to guess that the Japanese anime-companies will make more money or less money by lowering their dvd-pricing.

You are asking us to speculate something which most of us really have no clue. Specifically, we don't know exactly how japanese consumers behave and how much the profit-margins and stuff the japanese-companies currently have to afford lowering their disc-pricing.

Sure, we can prolly cite some anecdotal data from say, a suburb of Tokyo from hearsays etc, but then we'll have to correlate all that anecdotal data with the rest of Tokyo and the rest of Japan to even get to a meaningful average.

In short, it's really just like asking how big is the emperor's nose without actually seeing him in person.

[HyugaKojiro]

I'm no expert at Japanese behavior nor Japanese economics but I do believe that lower priced DVDs could succeed.

From what I understand the market for manga is much larger than the market for anime dvds (akaik), so there is definitely an interest for that kind of content.

With the right marketing (advertizing, promotions, etc) I think they could easily expand dvd sales, but it all comes down to how large the maximum user base is for this strategy to succeed.

I do however know that most Japanese companies are very risk averse, and maybe this is why they target the otakus as their target market, since their sales forecast is pretty much dead-on every time. There is virtually no risk involved with that market, where as if they were to target a larger more diverse market there would be inherently more risk involved.

Again, if my assumption with a larger manga market is correct, and a large enough base of potential customers exist, marketing that addresses the appeal of the content as well as its value to the consumer should do the magic trick.