Anime in the North American market is a unique beast, so to understand why the industry is in such a state of contraction is a complex undertaking. There are some parallels to be seen in comparison to the rest of the video market in the U.S., and yet some of the issues are unique to Anime, at least in the relative scope of the issue at this point in time.

To have a better grasp of what all of these developments mean for anime fans and the industry in general we first need to go to the source of the problem. Despite what some of you might be thinking, the fundamental problem is not fansubs, dvdrips, or torrents. While it would be fair to say that these things do have an impact, these are things that have an impact on quite literally all media around the world to one degree or another and are not going away. Ever. Dealing with the "pandora's box" the internet has become is truly a seperate issue, one all media industries will have to come to grips with eventually.

The real issue involves deeper and more fundamental changes in the marketplace for video. In Japan Anime is as normal in everyday television as soaps and sitcoms are here. Just as many American T.V. shows are "niche" market items in the land of the rising sun, so too is anime here in the states. It is this "niche" market status in the U.S. that is at the crux of the issue.

The overall market for DVD sales worldwide is in a slump. One that is expected to continue getting worse. The reasons are many. Changing viewing habits, competition with digital satellite, cable, DVR systems, Video On Demand systems, and yes even p2p networks and filesharing as well as "making copies for your friends...nudge nudge wink wink." People are simply getting their video content in different ways today, and the once lucrative DVD market is finally beginning to feel a little bit of the heat.

There are two truisms about animation. First, it is ridiculously expensive to develop. Secondly, it is at least currently a huge cash cow for media companies. Whether we're talking Pixar, Disney, or Clamp these statements are true. In Japan, the growth of anime as a medium of entertainment skyrocketed at about the same time as the DVD format was created, and the reasons behind this are the exact same reasons why the same situation occured in the states with movies and television series released on DVD. As the popularity and convenience of the DVD format grew it became a vital additional revenue stream for all video industries. Though similar growth spurts occurred historically with the introduction of VHS, it's safe to say that VHS just served the purpose of setting the stage so to speak for DVD's unparalleled success.

Conversely, just as DVD basically killed the VHS market owing to its inherent technical superiority, DVD itself is now under fire from all of the changes I mentioned previously and will eventually find itself in the same bargain bin as the "dead format" VHS has become. New high definition formats such as Blue-Ray or HD-DVD will do little to change this. Though at least one of these formats (at this stage it looks like it is going to be Blue Ray) will certainly be around for years to come, it will most definitely not enjoy the same market position currently held by "daddy DVD".

When an industry is beginning to soften, the first things to go are always the fringe markets. This is true whether you're selling canned garbanzo beans or DVD boxed sets in a retail chain. As much as we probably hate to admit it, our "fandom" represents a small fringe group of consumers in the states.

What is worse for the anime industry, and perhaps the biggest issue they didn't "see" several years back when they began to market heavily in the U.S., is that many like us became fans because of unlicensed fansubs. In other words, we became fans for entirely different reasons than their japanese core fanbase, yet we're marketed to in basically the same way.

The sorts of convoluted distribution restrictions (such as the number of episodes released at a time or the number of episodes on disc) and pricing restrictions levied on U.S. producers and distributors simply do not work as well here as they do in Japan. The audiences being marketed to are simply not the same.

An example of what cannot work for anime in the U.S. is also an example of what can work for animation in the U.S. Take Futurama as an example. The Fox series Futurama never appealed broadly as a network television show on Fox's network, but it did get a lot of mainstream exposure during its run. It did have a rabid following of fans, but these were a minority of Fox viewers, and not enough to save the series. After it was canceled Fox tried to milk the franchise one last time with DVD releases, and it was a runaway steamroller success for Fox. So much so that this decision alone led to the creation of the Futurama movie. The DVD release was a success precisely because it already had a developed following from television exposure. Anime in japan has mainstream television as a vehicle to drive demand for DVD. No such thing exists for anime here in the states to the same degree, and probably never will. Though Funimation and Adult Swim still survive and thrive there ability to effect the larger issues taking place here are minor as neither is remotely mainstream.

I expect the contraction in commercial anime to continue in the U.S., but I don't expect it to vanish. There *is* a worthwhile market of consumers here to exploit financially, but those who expected it to grow by leaps and bounds were sabotaged by bad timing. The fallout we're seeing in the states will likely end up being a microcosm of what happens to anime as a whole over the next decade. The business models relied on  by the industry are becoming untenable with the age of digital convergence and fallout is inevitable.

The anime industry in the U.S. tried during the last 7-8 years to grow, but failed because too many players were vying for too few dollars, and doing so with marketing strategies and restrictions designed for an entirely different market. The companies that remain will succeed or fail based on their realization of this, as well as on their ability to negotiate more "fringe market friendly" licensing deals with the powers that be.

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