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How Much Does It Cost to License Anime Series?

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How Much Does It Cost to License Anime Series?

Old 08-02-21, 09:12 PM
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How Much Does It Cost to License Anime Series?

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How Much Does It Cost to License Anime Series?
by Christopher Macdonald, Aug 2nd 2021Recently there's been some discussion about how much it costs to license an anime series, especially in the wake of the recent AnimeTube Kickstarter campaign. There are many factors that impact the cost of the license, including, but not limited to:

Recently there's been some discussion about how much it costs to license an anime series, especially in the wake of the recent AnimeTube Kickstarter campaign. There are many factors that impact the cost of the license, including, but not limited to:

1. How popular is the franchise?
2. Is this a first-run / simulcast license?
3. Is the license exclusive?
4. What rights are being granted?
5. What territories are included in the license?
6. Is the licensee on the production committee?
7. Are there previously existing materials?
8. Is there a holdback on the rights in Japan?

The first one is pretty straightforward. Licensing a new entry in a super popular franchise will cost significantly more than licensing a series that doesn't have a lot of hype. This impacts the demand for the product, and higher demand (from consumers and from competing licensees) drives up the price of the license.

Secondly, is this a first-run license? This is very similar to the previous factor in that it affects demand. First run/simulcast licenses are more in demand, and therefore they are much more expensive. Competition among simulcasters and the explosive growth of internet streaming has pushed anime licensing prices to heights that have never been seen before.

Almost all first-run/simulcast licenses these days are exclusive. An exclusive license is one that allows no other licensee to acquire the same rights. It's very rare for licensees like Crunchyroll, Viz, or Funimation to be interested in a non-exclusive simulcast/first-run license. In the rare cases where you see something simulcasting on two different platforms in the same territory, it is likely that one of those platforms licensed the rights from the other “master” licensee. For example, Funimation sometimes sublicense to Hulu, and in these cases Hulu is not acquiring the streaming rights from the Japanese licensor. Most licensees won't sub-license to direct competitors either, so you're unlikely to see Funimation ever license to HiDive, or to a startup that seeks to disrupt them.

There are a whole slew of rights that can be licensed, the most important of which are physical media (Blu-rays and DVDs) and digital media (itself often broken up into subcategories). Other rights include merchandise, television, or music, for example. These days, most licenses from Japan are for “physical media + streaming.” Some companies are only active in one business area: for instance, Crunchyroll is a streaming service, so they often sublicense physical media rights to another company such as Sentai Filmworks. Likewise, Viz and Discotek are physical media companies, so they often sublicense streaming rights to other companies.

These days, it's pretty rare for major anime companies to pick up rights for just a country or two. Typically they will have licenses that are something like “World Except Asia” or “English-Speaking World.” North American rights are almost always the most expensive, and North American companies often scoop up rights for many other countries at the same time. For a few years, Mainland China rights were sometimes higher than the North American rights, but due to a number of changes in both markets, this is not the case today.

Sometimes a licensee manages to be invited to be on the production committee for the anime. This means they are effectively one of the shareholders of the corporation that makes and “owns” the anime. Production committees are a whole topic for one or more other articles, but right now it's important to understand that if a licensee is on the committee, they will be asked to make an investment towards the production budget, and depending on the arrangement, they may also be expected to pay a licensing fee on top of their investment (other times it is included in the investment). Usually licensees who are production committee members will pay a bit less for the license than they would otherwise be expected to, however there have been cases of companies paying huge investments to be on the production committee. Normal licenses are for a limited period of time, but production committee members regularly get their rights in perpetuity. Foreign companies usually aren't invited to be on production committees, particularly for the most popular titles. But in some cases the producers are either looking for more investment, or some other added benefit that a foreign company can bring to the production.

First run and simulcast releases generally have limited materials available; no books have been created, the translations haven't been made yet, etc. But for catalog content, licensees are sometimes willing to pay a bit more than they otherwise would have (or might be expected to pay a bit more) if they want to pick up a pre-existing subtitle script or dub, or any other “materials” that they might want to include in their release as extras.

Finally, A “Holdback” is when there is a mandated delay between the Japanese release and the foreign release. This is much more common for physical releases than streaming, but originally a lot of streaming licenses were not truly simultaneous, delayed by anywhere from a few hours to a week. For a physical release, getting rid of the holdback requires a higher licensing fee, or may not even be possible, but for simulcasts holdbacks are no longer very common.

All of this affects not only the price, but also the structure of the payments. The most common licensing model for new shows is royalty-based with a “minimum guarantee” (MG). The MG is the bare minimum that the licensee guarantees to pay. Sometimes, the MG ends up being the only payment made. Licensors generally look for an MG that is sufficient to make the deal “worth it,” even if additional royalties are never paid. On the other hand, a flat rate fee is where the licensee pays a fixed amount for the series, and no royalties. Flat rate deals are almost unheard of among anime companies such as Funimation and Crunchyroll these days (they were more common in the VHS era), but they are very common with mainstream platforms such as Netflix and Disney. Flat rate deals are simpler because the licensee does not have to report any details about performance to the licensor. Even though these mainstream platforms like flat fees, licensors don't like them, particularly in relation to A+ shows, and have been known to turn down significant flat fee offers on licenses they believe have the highest earning potential. Keep in mind, many "Netflix Originals," and similar titles on other platforms aren't licensed at all; the US studio merely contracts an anime studio to produce the anime for them.

Historically, flat rate or MG licensing fees may have been paid upfront, but that hasn't been the case in decades. With today's high licensing fees for simulcasts, the flat rate and MGs are usually paid over a schedule, particularly in the case of extremely expensive licenses. More powerful and trusted licensees are more likely to be able to pay over time, typically over 12 to 24 months, but as long as 10 years in some rare cases. A third model, “revenue share,” is more common with catalog content, smaller markets (ie: non-English speaking), and non-exclusive titles. With a revenue share agreement, the licensee does not guarantee any payment, but instead agrees to share a certain percentage of revenue (eg: 50%) over the license period. As with a royalty model, the licensee must provide regular reporting on the revenue earned, and make regular (eg: quarterly) payments.

Now, keep in mind, every contract is unique. There are no rules to how a licensing deal should be structured, there are just “most common practices.” There are several other less common methods of paying for licenses, and there's a number of factors (such as recoupables) that go into calculating royalties and rev share.

So, with that, how much does it cost?

A first-rate, “triple A,” or “A+” simulcast for North America will set the licensee back an MG or flat rate of hundreds of thousands of dollars per episode. Currently, these titles often go for as much as US$250,000 MG per episode, but can go as high as $400,000 in some cases. $250,000 per episode roughly covers the full Japanese production budget for many series, although higher budget anime sometimes cost as much as $500,000 an episode to produce. At those rates, other countries and physical media rights are usually included, but they are the lesser part of the fee; the simulcast is the major portion.

A more typical show, or what the industry calls a “B/B+,” will have an MG of between $70,000 and $150,000 if it's a new (first run) show. Finally, the “Cs” will have simulcast prices in the lower five-figures – per episode, of course.

Long gone are the days of $500 per episode simulcast licenses.

Non-exclusive catalog titles are much more affordable. A streaming VOD platform could get a lot of titles for a couple thousand dollars per episode, possibly even under $1,000 per episode if the series isn't in high demand. Generally speaking, these rights would still have to be obtained as sublicenses from the existing local licensees, but in some cases, if the exclusive rights haven't been renewed, they could be acquired straight from Japan. Sometimes non-exclusive licenses, particularly in non-English speaking territories, can even be acquired as rev-shares (with no MG or upfront payment), which significantly reduces any risk to the licensee.

When it comes to sublicensing, as I mentioned before, streaming platforms such as Funimation, Netflix, and Crunchyroll aren't very incentivized to sublicense anything they have to another streaming platform, even for fair market value. There has to be a good reason for them to consider these deals, such as high exposure to a unique market segment, a significant MG, or the possibility of a very high revenue share in the long run. Sublicensing of first-run shows is exceptionally rare; most sublicensing takes place long after the master licensee has made the bulk of their money off the show and are no longer concerned about competing services. These platforms also typically renew most of their licenses these days; I've been told that it's very rare for them to let a license lapse.

But when it comes to older titles (say pre-2007) and for markets where the big guys aren't active, it is possible to get older, non-exclusive licenses directly from Japan, and for relatively cheap with little or no MG required... if you're a well-established company with a history of paying on time. However, acquiring cheap catalog rights from Japan poses an entirely different challenge. If the show is only worth a couple hundred dollars per episode, some licensors won't consider it worth the effort to bother with the sale. Acquiring really old titles poses an even bigger challenge; the older the show is, the harder it is to even determine who actually owns the rights for the show and find the materials. For a licensee with the budget, acquiring new shows, while more expensive, is actually much easier than acquiring older shows.

Now that you know roughly how much it costs to acquire a show, and how difficult it can be to acquire cheaper shows, let's talk a bit about risk. Licensees take two big risks when acquiring a show. The first is the MG; regardless of the title's performance, they are obligated to pay the full MG. If the title doesn't earn them as much as expected, the licensor does not refund any portion of the MG, but if the title does better than expected, the licensee will make "overage" payments to the licensor. Since even catalog shows usually have MGs, this risk applies to almost every anime license. In addition to the MG, they also have all their other expenses related to localizing, promoting and releasing the anime.

The second big risk is unique to new shows. Licensees are now being asked to bid on shows as much as a year or more in advance. At this point production hasn't even started, and all the bidders get to look at are a few production sketches, the outline, and who the expected production team is. This makes it very hard to judge how popular the show will be (unless it's based on an established franchise) so sometimes the licensees pay for a B+ and get a dud. There are also several famous examples of shows that change significantly between the time when the contract is signed (and the MG paid) and the show being delivered. Imagine paying for a series that is supposed to be a little risqué, but receiving a show that ends up being borderline pornographic? Avoiding this sort of situation is another benefit to being on a production committee.

So there you have it: streaming licenses cost anywhere from slightly under a thousand dollars per episode for the cheapest catalog titles, to hundreds of thousands of dollars per episode for simulcasts. But even if you have the budget, there's no guarantee that you will be able to secure licenses; licensing anime is decidedly more complicated than just being able to pay for it.

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I would like to thank the industry professionals and executives that contributed to this article.

Want to read more about Licensing? Our article All About Licensing, by Justin Sevakis, was published in 2012 and is still mostly accurate today.
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PhantomStranger (08-06-21)
Old 08-02-21, 09:55 PM
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Re: How Much Does It Cost to License Anime Series?

I saw that on Twitter today. I knew it wasn’t cheap but half a mil per episode for the top tier stuff is just, wow.

It’s easy to see why distributors can get shy about certain genres and not wanting to bother with certain titles. I feel like there could be ways of splitting the costs to get something out there but if didn’t find an audience then the distributor and the owner would likely end up in court fighting over payments.

I wonder how cheap Ghost Stories was…
Old 08-06-21, 03:38 PM
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Re: How Much Does It Cost to License Anime Series?

Nothing ever good has come of a Western licensee getting on the anime's production committee. Funimation is demanding that more and more.

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