Rebundling the Anime Value Chain ft Azuki
Rebundling the Anime Value Chain ft Azuki
How crypto is unlocking the Anime economy.
Introduction
Anime, as an art form, captivates audiences with its distinct visual style, vibrant storytelling, and diverse range of genres. What makes anime different from Western animation is the emphasis on character depth & intricate storytelling.
Unlike many Western shows that often focus on episodic or comedic narratives, anime delves into complex character arcs and thought-provoking storylines. It explores themes such as identity, morality, and personal growth with a level of depth that resonates with people on an emotional level. This narrative based approach allows anime to create more nuanced and multi-dimensional characters, providing a rich and immersive viewing experience that separates it from other art forms.
As someone who grew up watching Anime, it often frustrated me when a second season of anime got canceled or it took 3-4 years to air an episode. Which is why I decided to explore this topic. We’ll first look at the underlying problems in the anime industry, and then look at how we can use crypto to solve some of the biggest challenges in the Japanese Anime & Manga industry.
With a total addressable market of over 520 million, Anime is one of the fastest growing sectors in media with an annual growth rate of 10%. Furthermore, today much of the revenue is concentrated in Japan, but with the proliferation of IP in games ( ex- Attack on Titan in Fortnite), we’ll see
The Problem
There are 4 core problems in the anime industry-
Undermonetized IP
Underpaid & overworked animators.
Centralised model of creation
Fans have no stake.
Undermonetized IP- The anime industry used a window model in the early seventies, where movies first premiered in theatres, then video, finally followed by television. Anime eventually hit an inflection point with the video tapes, making it a sustainable business whilst leading to cultural appropriation.
Things have changed, as today anime is often financed through production partnerships involving multiple stakeholders. It’s often a combination of studios, streaming services, IP licence holders and music companies.
As there are multiple stakeholders involved in making key decisions, studios in Japan often don’t have as much bargaining power as in the West, akin to Disney or Pixar. Which results in the production delays, change of art style, often leading to an undermonetized IP.
Underpaid & overworked animators- The use of production partnerships also mean studios often operate on tight budgets, and this is one of the major reasons why animators in the industry are often freelancers paid by the frame, thus commoditising the sector further.
The key frames in an anime are often drawn by hand in Japan, whilst the frames in between are outsourced to underpaid workers in countries like China, Vietnam and Korea. Furthermore, the scenery and the characters are drawn separately & combined through software to better adjust the atmosphere, lighting and colours for improved depth.
The fragmented & commoditised nature of animators mean that they are overworked & underpaid to meet the demand. A key reason being there’s a lack of skilled animators to meet the demand. The industry produced over 300 titles annually, with 200 animators for each title, with over 6000 animators fully occupied.
Centralised model of creation- Every year, the industry releases over 300 anime and over a thousand manga across genres. Some of the anime have gone on to become highly successful franchises across the globe including the likes of Naruto, DBZ, Boku no Hero Academia among others.
When a few entities have significant control over the creation process, there is a risk of limiting the variety of storytelling, themes, and art styles. This can result in a lack of innovation and creative exploration, as decisions tend to be based on what has worked in the past or what is considered commercially safe, rather than exploring new themes.
Ownership & Stake- Even though fans are emotionally invested in an anime, on paper they have no stake & say in the direction. They are at the mercy of studios and producers. Let’s look into two examples-
After the commercial success of Demon Slayer’s Mugen Train film, there’s been a trend of anime franchises releasing canon movies for commercial success. Haikyuu, a highly successful volleyball anime written by Haruichi Furudate recently decided to condense over 110 chapters ( over 2 seasons worth of content) into two movies. That’s despite making the fans wait for over two years. Fans were hugely disappointed with the studio’s move and took to twitter to express their frustration.
This is not the first time, something like this has happened. Tokyo Ghoul, another highly successful anime moved away from the original manga adaption & animation style after waiting period of over 4 years, completely leaving the fans in utter disbelief.
Whilst it’s important to maintain the integrity of a franchise- an unwillingness to respond or adapt to fans will negatively affect the franchise. Today, the most a fan can do is voice their frustration on Twitter.
What if we had a different model for anime?
→ Raise funds by leveraging a global risk tolerant pool of capital.
→ Co-create the animeverse by leveraging the community.
→ Give fans ownership & stake in the Anime.
→ Build an on-chain economy around the anime using virtual goods & products.
Risk Sharing- With Crypto we can democratise risk sharing. Rather than relying on studios, animators now have access to a global risk tolerant pool of capital. Furthermore, by leveraging the community to underwrite them, they can set their own deadlines and roadmap, rather than be at the mercy of production studios.
Co-creation- Anime primarily being a Japanese art form meant that much of the fan experience in the creation process was largely limited to whether you live in Japan or not, despite having a global audience. For someone who’s outside of Japan, the only role they played in the anime’s evolution was that of a passive consumer.
By leveraging tokens, animators & mangaka can co-create the the universe. A world where a single story has multiple directions, where tokens act as enablers, and induce collectibility.
Furthermore, by building in an open form this also solves the problem of underpaid & overworked animators, as it enables artists to monetise new forms of engagement including signed autographs, art works, and build a personal brand that they could leverage later.
Stakeholders- Today fans have no say in how anime gets made, distributed or the timeline of the content.Whilst it’s important to maintain the integrity of a franchise- an unwillingness to respond or adapt to fans will negatively affect the franchise.
Take the above two examples, Haikyuu and Tokyo Ghoul. With both the anime, fans had no say in the creative direction of the story, distribution format, and timeline.
The best that they could do was voice their frustration on twitter, which doesn’t translate to much as the community is not an active stakeholder. Programmable IP rights coupled with NFTs can turn passive fans into
active stakeholders, whilst maintaining the integrity of the franchise.
Building an on-chain economy around the anime- Once an anime has managed to capture mindshare, and build a community of active contributors, the next step is to bootstrap the on-chain economy around the anime. There are two ways the Anime can leverage the community.
Content to community model
Networked distribution.
Content to community model
Fortnite is more than a game. It’s a window for fans to express themselves using cosmetics, skins and in game avatars. Hardcore otakus will pay a lot more to enrich their connection with the anime and virtue signal with digital goods, thus increasing the ARPU. By not leveraging these channels, studios are leaving lot of money on the table right now.
Dragon Ballz, Naruto, and Attack on Titan all understood the value, and leveraged the platform with anime themed skins, and in game items to enhance the rich fan appeal.
We can already see this proliferation in web 3, as Memeland is about to launch a traits marketplace in partnership with One Piece, one of the longest running and most successful anime of all time.
The above model is great when the IP is publishing new content. It’s also great for seasonal content, like holiday themed game skins and more. But, the real power lies in leveraging the community.
Community Generated Products + Networked distribution.
DemCrab- A product born out of a meme in the community. Today, the hallmark of a successful IP is when fans start creating art, write fan fiction online, and cosplay at events. For fans, it’s a sign of personal investment- there’s a deep appreciation & the franchise is a part of their identity. But, here’s the challenge, much of today’s fandom goes unnoticed & undermonetized. What if we had a way for Anime IP & the community to work together?
One way creators can monetise fandom by building virtual goods & services that leverage the Anime IP. Thus, unlocking a whole new virtual economy around on-chain cosmetics. This is similar to how CS:GO launched a skins marketplace, letting creators design and sell. This solved the content inventory problem, as the community had a recurring inventory of content. What about physical experiences and IRL activations?
Much of the fan experience today is limited to whether you’re in Japan or not, and couple of conventions every year. There’s very little outlet for franchises to connect with audiences locally despite being global from day one. Even though, there are definitely fan communities on
the grassroots level.
With programmable IP rights enforced via smart contracts, we can build a global distribution network that leverages the anime IP from day one. Builders can leverage the IP to instantly build trust with the consumers, whilst the IP will be to cater to a global audience right from day one.There are three core advantages to this model-
IP expansion
Localisation from day one
Eliminates marketing & distribution costs by leveraging the community.
Now that we’ve looked at building an on-chain economy around Anime IP, let’s look at where the value accrues. When we are talking about value accrual with respect to IP, we’re thinking of atleast a 5-10 years time horizon in the bare minimum.
Bridging the physical & digital worlds
The PBT standard revolutionises the way we authenticate and track ownership lineage of physical items by without the need for a centralised party. This approach introduces trustless authentication, where no single entity possesses exclusive rights to authenticate or verify ownership of items. Instead, individuals are empowered to freely authenticate, verify, and innovate upon this technology, creating unique experiences and opportunities.
The PBT standard offers a range of compelling use cases:
Decentralized authentication of goods: With PBT, authenticating a physical item becomes effortless. By scanning the item with your smartphone, you can verify its authenticity securely and conveniently.
Tracking ownership lineage of physical goods: PBT enables a transparent and immutable record of an item's ownership history. This feature provides verifiable proof of past and current owners, allowing brands to leverage this information to create personalized product experiences for their audiences.
Bridging physical and digital experiences: PBT facilitates the convergence of physical and digital realms. By owning a digital token associated with a physical product, individuals can unlock exclusive digital experiences. Similarly, owning a physical product can grant access to unique digital content, enhancing the overall ownership experience.
The PBT standard opens up exciting possibilities for decentralised authentication, ownership tracking, and the integration of physical and digital experiences, fostering new opportunities for both individuals and brands
Value Accrual in Anime IP
PFPs today are passive assets. NFT IP will soon move from passive assets to productive assets. Whilst NFT IP unlocks access & utility, investors are looking for new ways to turn their passive investments into cashflow generating assets. Which means monetising the IP.
With ERC-20, you can earn yield, use it as a medium of exchange, and it’s fungible. It’s different when you’re investing in culture, as jpegs are non-fungible & often illiquid.
Since NFT IP is about capturing & tokenising mindshare, my thesis is grails & people who build meaningful experiences that leverage the IP will see new forms of value accrual.
For example- Recently shibuya_xyz used Dingalit’s Spirit Azuki as a part of their anime- White Rabbit. If the anime was released for a commercial audience, dingalits will earn a % of revenue share from movie.
But, this isn’t limited to movies or anime. It can expand across merchandise, toy sales, gaming and more. Imagine holding a Naruto NFT IP from the early days, and you get a percentage of revenue back from every Naruto collectible, in game cosmetics, and merchandise that’s sold.
We’ll see collectives forming around character IP & actively governing the treasury. Bobu the Bean Farmer is one example. As grails become inaccessible & expensive, we’ll see more collectives pooling funds & actively managing the character IP, partnerships and more.
This is what it means to have true ownership. Investing in culture. IP.
Conclusion
By leveraging crypto from day one, we can flip the traditional model of Anime production where fans & creators are at the mercy of production studios. By leveraging a global settlement layer from day one, crypto puts value & ownership back into the hands of people right from day one. From passive consumers to active stakeholders in an ever evolving world.