As one of the very first Chinese distributors to release animations in Mainland China legitimately, JY Animation (JYA) suffered through the tough periods when piracy swept across China and nobody troubled to ask for legit contents. All these years, JYA witnesses the growth of streaming business and contributes to the establishment of a healthy market mechanism.
As one of the very first Chinese distributors to release animations in Mainland China legitimately, JY Animation(JYA) suffered through the tough periods when piracy swept across China and nobody troubled to ask for legit contents. It brings about a promising future after all by acquiring and sublicensing on streaming platforms Crayon Shin-chan, Doraemon, Pokémon, Natsume yûjinchô, Garfield & Friends, Les Aventures de Tintin et Milou. All these years, JYA witnesses the growth of streaming business and contributes to the establishment of a healthy market mechanism.
At the moment, JYA is undergoing an internal upgrade by stepping one foot in production. By investing and developing original contents, JYA is actively involved in project development at an early stage, to gain more control and provide customized merchandising services. On July. 19th, 2017, JYA held a press conference to announce 4 co-productions with Japan, including ANIME GATARI, SENGOKU NIGHT BLOOD, NIL-ADMIRARI OTTOME and MAHJONG GIRLS.
The Chinese Film Market had an exclusive interview with Mr. Yao Xin, the general manager of JYA, for his insights on how JYA stepped up its game.
CFM: In what way did JYA start to with Japan in the first place?
YX: We first started as international buyer. In 2010, we started to bring in Japanese animations to Mainland China. It was difficult in the beginning, as our Japanese partners did not take Mainland China as a profitable market for animations, due piracy issues so immense that they thought it didn’t make sense to license their content here. We were their first legitimate distributor in China. Back then the market was saturated with pirated contents, barely anything legit. However we have faith in licensed distribution and were willing to test the water. So from 2010 onwards, it’s been 7 years since then.
I believe end of the day it’s a business of need and supply. The more our Chinese clients are willing to invest, the more we provide them. We cultivate our clientele by recommending quality contents. Animation has its appealing to an audience in their 20s to 30s, especially the newly graduates and the job-hunting crowd. We hence adjust accordingly to import more such contents. We do feel it’s a growing business and are expanding our acquisitions. JYA also works as international sales agent to represent Chinese animations overseas. Bringing international contents to China is the first step. Usually we take all rights, including VOD, merchandising and events rights to bring in a whole licensed package and work with our Chinese clients on a B2B model. And now we are doing the other way round.
CFM: It feels that JYA’s productions are purely Japanese. What do you take into consideration when making decisions of stories to tell and productions to do?
YX: One of the most popular animations in China is Japanese 2D ones. We don’t want to challenge the market and work against this trend, and thus decide to use Japanese elements to our own favor to expand our market. Before, we only did acquisitions, but those were not original, not ours. By the time the licensed period expires, we will need to strategically decide if to renew our agreement or not. But the ultimate investment for a company is always to produce original contents—that way it will always be our own. We get to have a bigger and earlier say in production to use it to our favor when expanding market. For example, we can suggest adding in a character or element that we deem bankable in Chinese market in early stage.
Our ANIME GATARI has a Chinese girl character in it. She’s designed to be a Chinese ACG fan who enthusiastically participates in Japanese anime off-line events and thus gets to know all the other characters.
CFM: It’s safe to say that the performance of Japanese animation in China relies greatly on its fan base. What is JYA’s stance when it comes to the fan-base phenomenon and creating original contents?`
YX: The beginning of 21st century, Japan still has many good original animations. But it has become less and less along with the ever-growing market risks. It’s safer to develop animations from comics or novels that already have a fan base. Followers will be drawn effortlessly. However, from a practical point of view, animations adapted from comics or novels have many restrictions. Our rights and thoughts are largely confined by the licensors. For example, when adapting an animation from comics, it is the publisher who makes the final call of what to keep and what to change. So, that would be our top concern. That being said, we would rather make our original contents.
Secondly, we are not deliberately solely after original contents. Our plan next year has several adaptation works, including working with some major publishing houses. It is just that in the company’s early stage, it’s easier to step in with original projects, as they don’t have as many restrictions from the author, the publisher, and the initial parties already in the project, so from a hands-on perspective, they are easier to control and there’s more freedom for creativity than adaptations.
CFM: Is there anything you do to cultivate awareness and followers for your original contents?
YX: Generally speaking, it’s to give as many exposure as possible, to convey the message to users through online or offline campaigns. That’s the traditional way.
Also, before the broadcasting when no one knows what the actual image or story is, we would try to find publicity highlights production-wise, or staff-wise, for example seiyù—voice actors. ANIME GATARI that we mentioned earlier is a co-production between China and Japan that contains Chinese elements, that would be our publicity angle. Another work of ours, Sengoku Night Blood, is an adaptation from a video game. We have the best Japanese illustrator in the crew and 28 A-list seiyùs. That would be our biggest highlights. Audience will decide if a work is good or bad when they watch it. Before that, there’s not much to be done. We would wait until the second round of P&A to customize campaigns according to the audience’s reviews and feedbacks.
CFM: In China, it seems animation is largely a sub-cultural phenomenon that belongs to an ACG niche. What’s your understanding?
YX: It is a general belief that Japanese animation, or the entire animation genre is a sub-culture. After all, compared to mainstream entertainment, its influence is still limited. I feel the word ACGer is somewhat discriminatory, because if you look at the Chinese market today, animation is becoming quite impactful and in certain age group, it is the mainstream culture. Quite a number of our Internet vocabularies derive from animation language. That’s my understanding.
CFM: Where do you release your works?
YX: As of today, it’s still rather difficult to broadcast animations from other countries in Chinese TV network. That’s why we mainly work with streaming platforms, video platforms being the first-tier partners and mobile operators, such as China Mobile and China Unicom, being the second-tier. We are also trying to sell ancillary rights to airlines. There are also assigned platforms by our clients.
Before, I used to worked for a website. Back then in 2012-2013, gross clicking of Crayon Shin-chan series per year was around 1 billion, whereas now, clicking went up to 10 billion. So from both user number and statistics, we see a fast growth of streaming platforms.
CFM: Is merchandising the main revenue source of animations?
YX: Actually in China it isn’t. In China, it’s still content that generates the most of the revenue, which means revenue that has been generated from distribution. For instance, website memberships, or advertisement royalties. Merchandising comes the second. There’s barely any merchandising retail in China, while offline or online B2C retail still dominates abroad. The lack of it in China means we need to greatly resort to Comic-Con and online retail. In the meantime, it remains quite difficult to establish the market with licensed merchandising, as the awareness of copyright and a healthy market mechanism is still to be reinforced. However, we are learning by doing.
CFM：Would you mind shedding some light on the profit model of Japanese animations?
YX: In Japan, the major source of revenue lies in DVD. There is still DVD shop in Japan—CD and DVD rental business and the market is still there, whereas VOD isn’t as popular, or better to say it’s yet to be accepted by Japanese consumers. That explains the DVD revenue.
The second biggest part of revenue is international sales. Before, it wasn’t so prominent, but now, together with international distribution, it has come up to No. 2 among all revenue sources.
Merchandising ranks the third. For some works, the sales of cards and dolls are better during offline campaigns. It’s designed in such a way that the revenue of that particular work is supposed to be generated from merchandising sales. Revenue varies with different works. There are also works that generates revenue from its music, opening songs, theme songs, etc. End of the day it all comes back to how you position your work and what its niche market is. Merchandising is designed to meet the need of that specific market.
CFM：How would you work with your Japanese partners?
YX: We do co-productions with other Japanese companies; there are productions that we only invest, which produces Japanese animations; and there’s employment, which produces Chinese animations and our Japanese partners are more like crew members.
CFM: As you mentioned before, different territories have different profit model. How would you balance the dominant market within a co-production? How to balance the profit?
YX: At current stage, we would prioritize Japanese market in our cooperation with Japan. Actually from a product point of view, the tastes of Chinese and Japanese audience are quite alike. What has been received well in Japan would usually have a promising performance in China. We would take into consideration the likes and dislikes of the Chinese audience and users, but we still tend to follow the Japanese criterion. If we take a look at the result, Chinese audiences are quite alright with Japanese animations.
CFM：It feels like Japanese market is a closed cycle. It doesn’t show much will working with the outside world. Is it hard to work with Japanese companies?
YX: It did feel like so two or three years ago. They wouldn’t actively reach out to for an international partnership for cooperation. They didn’t need it, especially for good projects. They were usually fully funded and only had to take care of the domestic market, fans and users. The producers were satisfied if those people were satisfied. International market was quite secondary compared to Japanese market, which was their utmost pursuit. The common practice would be to start international sales years after a project’s Japanese release. However, the performance of Japanese animation took a plunge these recent years.
As revenue from international sales went up higher in the overall revenue structure, Japanese producers started to resort to international cooperation to steady revenues from international market. Before, the international market was an uncertain factor, now it’s becoming rather certain and can be calculated out. So, many Japanese companies are now willing to factor in the international market from early stage for revenue’s sake.
We’ve recently announced 4 projects. The plan is to release 15-20 works by 2020. In Japan there’s the committee mechanism, that a project is managed by a committee formed by its investors and producers. Every work has its own model to work with a Japanese partner, due to the fact that it’s a different committee for different project with different investors and different rights. This one has four parties in the committee, that one has five, there will also be Chinese company asking to be part of the committee, thus leads to a completely different committee structure for every single project.
At the moment is more us actively asking to be part of a project. Such is how we want to work our way into the Japanese market. Gradually they are coming to us. They know JYA’s doing well in international market. Most of the Japanese companies are prudent. They would want to study the history of a company, whom it worked with before, what it does, before willing to work with it. In that sense, it would be quite hard for a new company to start a partnership with a Japanese company immediately. Many Chinese companies usually just march in, but that wouldn’t work even you have the money. Most of the successful cases would be to have an intermediate party in between to mediate and help out.
That is also what made us successful. One of our partners has a Chinese branch. We were in contact with them for a long time, for commercials, not animations, before they introduced us to their Japanese headquarter. And the project we started with wasn’t a very big one. It was another work by Doraemon’s author Fujiko·F·Fujio—Super Best. But eventually we made it and it made money. After that the Japanese company finally started to establish deeper partnership with us.
CFM：It’s always a sensitive topic working with Japan. What are the risks involved?
YX: There’s definitely risk. In general, it’s the cultural difference. Our governments have different ways to manage cultural communication and cultural exchange with another countries. It’s not meant to target a specific country. Policy with Japan is only one part of a comprehensive cultural management plan. We are in fact preparing for the launch of such policies. But rather we’d more just hope to use the Japanese creative productivity to our own favor, for us to produce more quality contents.
CFM: Would you say that’s also your future pursuit?
YX: As the first step, I’d say we still need to reach out to Japanese projects and try to be part of that, to get to know the structure, to study the creative part. And the second stage would be to produce content that caters to both Chinese and Japanese markets and audiences, and then slowly expand to Southeast Asia, Asia, and eventually the global market. It is indeed very hard with the global market, as it’s a fine line to walk to try to satisfy all. We plan to do a Chinese storytelling with Japanese techniques, so that we can leverage in our Japanese partner when we do P&A. Of course we will also want the content to be popular in the Japanese market, but we would prioritize Chinese market. It’s a three-step plan; it’s the first step now to focus on getting to be part of a Japanese project to study the structure and composition.
CFM: Would you consider theatrical projects in the long run?
YX: We would. Before, we didn’t know much about the movie industry that we focused mainly on TV contents and short films. But now we are exploring the possibility of a theatrical version of TV contents. For example, we are doing a 12 or 24 episodes TV project, trying to cultivate its awareness and followers when it’s airs. And next we would do an animation movie based on this. This project is on the go now and will be our first theatrical animation. It’s something like what TV and movie business is doing at the moment, to shoot a TV series and a movie at the same time, to broadcast the TV series first and the movie later. What’s different is that the TV series and the movie usually share the same story, while in animation it will be an independent story with the same characters and elements.
CFM: Would you want to do a co-production theatrical animation?
YX: We want to do a Chinese one.
CFM: Why?
YX：There are too many restrictions with co-productions， which makes it even more complicated from a practical point of view. Secondly, from a revenue point of view, especially for imported movies, revenues from international cooperation will be diluted. That’s why a Chinese animation is an optimized solution.
CFM: If that’s the case, what’s your strategy on international sales?
YX: We would definitely consider selling it back to where the original story is. Many of the key aspects will need to be done through our Japanese partners or partners from other countries to ensure quality. We would either outsource certain part of the production or look for consultants to make sure what we present doesn’t not disappoint followers from the source country.
CFM: How would you envision the future of the company?
YX: What I envision for our production department is to focus on the content itself—how to make sure of the quantity of productions while establishing a comprehensive merchandising structure for these works. If we envision certain work will make quite a blast, what to do to shorten the production schedule and enhance efficiency. Ideally, risk will be lower if we commercially develop every project. To do that we will need to standardize the procedures of development, and try to produce eye-catching or our signature productions in the meantime. These are what are on my list. At the moment we are focusing on the quantity of the production.
Five of our works are schedule to be released on Internet shortly, targeting both children and the ACG crowd, which is 15 years old and above.
CFM: What’s the age-span of the ACG crowd?
YX: It doesn’t really have a limit. Some of my friends are over 40 and are just as enthusiastic. Our very first group of Chinese ACG followers grows and ages along with animations. But if you are talking about the main consumer crowd, they are high-schoolers and university students in their 20s.
CFM: Whose market performance is better? The children-oriented one or the ACGer-oriented one?
YX: I can only say the sales circumstances and cash-out models are different. Educational merchandising for the 0-3 toddlers is the main source of revenue for the children-oriented one. For preschool boys, it will definitely be toys. That being said, contents that target those audiences will be like a massive commercial. In fact, all animations are originally commercials to boost the sales of certain products for small children, in Japan or in China.
Whereas content distribution are the main revenue source when it comes to the ACGers. However, it’s difficult to predict which cash-out model is the most profitable one. Of course your expectation goes up higher alongside with your investment. It is sustainable and long-term projects that we are after. In this sense, children-oriented contents seem to be more promising. ACGer-oriented contents are not as sustainable.
CFM: You already have quite a line-up here. Would you consider building your own video platform?
YX: We are indeed quite productive in both acquisitions and our own productions. But after all we are a B2B business that helps our partners from abroad develop their Chinese market and optimize their contents.
That being said, we do want to establish a platform, not just a video site, but an IP management platform to wield our rights of the works we represent to the maximum in China.
CFM: What other territories Japanese animations have good performance in, on top of China and Southeast Asia?
YX: It is the U.S. and China that Japanese animations are the most popular. But these two territories have different demands. The U.S. has a more traditional appetite for Japanese animations, for example, transformative and robot elements in Apple Seed Alpha were received quite well in the States. As for Chinese market, it yearns for more unique, more one-of-a-kind contents. For instance, traditionally an animation would want to present the growth and friendship of the leading male character, while now our audience would tolerate his weakness or even his absence. Some unusual storytelling begin to emerge.
Compared to this, the U.S. market expects to see how the leading male character evolves and becomes his better self. I’m not saying such story isn’t appealing to Chinese market. It’s just we are more demanding, we want more than this.