We talked to Gonzalo Ferreyra, Vice President of Sales and Marketing for Viz Media, in our annual interview to review the state of the market, Viz’s year, and plans for the future.  In Part 2, we talk about the anime market, Viz’s plans for Blu-ray, the impact of digital distribution, and the TV market for anime.  In Part 3, we talk about finding new consumers with a smaller mall footprint for manga and anime and look forward to 2010 in both manga and anime.  In Part 1, we talked about the manga market, the competition for consumers’ attention, digital comics, and original material. 

Let’s switch over to anime.  How do you evaluate the market for anime and for Viz anime in 2010?

It’s certainly become more competitive again, going back to some of what I was saying earlier.  The issues are a concentration into the mass market and pricing.  I think those are the two major challenges anime is facing and has faced for the last couple of years.  We can’t be going out there with thirty dollar four-episode single discs any more when we’re competing against a full season that’s $29, $39, no more than $39 in many cases from the major networks and cable channels. 

The opportunity has been (at least for us and this has always been our strategy) to focus on a few A+ titles and maximize what we can do with them in terms of their placement and in terms of really as broadly as possible reaching the market.  Obviously that also is to some degree dependent on a strong television strategy as well.  We’re very blessed by titles such as Naruto and Bleach that fit quite firmly into that strategy.  I believe there’s a smaller market now, a shrinking market for the B and C titles.  There’s no question those are harder to place largely because such a massive percentage of the DVD business goes through the mass market.

It sounds like the mass channel for anime is increasingly important, and every other channel is shrinking as a percentage of sales.  Would that be a fair characterization?

That would be fair.

One of the things that’s happening in the DVD or home video business at large is the impact of Blu-ray.  Where’s Viz on releasing Blu-ray versions of its titles?

Again, we’re in the early stages of examining it in terms of the U.S. market potential.  As you know we’re distributed by Warner Brothers.  It has a very active and successful Blu-ray program.  One of the challenges with Blu-ray is that it’s region-free.  We really need to do our homework in terms of coordinating releases with Japan, with the licensors to get this right.  New conversations are happening.

So is this material not coming out on Blu-ray in Japan either?

I’m not sure.  It probably is.  The issue is simply that any strategy we proceed with on Blu-ray is more than ever tied back to what they are doing and their release strategy.  Keep in mind that if we release a Blu-ray disc in the U.S. with with original Japanese with optional sub-titles, that is an attractive disc back in Japan.  It opens you up to a gray market back in Japan that creates some problems.  The pricing here is actually very competitive versus the Japan pricing.  We have a lot to sort out.

Blu-ray’s the growing part of the home video business, DVDs are shrinking.  Aren’t you leaving growth on the table by waiting so long?

Perhaps.  I’m not saying we’re not exploring it.  We’re exploring it pretty aggressively.  The question is right now in the market it remains to be seen--it is a percentage of the business.  It remains to be seen at what point it will dominate and move forward.  Trust me.  We’re having lengthy conversations with Warner who obviously is providing their knowledge of the market and the potential for us to engage Japan with these discussions and make a compelling case for how to proceed.

Do you think you’ll get any Blu-ray out in 2010?

I don’t think we’ll see Blu-ray in 2010.  It’s not likely.

One of the changes since the last time we did one of these interviews is similar to some of the things we were talking about with manga in anime.  There’s increasingly material available online if not day and date, very close to the time it becomes available in Japan.  Is that having an impact on the business here?  Is it having an impact on the illegal side of anime file sharing?  Is it increasing the market or the audience?  

To separate that out a little bit and address the impact on the business, again as with the scanlation issue and the online free manga issue versus the physical sales, it’s very difficult to translate.  We continue with it as a strategy, sort of like with Hulu obviously, largely under the belief that it’s comparable to a television broadcast.  It’s finding the fans and the experience that is granted to them by watching it streaming is not what they would get if they actually made the purchase and brought home the boxed set.  The most obvious being that you have dubbed versus subbed.  Also additional material is available in the boxed set.  We do believe we’re not giving away what we make available in the boxed set. 

Is it increasing the audience and is it having an impact on the illegal side, on the file sharing?

Yes.  I do believe it is increasing the audience.  There’s no question that the numbers that we’re drawing in streaming do represent a broadening of the audience.  It’s also a distinct demographic from what we would reach, say in the case of Naruto Shippuden, just to take an example.  There’s no question we’re reaching a different demographic, an overlapping demographic, but a different demographic through the streaming model and through Disney XD.  In terms of the piracy I have anecdotally heard here and there that there is a positive effect, meaning that with titles that are day and date being made available in the U.S., the piracy is shrinking.

Talk a little about television.  You said that Viz has some of the strongest titles, which are getting television exposure.  Still overall it seems like the opportunities for anime to get on television are not what they were in their heyday.  You’ve got Disney XD coming up as a new venue which is great and Syfy channel stepped up with some new hours and so forth.  Could you evaluate overall how you think the television market for anime is now versus a year ago?  And how do you see it going forward? 

We’re actually very, very encouraged, largely because, who would have imagined Naruto Shippuden on Disney XD a few years back?  It’s unprecedented.  And in terms of the breadth of opportunities, we’re on Adult Swim, we’re on Syfy, and we’re on Disney XD.  It’s certainly less concentrated, it’s a tougher market, I won’t pretend otherwise.  But the opportunity and the interests are still there for the right properties, as with the question about DVD sales, I do think if they focus on the A+ properties, if they focus on those fewer, stronger titles.  There’s no question that the opportunities for a full run of anime in all its diversity has shrunk in the last few years.  The market has spoken as to just how much of it it can process.  But in terms of our key titles it’s extremely encouraging; there are other conversations that are equally encouraging; the interest is there.  I attended MIP along with Bill Germain our director of TV sales this past year.  There’s a fantastic range of opportunities and broadcasters continue to be interested in exploring these titles.

Click here for Part 3.