ADK LogoJapanese financial newspaper Nikkei (via ANN) reported that marketing company Asatsu DK will start streaming anime titles outside of Japan. The company issued 340 million yen ($3,69 million USD) in stock for a new subsidiary named Daisuki, which will host and translate titles, with plans to recoup costs via fees and advertising. In addition, Daisuki will begin an e-commerce service in June, through which they plan to sell licensed goods based on the titles the company streams. The company aims to attract three million users within five years. The venture plans to release over five hundred titles via its service.

A total of six anime producers are investing in the venture:

  • Toei Animation
  • Aniplex
  • Sunrise
  • TMS Entertainment
  • Nihon Ad Systems
  • Dentsu

While I’m sure there are many who will regard this news with a legitimate shock, careful market watchers should see this as a natural reaction to elements already in play. In particular, when a disruptive innovation is introduced into a marketplace, the profit structure to the established players comes under threat. However, due to their nature, these players are not necessarily able to compete with those who introduced the disruptions. This is due to the fact that disruptive technologies, due to their nature, are “inferior” products. They’re less expensive to produce, and often lag behind in certain areas. However, because they’re cheaper to produce, potential profit margins are often far lower than the existing product.

Rather than compete directly, it’s more common for a company to try to co-opt the potential audience for the disruptor’s wares. It’s not uncommon for larger players to attempt to do so by investing in smaller companies that will adopt the innovations introduced by their competitors, while still pushing a product that will appeal to the “core” market. The ideal situation for the established players in this case would be their successful fending off of a potential challenge to their market. A successful co-option would lead to the established player maintaining their own market share while also scooping up a share of the market created by the would-be disruptor.

With this in mind, it’s not hard to see just why these major industry players are entering. Services like Crunchyroll (especially Crunchyroll) and FUNimation Video created a new market that simply didn’t exist in the commercial world prior (we could argue the other market, but that’s another story for another day). By dealing with these companies, the Japanese players sacrificed untold revenues in the licensing split. We can’t exactly say how divergent the split is, since no financial reports or actual fees are disclosed outside of the rare bankruptcy report.

By creating this subsidiary, the Japanese players are aiming to claw back some of the market created by the digital revolution in the US. If the licensors play their cards right by supplying Daisuki with heavy hitters like like Gundam and One Piece (both of which were named in ANN’s article), and simultaneously opting out of such agreements with existing digital partners, Daisuki could starve out their smaller competitors. In addition, without the need to sign expensive licensing agreements, tasks like content delivery to countries outside the core markets would become more viable, which would allow for greater potential revenue.

As always, this is speculation at this point, since it’s still too early to tell exactly how Daisuki will operate. However, where they enter the market, and which audiences they approach first will speak volumes of their international plans.