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How OVAs Worked

Brief description of how the direct-to-video-rental model helped create the anime boom by allowing wide diversity in bankrolled anime projects, outside the production committee system.

Anime in the 1980s–1990s was famous for its diversity and edgy content like sex & violence, enabling the early careers of famous directors. I summarize what made this possible: a change in anime business models from being captive to established censorious media interests, to ‘direct-to-home’ video sales of ‘original video animation’ or OVAs—a misnomer, as it involved rental stores as much or more than individual consumers.

The rise of home videotape players but high prices of videotapes meant that video rental stores were the preferred method to acquire videotapes, and decentralized rental stores could collectively pay, on an episode by episode basis, for all sorts of strange sketchy OVA productions that would be ignored or censored. Successful OVAs would serve as proof-of-concept and bankroll followups.

But the economics & technological circumstances that enabled this breakout from the standard media model would not last, and standard media interests would both loosen their censorship and flood the market with cheap videotapes, rendering rental stores & the OVA model obsolete, and relegating ‘original video animations’ to just ‘video animations’ as a way to further monetize existing franchises by selling minor productions directly to fans.

The ’80s–’90s OVA boom is a remarkable example of how business models & incentives can matter far more to art than any technology, individual, or trend. The Wikipedia history is a little confusing & muddled (was it ‘individuals’ buying VHS tapes, or ‘rental stores’? what did speculators have to do with anything?), but this is how I understand it.

Anime has always been a difficult business economically for animators & anime studios, even as anime has been extraordinarily lucrative for many entities around anime. It can be very good to be a licensor making merchandise, or the owner of the copyright in an anime adaptation, or the publisher of the original light novel/manga; but the animator who drew the key scene, or the anime studio which nearly imploded making the adaptation? Not so much. No matter how successful an anime is, there are no billionaire animators or anime directors (not even the most commercially successful anime directors of all time like Hayao Miyazaki or Hideaki Anno hit the billionaire mark, AFAICT), and anime studios infamously come & go; individuals working in anime are either cynical, lucky, or not long for the field (and are generally treated as disposable and having plenty of eager young replacements).

Why? The basic answer is the usual media/telecom/oligopoly answer (and in Japan, oligopolies are especially oligopolistic), revolving around the bottlenecks of broadcast TV stations and the production committee system: it is better to be the gatekeeper than the gatekept, anything video requires a lot of capital upfront, it is a hit-driven business so it is hard to accumulate capital of one’s own, and anime for a long time was forced through the bottleneck of TV broadcasters like the NHK or TV Tokyo (to name two relevant to Evangelion). These are uninclined to leave anime studios any more profit than necessary to keep them alive, and then a little less than that to keep them lean & not leave any yen on the table. The studio may be paid upfront for the rights, just enough to make it, and then left to recoup anything it can later on; the studio may even have to pay the broadcaster, to get ‘exposure’ for selling the VHS/DVD/BD afterwards. (An anime fan may be surprised to learn that many anime studios, like Gainax, were really game-writing or figurine-designing or pachinko-licensing business judged by the numbers, and made anime as a hobby or advertising—no Princess Maker or strip mahjong computer game series churning out installments, no Evangelion anime! No Ghibli merchandise like Totoro catbus backpacks, no Princess Mononoke, etc.) Movies represent an even more extreme situation: relatively few theater chains in Japan, staggering upfront costs in time & labor & money, utter ruin if the movie is not a hit—Studio Ghibli’s success is all the more remarkable in this light. Anime studios could do nothing about this equilibrium: you have to go where the customers are, and the customers were controlled by the TV stations/chains. The media oligopolists didn’t ever need to ‘commoditize their complement’ of anime studios or anime production, because shows to fill up airtime were already commoditized naturally.

This changed in animators’ favor. When videotapes were invented and home video became a real alternative to movie theaters & broadcast/cable television, there were three possible equilibria: “free, expensive, cheap”. First, free: that’s broadcast TV and already existed. The second, default, was an equilibrium in which videotapes (still highly expensive to make) were legally restricted, taxed & controlled, blank tapes the equivalent of ‘the Boston Strangler to a woman home alone’, and tapes sold only by copyright holders at a high price, such as >$100 each, because a single tape might be watched by many people and thereby cannibalize many high-margin ticket & ad sales, and so tapes would tend to be bought by rental stores (presumably safely after any theatrical release or broadcast) who would then recoup it by renting it to many consumers until the tape wore out, or by the occasional wealthy or fanatical person who intended to watch it many times or simply had to have it, price no object, or as a splurge to share it.1 In the final equilibrium, the goal was to sell as many tapes as possible to home viewers, so cheap that people could buy tapes speculatively or to watch relatively few times, and accept that people would be recording shows at home & bootlegging but that the ‘pie’ would be so much larger that everyone was better off regardless.

The third equilibrium won eventually2, but early on, the second equilibrium of few expensive rentals was dominant. The paradigmatic example was porn rental stores: men greatly prefer porn in the privacy of their own home to going to seedy disreputable undeniable porno theaters (used to be a thing, young readers—Times Square was infamous for them), video rental stores could segregate them from regular videos to make renting them deniable (who’s to say which kind of video you went in for?), and variety is the spice of life, while compiling a large collection too expensive even without copyright margins. So, you didn’t buy porn, you rented it.

The side effect of this was that rental store owners became, collectively, almost venture-capital funders of new porn: they kickstarted speculative pornographic enterprises, particularly when it came to series, or new actresses or genres. They were atomized, disparate, privately-contactable, profit-maximizing individuals with little market or bargaining power; it was possible for anyone with access to film-making & tape-dubbing equipment to film a porno and sell individual copies by mail, and if it hit a niche, sell some more to the same owners (because a popular tape could only be checked out by one person at a time, and might wear out), quickly making back their costs to reinvest in another tape. A porn company was a rental store’s way of making more rentals. An earlier dynamic had contributed to the American Golden Age of Porn starting about a decade earlier—you can make the still-infamous _Deep Throat for all of $233898.95$500001972, which when distributed to several hundred porno theaters charging by the head, could explode to anywhere up to $467.8$1001972m in gross revenue (and triggering countless imitations).

Anime OVAs exploited ‘sex and gore’ for the same reason. You could never get NHK to air, much less bankroll, ultraviolent/pornographic OVAs like Legend of the Overfiend; and as a government-enforced monopoly, they cannot be bypassed. It can’t be aired, period. What you could do, however, was to convince someone to put up the money and animators to put in the sweat to make the OVA anyway, and sell it to rental stores & fans. It is risky, but potentially highly lucrative, and your risk is limited to what you invest, particularly if you know otaku animators willing to work for next to nothing.

If you want to do it, you can: there are no gatekeepers there. You can put just about any videotape up for sale with some ads in anime magazines or mail-order catalogues—and people did. All sorts of wacky OVAs (like the influential Megazone 23) got started by selling an episode or two (not always getting finished), and relying on sales to fund more episodes; and if things went well, they could be stapled together into a ‘movie’, or justify a full-scale TV series. Dream Hunter Rem, for example, started as an ecchi/hentai anime with a barebones plot but sold so well that they simply turned it into a regular OVA anime (made in whatever genre they felt like animating for that episode). If nothing else, the staff now had something on their resume showing off their skills: a particular sakuga, or a particular episode. This led to a blossoming of anime in volume and variance, helped launch the career of directors like Hideaki Anno (Gunbuster) or Mamoru Oshii (Dallos) and helped create anime’s early reputation for sex, violence, and just all sorts of strange experiments you’d never see on American TV at that time. (Note that the ‘golden age of TV’ substantially postdates the wave of anime into America in the 1990s. I’m not claiming that competition from anime caused the golden age compared to bigger business-model changes like the success of premium HBO subscriptions, but at a minimum, many people grew up aware that TV series could be so much more than the episodic dreck they saw every night on the Big Three—scrubbed of continuity & complexity in the interests of catering to the all-important syndication packages.)

So if OVAs were so great, why have they long since ceased to mean much of anything to an anime fan, and they now talk more about things like web-animations or shorts or the ‘NoitaminA block’ or Netflix specials? For the same reason that they came into existence: economic & technological change continued, and the business model ceased to be such a win.

The ‘bubble decades’ surely played a role in all the money sloshing around Japan, available to be speculatively invested in anime, and that would abruptly end forever by the mid-1990s. Even if Japan had not entered its lost decades, however, the OVA period was doomed. When was the last time you entered a video rental store? If it was ever, it was a long time ago. (I’m not sure if I set foot in a Blockbuster this side of 2000 AD.) VHSes, and then DVDs, became ‘too cheap to rent’. There was an explosion of DVD boxsets delivering everything to the comfort of your home—no late fees ever. (The Blockbuster late fees were truly extortionate.) When the high-price equilibrium collapsed, movies and anime started being broadcast regularly; broadcasters had to expand their tolerance far beyond anything permitted before. Why would you go out of your way to rent from your local video store if you can watch it on TV? The customers returned to the comfy & no-longer-so-stifling embrace of the oligopolies, and purchasing completed series.

All logical and following their incentives, but the consequence was the gradual fadeout of the OVA model in favor of making safe anime to sell to existing fans in known numbers: hence all the one-off ‘sidequels’ or ‘sequels’ to existing franchises. I feel nostalgic for a period I knew primarily from gawking at Right Stuf mail-order catalogues, going, “that’s an anime? How on earth did that get made‽”… But anime has done fine for itself since then, and the nature of these things is that they are cyclical as leverage moves back and forth, and no one can predict what the future will bring—who foresaw that big tech & media giants competing over streaming markets would lead to an OVA-esque anime market where demand for new anime was white-hot and all sorts of strange series could get made? And streaming itself will surely fadeout and some new market dynamic replace that. And if it’s a bad dynamic, well, I still have a lot of old anime to watch.

  1. When media was really expensive, people resorted to informal sharing to a much greater degree than they do in 2023. For example, you would try to buy the same video game system as your friends so you could share games, and you might coordinate by discussing the games you planned to buy to avoid duplicates. Similarly, many anime fans would buy some tapes because they intended to share it with friends who came over, or during sleepovers or ‘movie nights’, or often at an anime club. Anime clubs themselves would be de facto ‘video rental stores’—some college anime clubs would amass collections of thousands of obscure (often bootleg or fansubbed) tapes & DVDs, access to which was the chief privilege of membership for skint students.↩︎

  2. Which is not guaranteed. Many markets will never reach the ‘cheap’ or ‘free’ states, for example, relatively boutique software services—which is why if you are in that market, you should charge much more.↩︎