Japanese Anime Studio Embraces YouTube Pirates

Animation producer Kadokawa thinks it has more to gain than to lose by allowing its content to be shared for free on the Net

by Kenji Hall

Tsuguhiko Kadokawa, chairman and CEO of Kadokawa Holdings. Junko Kimura/Getty Images

Last May, when Kadokawa Holdings released The Melancholy of Haruhi Suzumiya on DVD in the U.S., fans of Japanese animation swarmed shops in Los Angeles and other cities. For months, Kadokawa, a Tokyo publisher and TV and movie distributor, had dropped hints about the anime's imminent overseas release on a Web site. But other than that, it did almost no advertising. It didn't have to. The company merely tapped into the huge following Haruhi Suzumiya already had on YouTube (GOOG) and other video-sharing Web sites.

It sounds like the classic viral-marketing success story. But Kadokawa arrived at this strategy more by luck than by design. And lawyers would have been appalled by what they saw: the company allowing rampant Internet piracy to go unchecked.

That's not how Kadokawa sees it, though. Chairman and CEO Tsuguhiko Kadokawa thinks his company has nothing to lose by reaching out to anime diehards. As he sees it, the company's traditional publishing business has no future in the digital era. And suing YouTube for copyright infringement, as MTV Networks owner Viacom (VIA.B) did last year, would have only angered anime fans who have been using the site.

No Guarantee Goodwill Will Pay Off

With the experiment, Kadokawa is betting it can score points with the anime faithful and win over new fans overseas where it might sell DVDs, downloads, and other paraphernalia. But there's no guarantee the goodwill will pay off. "I think a lot of people are watching to see whether we will succeed," Kadokawa said in an interview last week at the Creative Commons conference in the northern Japanese city of Sapporo. "If we can do something they haven't been able to do up to this point, they may follow suit."

On a recent afternoon, at an office upstairs from a men's clothing shop near the Korakuen amusement park in Tokyo, Kadokawa employees were busy watching several hundred freshly uploaded YouTube videos. They have been at it since January, when Kadokawa announced it would use YouTube's video-identification technology to scan the video-sharing site (BusinessWeek.com, 1/25/08). In the past few months, they have found tens of thousands of online videos made with its content, mostly culled material from Kadokawa's two hottest shows, Haruhi Suzumiya and Lucky Star. (Haruhi Suzumiya is about a bored high school girl who creates an imaginary world to cope, while Lucky Star is about four high school girls who only care about manga and video games.)

Employees keep track of what they see on a spreadsheet and immediately issue takedown notices for videos that have been copied from DVDs. "We are checking every video, one by one," says Tadashi Fukuda, president of Kadokawa's digital media division Kadokawa Digix. The employees will use the database to create a program that will learn which videos should stay and which should get taken down.

Seal of Approval for Some Videos

That's only part of the plan. Kadokawa wants to endorse the best YouTube videos made with its content, some of which have been watched more than a million times. It's sending e-mails to YouTube users, asking for permission to place Kadokawa's marque and an ad alongside their videos, and encouraging them to join the four-month-old Kadokawa Anime channel on YouTube (2,186 have joined). Which videos make the cut? "If we can feel the love from the fans, I would say it's O.K. to leave it," says Fukuda. He is even looking into sharing the channel's ad revenues with users.

It's unclear whether Kadokawa's experiment will ever make the company any money. And it's not cheap, either: Kadokawa expects to spend $1 million on the project over the next few months.