VTubers

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It's December 2021, and Sakamata Chloe a new Virtual Youtuber (VTuber) started a singing stream that lasted 58 minutes. It generated USD$94,498 in donations.

What are VTubers?

VTubers are virtual characters played by humans animated by mocap or digital tracking. An artist draws a 2d character animated using various software like Live2d (character creation) and then rigged using VTube Studio.

These are not ordinary content creators, the biggest talents work with agencies that run like well-oiled media machines. The character IP is owned by the company itself. Allowing them to license the content externally.

Cover Corp parent company to Hololive is one of the biggest and largest agencies in the industry. It features 71 talents and a total of 68 million subscribers.

What are the criteria for joining one of these agencies? Hololive is a largely Japanese agency despite having both English and Indonesian arms.

An English talent is likely to have some experience;

• Performing (Acting or Comedy)

• Voice acting

• Live Streaming

• Speak at least 2 or more languages

• Singing

• Producing and/or writing original songs

• Dancing

• Drawing

• Playing video games

• A requirement to produce a certain amount of live content a month in addition to brand deals, comarketing, and streams with other talents

• If they don't have the experience they take external classes to get better at them

VTubers are already some of the most popular female streamers globally. In Q3 2022 50% of the top female streamers across Youtube, Twitch and Facebook were VTubers by hours watched.

It's big business

Creators struggle to turn on monetisation that converts views or gets fans off the platform. Youtube and twitch effectively own their audiences. Hololive kills this. Their website traffic compared to other creators is massive.

Anycolor (Nijisanji)

Anycolor is bigger than even Cover Corp featuring 211 active talents. It's also listed on the Toyko Stock Exchange. Public Financials, yay! Let's explore.

While up 7.08% this year it's down 54% from its peak.

Its 26-year-old CEO Riku Tazumi owns 45% of the company. Anycolours current market cap is USD$1.35b. Making him one of Japan's youngest billionaires. He started the company at 21 while at university.

Anycolor The Next Disney

It describes its company as "The Next Entertainment Factory". A way to deliver freer, more diverse and more detailed content.

The next cultural zeitgeist is a new Entertainment Economic Zone.

They talk about an age where there is no barrier between users and creators. I've talked about this previously in my article on the Rise of Wholesome Social and the social app Gas.

Anycolor Financials & Growth

I've translated Yen to USD for our distributed reader base.

Let's break down its revenue arms. Looking at FY22 revenue;

• Commerce - USD$50.71m (46.8%)

• Live Streaming - USD$22.85m (21.1%)

• Promotions - USD$17.34m (16.0%)

• English Branch - USD$8.62m (7.96%)

• Events - USD$6.00m (5.5%)

• Total - USD$108.33m

Commerce both Digital and Physical make up close to half of their revenue. Nijisanji's English branch only launched at the end of this year and they expect it to grow to USD$23.57m in revenue in the first two quarters of 2023.

Across all talents, in Nijisanji we can see that in Japan their Character IPs bring in ~ $USD300k each in the last quarter. With the launch of the English branch bringing in just under USD$400k. This is likely due to the smaller concentration of English VTubers vs Japanese talent.

While VTubers may not be breaking youtube records for hours viewed the monetisation and retention of viewers is the key component of the model.

For a company in hypergrowth, the net profits don't look too bad either. Traditionally this type of media is dominated by a male demographic. Nijisanji benefits from some extremely strong male talent.

Youtube Revenue

Superchats, youtube versions of donations or tips are some of the most trackable sources of revenue for VTuber talent. 

Quick facts

• 34 of the top 50 most superchatted channels were VTubers in 2022.

• Alongside 44 of the top 50 most superchatted streams of all time.

The way youtube gamifies donations is also much better than competitors like Twitch.tv, which often rely on external plugins. Twitch tried a native donation feature this quarter that failed miserably.

Using coloured tiers it promotes donating higher amounts to reach a famous "Red" super chat (10,000 yen, USD$100). Youtube takes a 30% cut of this revenue and it's predicted the remaining 70% is split evenly between the talents and the agencies.

7 out of the top 10 most donated users on Youtube are Hololive talents. 8 out of 10 are VTubers.

The 4th single largest super chatted stream of all time was Kiryu Coco's graduation (retirement) which generated USD$311k in under 2 hours.

In 2022 female fans showed up in force. Vox Akuma a male talent from Ninjisanji English earned the 3rd spot for most superchatted channels in 2022. Earning USD$1.09m across 86,000 donations.

All talents generate significant revenue for licensing the Character IP. While many play a persona they don't hide just enough of their lives off-camera to keep people engaged and relatable.

Demonetising on purpose

What if I also told you that it's common practice to turn off Superchats completely when they get out of hand? Something as simple as a funny moment in-game or an Idol Break (going AFK) can generate hundreds of donations. Agencies frown upon some of these actions as negative sentiment and rather recommend talents turn off donations if it gets overwhelming with spending from their viewers.

Debut (Launching Talent)

When launching a new product you generally want to do beta testing, get feedback from users, and build in public. Big announcements with pretty long lead times. VTuber agencies like to take the Apple approach to the extreme. Tease 1-2 posts with short videos. Within 72 hours they will debut 4 to 5 new talents.

While this may seem spontaneous it's anything but. Talents have been perfecting their first stream for weeks, spent months getting to know each other to build chemistry and preparing their first 2-3 weeks of streaming content and co-streams to release.

Hololive's first English branch debuted in 2020. Gaining hundreds of thousands of subscribers on youtube and followers on Twitter before even saying their first words.

Anycolor Debut Model

Most agencies operate similarly to Anycolor. With in-house concept teams or contractors. They leverage existing artists' brands and communities on launch. Much like how an Actor or Director brings their prestige to a movie.

As agencies own the IP for the character they also to some extent control the type of content and persona that talent gets to play. While this usually does match closely with their personality, tight control is still in place and can lead to termination if it isn't followed.

The Algorithm and the Rabbit Hole

How are VTubers especially with the majority of them only speaking Japanese starting to appeal to a global audience and generating so much revenue? VTuber agencies are retention gods.

This is fuelled by fans and User-Generated Content (UGC). Let's talk about how VTubers broke the youtube algorithm.

The Fold

Youtube's front page is a mess for discovery. It's excellent as a recommendation engine for users who like certain content. When you enter the VTuber rabbit hole often through watching anime or gaming content, the sheer amount of UGC created invades your feed.

Let's dive into what youtube is showing us here;

• UGC Japanese content translated by fans (multiple sources)

• Past stream content automatically archived as a video

• Scheduled Live Streams (no content created yet)

• Current Live Streams

• Recommended content (multiple sources)

Depending on the screen size you could have between 8 - 14 cards above the fold at any point in time.

So a single live stream from a VTuber can generate at least 4 additional cards before or after a live stream occurs. They effectively have multiplied their screen real estate on youtube by 5x anytime they publish content.

Power Law

When a talent debuts it's never alone its always in a group, so cross-promotion across socials, platforms and partnerships can happen immediately. Further fuelling UGC and the recommendation algorithm to incentivise watching other talents in a batch.

Side Bar

Agencies span multiple time zones. Youtube prioritises live streams over channels in your left sidebar. The more talents that are live, the more real estate on youtube you own.

Lore

VTubers are not a new concept existing since 2010 around the same time as the rise of the first rise of vocaloids like Hatsune Miko and Super Sonico came into existence. The first large VTuber was Kizuna AI, who started in 2016 and graduated (retired) last year with 3 million subscribers in that period and became Japan's National Tourism Association official ambassador.

Currently, 3 agencies dominate the VTuber algorithm on the largest streaming sites. Youtube, Twitch & Billibili. Hololive, Vshojo and NijiSanji.As of late 2021, there were an estimated 16,000 active VTubers. In 2022 there has been an explosion of talent with even popular content creators donning VTuber personas.

Metaverse

Meta defines the metaverse as "The metaverse will help you connect with people when you aren’t physically in the same place and get us even closer to that feeling of being together in person."

A paradigm shift is occurring as companies embrace the concept of always online and digital personas.

The Shangrila is an interoperable metaverse. Exactly how you get there isn't clear for many companies outside of simply creating a game. Apart from Fortnite which has been extremely successful in marrying IP partnerships with Lore and world-building, Minecraft, Roblox and GTA V largely rely on user-generated content (UGC) to craft their worlds.

What if I told you these VTuber agencies were already doing this at Scale? By licensing these talents out and creating games, partnerships, 3d environments and concerts all live and interactive. People are interacting with these online personas and characters on daily basis with hundreds of thousands tuning into VTubers daily.

Hololive and Anycolor have created several games relating to the lore of their characters including several original animations.

Some of the best content is produced by Fans of the IP rather than agencies themselves. All simply the love of the brand that has been created.

Pseudonymity

As internet influencers become more mainstream than traditional artists or movie stars, so come the perks and the stress.

The sidemen is one of the largest Youtuber groups located in the UK. This year held a charity football place streamed to over 2.6 million concurrent viewers.

Some members expressed they can't film videos in public places in London or even the UK anymore due to being swarmed by fans. Vtubing solves this problem as it allows creators to hide their real identities and live virtually normal lives away from their screens.

Artists like Bansky have been leveraging pseudonymity for years. Live streaming for 40+ hours a week to a captivating audience brings a different type of passionate fan.

A change in Japanese Law coming into effect in 2023 could change all this as it moves to incorporate a new invoicing system. That would force people to attach their real names to their channels to get paid. This causes a whole host of problems as parasocial interaction is prevalent as you can imagine in this industry.

This doesn't affect just VTubers but many popular manga artists like the creator of One Punch Man, praise their ability to stay anonymous despite their fame.

Agencies and talent alike are super protective of their own lives. The most super-chatted channel of all time Uruha Rushia had to graduate last year due to obsessive fans.

Talent Wars

Most agencies own the IP for the characters, when they decide to graduate a talent usually the character retires as well. The two most superchatted channels of all time on youtube, both Hololive talents, are graduated accounts. Rushia (USD$3.28m) and Coco (USD$2.95m).

The Japanese creators behind them now work for North American competitor VShojo spearheading their competitive launch into Japan against Anycolor and Covercorp.

Vshojo is working on a talent-first approach to Vtubing that involves the talent owning their character IP and providing extended back-office support for them. Think of it more like a VTuber accelerator.

Summary

Online personas and worlds are blurring the line of what it means to be a creator who are we to say that VTubers can't be more popular than actual humans in front of a screen?

Virtual Personas are something we all have to embrace if the next generation of the internet is a Metaverse like we imagine. Already the connections people are forming between virtual characters and human ones are less distinct. JJ Yu has a great article helping define the similarities of Vtubing to the Hallyu or Korean Wave that took over China in the late 90s and more recently the west with groups like BTS.

What's for certain is that VTubing has a significantly lower startup cost than a traditional media group or a triple AAA game like many are planning their entries into the metaverse with. How can we leverage the learnings from virtual agencies as we pioneer this new online world?

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