In the Volatile World Of VTubers, Companies Crash And Burn

Three VTuber avatars, Shxtou, Mito Tsukino and Ironmouse look on a purple and green background.

Image: Shxtou / Mito Tsukino / Ironmouse / Kotaku

Elves, robots, zombies and pirates. Many of today’s internet stars aren’t even human, but outlandish characters that wouldn’t look out of place in a popular anime or manga. Such is the world of virtual YouTubers or “VTubers”, who have gone from a niche technological experiment to a full-fledged cultural phenomenon in the space of just a few years. Yet as this fantasy world continues to expand, so do its cautionary tales, painting a picture of a subculture that may grow faster than its fledgling infrastructure can support it.

Kizuna AI is often acknowledged to be the first virtual YouTuberbut the industry has come a long way since it burst onto the scene in 2016. As animated avatars that mimic the movements and facial expressions from the person behind them, VTubers are now among some of the platforms highest earning singles and most viewed accountswhile benefiting from a sizeable presence outside the country where they started – Japan. Despite some recent scandalsthe VTuber bubble doesn’t seem set to burst anytime soon, leading many aspiring creators to take the virtual path less traveled.

In doing so, many would rather get their start with a talent agency or firm than try to break into the field on their own. While it’s certainly possible to make a living as a freelance VTuber, there are some benefits to signing an agency deal, usually in exchange for a portion of your earnings. The first is brand recognition: when you debut in a well-known group, more fans are likely to discover your content. The second is the sense of community: talents frequently form friendships with each other and carry out collaborative projects.

The VTuber Ironmouse smiles in a snap from a YouTube video.

The popular VTuber Ironmouse is seen here in a recent YouTube video.
Screenshot: Fermouse

Additionally, VTuber agencies can also help with less glamorous things such as software support, legal advice, brand deals, and even character creation. This last part is especially important because a VTuber is nothing without an attractive avatar, so a good VTuber agency can help connect talent with potential designers. Some agencies may even provide them in-house.

That said, there is currently an imbalance between the number of creators who want to start and the number of agencies capable of welcoming them. As the VTuber bubble continues to grow, there are incredible opportunities for new companies to enter the space, but also incredible pressure on them from potential talent. The result is an industry littered with the corpses of countless failed companies, each with its own story. Here are just two.

The curious history of colored magic

In June, a curious phrase started spreading on Japanese Twitter: 1日落ちたVTuber事務所. Roughly translated as “the VTuber agency that went down in a day”, it was referring to the incredible feat accomplished by a company called Colorful Magic which started operations, held auditions, recruited talent and dissolved …all in one day.

It started innocently enough, with a single tweet about June 13 announcing the formation of the company and the start of auditions for its first wave of talent. Very quickly, however, several users began pointing out some of the pitfalls of the company’s strategy: in particular, the fact that anyone providing the avatar modeling would be doing so “for free”, as the company was currently not earning money. Avatar provision is considered to be one of the key functions of a VTuber agency, but the number of artists who would be willing to do this job for free is indeed very low.

As the day progressed, some cyber sleuths managed to trace the identity from the owner and founder of Colorful Magic: an independent rigger named Roze. Having taken avatar commissions in the past, Roze certainly had some experience in VTuber-related software such as Live2D and Reality, but nothing in terms of successfully running a business. So the amount of support that this agency could actually provide for their talent was probably quite limited.

On June 14, just under 10 hours after the initial announcement, Colorful Magic’s Twitter account issue a statement essentially confirming everything the internet had uncovered up to that point. Roze admitted that they had seriously underestimated what it takes to run a VTuber agency and would put the company’s operations on indefinite hiatus, at least until they had enough. leveled the relevant skills.

True to Roze’s word, Colorful Magic finally reemerged several months later as an “AVTuber” agency (AV standing for “adult video”), combining the wonderful world of Japanese pornography with virtual YouTube. Another controversy soon followed involving Colorful Magic’s unauthorized use of artist’s artwork this led to Roze deleting her Twitter account, but the agency has managed to debut four talents so far.

It’s a viral tale with a (relatively) happy ending, but not all of them turn out to be so enjoyable.

VStars: “For VTubers, by VTubers”

A positive consequence of Colorful Magic’s rather rapid rise and fall was that any real fallout was largely avoided. The sheer number of people wanting to debut under an agency in the VTuber space meant that some of the more dubious aspects of the business were quickly uncovered, but the business never really existed in its first iteration for gather a strong group of people around her. Unfortunately, the same cannot be said for VStars.

Start of operations in April 2021VStars was a community-driven VTuber talent agency that primarily operated on a fairly large Discord server somewhere between 250300 members. Described as a community “for VTubers, by VTubers”, its goal was to provide a place where virtual talent, old and new, could support each other through a variety of activities, including game nights, raids support and even workshops animated by associated personalities.

In many ways, VStars was more of a hub for independent virtual YouTubers than an actual agency offering business and branding support like Colorful Magic, but it fulfilled the desire for a sense of community and even offered the hope of brand recognition in the future if the group has grown sufficiently. According to official siteat least three talents debuted under the agency before it imploded: the “celestial shapeshifting fox” Fuwapuffthe “chaotic bat” Nimu Kalmiaand the now inactive YoRoHu, which stands for “your robot husband”. Maybe there were even more, but it’s a bit hard to say.

An anime bartender cleans a glass while standing behind a bar.

Takahata101 is a virtual bartender who streams on Twitch.
Screenshot: Takahata101 / Kotaku

What makes understanding the rise and fall of VStars particularly difficult is the fact that the band’s official Twitter account was taken down at some point for unknown reasons. All we’re really left with is pretty empty space PageInstagram and a particularly venomous TwitMore published in November 2021 where one of the owners (we do not know who) lists a long list of grievances and reasons for leaving the group. In and among petty grudges and jokes, there are two main themes: burnout and betrayal.

As a largely volunteer-run organization, none of VStars’ top executives have ever been paid. Still, they were apparently fine with that as long as the project was successful and garnered support from the wider community, but engagement apparently plummeted to “abyssal levels” after the band held their first auditions. They therefore felt used and abused by members of their own servers, accused of only looking after themselves.

Corporatization and demand

Halfway through, the VStars TwitLonger issues a stern warning: “You’ve seen these messages before. You will see them again. Indeed, there are so many different talents and companies entering and leaving the VTuber space every day that it can be difficult to keep track of them all. It turns out that these two examples have been particularly publicized.

Many reasons can be given for the continued growth and popularity of VTubers. For one, they combine the artificiality of anime aesthetics with the ability for viewers to form a parasocial relationship with the streamer they’re watching. (This is present in all forms of live streaming, of course, but it’s perhaps newer when the individual you’re forming a parasocial bond with is a cartoon catgirl.) More importantly, they provide also a liberating method of self-expression for those who are not comfortable with their own image. However, the fact remains that the demand from the wider community far exceeds the infrastructure available to accommodate it. The result is the rapid rise and fall of agencies such as Colorful Magic and VStars.

In its first iteration, Colorful Magic was obviously not a compelling proposition. Not only was the owner completely inexperienced, but he was more than willing to profit from the work of other artists without paying a single penny. And yet, the company still managed to attract considerable attention due to the large number of people wanting to debut under an agency in the VTuber space. While this is also (ironically) how he managed to come under scrutiny and come to a standstill in a single day, it effectively demonstrates the intensity of the dynamics at play.

Given the lack of suitable agencies to meet the demand, independent groups performing many of the same functions could step in to fill the void. This is what VStars attempted to do while remaining a non-profit organization, but the creators were shocked by the reception they received. From their perspective, their server members were only interested in being elite as affiliate talent: in other words, brand recognition was prioritized over community project.

Looking at the list of Top 50 most subscribed virtual YouTubers, it is difficult to find a single talent not associated with one group or another. The specifics of each contract no doubt differ from agency to agency, but this speaks to the growing corporatization of the industry. How are future talents supposed to break through if there aren’t enough agencies to accommodate them? It may actually take a dip in interest before a balance can be restored, lest the industry continue to be a place of dramatic ups and downs.

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