A Brief Bit on Taiwan As a Thing, Musing on Vtuber as Economic Output

I never really wrote about vtubers, but it’s interesting to note that recently Hololive/Cover suspended two of their vtubers for upsetting the Chinese mainland audience by mentioning Taiwan in the context of countries. It’s a pretty common shorthand to refer to economically distinct regions on internet platforms because there are places in this world that are run by different commercial laws despite those places not being really countries. Maybe this is just a very short explainer on both Taiwan and reporting data on the internet.

Places like the Vatican are city-states that are not fully a nation but are run by distinct set of local laws. Places like Hong Kong are administrative regions of other countries, which runs on different laws than their mother countries. Places like Taiwan are effectively different countries but are not legally recognized as independent countries by the UN and most other countries (although some countries do recognize them).

For sake of ease, viewer analytics for ads will list entities, viewers, etc., by these legal boundaries. It’s not “country” but there are few terms more suited.

The PRC, as a stipulation of doing business with them, require their trade partners to follow the same political stance in regards to Taiwan. I think the situation always escalate fast because, as per its communist tradition, being called out by the common folk was the original gaslighting social media mob that you see online today. It just happens that there are so many people in China that the effect was a lot more immediately felt in more places. Normally you would just have reasonable government agencies or some more professional parties regulating speech do this, but out comes the mobs.

As for Cover’s actions, that seems rather business as usual. I think when you have virtual youtubers who are being managed and monetized in a VC-y kind of way, this sort of thing is invariably going to happen. Cover has made investment to stream on Bilibili, which is China’s biggest weeb/youth video platform. The fact that the vtubers themselves are Japanese is irrelevant because by association Cover trying to monetize Coco or Haachama will lead to those problems. And frankly a mandatory 3-week break for the talents is the usual showbiz tactic, helping things to blow over. It’s not like those two won’t be attacked by streaming now, despite what their stans may say. It’s just typical de-escalation.

I think it does mean that the better long term strategy is to stream Chinese vtubers in China only, so you can let the more western-minded vtubers be themselves. Of course, there are internal business ramifications there. The token kotowing and having to make Coco/Haachama fans suffer for 3 weeks is a drop in the bucket in the overall scheme of things. Things will smooth over and move on while Cover management learn their lessons, hopefully.

To me, though, this is a bigger issue in two sense. So I’m going to pivot into this second discussion about economics (again).

In general, world economies broke out by country falls into three categories: 3rd world, developing, and first world. The majority of people in the world live in developing countries, like China and India. These general labels reflect more of an economic mode than actual quality of life that people associate with say, 3rd world countries. Yes, third world countries generally have major lack in infrastructure and developed industries. Their main economic output would be subsistence farming, mining and other resource extraction, and very low tier labor. Advanced economies, on the other hand, make their economic output on higher-end service industries (such as tourism) and labor adds value in a value-add chain (high tech industries, financial industries, etc). The former kind of countries can only make money by extraction: people mining ores are selling ores. The latter kind of countries make money because the people and businesses themselves add value: people writing code, giving your investment more dividends.

Developing economies are ones in between, where the mode of its economic output has shifted from the lowest tier into manufacturing and adding value, but they are cost-competitive because the labor force is cheap as the standards of living is low. As a country gets wealthier the cost of its labor will rise. Unless the value they add to their manufacturing also rises (for example, instead of sowing t-shirts they move to sowing shoes to building furniture to building computers), these developing economy will lose their competitive edge globally and be stuck doing that thing they got good at making. (By the way, Taiwan is a good example of this–a wealthy people that don’t make much money but because of the kind of products that make up Taiwan’s core exports, able to truck along much farther than much bigger, more resourceful countries.)

Where does the entertainment industry fit in here? Movies, music, art, books, and brands generally, are value add. A Louis-Vuitton bag may cost thousands of dollars, but it’s no different than a high-quality bootleg you can find in China in terms of looks and utility, at a fraction of the price. That’s because the brand itself adds value to the final product in the production chain.

A market like PRC brings its gigantic consumer base to the table. Indeed, advanced economies are not concerned about how much corn they can grow, or if they’re going to run of land to grow food or mine iron or whatever. They are concerned if there is demand for the things they can add value to. This is in other words the post-scarcity economy that advanced national economies are operating from. It’s not about how much you create, but how much you consume. For example it’s less important for Volkswagen to get that extra cent less per ton of steel they buy, and more important for them to increase demand for their cars–higher demand drives their topline price, reduce their inventory, increases margin, and improve on economy of scale.

And yeah, virtual youtubers only makes sense as an economic entity in this sense. Any reasonably outgoing person with knowing how things work could be a vtuber. The value-add here from Cover or other vtuber production teams add to the core product–a YouTuber/internet celebrity–is the promotional aspect, the business management, the branding management, tech support and creating art assets and what not, and also in talent management. These internet celebrities do things people already have been doing since the dawn of the vlog era, but this is the value add. And these things are only valuable if it generates corresponding, and additional, demand.

It is with demand that Mainland China heaves its similarly-trained netizens onto the world. In order to really escape that middle income trap that will invariably clip the wings of modern developing economies, these countries are always looking for ways to change gear in terms of what drives their economy. But this is still on the consumption side. For example, it is good economy for the USA to make a good film for the PRC, because mainstream/Hollywood films are these advance-economic, extremely value-added products that make billions of dollars for the USA each month (at least, pre-COVID). It’s like saying Avenger Endgame or Avatar made a billion bucks in the USA is a big deal, but it’s the billions of bucks these movies make overseas that is the bigger deal. And global blockbusters of this kind is almost monopolized by American filmmaking companies. China has been able to make some domestic ones, but they invariably all fail to register overseas. That’s where China is stuck on.

Maybe this partly explains why Tiktok is such a focal point this year, politically? Because the same thing is happening for social media platforms.

What I’m trying to say is, this is a bit of the same thing for virtual youtubers. At least for now.

Actually what I’m really trying to say is, the way China goes about their national policies about utilizing its massive human resource to shittalk their way into power is a zero-sum or negative sum economic strategy. Chinese companies are significantly sheltered by the country’s nationalistic economic agenda and it’s probably fair to argue many of them do not have what it takes to become global brands. This is also a national agenda for them to change, in which the likes of Huawei and Tencent are in the forefront. However, it’s not really clear how far this will go, and if the competitiveness of these companies and advantages are sustainable, innately driven, or external (such as above-average protective government policies). People in that country are working hard to shift their brands from being perceived as low-cost, low-quality to high quality. (Again, see the LV example. [Or maybe this is the difference between Nijisanji and Hololive? LOL]) That is really the mark of an advanced economy.

Then again, this is also why you can see having the fifties out in force is really the only leverage PRC has, because ultimately they are still in a position of consuming the products from external actors (Japanese companies in this case). Do they really have any say? Should they? I personally think the answers to those questions depends on ultimately the quality of good produced, and the arrangement of the bargain. That these vtuber VCs make good decisions that enable their talents and managers to make the best content is likely, the best outcome for the most people, long term.

PS. The video I linked has a super rough crash course on the political background on Taiwan and why they’re shunned by China. It doesn’t get into the nitty gritty at all, and doesn’t explain why there is an independence movement, etc., but it does highlight the economic trade agreement between Mainland and Taiwan, which is ultimately the one paper clip that connects the two sides of a single piece of paper. If you know a better video that gives the geopolitical crash course for Taiwan please let me know.

One Response to “A Brief Bit on Taiwan As a Thing, Musing on Vtuber as Economic Output”

  • mvb

    > Or maybe this is the difference between Nijisanji and Hololive? LOL

    Btw, I think the difference is Hololive are idols and Nijisanji are seiyuu idols. This explains most of the audience, although HL is as far as I can tell the first idol group to actually work in the West without changing anything!

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