ITmedia’s Atsushi Matsumoto interviewed Nao Hirasawa, CEO of the anime production company ARCH and president of studio Graphinica, who shared developments in the anime industry that have led to TV production costs rising in recent years to as much as 300 million yen per episode (~$1.9 million) or 4 billion yen per movie ($25 million).
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Hirasawa makes his arguments by dividing anime studios into ecosystems and tiers based on which types of companies approve the budgets, as well as the studios’ capabilities, respectively. These ecosystems have corresponding revenue streams that studios earn income from, as well as budget ranges the studios can allocate to anime. The tiers depend on brand power and diversified income streams:
- Brand power: Does your brand recognition merit higher budgets for anime production? (Are companies seeking you out specifically to produce an anime?)
- Diversified income streams: Do you just make money by being commissioned to complete an anime, or do you also receive other income, such as copyright income from production committee participation?
Hirasawa’s diagram below showcases these segments. The Y-axis represents studio brand power, with bigger brands at the top. The X-axis represents diversified income streams, with studios that gain more diversified income (e.g., copyright and non-animation commission costs) on the left. There are a variety of studios. Studios span prime contractors, which are given direct responsibility by production committees (typically) for the creation of an anime; subcontractors, which prime contractors typically commission to make sections of an anime; and studios that can perform the above and also manage copyrights by participating in production committees. An example of this type of studio is Toei Animation.
Anyways, Hirasawa’s diagram is below (Y-axis: brand power; higher is better / X-axis: diversified income streams; left is better; translated by me):
The above ecosystems are defined here:
- Overseas headquarters commission (global scope): In this ecosystem, studios produce anime with budgets approved by major companies headquartered overseas. The anime is expected to target a global audience.
- Streaming platform and game IP anime ecosystem: Studios in this ecosystem produce anime whose budgets have increased due to the influence of streaming services and the anime being part of an IP media mix involving hit games. There are also pressures to target global/mass audiences.
- To give a sense of how much these games can make: While the Solo Leveling: Arise game’s copyright isn’t held by the anime production committee (it was released after the anime’s first season), Hyundai Motor Securities estimated it would gross around 500-600 billion won per year (~$365-438 million USD at the time, June 2024).
- The upcoming Solo Leveling: KARMA game’s copyright is held by the production committee, though, so that’s one to keep an eye on. There’s probably a better anime-game example, but it was interesting to imagine someone at Aniplex/Crunchyroll perhaps going “Holy fumble.“
- Late night and theatrical landscape & Weekend morning anime: The traditional anime landscape where shows are aired late at night/in the morning, and films are released in theaters. The influences from the above ecosystems matter less here. The domestic market and more niche markets are bigger priorities.
The original (untranslated) diagram by Hirasawa is below:
Outside the article’s diagrams (could use Google Lens perhaps?), Hirasawa’s thoughts are pretty accessible and very interesting (read here). The diagram above is his view of the current industry, which he expects to become further polarized by the 2030s.
He says that previously, the smaller disparity between budgets meant that companies could move between ecosystems more easily by efficiently producing high-quality work, building brand power and infrastructure (and funds/creditworthiness) to participate in production committees, and then negotiate from stronger positions and participate in future production committees. This has always been challenging, but it is now far more difficult. Nevertheless, Hirasawa argues that these new market forces often bring bigger budgets and streamlined decision-making, making them favorable options too.
- Mildly related, but the manner in which studios can raise funds to participate in production committees probably isn’t intuitive. Borrowing money from banks probably isn’t the first solution that comes to mind, either, so here‘s Studio Pierrot’s (Naruto) Keirou Itsumi discussing how they did just that. In the event Pierrot defaulted on a loan, the bank could have sold the anime rights put up as collateral to another company. Interesting parallel universe, that.
- Related to the previous bullet point, here‘s Hiroshi Kase, a tax advisor to Studio Colorido (Burn the Witch), advising how to secure loans from banks.
- Here‘s former MAPPA (JJK/Chainsaw Man) producer Makoto Kimura on how the studio used bridge financing from Cool Japan Fund’s Japan Contents Factory fund (JCF) to independently fund Chainsaw Man Season 1. It was seen as a big deal for a company that was previously a prime contractor to effectively become a single-company production committee.
- I reference all here: ‘I Am Concerned’: KADOKAWA Anime Producer Says Japan Needs to Protect Its Unique Style and Calls for Sustainable Production
Broadly speaking, the big budgets stemming from the anime being part of an IP media mix involving games, as well as the streaming services that entered the market in the mid-2010s, require the anime to have global mass appeal. Meanwhile, for cheaper anime, foreign income matters less in determining success.
However, cheaper anime are seeing only modest increases in production budgets compared with those at the higher tiers, Hirasawa says. He argues that studios are increasingly being forced to decide whether to produce anime on a cheap budget, where profits can largely be secured from Japan alone, and allowing for more niche or creative expressions from a Japanese perspective, or at higher budgets, where the expectation is on global mass appeal due to the influence of streaming services and games.
Finding a middle ground that can hit both domestic and core international markets is becoming riskier, so it’s harder for new studios to start small and progress toward greater retained earnings, brand power, and participation status in production committees.
Furthermore, Hirasawa says the widening disparity in budgets has disrupted investors’ prior assumptions about how much money and how long it takes to complete an anime, leading to insufficient budget allocations for studios. Leftover funds that could’ve improved studios’ retained earnings are being used to cover deficits when the production committee is unwilling to increase them. It’s also left studios that primarily function as subcontractors even worse off, since they register even lower sales and have less cash on hand.
Hirasawa argues that studios and creators will need to decide where they want to compete, as paths to advancement are closing off. It’s less likely that creators can stay at a small studio with the goal of moving up together in the world.
If production budgets at the lower end are growing more slowly and becoming harder to estimate, leading to increased risks and deficits for studios, then regular operations become more survival-oriented. The ability to access larger budgets narrows as connections or referrals are reserved for upper tiers; bigger studios can grow bigger still.
Anime industry figures have said that companies poaching staff from other studios has increased, which checks out, given the increasingly competitive environment. The anime standards advocacy association, NAFCA, says that studios are spending even less time training staff, leading to more outsourcing to foreign studios and decreasing standards due to more desperate recruitment.
Again, it’s a great read (article). Overall, it sounds like the growing disparity is cutting off the bottom rung of anime production companies from sustainability, while making the upper tiers more accountable to foreign capital and mass market appeal to recoup costs reliably. Plus, worsening conditions at the bottom, such as the trend of increasing bankruptcies at subcontracting studios, complete the negative cycle.
I struggled initially a little with “why” the middle tiers of anime production are becoming more difficult to exist in. (After all, just make an anime that’s not too cheap nor expensive that’s successful globally. Duh.) But, I believe it’s that, whether it’s overseas audiences’ tastes or analysis from streaming services, it’s been judged that overseas audiences require sufficiently expensive (high-quality?) anime, with expressions more accessible to them. Producing expensive and Japan-centric titles when the Japanese market alone won’t cover them would just lead to losses. Producing titles that deliver on price effectiveness and global demand is increasingly difficult.
While I’m not sure of the degree of reliance on foreign capital, what happens if the reliance is sufficiently high and these companies withdraw from Japan all at once? Will Japanese companies affected suddenly rush into the domain of smaller studios that are currently trying to survive? Will those small studios be pushed out? Acquired? Mildly related: Top Anime Producer Kadokawa Says American Dominance by Crunchyroll Has Led to More ‘Careful’ Negotiations Over Prices.
Source: ITmedia
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