New Anime 2018 Sales Grow, But Industry Must Invest In The People At Studios, Says Twin Engine President

Anime used to be judged by home video sales, but that may no longer be the largest factor to success.

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Anime used to be judged by home video sales, but that may no longer be the largest factor to success.

The anime industry is continuing to grow rapidly thanks to streaming platforms like Netflix and Amazon. Some anime companies have found themselves switching up their business model. For example, in the past, anime home video sales used to comprise the lion’s share of revenues, but in some cases, the Blu-Ray/DVD sales now only amount to a small portion of new 2018 anime sales. Besides changes to the business model, some leaders in the industry believe that investing in the people of anime studios is necessary to sustain growth, and it’s no secret that Japanese animators are often paid poorly.

The Association of Japanese Animations (AJA) provides an annual industry report and now they’ve published the trends for 2017. What is notable is that the anime industry has about doubled in revenue in comparison to 2002, when the total market value for the anime industry was about 1.09 trillion yen. The real growth started in 2013 when growth reached double-point percentages, and by 2016 the anime industry had posted a record 2 trillion yen (about $17.5 billion USD).

Of course, most of this growth was from overseas market growth for anime, not because of domestic market increases. New anime has become popular to the point that even Kim Kardashian is talking about Darling In The FranXX in 2018. However, the U.S. does not top the charts when it comes to countries having the most contracts with the Japanese anime industry. Instead, China has taken that number one position as of 2015.

In the new 2018 anime spring season, over 40 new anime were launched. Many are produced using the production committee system, where risk is hedged by splitting the cost between multiple companies with certain interests in the property. For example, the anime studios will usually create an entire season for a set rate that does not fluctuate too much, based on industry standards. Book publishers love anime because they serve as advertisements for any related manga and light novel series. Then there are the package businesses that sell the Blu-Ray and DVD.

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President Koji Yamamoto of anime producer Twin Engine spoke to Mantan Web in a new interview and he believes the production committee system is “broken.” In previous years, distributing anime to the world required each television station to purchase a license. The subscription model of video-on-demand services like Netflix or Amazon video have turned that model on its head.

“We are focusing on distribution as the center of business and thinking about how to win in the next decade,” Mr. Yamamoto said. He noted that strong Chinese companies have risen in recent years, based on the success of animated cartoons.

If anime distribution is focused on building a business other than packages, it is believed that anime can be produced without a production committee.

“Instead of risk hedging at the Production Committee, it is a scheme like a fund,” Mr. Yamamoto explained. “As for details… I’m sorry, that’s a trade secret.”

Twin Engine has created a strategy that places an emphasis on the anime studio, the animation production company itself. Planning based on this strategy increased “the value of the studio.” Unfortunately, Japanese anime studios are facing problems growing due to low wages of animators. The average animator salary in 2015 was ony $10,000 a year, which has resulted in a shortage of human resources. Many anime studios have scheduled projects multiple years in advance because they are booked to capacity and they simply don’t have enough people to do the work.

“Investment becomes necessary, and the studio needs to invest in order to keep current. Everyone in the industry is working hard as a group, so planning is difficult. Our only people are aging. If you have to change the training method, it takes a lot of money to train. We are aiming for structural reform.”

The new business model has definitely changed an indicator that used to define success. It’s long been a staple of anime fans to judge an anime’s success by the number of domestic Blu-Ray/DVD sales in Japan during the first week. The assumption was that 3,000 sales indicated the magical point where second and third seasons might be renewed. But companies like Netflix and Amazon have been changing that business model due to streaming revenue.

In the past, home video sales could be up to 90 percent of the business’ revenue. Now, the Twin Engine president says they can be as little as 10 percent. However, it should be noted that Twin Engine is in the business of selling rights to streaming domestically and internationally, not releasing anime home videos. Still, it should not be a surprise to fans if an anime is renewed for a second or third season when the domestic home video sales were relatively low. They’re just not that important of a factor any longer.