The State of Anime in 2021
Who’s involved in the business side of anime production, anime's effect on Internet culture, and where opportunities lie
Happy February Substack fam 🎉 As the first Zestrepreneur product I’m creating revolves around newsletter writers getting high-quality feedback on their work, I’ve decided to start writing with the goal of releasing “uniquely-Kiren posts” on a weekly basis via Growth Improvements.Those posts will all vary in length, depending on how busy I am on any given week. You can expect these “Creating with Kiren” posts on a monthly basis.
I love to throw myself into the deep end when it comes to learning about the context behind the hobbies I enjoy, especially those that I've been enamored by for the past 10+ years. The recent acquisition of Crunchyroll by Funimation spurred me to finally write this piece, in an effort to learn a little about who’s involved on the business side of anime production, anime’s effect on Internet culture, and where opportunities lie. Let's get started.
Who’s Involved in the Business Side of Anime Production?
For those unfamiliar with the medium, the most agreed upon definition of "anime" describes all animated works that originate from Japan. Anime is widely equated to American cartoons among people who haven't consumed such content, but this is not the case. Unlike American cartoons that largely fall under the three segments of children's TV, superheroes, and adult sitcom, the entirety of anime can be bucketed into the low-high tens of genres and subgenres that cater to a wide spectrum of audiences and ages. My favorite shows tend to showcase complex world-building, exceptional sakuga, and/or inspirational characters working super hard to achieve their goals.
The intricacy of the content created is a reflection of how capital intensive the process is, as it takes around $100-300K to make a single episode. As a result, the vast majority of anime series are adapted from source material that's popular at the time. Adapting anime from popular IP mitigates a lot of risk when it comes to predicting how well the content will be received. It makes complete sense from a business perspective. After doing a little research, I found that manga seems to be the most adapted type of source material, followed by mediums such as light novels, video games, and visual novels. Since the practice of adapting anime from popular, market-tested IP has become commonplace, end-to-end anime creation has been streamlined by including all of the relevant players in the process: anime production companies, publishers of the source material, distributors, TV networks, animation studios, and more. Here’s a little bit of a breakdown on each of these parties.
Anime Production Companies
Production companies are essentially the glue that holds everything together, interfacing between many of the relevant parties in order to keep everyone aligned and episodes released. They’re the ones who pay upfront costs for studios to make it, TV networks to broadcast it, and distributors to get it to market. Companies like Aniplex have started to vertically integrate by creating their own animation studios and distributor subsidiaries.
Publishers
As previously mentioned, the usage of source material like a popular manga is a key predictor of a show’s success. It’s natural that manga publishers are a part of the process when manga is used as source material. The role of a manga publisher in Japan is similar to that of a comic book publisher in the US. However, as opposed to the US comic market where publishers own at least some of the rights, the author or mangaka in Japan commonly keep their copyright for business model, legal, and cultural reasons, all of which are specific to Japan.
Distributors
Great products need great distribution in order to be successful. In the case of non vertically-integrated anime companies, distributors will pen deals with producers requesting a set of rights to distribute and merchandise the created work for a certain set of time in a particular territory, along with an accompanying payment model. The big anime streaming services like Crunchyroll, Funimation, and Netflix are now distributors in their own right, as many production companies now make deals with them directly, instead of adding complexity by using an intermediary company to negotiate with the respective streaming services.
TV Networks
Japanese TV networks are a critical component of the anime value chain. Not only do they serve as highly-lucrative distribution channels, but many also participate in production committees with the anime production companies themselves, helping garner sponsors and advertisers to fund a lot of the production. In Japan, the domestic TV market segment is around twice as big as the domestic streaming market. With streaming playing such a prevalent part in our lives and culture, this was surprising to me. Overall trends are shifting towards streaming in general, so I can see that happening in Japan as well eventually.
Animation Studios
There wouldn't be any of the amazing anime present today without the work that anime studios put in. Studios are ultimately responsible for staffing all of the people needed to create the content. These roles include, but are not limited to:
a show director who conducts the entire operation,
character designers who design characters and oversee that they're being implemented properly throughout the series,
episode directors who storyboard an episode and oversee management of that episode,
layout directors who layout cels that will become the definitive blueprints of shots,
key animators who create the key frames that depict an important position in the cel,
animation directors who make sure that all of the key frames are consistent with the entirety of the series thus far,
in-between animators who fill in the blanks and draw frames between the key frames to depict smooth movement,
a compositing team who's job it is to import all of the frames on a computer, color them, add CG, and special effects,
a recording director to oversee post-production,
and voice actors to add their lines and sounds to make the characters come alive.
Anime’s Effect on Internet Culture
It's debatable as to when anime became mainstream in the US, but I believe it was through the introduction of the Toonami block on Cartoon Network in the late 90s. That's when I first became familiar with the medium. Shoutout to Toonami creator Jason DeMarco for creating that initial spark! Now the US has highest demand for anime in the world when it comes to streaming, merchandising, and otherwise, with the exception of Japan. We can see that with Crunchyroll and Funimation persisting in the Top 200 Free Apps chart in the US App Store.
This surge in demand has enabled anime to become a permanent fixture of Internet culture. The butterfly and "it's over 9000" memes are just a couple of examples. Whenever I want to post a GIF on Twitter, anime-related GIFs always come up first on search. In the fashion world, Gucci recently released a Doraemon capsule collection to celebrate Chinese New Year. Shounen anime has been a staple of the hip-hop community for the longest time, and now Megan Thee Stallion is unabashedly leading the charge as the biggest rapper otaku with a Naruto drop in “Girls in the Hood,” fire Boku no Hero cosplay, and big love on IG Lives. TikTok and Insta are always flooded with so anime content that it’ll make your head spin. The impact that anime has on culture today is undeniable.
Where Opportunities Lie
The anime market is growing at an astonishing pace, as its influence continues to spill over into Internet culture. This spillover effect raises more awareness of the medium and enables the market to expand, causing this virtuous cycle to repeat over and over again with greater momentum on each successive spin. This market expansion allows for more opportunities in new products, offerings, and experiences that can be brought to market than ever before. Here’s what I’m currently thinking about.
A New Series with Pokémon-Level Awareness
Let’s face it — the only anime series that your grandma likely knows about is Pokémon. Pokémon roughly grosses $4 billion a year in merchandising, and has been able to maintain steady cultural relevance for the past 25 years. Recently, the franchise has an experienced a larger-than-life resurgence through the advent of Niantic’s popular AR mobile game Pokémon GO.
I predict that a franchise with Pokémon-level brand recognition will emerge in 5-10 years. With the simultaneous rise of esports and manga, I predict that the anime will be adapted either from a popular video game or Shōnen Jump manga.
More Anime Created from Korean Source Material
Along with Crunchyroll and Funimation, WEBTOON frequently makes appearances on the Top 200 Free Apps chart in the US App Store. WEBTOON is a Korean-owned platform where creators can self-publish their own manhwa/webtoons, gain access to millions of readers, and get paid. WEBTOON’s parent company Naver, who also owns the popular messaging app LINE and camera app SNOW, recently acquired text-based storytelling platform Wattpad for a rumored $600 million. Considering WEBTOON and Wattpad’s high-quality threshold bar, the amount of promising anime source material here is endless. Crunchyroll has also come to this realization, collaborating with WEBTOON to adapt popular manhwas like “The God of High School” and “Tower of God.”
I predict that the next big Korean-based anime series will come from the manhwa “Solo Leveling.” It’s an extremely riveting action read with great character development and differentiated art that I can’t take my eyes off of. Seeing an animated Sung Jin-Woo duke it out with dungeon monsters would be mind-blowing to say the least.
An Anime-Based, Community-Driven Social Network
I’ve been passively thinking about this for a few years, but there was recently an amazing slide deck from Greg Isenberg who actually did the legwork digging into the popular r/manga subreddit and he came to the same conclusion. As emerging social networks are moving away from the older broadcasting UX model and into a more community-driven format, there’s a huge opportunity for an otaku social network where millions of fans all over the world can share their love for anime, manga, and gaming. I could honestly see this as a potential Zestrepreneur product, sequencing it after CrafterFaster.
Big shoutout to Seyi Taylor, Anthony McGuire, and Kevin Cirugeda for their feedback!