Anime merch targets U.S. 'kidult' market
Plus: IG Port targets profit growth with merchandising; Redefining anime production quality; Gov't sets generative AI guidelines in making anime; and more
This is the weekly newsletter of Animenomics, covering the business of anime and manga. Today is Wednesday, July 17, 2024.
In case you missed it: Publishing conglomerate Kadokawa has acquired Doga Kobo, the studio that makes the hit anime adaptation of Oshi no Ko.
Kadokawa leads Oshi no Ko’s production committee and earned ¥3.6 billion (US$22.7 million) in licensing sales revenue from the series in the most recent fiscal year. A second season is currently airing.
Merch licensors tap into U.S. adult anime fan segment
Adults who have the financial means to satisfy their inner child with pop culture purchases, or “kidults”, are a growing consumer segment in North America, and the Japanese anime industry is increasingly eager to tap into this market.
Why it matters: In the United States, adults ages 18 and older have overtaken preschool-age children as the toy industry’s most important age demographic, says a recent analysis by the Circana consumer research firm.
U.S. adults bought US$1.5 billion worth toys in the first quarter of 2024, with 43 percent of those surveyed purchasing the items for themselves.
Driving the story: Interviews with U.S. licensing companies conducted by the Los Angeles office of the Japan External Trade Organization (JETRO) found that the average age of anime merchandise buyers have gone up in recent years.
At last year’s Anime Expo, the 24–34 age demographic demonstrated the most purchasing power, says the Society for the Promotion of Japanese Animation, the organizer of the event.
A licensing agent also told JETRO that the 16–30 age group has the highest engagement with anime content, expanding from the 16–24 age group in previous years.
Between the lines: Anime merchandising in Japan has also shifted away from the children and family demographic to adult anime fans, so companies are prepared to meet the demand.
The share of anime merchandise revenue coming from adult fans grew to a high of 19.1 percent in 2022, according to data compiled by the Association of Japanese Animations, up 6.5 points from 2018.
Yes, but: Since anime is still a relatively niche merchandise genre in the U.S., Japanese companies must learn to navigate a complex network of local licensors, distributors, and retailers to be able to maximize their investments.
IG Port targets record profits with merchandise business
IG Port, the parent company of anime studios Production I.G and WIT STUDIO, is building an in-house merchandise development business in order to double the group’s operating profit over the next three years.
Why it matters: Merchandising is a key market segment in anime, accounting for 45 percent of Japan’s domestic anime industry revenues in 2022, according to the latest available data from the Association of Japanese Animations.
By the numbers: IG Port plans to grow merchandising revenue from ¥298 million (US$1.88 million) in the most recent fiscal year ending in May 2024 to ¥2.4 billion (US$15.2 million) by 2027.
As of June, the company has already met 40 percent of its ¥1 billion (US$6.3 million) merchandising revenue target for the 2025 fiscal year.
IG Port expects to see a ¥774 million (US$4.88 million) operating profit in the merchandising business in the 2027 fiscal year, nearly a third of the group’s projected total operating profit for that year.
What we’re watching: IG Port wants to conduct its own merchandise planning, development, and manufacturing for company IPs such as Haikyu!!, Spy × Family, and Kaiju No. 8.
Domestically, IG Port will increase usage of its own e-commerce website while partnering with retailers such as Animate for pop-up stores.
Sales of Haikyu!! merchandise recently launched in China in partnership with Bilibili to coincide with the local release of Haikyu!! The Dumpster Battle.
IG Port will leverage overseas Animate branches as avenues for international sales while negotiating with additional retail partners.
Clippings: American Manga Award nominees selected
Inaugural American Manga Award nominees include translated titles such as The Darwin Incident, Delicious in Dungeon, The Summer Hikaru Died, and Okinawa. Anime NYC and the Japan Society will announce winners next month. (Publishers Weekly)
E-commerce giant Rakuten will invest in 15 anime productions through 2026, an associate producer job opening posted by the company reveals. Rakuten invested in an adaptation of Me & Roboco, a Weekly Shonen Jump manga series, in 2022 as its first anime venture. (Rakuten Careers)
Between the lines: The Japanese-language version of the posting specifies that Rakuten will lead such anime production committees, investing the most amount of money and receiving the most licensing rights in exchange.
Anime’s popularity in South Korea is helping fuel a J-pop boom in the country, driven by rising interest in Japanese music artists that perform theme songs for anime titles. (NHK World)
A Love Live! Sunshine!! anime fan has taken over management of a shuttered aquarium in Shizuoka Prefecture that was featured in the series, reopening the site after it closed earlier this year due to high operating costs. (The Mainichi)
Anime exports rely on consistent production quality
“When binge-watching through streaming is the focus [of consumption], I think that the stability of quality is more important than high [animation] quality, so we placed more emphasis in that area. Let’s make [the quality] more stable, not better.”
— Tsukasa Sakurai, Tsumugi Akita Animation Lab studio president
Context: In a two-part interview with anime critic Atsushi Matsumoto, Sakurai argues that reducing anime studios’ reliance on freelance animators and external subcontractors will result in more consistent quality from one anime production to the next, a critical piece in the effort to remake anime into an export-oriented industry for Japan.
What he’s saying: “From a management perspective, I think it all comes down to how much we can reduce costs. It’s about how much we can create something that people will think is ‘good’ within a limited budget,” Sakurai told Matsumoto.
Catch up quick: Tsumugi Akita Animation Lab drew attention earlier this year when the production credits of I Was Reincarnated as the 7th Prince so I Can Take My Time Perfecting My Magical Ability showed that it gave key animators additional responsibilities in creating 3D layouts and photography, roles that are typically not done by animators and instead outsourced to subcontractors.
This was made possible with the adoption of Unreal Engine, a 3D CG software that is gaining popularity among anime studios and manga artists, allowing animators to create animatics with the help of online tutorials.
Unreal Engine also saved the studio ¥750,000 (US$4,725) annually in software license cost by replacing 3ds Max, which required more specialized training.
Reality check: Sakurai said it took Tsumugi Akita Animation Lab four years and near bankruptcy to realize that training animators in-house alone can’t solve the outsourcing problem because of the toll it takes on internal resources.
The studio instead created a standalone preparatory school to prepare animators before they are recruited to join the company as employees.
What’s next: Bandai Namco Filmworks, which funded 7th Prince, has formed an alliance with Tsumugi Akita Animation Lab to produce more anime IPs.
Gov’t outlines generative AI risks in anime production
Use of generative artificial intelligence (AI) technology introduce potential risks of copyright infringement throughout the anime production process, especially in its early stages, according to case studies conducted by the Japanese government.
Why it matters: The findings, published this month in the Ministry of Economy, Trade, and Industry’s new Guidebook for the Utilization of Generative AI in Content Creation, offers the first official guidance on how studios should approach using generative AI tools in certain areas of anime production.
The details: Two case studies highlighted by the ministry involve Tokyo-based anime studios K&K Design and DLE.
As previously reported by Animenomics, K&K Design uses generative AI to assist with enhancing character designs and creating background art.
DLE, a subsidiary of Asahi Broadcasting Group, is experimenting with speech synthesis technology to automatically create unique character voices.
Zoom out: Aside from anime, other case studies done by the ministry involve companies in the video game and advertising industries.
As a guidebook to help businesses, overseas partners, and developers think about how to create, use, and collaborate on AI technologies, the ministry emphasizes its status as a living document.
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