Answerman

Do the Animation Cuts at HBO Max and Netflix Spell Trouble for the Anime Industry?

UPDATE (10/2): The Answerman email written in the original article pointed to an outdated address. This has now been corrected. Please direct your questions to [email protected].

After two years of hiatus, Answerman is back! For those of you who need an introduction, Answerman is ANN's oldest column. For roughly 15 years, our staff has been answering reader questions about the anime business. In that time, the column has covered a massive breadth of topics; nevertheless, the anime world changes fast, especially in this age of international streaming, so we felt that the timing was right to bring back the format with a new perspective.

Let's get the ball rolling with a question I asked myself not too long ago:

Kim asked:

HBO Max and Netflix are cutting down on their animation catalogs. Does this spell bad news for the Japanese anime industry as well?

The past few months have not been good for HBO Max's public image, as insiders revealed numerous canceled projects, the most high-profile of them being the very-almost-completed Batgirl film. A handful of animated shows were also taken off the service or stopped mid-development, including Batman: The Caped Crusader, Summer Camp Island, Infinity Train, Little Ellen, and Mao Mao: Heroes Of Pure Heart.

Although HBO Max was never big on streaming anime, even some anime titles have recently faced the chopping block, most notably Adult Swim's slate of anime originals, including Blade Runner: Black Lotus, Fena: Pirate Princess, and Shenmue the Animation. According to Toonami co-creator Jason DeMarco, Shenmue in particular actually did well enough to warrant a season 2, but that's not going to happen now.

Meanwhile, Netflix has been dealing with its own slew of canceled animations, like Wings of Fire, Antiracist Baby, and With Kind Regards From Kindergarten. While insiders have stressed that creative differences can play a bigger role in animation due to their relatively longer production cycles, the wider context isn't promising for creatives. This year, Netflix lost subscribers for the first time in a decade and laid off a significant chunk of its workforce, with the animation division particularly affected.

Much of the public commentary around shafted animation projects has centered on how counterproductive it is from a pure numbers perspective. During the pandemic, animation was one of the most significant growing categories, and this was especially so for Japanese anime and adult-targeted animation inspired by it. In that sense, then yeah, it might seem as if animation is suffering due to small-minded executives. So far, animation aimed at children has been suffering more from this dilemma than anime, but there is definitely something to be said about human biases in business decisions.

However questionable they are, all of these individual choices about streaming content are taking place within a larger market context that cannot be ignored. Streaming services are reaching their peak saturation in the United States. According to Kantar's Entertainment On Demand Panel, the proportion of U.S. households who are subscribed to at least one video streaming service has stalled at around 86%. Even if the global demand for anime continues to grow, it's clear that the consumer base in the U.S. simply doesn't have much room left to grow at this point.

The ensuing downward swing will have a tangible impact on a very important aspect of its bottom line: licensing costs.

In 2021, U.S. streaming license costs for popular shows could go as high as hundreds of thousands of dollars per episode. This goes hand-in-hand with the growth of anime streaming. According to the Association of Japanese Animations' (AJA) Anime Industry Report 2021, this market increased dramatically in 2020 by 35.8% year-on-year, with a total value of 93 billion yen (about US$817 million). Notably, it was also the only market segment to see growth that year. With the industry reeling from the impacts of COVID-19, it might be tempting for producers to see streaming as the most reliable form of growth, but this will no longer be the case given the upheavals in the market.

Already, we are seeing insiders comment on lower licensing fees in the wake of the Crunchyroll-Funimation merger. As the major streaming services in the U.S. start to cut costs and consolidate even further (HBO Max, for example, is being merged with Discovery+ next year), the “streaming bubble” will probably continue to deflate.

That said, I don't expect the effects to be catastrophic for the anime industry, especially as the other revenue streams begin to recover from the pandemic. We may see a decline in “made for streaming” anime, and it's possible that streaming profits overall will eventually flatline as other regions reach the U.S.'s level of market saturation, but it would have been naïve to expect perpetual growth in this sector. As long as anime continues to be popular on streaming platforms, it will remain an appealing investment, just not as appealing as before.

Finally, it's worth keeping in mind that the average consumer is rarely privy to scrapped projects behind the scenes. So while it is deeply dismaying to witness callous executives squander the hard work of creatives, there are many, many other canned shows and movies that you'll never hear of. Such is the way of things.

Do YOU have a question for the Answerman?

We'd love to answer your questions, and we especially encourage questions inspired by recent news and headlines. However, READ THIS FIRST:
● CHECK THE ARCHIVES. Over the years we've answered THOUSANDS of questions, and might have already answered yours!
● We cannot tell you if or when a show will get another season, nor can we help you get in touch with any producers, artists, creators, actors, or licensors.
● We take questions by email only. (Tweeted questions get ignored!)
● Please keep your questions within a paragraph length.
●The email address is [email protected].

Thank you!