The coming anime avalanche

Netflix, growing interest outside of Japan, and artificial intelligence could fuel an anime boom.

“Terminator Zero” (Netflix)

Welcome back to The Traverse. It’s been a busy time (I’m getting married in a few months), so I skipped last week. This week I’m back with a more in-depth exploration of a topic I’ve written about here before: the rapid rise of anime around the world.

The Gist

• The popularity of Japanese anime has ben growing around the world, and as Japan’s population ages, that’s ever more urgent.

• Netflix in particular has invested heavily in anime content as it focuses on nurturing global fandoms.

• Japan (and Netflix) has embraced the rise of artificial intelligence, a hard-to-ignore fact when considering the future of anime.

Japan is Netflix’s second-biggest country of origin in terms of content production, behind the US.

As of January, of the almost 1,900 distinct Japanese-produced titles on Netflix, about half were anime, according to Ampere Analysis. I start with that stat because it showcases a vital point about the future of streaming content, particularly on Netflix, the world’s biggest subscription video streamer.

The company released its Q2 earnings report this week, and made a point that growing its “fandom” is an essential part of keeping subscribers engaged, and most importantly, differentiating itself from what it sees as its biggest competitor when it comes to attention, YouTube. Co-CEO Greg Peters said on the call on Thursday that it’s hard to imagine the kind of creative bets that Netflix takes would be possible “within YouTube’s model.”

There’s maybe no fandom that’s growing more around the world right now than anime. For streamers like Netflix it’s relatively inexpensive to produce or license, and to market, compared to other kinds of content. Animation in general is a major part of Netflix’s content strategy going forward, as it showcased over 30 new animated series at a recent upfront event, where it said that anime generated 1 billion views in 2023.

Ampere says that Netflix is now the most important platform globally for licensing and producing anime content (Crunchyroll, a dedicated anime streamer, has nearly 1,300 titles, but Netflix’s global reach and production prowess is unmatched). Licensed content still far outstrips originals, but the signs point to Netflix moving further into original, exclusive anime programming. The number of licensed anime titles on Netflix decreased from 753 in 2022 to 729 in 2023, while the number of original titles rose from 54 to 76 in that time.

Provided by Ampere Analysis

Netflix’s first original Japanese-produced anime was “Devilman Crybaby” in 2018, based on the manga “Devilman,” which concluded in 1973. Roland Kelts — author of “Japanamerica: How Japanese Pop Culture Has Invaded the US” and a visiting professor at Waseda University’s School of Culture, Media and Society — told me that the manga’s creator, Go Nagai, “couldn’t believe it.” He was in his 30s when he created the manga and is now in his 70s; but part of the Netflix strategy, without its own library of IP to fall back on, is to sift through decades worth of manga inventory and see if it can find an entirely new audience.

“Netflix’s entry into anime production really changed the landscape of who the players would be,” says Amanda Nanawa, a longtime anime industry professional/expert with experience at Funimation and other organizations, who’s starting an anime-focused creator-economy company.

And it’s not just anime that Netflix is eyeing, but anime and manga live-action adaptations. I won’t belabor that point since you can read my previous story on it, but the streamer’s live-action adaptation of the “One Piece” manga and anime was its biggest title in the second half of 2023, and viewing for the anime also doubled on the service in that time.

Again, Netflix, as well as Amazon — both of which dramatically increased their anime libraries in recent years — are in the market for IP with global reach, so expect to see more adaptations like this. It’s not just about the manga-to-anime pipeline, but the manga-to-anime-to-live-action pipeline, too, and the more it keeps viewers engaged on the platform, the better.

The pros and cons

Streaming’s impact on anime is a mixed bag. While it has undoubtedly led to a surge in popularity, the implications for Japanese producers and artists, who are already running scarce, could be serious. For instance, Netflix is planning to recreate the “One Piece” anime; that’s not the live-action adaptation, but a new interpretation of the anime that has already been running for over two decades. Motohiko Ara, an analyst at Ampere, wondered if that reduces local creators’ influence to create and export new content.

And if streaming companies release a series under the binge model, it can be deflating for creators to see so much work and effort be consumed in a weekend and then largely moved on from: “The industry has been trying to negotiate more to get shows to drop once a week,” Kelts says. “Anime is really good at cliffhanger endings; they keep you engaged. If they can parcel out a series over a weekly installment, then the fanbase has a chance to grow.”

But the benefits are hard to ignore. The Animenomics newsletter recently wrote that Japan’s top manga publishers are seeing bigger profits in recent years thanks to higher licensing rates and more merchandising deals amid the anime boom. And according to the experts I spoke to, for the local industry there’s also just an urgency to expand anime’s foothold outside of the country, as Japan’s population ages and shrinks.

“There are fewer young people in Japan as both consumers and producers; a lot of people in the industry here know that there’s no room for domestic growth and that it has to come from overseas markets,” says Kelts.

Where anime is growing

“Cool Japan,” an initiative originally conceived of a decade ago that the country’s government is reviving, is a broader reflection of that understanding. It’s intended to spread the allure of Japanese culture, not just anime, around the globe. But the initiative back then — including a 24/7 anime cable channel and a short-lived streaming site to compete with the anime-focused Crunchyroll — was largely a failure, according to Kelts.

Since then, though, global streaming giants, as well as smaller regional players, have done a lot of the work. According to Ampere, subscription video streamers are the top way anime fans watch around the world, more than pay-TV providers or even social media. One report estimated that the Japanese anime market was valued at $29 billion in 2022 and projected it to grow to $72 billion by 2032. Japanese officials are even more bullish, and want to increase those numbers to $129 billion over the next decade.

It’s all probably come as a bit of a shock to those who have been ingrained with the industry for a long time. While Japan has been making anime for over 60 years (1963’s “Mighty Atom,” or “Astro Boy” as it was known in the US, is considered the first), it never quite saw their content as a global power before entering the 21st century. Japanese anime only started to go “mainstream” in the 2010s, according to Nanawa.

“We started to see a shift in people being more open about being anime fans, and it has a lot to do with generational viewing,” she said. “We even started to see celebrities admit that they watched anime.”

The most recent example is track athlete Noah Lyles, who made a point of running with Yu-Gi-Oh! cards during his Olympic trials. And before that, Michael B. Jordan was vocal about anime’s influence on “Creed III,” which he directed and starred in. Even brands are getting in on the action; McDonald’s recently launched an anime-inspired marketing campaign.

But while anime has a greater foothold around the world, Asia Pacific is still the biggest region for available titles outside of Japan, thanks largely to Taiwanese and Korean streamers like Hami Video (Taiwan) and Tving (South Korea), as well as the global players like Crunchyroll, Netflix, and Prime Video, according to Ampere Analysis.

Europe offers room for growth, though, as it has the most countries where interest in anime is rising, according to Ampere. Kelts and Nanawa both mentioned the Middle East as another huge growth opportunity; Saudi Arabia is building the world’s first Dragon Ball Z-inspired theme park, and the country has a history of partnering with Japanese studios.

Kelts also pointed to South America: “A lot of the shows that kids saw in South America back in the ‘70s and ‘80s were different from shows on US network TV. Television production companies didn’t have the resources US companies had. It was much cheaper for them to buy cheap anime titles. That means there’s an audience in those regions that has aged up with anime.”

“Star Wars: Visions” (Disney+)

What’s next

One trend I’ve noticed is American IP getting the anime treatment, which further shows just how popular the medium has become. Netflix will debut “Terminator Zero” next month, a Japanese-produced anime take on the Terminator franchise. Disney+’s “Star Wars: Visions” debuted as a Japanese anime, produced by various studios in Japan (Star Wars Celebration, the annual event celebrating the franchise, will be held in Japan in 2025). Knowing Disney, it would feel on brand for the company to turn to anime only in relation to its, well, brands.

But the future of anime probably won’t be influenced by any one streamer or producer or company, but by the fan community. If they’re happy, the medium will thrive. If they’re not…

“The industry shouldn’t spend too much money promoting anime,” Kelts says. “The fanbase loves to discover it. That’s part of the passion. They discovery something and then go bonkers because there is so much of it.

Now, the way all of us live online, I don’t think anybody likes top-down promotion. Nobody likes being told this is the book you should be reading or show you should watch. People reject that. Anime and manga fandom was always grassroots.”

Part of that passion and discovery is emphasized in “doujin” culture in Japan, which includes fan-made, self-published work. Kelts explains that there are no guardrails, unlike in the US, for stuff like this in Japan; if fans want to make and sell manga or anime using existing IP, it’s not only legal but encouraged.

The rise of generative artificial intelligence, of course, raises some questions in that regard, as it does with any art form these days: “That’s been tolerated in Japan for decades, but what happens now that AI can reproduce it much faster than an individual, and if what’s being sold is machine-generated artwork?,” says Kelts.

For now, Japan is fully open to AI. Matt Alt, author of the book “Pure Invention” and the newsletter of the same name, published a piece on Sunday (as I was writing this!) noting that Japanese officials intend to make the country “the “most AI-friendly country in the world.”

The people I spoke with admitted that there’s probably no getting around AI becoming more ingrained in the anime world. Like streaming, there are pros and cons; unlike streaming, it’s too early to know for sure just how dramatically AI could impact the industry.

Kelts says that “there are a lot of opportunities for AI to make anime and manga even more accessible,” particularly when it comes to translation (which is already opening up its own can of worms). But the biggest elephant in the room is this: there’s always the potential for the technology to streamline the animation process, a daunting but perhaps necessary possibility in a country where the population is getting older, fewer young artists are emerging, and the content is seemingly infinite.

“AI is still a tool, the question is how will that tool be utilized,” Nanawa says. “Japanese creators, definitely don’t want to use AI as a way to replace how animation is being produced. They would lean on AI to help with streamlining story arcs, to create story probabilities. What they don’t want to see happen is replacing human animators.”

Netflix — the “most important platform” for licensing and producing anime content, remember? — might have a say in it, if co-CEO Ted Sarandos’ recent comments are any indication.

“I think that AI is going to generate a great set of creator tools, a great way for creators to tell better stories,” Sarandos said on Thursday’s earnings call. “And one thing that's sure, if you look back over 100 years of entertainment, you can see how great technology and great entertainment work hand in hand to build great, big businesses. You can look no further than animation. Animation didn't get cheaper, it got better in the move from hand-drawn to CG animation.

“I think [audiences] largely care mostly about connecting with the storytelling. And I'd say they probably don't care much about budgets and arguably, maybe not even about the technology to deliver it.”

Beyond the Traverse

⭐ There’s new data out about how Disney+’s Star Wars shows are losing viewership

• ICYMI I wrote last month about this. Star Wars is effectively a TV franchise now, more akin to Star Trek, and it’s hurting the brand.

🌪️ “Twisters” is the latest movie to beat expectations, expected to make around $75-80 million this weekend

👊 They are…inevitable. Looks like the Russo Bros. might return for the next two “Avengers” movies

🍎 Apple wants to license more movies to beef up its non-existent library (has it considered anime?)

🎟️ Alamo Drafthouse announced re-opening dates for locations that had recently shut down

• I first reported that Alamo was looking to buy these former franchise venues