How do anime studios make money? We see reports coming out stating that the industry is posting record high revenues, but they have followed by reports of studios struggling to pay their animators above minimum wage.
It’s a complex and easy answer! The simplified answer is that studios don’t share in the all of the revenue that production committees make.
Now for the complex answer…
Production committees are heavily talked about but are rarely understood by the community. For many fans, there is a mysterious air about production committees sort of like puppet masters. Before diving into how studios generate revenue, we need to briefly examine the structure of the committee system.
Committees are pretty simple – a group of entertainment companies comes together to fund an anime series. Every member specializes in a different area such as marketing, distribution, or merchandising and split the production costs. Keep in mind that production costs are not evenly split, which means certain members can make more money off of an anime’s success.
Additionally, not all members receive money from the same revenue streams. For example, anime producer Marina Sasaki (Barakamon / Parasyte -the maxim-) said that anime studios don’t get a huge chunk of merchandise sales. A studio might see a few hundred thousand yen per 1 million yen in merchandise sales.
Also, not all studios have a seat on production committees, which can limit their potential profit. Toei Animation, Studio Pierrot, Kyoto Animation, Sunrise, Studio Bone, and P.A. Works are among the few anime studios to be on committees.
Most anime studios are contractors. Meaning, the production committee puts together a budget and hires a studio to work on the anime. Typically a studio doesn’t get to choose the anime they work on but are paid upfront for the work.
A late night anime can cost $5 million USD to produce, and that money has to be stretched to pay everyone working on the project. One of the reasons animators have low wages is due to the production and sheer amount of animators employed with some projects having over 100 artists!
Of course, studios do manage their finances. They try to save profits from past hits to help pay their employees or outsource to other studios if it’s cheaper.
Let’s look at The Ancient Magus’ Bride as an example. Wit Studio is credited with producing the anime’s beautiful animation and is praised for the series’ consistent look. They aren’t the only studio working on the hit anime:
- Anitus Kobe – 2nd animation / in-between animation
- Wish – 2nd animation / finish animation
- Bamboo – backgrounds
- Sublimation – CGI
- Jay Film – animation editing
- Asahi Production – finish animation / in-between animation
- D-COLORS – finish animation
- DEFA – finish animation
- RIC – finish animation / in-between animation
- SILVER LINK – finish animation
- Studio 4ºC – finish animation
- Studio Elle – finish animation
- A-Line – in-between animation
- Angle – in-between animation
- FAI International – in-between animation
- ingresA – in-between animation
- Nakamura Production – in-between animation
- Production Reed – in-between animation
- Rising Forcer – in-between animation
- SDM – in-between animation
- Snow Light Staff – in-between animation
- Studio Gimlet – in-between animation
- Studio Mu – in-between animation
- Studio µ – in-between animation
- Asura Film – line test
- T2 Studio – photography
- Team Taniguchi – special effects
28 anime studios are collaborating on The Ancient Magus’ Bride and you’ve probably haven’t heard of most of them. Again, the 5 million budget (assuming the series has average funding) has to be spread among those studios. Not all studios will get an even split and they have different salary rates for their artists.
This is a factor that tends to get overlooked when talking about anime production. It’s a collaborative effort among a variety of studios and they are needed if an anime is to air on time.
So, how do studios make money after producing a series?
The Importance of Discs
Home video is still vital for animation studios. Production committees and studios will rarely if ever comment on revenue splits, but it’s been implied that home video is extremely important for an anime studio’s bottom line.
Discs sales have also been falling in Japan every year since 2005, meaning that this revenue stream is drying up. This is one of the reasons anime is so expensive to buy in Japan. The studios are trying to make up for the lack of quantity sold at high prices.
Digital sales of anime series are also down, highlighting that fans don’t feel a need to own their favorite anime. However, these sales are still relied upon by studios to help cover their costs, which has led to 25% of all studios reporting a net loss of profits.
The Importance of International Licensing
It tends to clash with the “international fans don’t matter” narrative people love to peddle, but international licensing has become the life-blood of anime.
In 2015, licensing was the second largest revenue stream for the industry. This includes legal streaming and purchasing localized home video releases.
Licensors don’t report the revenue splits (and they have no reason to), but a portion of it does go back to animation studios.
Other revenue streams for studios include theatrical releases, producing animation for pachinko, and small portions of merchandise sales.
The Effect of Piracy
Piracy isn’t a zero-sum issue that can be easily solved. In fact, various academic studios from independent agencies have found that piracy has a minuscule effect on sales numbers for most industries since not all revenue streams can be pirated.
However, academics do agree that piracy hurts home video sales, which is what studios rely on. The availability of pirated streams or torrents also hurts legal streaming services due to a price advantage as most people will choose free instead of paying. The issue is trying to place a real sticker price on the damages, which is covered in a Ted Talk about music piracy.
It’s incredibly simplistic to boil piracy down since there are a lot of uncontrollable variables such as assuming all pirates are potential customers and regional availability. This is why many academics label piracy “problematic,” but not an actionable threat due to the lack of controlled studies.
In the end, you should always try to legally support the arts and entertainment when you can.
Anime Industry Growth, but Lack of Studio Profits
How is that the anime industry posted a record 2 trillion yen revenue line, but anime studios are struggling to pay their artists? It’s because the actual anime itself isn’t profitable.
The industries three largest revenue streams are merchandising, international licensing, and anime-themed pachinko machines.
The three lowest revenue streams are Japanese home video, Japanese digital distribution, and anime related music sales.
Notice the trend? Auxiliary segments rake in the cash, whereas the anime itself doesn’t gross enough for studios.
The challenge is trying to increase these revenue segments, which do have a large piracy rate. This is why so many studios and agency try to educate anime fans about piracy.