Japanese Animation Industry Report

Industrial Report (C) JETRO Japan Economic Monthly, June 2005

Japan Animation Industry Trends

Japanese Economy Division

Japanese animation is in the spotlight not only in Japan, but overseas as well. Amid an expanding

domestic market for films, television and videos, Japanese animation film producers have also been

turning their eyes toward overseas markets. At the same time, new developments have been seen in

terms of diversified funding methods for film production. Against this background, the Japanese

animation industry is working hard to deal with shortages in certain human-resource skills, reductions

in domestic film-production sites and the challenge of expanding operations overseas.

1. Market Overview

Japanese Animation Market in 2004

The talk of the Japan animation market in 2004 was Studio Ghibli's smash hit, Howl's

Moving Castle, the studio's first new release in three years, which opened in November. Director

Hayao Miyazaki's work exceeded 10 million viewers in just 44 days, faster than any movie in Japan.

Its popularity continued thereafter, with viewers rising to 14.23 million as of March 8, 2005, breaking

the mark set by Miyazaki's Princess Mononoke and placing it number two in Japanese film history.

The question now is how close it will get to Japan's all-time record of 23.5 million set by Spirited

Away. Howl's Moving Castle has also been shown in South Korea and other countries, including 60

cities across the U.S. beginning in June 2005.

Market Environment

Japanese animation ("anime") has been acclaimed worldwide for its original, Japan-based

culture and content, to the extent that it is called "Japanimation." Director Mamoru Oshii's animated

film Innocence was nominated for an award at the 57th Cannes film festival in 2004. Innocence is the

sequel to Ghost in the Shell (1995), which reached number one on Billboard's video chart in the

United States. Miyazaki's Spirited Away won the feature length animation Oscar at the 75th Academy

Awards in 2003, reprising its capture of the Golden Bear at the 2002 Berlin Film Festival and proving

once again Japan produces world-class animation.

Many American and Asian animators reportedly want to work on Japanese anime

productions, indicating that Japanese animation is viewed by professionals as leading its field. Spirited

Away's commercial success, however, demonstrated Japanese anime's merits and international

competitiveness among the global general public as well. The world clearly views Japanese anime as

having potential for big business.

Nonetheless, the industry has not yet shifted its posture sufficiently to respond to overseas

acclaim. Moving forward, the Japanese anime industry not only must expand overseas, it also must

develop the necessary production/distribution systems and personnel to capitalize on the global

business opportunities for anime and other content. Production systems have in fact been set up, but

the industry still has many glaring weaknesses in domestic/overseas distribution and rights, such as

licensing and international business expertise in general. In the field of personnel development,

animators do not have a suitably high social standing, so the exodus of such personnel to other

industries and countries has become a large problem.

2. Shifting Market Size

Japan's domestic anime market can be broadly divided into three categories:

1) Feature-length films

2) TV shows

3) Video and DVD versions of the above two, and original productions

Summary

Industrial Report (C) JETRO Japan Economic Monthly, June 2005

According to the Media Development Research Institute, Japan's anime market sales fell

10.4% to 191.2 billion yen in 2003, including box office revenues for anime films, TV animation

production fees and profits from sales and rental of video and DVD titles. This was the first decline in

two years (Fig. 1). The substantial gains realized in 2001 and 2002 were largely due to Spirited Away's

success at the box office (30.4 billion yen) in 2001 and then in DVD form in 2002. The lack of this sort

of hit led to market contraction in 2003, but sales are estimated to have grown in 2004 due to the

success of Howl's Moving Castle.

The market for anime content, including character licensing/merchandising, selling rights

to use character images on other products and the sale of character toys, is estimated to be worth about

two trillion yen.

3. Industry Structure

Figure 2 provides a simple description of the anime industry's structure. The diagram

below is an actual example of television animation in general. Of course, circumstances can vary for

each TV program or film, especially in the planning stage.

Television