Finance

As Comic-Con Kicks Off, Japan’s Booming Anime Industry Is Attracting Institutional Finance

Published

2 years ago

July 25, 2024

As Comic-Con Kicks Off, Japan’s Booming Anime Industry Is Attracting Institutional Finance

Ahead of a weekend when Asian content will be making a big impact at San Diego Comic-Con, two of Japan’s largest industrial and financial conglomerates have quietly begun to invest in Japanese animation, the hottest part of the country’s film and TV industry.

Marubeni, which has roots in cereals, chemicals and paper but has diversified to become a trading giant and Japan’s 13th largest corporation, says it is targeting the booming manga (comics) and anime (animated movies and series) markets through a new venture with Shogakukan, a leading publisher.

Mizuho Securities, another part of the Mizuho keiretsu (a form of business alliance common in Japan), revealed this month that it will launch an animation film fund. The brokerage will raise finance from institutions and wealthy individuals in lots starting at JPY300 million ($200,000) apiece and says that it aims to raise $15 million by the end of the year.

Japanese animation is certainly enjoying a period of unprecedented success. Titles such as Shogakukan and Shin-Ei Animation’s “Doraemon,” Shuiesha and Ufotable’s “Demon Slayer” and “Detective Conan” and “One Piece” have become powerful global franchises. Recently too, Japanese animated films including Studio Ghibli’s “The Boy and the Heron” and CoMix Wave-Toho’s “Suzume” have proven themselves capable of $100 million single-territory theatrical feats.

Mizuho will work with Questry, a blockchain startup, and Royalty Bank. They will then deploy tranches of cash, up to $5 million a time, as investments in a handful of new Japanese animations each year.

Institutional funds were a bigger part of the Japanese scene in the early 2000s, but have since given way to the dominant production committee system. These committees are clusters of companies either in the entertainment business or closely allied to it, such as ad giants Dentsu and Hakuhodo, that agree to share risk.

The production committee system creates stability, but it has been criticized for slow decision making, scaring off international co-productions and keeping budgets artificially low. The per film, special purpose vehicles that committees frequently set up ring-fence financial risk but may also discourage reinvestment.

In recent years, however, multiple factors are causing an erosion of the risk-averse committees. These include the growing international success of Japanese anime, Sony’s acquisition and rejuvenation of specialty anime streamer Crunchyroll and the arrival of Netflix as another major investor in the sector.

The government of Prime Minister Kishida Fumio is also itching to see Japanese entertainment put on the same level as K-pop and Korean TV dramas. In his “New Capitalism” proposals last month, he said: “Anime, manga, music and other artistic content are assets we ought to be proud of.” He suggested that entertainment content could have an export profile that compares with steel and semi-conductors.

Additionally, leading filmmakers such as Kore-eda Hirokazu are militating for a modernization of the Japanese film industry – one that sees the establishment of state-backed production funds and incentives modeled on those operated by France’s Centre Nationale de la Cinematographie, and a system that breaks down paternalist hierarchies.

In a report by Bloomberg, Shuichiro Tomihari, director at the Mizuho’s global investment banking division, said that he hopes to “create opportunities for third-party investment and accelerate the revitalization of the animation industry.”

New funds could help ease two problems that the industry is currently facing: a shortage of animators (low salaries and long hours are dissuading new entrants) and production budgets that pale in comparison with the biggest American (and Chinese) counterparts. (Sony is also currently setting up a skills training academy.)

Backlogs of work are reported to extend two to three years, and are causing leading studios to consider outsourcing more production to offshore centers such as the Philippines or Vietnam. That is something that many are unwilling to give in on. Ditto to further weakening of the tradition of predominantly hand-drawn animation. But change is coming whether they like it or not.

The threats posed by overseas rivals and AI-assisted production — and the current opportunities for diversification of Japanese anime into new markets and online formats — are catalysts for transformation of the sector that will require funding.

Marubeni’s involvement is fairly conventional in that it set up MAG.NET Corp. as a joint venture between two established corporations (in fact three, including Marubeni’s paper products subsidiary Forest LinX). But it remains significant that this is the 168-year-old industrial giant’s first foray into entertainment.

The group’s background reasoning is similar, too. “Overseas sales of Japanese content were estimated in 2022 to be equivalent to JPY4.7 trillion ($2.9 billion). The popularity of Japanese manga and anime is growing rapidly to a backdrop of rising demand for stay-at-home stocks occasioned by the COVID-19 pandemic as well as aggressive distribution by major overseas distributors, with the market expanding to encompass a variety of merchandise, including games,” Marubeni said in a statement.

It also identifies weaknesses that need fixing. “Lack of direct distribution networks and retail outlets means that attractive content cannot be delivered to fans around the world, resulting in lost opportunities. This situation has led to an increase in pirated products, highlighting the need for a system that ensures the distribution of legitimate goods,” the statement continued.

While Shogakukan is tasked with ensuring product supply for MAG.NET, Marubeni and Forest LinX aim to expand the range of goods and services that use manga and anime, expand overseas distribution including the building of retail outlets.

And other financial engineering moves may be afoot. Earlier this month Singapore-based Phillip Securities said that it was raising more than $2 million through the sale of digital securities for the Japanese live-action film “Treasure Island,” adapted from a Shindo Junjo novel and starring Tsumabuki Satoshi.

In mid-June, private equity giant Blackstone announced that it had made a $1.7 billion tender offer for Japan’s Infocom. The company is a leading provider of digital comics, with its Mecha Comic subsidiary described as “the market leader for Japanese women 30 years old and above.”