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How Kadokawa is Redefining the Anime Market (Updated)

by Chris Macdonald & Kim Morrissy,

Japanese publishing giant Kadokawa has its hands all over the manga, light novel, and anime industries. ANN CEO Chris Macdonald sat down with Kadokawa's Takeshi Kikuchi (CEO of the Anime Business Division), Daijō Kudō (Chief of the Anime Business Division), and Shuzo Kasahara (Planning Manager) to discuss Kadokawa's expanding ambitions in the anime sphere. Read on to find out more about how the company has been addressing staff shortages in the animation production industry, Kadokawa's robust partnership with Crunchyroll, and more.

Last year, Kadokawa announced that it is aiming to produce 40 anime per year until 2023. Is the company still on track to achieve this, or have the goals changed since then?

All: We're still on schedule, yes.

Has the COVID-19 pandemic affected your short-term or medium-term business strategy? If so, how?

Takeshi Kikuchi: The pandemic definitely affected the production side of things. We had to delay about ten of the titles we had scheduled for last year to this year; much of that was a result of shutdowns affecting work in China, as well as some studios having to stop work due to the virus. So delays affecting some of the more work-intensive titles, like Overlord, can definitely be attributed to the pandemic. We hit our target of “40 anime” – we just hit it a year later than we thought we would.

Related to that, we know there have been challenges in production due to COVID-19. We've also seen a surge in demand; there's more viewership of anime than ever before over the last two years. How has that impacted your work, and has it affected Kadokawa's plans?

Shuzo Kasahara: Obviously, streaming sites have had the biggest impact. In Japan, about half of the viewership has shifted from TV to streaming; I think COVID-19 has a significant effect on that change.

Of course, there are still a lot of consumers in Japan who like to watch anime on TV. However, you also have a lot of younger viewers who are used to consuming content on smartphones and devices. Furthermore, as producers, we're always trying to improve the quality of our work. Right now, the balance between those three things – traditional viewers, what younger viewers want, and our own wishes for our productions – is shifting.

It is said that one of the biggest long-term problems in the anime industry is that there are too many anime projects, but not enough manpower to complete the work. How much does Kadokawa take this issue into consideration when planning projects, and do you have trouble getting the manpower for your 40 shows?

Kikuchi: This is an acute, complicated issue. I think the entire anime industry realizes that we need to do more to provide better conditions and compensation. We have three studios, ENGI, Kinema Citrus, and Studio Kadan, within Kadokawa. Within those studios, we're undertaking efforts to improve conditions and create an environment where animation is a career that provides people with a good living.

While a lot of these changes are going to take time, our industry is losing staff to the video game industry, and we could potentially face staff shortages if changes aren't made.

One of the generally given reasons for the drain of animators from anime to video gaming is that the pay on the video game side is higher. There are a lot of people unhappy with the pay, especially for entry-level jobs in anime. Is improving that part of your strategy for making anime a better place to work? What do you think of the current discussion surrounding animator salaries?

Kikuchi: I think this issue ties into initiatives to make anime more popular worldwide. Comparatively speaking, the industry is still small. We're also restricted in China. As such, we see North America as the main market for expansion for our titles. If we're able to streamline income from our anime globally, like Pixar and Disney does, or reach an audience as large as IPs like Marvel and Star Wars, that opens up a lot of possibilities. On top of that, you have a lot of viewers in Southeast Asia and India still viewing titles for free. If we're able to expand that global market effectively, we believe it would be easier to compensate all of our staff properly.

We know that the licensing fees for anime have gone very, very high. Previously, the competition between Crunchyroll and Funimation was contributing to that; now the two biggest companies in the space are no longer competing. How do you feel about Crunchyroll being the one primary platform for anime, and what kind of influence is that having on your business?

Daijō Kudō: There's two parts to it for us.

On the plus side, Crunchyroll and Funimation's core business is anime, and we believe they treat anime with a great deal of care. For Netflix, they also promote other animation from places like China and France in the same space. Crunchyroll is a service we have strong ties with, and it's a platform built for anime fans with lots of titles to watch. So we're hoping the merger can lead to a bigger user base and more income.

As far as negatives go, now that the competition between Crunchyroll and Funimation isn't there, initial investment could go down. As you alluded, the title acquisition battle between the two companies isn't there now, so the pressure to create a strong title that really drives viewership will be much higher. As someone responsible for making sure the business is making a profit, it's something I worry about. However, when I think about it as a producer, it's obvious that we'd feel that pressure. Besides, you always want to be able to produce the best possible content for the audience.

Regarding Kadokawa anime titles, how much are you taking viewer feedback about content and quality of the animation into consideration?

Kudo: Obviously you can't change the content of an anime once it's already airing; it's already out there. Once a title has wrapped, that's when we check domestic streaming numbers, feedback on Twitter, how many followers official social media accounts for shows get, and so on. Members of the international sales department keep an eye on international streaming numbers, on sites like Crunchyroll, bilibili, Funimation, and so on. From there, we collect all the data and analyze how each title performed.

There are times in anime when you have an enthusiastic core base for a show separate from the wider general audience. Core fans can be quite vocal, either with their approval or disapproval. How much more does that core audience influence decision making compared to that larger general market?

Kasahara: As you know, with anime you have a majority of titles that are based on an existing manga, so most of the time, a title we'd make into an anime already has a strong fanbase that we are trying to grow by making that anime. While we always want to keep fans of the original happy, we also consider how the casual fan might react to the anime version of that story when we're in production. That being said, every anime is different, and there's a different pattern for each title. Any anime based on an original work or manga always begins with the interest and passion of the original creator, so we always want to take their perspective into account to see how they would picture having their work adapted into an anime.

There are some light novel and manga titles which receive an anime adaptation at a remarkably early stage. At what stage in the serialization are you able to determine the IP's franchise potential, and have there been any downsides to proceeding with an anime early?

Kudo: If we see a title that's got a solid start and becomes more and more engaging, that's the sort of title we might consider adapting early. One advantage we have is that we are both an IP holder and an IP maker, but fundamentally, we don't try to make a decision on a title adaptation too early. The earliest we'd consider an adaptation is when the original work already has a single volume released and a second volume is about to be published. Especially if we're working with an IP from another company, that's the soonest we'd consider pitching an anime.

Ideally, you'd like the process to go quickly, but if you want to make a hit, you want to take the time to meet with the original author and plan things carefully. You also want the time to assemble the best staff for the job. If you make time for all of that, there's a much better chance for that anime to become a hit.

Kikuchi: One of the unique advantages we have as Kadokawa is that we're also a publisher; other companies don't have that. We maintain close relationships between anime producers and editors on the publishing side. That gives us a kind of antenna to pick up on potential hits. If we hear something like “this light novel is going to be really interesting” or “this creator is going to be famous in three years” from someone on our team, that is the sort of thing that would enable us to create an anime at an earlier time than you'd typically see. On top of that, if we are the original publisher, it's also our job to help drive sales of the original books, so sometimes that might be taken into account as well.

Related to that, a large part of Kadokawa's business strategy seems to focus on developing a “media mix” (anime, games, novels, manga, music, etc.). However, there are still some difficulties in making the various works within the media mix available in countries outside Japan. What is your strategy for dealing with this? Does the limited availability of some works affect how you approach marketing in foreign markets?

Kikuchi: Typically, this is an issue that affects the original work more than the anime. Publishing [for manga and light novels] still varies a lot around the world; you'll have a title that's available in North America but not in Europe, Australia, and so on. Meanwhile, we're at a point where Jump Plus can be read by anyone anywhere around the world in English.

The goal is to be able to make the anime and the original work available at the same time. In Japan, one of Kadokawa's strengths is our ability to market both the original work and the anime together. I believe that creating a market, where people who watch anime also have access to the original works translated into their own languages, will lead to greater popularity of anime around the world. I hope to do so soon.

Kasahara: We're definitely optimistic about our work with Yen Press.

With regards to overseas streaming, Kadokawa has maintained a close working relationship with Crunchyroll. From your perspective, what is the benefit of working with Crunchyroll (as opposed to other streaming platforms)? I know we addressed parts of this earlier, but if there's anything additional you'd like to add...

Kikuchi: I'd say the access to data is a big factor...

Kudo: For starters, they share their marketing data with us. Before we develop an anime, there's a whole team [at Crunchyroll] that analyzes marketing trends and tracks what kind of series are likely to find an audience. Previously this was done by different teams at Crunchyroll and Funimation respectively, but now that those teams have been combined, we're optimistic about the future. We're about to have another meeting with them, but we rely on them for suggestions as to which titles to market overseas, as well as which titles would be good candidates for simuldubbing.

This approach has yielded a lot of successful titles like The Rising of The Shield Hero and So I'm a Spider, So What?, so we consider it a very important partnership. Kiyohara and Kishita from international sales department are part of this process too, since they are in charge of key visuals for North America. We're also able to compare the domestic Japan market with the overseas market a lot easier. While there are series that become a huge hit in both, there are more and more anime that get a larger percent of viewership in North America. Being able to keep track of that has been one of the biggest benefits of our work with Crunchyroll, and it's yielded strong results.

Kadokawa's investments in anime also include the development of new animation production studios, such as ENGI. Is it currently a priority for Kadokawa to expand its in-house production capabilities? If so, why?

Kikuchi: We're trying to expand production at our studios, as well as considering launching other studios. One point of focus is expanding capabilities to produce more episodes; another is being able to make a second season of an anime as quickly as possible if it is a hit. If we are producing an anime with a studio that isn't part of Kadokawa, it can be difficult to schedule a “part 2” or “part 3” of a popular series since that studio also has its own schedule to maintain. When that happens, you're keeping the fans waiting – sometimes past the point that the original work has ended.

As a major investor in anime production committees, you're also working with a lot of outsourced animation studios. How does Kadokawa plan to address the problems of underpaid contract work in the animation industry?

Kikuchi: As we touched upon before, being able to centralize income globally would help here. Japan's animation industry still has a comparatively small reach, and while anime has become more popular in North America, being able to monetize viewership worldwide in places like South America and Southeast Asia is essential if we want to support more staff and improve their lives. Developing a system for that is a major goal of ours.

So the answer for both contracting studios and in-house studios is the same?

Kikuchi: I think the entire anime industry stands to benefit from a global market in that way.

Kudo: With our own studios, in the digital age, we've been able to make the entire production process more efficient. Aside from that, in the case of studios like Studio ENGI in Kurashiki, we've taken advantage of government grants and subsidies to expand studios in places where the cost of living isn't as prohibitive for staff, especially at the entry level. As you know, living in Tokyo can get expensive! This also allows our studios to help contribute to quality training programs across Japan, and we feel like its created a wealth of opportunities.

In which other regions are you developing this kind of system?

Kudo: So far, the biggest are in Kurashiki and Sapporo. In a lot of these areas, there are already Art Schools and Universities training people to become animators that we've partnered with to recruit new talent. In turn, that's also let us help address a problem in those regions. In the past, it was more difficult for new grads to find jobs near where they went to school; they were expected to move to Tokyo and job hunt. This way, they can find jobs at studios that are local.

Kikuchi: A lot of other anime production companies are expanding in places like Osaka and Fukuoka. One good result of the pandemic has been the empowering of staff working locally, instead of having to move to Tokyo and settle for a small apartment on a low salary. If staff can work in the place they grew up in and that becomes a viable option, they benefit. This is a trend we're hoping to see continue.

Translation provided by Evan Miller

Update (8/25): Some answers were initially misattributed to a different speaker. These errors have been corrected.
(09/01): Editor's Note: Two statements made in this interview were previously attributed to the wrong speaker. At Kadokawa's request they have been removed from the interview. ANN apologizes for the error.

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