Netflix Doubles Down on Anime

Netflix announced a trio of new anime shows on Monday, including an animated adaptation of its live action sci-fi Altered Carbon and a series based on Capcom’s Dragon’s Dogma video game.

The shows are part of Netflix’s new partnership with anime studios Sublimation and David Production in Japan and Anima Studios in Mexico City. Last year, Netflix announced partnerships with Japan-based animation houses Production IG and Bones. That’s five major partnerships in two years—a sign that the streaming giant is doubling down on anime while staring down looming competition in the streaming space from Disney and WarnerMedia.

Netflix has been ramping up its anime stable for a while; in 2017, Ted Sarandos, chief content officer at Netflix, said during a call with investors that the company had "more than 30 original anime projects in various states of production these days." The increased anime production reflects a broader strategy at Netflix: create as much original content as possible to compete with the old-school production studios.

A few years ago, Netflix was the one-stop streaming destination for cord cutters. Everything from Disney movies to classic films was there, and still is, at least for now. But as the company grew, some content creators decided they could cut Netflix out by breaking off to launch their own services and take their films and franchises with them.

When Disney launches its planned streaming service Disney+ later this year, its properties—Star Wars, Marvel, and a hundreds of classic films—will disappear from Netflix. The same will likely happen when WarnerMedia launches its own service at the end of 2019. WarnerMedia owns Friends and CW shows such as Riverdale on Netflix, as well as the Harry Potter film franchise.

Anime is just one of the many types of content Netflix is pursuing the fill the coming content gap; the company has also invested heavily in producing shows and films like the acclaimed Roma, which was available on Netflix shortly after debuting in theatres.

It’s hard to make a profit producing anime in Japan, and the industry has come under fire for notoriously poor working conditions. Shows are often developed by committee where anywhere from five to 15 different companies gather together to fund a production and distribute the risk. The different players may have their own demands, and each take a small chunk of whatever profits a show might make. This process often leaves studios running in the red.

Netflix, and other streaming services, are changing that. "Netflix is restoring it to a sane business model,” Toei Animation producer Joseph Chou told The Hollywood Reporter. “You're looking at maybe a 15 percent margin rather than a 5 percent loss."

"There's no TV station involved to say what needs to be done to make something okay for broadcast," Kotaro Yoshikawa, vice president distribution and licensing at TMS Entertainment, which licenses content to Netflix, told the Hollywood Reporter. "Though we may still have to make adjustments, like reducing the amount of blood on screen, for versions that will be broadcast on television."

The chance to actually make a profit likely made Netflix an attractive partner for the Japanese animation houses it’s partnered with. But it’s not the only streaming service shopping around. According to Chou, Amazon, Apple Studios—which has streaming plans of its own—and anime streaming service Crunchyroll are all courting Japanese studios.

It’s clear that Japanese animation studios are in demand and streaming services like Netflix see them as vital allies in the fight against old media brands hoarding their digital libraries.