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Anime Businesses Move Online
to Survive the Pandemic

Author Roland Kelts

By Roland Kelts

Four years ago, the Japanese prime minister, Shinzo Abe, popped
up on a podium in Rio de Janeiro cosplaying as Nintendo’s most
famous character, Super Mario. Wearing the eponymous Italian’s
signature bright red cape and cap and holding a crimson ball, Abe wasa hit with fans at the stadium in Brazil and on social media around theworld. The signal was sent that Japanese pop culture would be theglobal face of the 2020 Tokyo Olympic Games.
International anime hits such as the film Your Name and series like
Slam Dunk and One Piece helped spawn an official Anime Tourism
Association. Pilgrimages by fans to locations featured in anime
programs soared in popularity. The Tokyo metropolitan government
issued a new series of tourism posters and videos called “Old Meets
New” – pairing icons of traditional Japan with world-famous pop
culture figures such as Sanrio’s Hello Kitty and the virtual anime singer
Hatsune Miku.
The anime industry was anticipating a banner 2020. Together withrecord-breaking incoming tourism numbers that peaked at 32 million
in 2019, the Olympics promised increases in production, live events,
commercial tie-ins, merchandizing and sponsorship deals.
Instead, the Covid-19 pandemic forced the postponement of theGames and a dizzying drop of 99.9% in foreign visitors to Japan,
according to the Japan National Tourism Organization (JNTO). Animebusinesses both inside the country and overseas were radicallytransformed in a matter of months.

Exposed by Covid
The national government’s first call to prohibit all large-scale eventsin February caused the cancellation of AnimeJapan 2020, the industry’s
only official yearly trade fair. Soon after, anime conventions in the
United States and elsewhere also started dropping off the calendar.
Photo: Domain Photography

Anime conventions worldwide were canceled this year, including Anime
Expo in Los Angeles, the largest in North America.

https://www.jef.or.jp/journal/©Nobumasa Takahashi

For studios, most of the damage was sustained in the spring andearly summer. After the government declared a national state of
emergency in April, production schedules were delayed, domestic andglobal supply lines disrupted, and live events postponed or canceled,crippling merchandising sales. Studio recording sessions had to be
scrapped over infection fears, and the shuttering of cinemas put
theatrical releases on hold, drying up a key revenue stream for anime
studios and investors.
In Japan, many traditional anime companies accustomed to having
managers and staff work side-by-side at adjacent desks initiallystruggled to implement teleworking strategies. More digitally driven
computer-generated imagery (CGI) studios, whose technologies
theoretically make them better equipped for remote labor, faced an
unexpected obstacle: their bandwidth levels were exceeded whenemployees at home tried to access company servers at the same time.
The anime industry has been plagued for years by a checklist ofadverse conditions: long hours in cramped studios, razor-thin profit
margins, domestic labor shortages and a reliance on public fangatherings and box office sales. With the state of emergency, those
adversities were exposed and exacerbated, forcing management toscramble for new business models.
Dozens of productions were suspended, including hit series like
Pokemon and My Hero Academia, theatrical releases in the popular
Doraemon and Detective Conan franchises, and even Sazae-san, thedomestic drama that holds the Guinness World Record for the longest
running animated series on broadcast TV.
In late April, Kumiko Okae, a veteran voice actress behind Pokemonand Studio Ghibli productions, died from pneumonia complications
caused by the coronavirus, shocking the voice-acting community.
Animation studios in Japan are not like their mammoth corporate
counterparts in the US – Disney, Pixar and DreamWorks. Most are
chronically understaffed and overworked, qualifying at best as small
and mid-sized businesses. Many are also independently operated,reliant upon collaborations with other studios at home and abroad.
Veteran anime business analyst and critic Tadashi Sudo, founder ofindustry trade site Anime! Anime!, identified the four major challenges
facing Japanese studios in the throes of the pandemic: the disruptionof supply lines with Asian partners and subsidiaries; the cancellation oflive events and closure of cinemas; delays in domestic production due
to teleworking; and the cancellation of voice-dubbing sessions. Of
these, he said, the last was the most pressing.
“Dubbing is the biggest problem. Many anime voice actors gather
together as a full cast in a highly congested space. They speak loudly
to each other, filling the air. Some of those actors are elderly. We cantry to change the system, but it will take a long time.”
Japan SPOTLIGHT • November / December 202035

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Adapt to the New Normal

Having actors appear one at a time to record their lines is standard
procedure for many video game companies, Hollywood studios andthe larger overseas animation producers. But booking solo recordings
is costly. As Tokyo-based anime and manga translator Dan Kanemitsu
said, it also produces different aesthetic results.
“The spontaneous interaction between the performers is lost when
you have people come in one by one,” he noted, contrasting anime
with video games, where flowing dialogue between multiple charactersis rare. “Anime voice actors also make a lot of money with their live
performances. With this revenue stream disappearing, the situation isvery difficult.”
So difficult, in fact, that one voice actor, Megumi Ogata of
Evangelion and Yu-Gi-Oh fame, tweeted a plea for understanding from
impatient anime fans frustrated by delays: “It’s amazing that anythingis on the air,” she wrote. “While the cuts are painful, we’re working as
hard as we can.”Japan’s anime industry has been reluctant to embrace global
standards in digital, computer-generated 3D imagery, adhering instead
to a 2D model of visual art, much of it hand-drawn by employees
crammed into tiny open-air cubicles, surviving on instant noodles andsometimes sleeping at their workstations. The environment is often as
antiquated as company policy: working from home does not compute.
But Japan’s few pioneering computer-generated anime studios faced
their own unique limitation: bandwidth.
Photo: Courtesy of Polygon Pictures
Seven years ago, Shuzo John
Shiota, president and CEO of
Polygon Pictures, the world’s
oldest computer-generated anime
studio, became the first industry
executive to ink co-production
deals with Netflix. Through thisspring and summer, Shiota said
that his staff was operating at
70% to 80% capacity, but notwithout strain.
“Being digital natives gives usadvantages working remotely,” hesaid. “The advances in datacompression allow us to do
Shuzo John Shiota, president and CEO ofthings that were inconceivable
Polygon Pictures, says his studio has
just a few years ago. But thereopened but more than half his staff stillwork from home.
pandemic has caused apremature jump. I am sure the 2D anime industries will look into
adopting digital technologies and workflow faster now.”

Embrace Life Online
More recently, there have been glimmers of hope. Jeff Wexler, whoruns Kiyuki Inc., a Japan-based consultancy supporting several anime
studios, including Ponoc, Ghibli and Mano Animation Studios, helped
broker a deal to make all of Ghibli’s films available worldwide via
streaming services starting in the spring of this year.
The timing was fortuitous. Like other entertainment media, anime
has surged on streaming platforms with homebound audiences.
36 Japan SPOTLIGHT • November / December 2020

Dedicated services like Sony’s Funimation, Warnermedia’s Crunchyroll
and HIDIVE from Sentai Filmworks – the latter two having recently
signed a distribution partnership – saw their spring and summer
subscription numbers spike.
Crunchyroll surpassed the three million-subscriber mark in lessthan a year’s time, after taking 10 years to reach one million. “We’refortunate to be in a business that provides entertainment and comfort
during these times,” said Joellen Ferrer, the company’s vice presidentof communications and marketing. “We have experienced a noticeable
uptick in users and engagement throughout the pandemic.”
HIDIVE’s founding CEO John
Photo: Photo by Noah Ledford
Ledford of Sentai Filmworks
called his streaming platform’s
subscriber growth “massive”. “It
blew our projections out of thewater,” he said. “Folks were stuckat home, and we are the mostprice-friendly site for anime on
the market.”
Sentai and other anime
distributors sustained theirbiggest losses in physical sales,with the closure of retail giants
like Walmart and Best Buy, andtheatrical releases. For the MadeJohn Ledford, founder and CEO of Texasbased anime distributor Sentai Filmworks,
in Abyss: Dawn of the Deep Soulsays his company’s streaming platform,
HIDIVE, saw “massive growth” during theanime movie, Ledford said, “Wepandemic.
had over 1,000 theaters booked
across America alone, and that all evaporated with Covid.”

The Anime Option
With most live-action productions in film and television stalled oversafety concerns, animated properties that can be created andproduced with very little human-to-human contact have become an
attractive content option. Larger mixed media streaming outlets like
Netflix and HBO Max, whose debut in May included a content-sharing
deal with Crunchyroll, are expanding their anime menus.
Los Angeles-based animation producer, writer and consultant Eric
Calderon, who oversaw the international development of Takashi
Okazaki’s 2007 anime series Afro Samurai, said the number ofinquiries he received from US entertainment executives skyrocketed
this year. “People from the live-action world who have never made andknow nothing about animation have called me asking about prices,” hesaid. “The animation medium has been growing in audience
acceptance for years, but the pandemic really accelerated the intereston the creative side.”
The anime industry has survived national crises before, mostnotably during Japan’s triple disasters of March 11, 2011. That
disruption, according to Joseph Chou, founder of Sola Digital Arts, thecomputer-generated anime studio behind Netflix reboots of Ultraman
and Ghost in the Shell, lasted only a month, and studios needed two to
three months to resume production schedules.
Predictions that the coronavirus will continue to surge in waves
caused Chou to worry about the industry’s long-term capacity tosurvive. “We almost went under in 2011,” he said. “It’s like a speedingSpecial

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train. You can’t go from 100 miles per hour to zero, and then expect toget right back to 100 again.”
But the post-2011 recovery, together with the slow but steadyadoption of digitalization over the years and Japan’s relatively lightcoronavirus caseload, may have strengthened domestic anime
businesses, leaving them battle-tested and better prepared for the
pandemic.

Japan’s Post-2011 Resilience
By this autumn, studios had settled into a mix of staggered in-house
working and teleworking schedules. Productions had resumed, andwith the start of limited cinema seating, theatrical releases were being
cautiously rolled out.
“We’ve reopened our studio since the end of the ‘emergency’
period,” said Polygon’s Shiota. “But more than half of our staff
continues to work from home, or mostly from home. We’ve found thatthey work just as efficiently as they do in the office. We’ve alsorenovated our studio arrangement to allow for ‘free address’ seating, sothat people can choose to work from home or the office, depending on
their tasks. This type of flexible work arrangement that we discovered
due to Covid-19 will be a permanent structure going forward.”
Nippon TV (NTV) announced that it was launching a new division in
October focusing solely on anime content – an unusual move for amajor Japanese TV network – to compensate for uncertainties in live
action film and television production and the resulting plunge inadvertising revenue. Despite the strain of the pandemic, a growing
number of start-up anime studios have increased the potential for
another industry boom.
A network executive from NTV added that increased regulation andcensorship had made the Chinese market less attractive, but the North
American market continued to strengthen, especially for anime shows
about friendship and overcoming challenges.
Analyst Sudo believes the industry is managing a remarkable
comeback. “There will be a concentration of anime feature film
releases at the end of this year,” he said. While box office totals will
inevitably be reduced, cinema operators and film distributors will takethe brunt of the losses, not anime studios.
Photo: Courtesy of Polygon Pictures

Anime studios in Tokyo were empty during Japan’s state of emergency in April.

Losing Live Spaces
Unfortunately, the pandemic’s impact on anime conventions,anisong (anime soundtrack) concerts and other live performances has
been more devastating and long lasting. Though adjustments arebeing made to conduct events and their related businesses online, thedrop in merchandising sales for producers and artists has in manycases been steep.
In Japan, Comic Market (Comiket) 98, the largest fan-artist
convention in the world, with roughly half a million participants at eachof its biannual summer and winter events, ran its first virtual
convention, Air Comiket, from May 2 to 5.
Comiket emphasizes the print sales of artwork created by fans. For
its Internet replacement, Air Comiket sold physical books throughe-commerce sites featured on its livestream feed, recording 443,357
views over four days.
Online transactions were surprisingly brisk, according to translator
Kanemitsu, a frequent Comiket participant. The overall demand foranime, manga and videogames in Japan has never been higher than it
is now, he said, though it’s being redirected through online portals.
This explains the year’s explosive success in Japan of VTubers,
entertainers who livestream on YouTube with a computer-generated
anime avatar, who have capitalized on the stay-at-home market.
“There’s not as much new anime, and fans can’t go to concerts or
cosplay shows,” Kanemitsu said. “So their passion is being channeleddifferently, through online and virtual platforms. People who wereplaying anime characters as VTubers filled the top ten list of fan
donations through Super Chat,” a service enabling viewers tocontribute donations to entertainers while commenting on their
YouTube streams. “That shows that the passion is still out there andprobably even growing.”
Online contributions also helped cover the year’s costs for Comiket,
whose organizers set up crowdfunding resources for both of its
biannual editions. The virtual version, Air Comiket, attempted toreplicate fan-artist interactions on Twitter, and physical manga books
were sold through a variety of digital consignment shops.
Over the summer, Comiket announced that its winter event thisDecember, Comiket 99, would also take place entirely online, together
with a commemoration of its 45th anniversary.

A Global Convention Crash
Internationally, the 2020 anime convention season was decimatedby the spread of the novel coronavirus. Hundreds of events held
annually across the globe, from Paris to Seattle to Toronto and Sydney,most of which attract thousands of guests, were canceled or
postponed.
Some conventions date back 30 years or more and have neverbefore been scratched. Fans spend an entire year preparing for them,
designing costumes, budgeting for travel, lodging, get-togethers andreunions. Hotels, halls, guests and vendor booths are booked months
or even years in advance.
On We Run Anime Cons, a private Facebook group for convention
organizers across the globe, the postings shifted from cheerful
exuberance over big-name guests and cosplay contests to anxiety anddread over refunds and insurance policies. Group founder A. Jinnie
McManus said that while canceling was clearly the right call in a publichealth crisis, it is never an easy one to make.
“It’s a very heartbreaking choice, a difficult and emotional decision,”
she said, “forgoing a year’s worth of planning and affecting thousandsof people. Conventions are made up of a lot of moving pieces. Often
they can’t just simply cancel or shift dates.”
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Special guests, such as professional voice actors, anime artists,musicians and cosplay models, often rely on event appearances as a
key source of income. Anime-related businesses large and small rentbooths and sell merchandise, some of it produced exclusively for theconvention site. A separate area is usually dedicated to independent
fan artists, who lease and decorate stalls to market their wares.
For the smaller industry players, an entire season’s worth ofconvention cancellations may be impossible to survive. “It is soberingto think of the domino effect this pandemic will have,” said McManus.
“Vendors, especially small businesses and fan artists, are among thehardest hit. Some events are making the decision to call off their 2020
convention knowing they’ll likely never return as a result.”
Tom Croom, CEO of the Orlando, Florida-based Green MustardEntertainment, a producer of pop culture events that started as an
anime club 20 years ago, described the scenario in harsh Darwinian
terms.
“Conventions will either be strong enough to survive or smart
enough to evolve, or they’re just going to die out,” he said. Of thosethat have scrapped this year’s plans, “I’d be surprised if more than
two-thirds of them return in 2021.”
The legal term for permission to cancel is force majeure, a contract
clause enabling all parties to walk away from their obligations in theface of a massive and unforeseeable event, such as a pandemic. It’s aphrase on the lips of event organizers worldwide. Of the over 200
anime-dedicated events planned across the US in 2020, nearly all had
to cancel or postpone, leaving tens of thousands of fans, dealers,
distributors, volunteers and guests, not to mention hundreds of
hospitality venues and transportation services, in the proverbial lurch.
In some ways, the summer conventions had it lucky. By the time thevirus’s continued spread became self-evident, two of the largest,
Anime Expo in Los Angeles and Otakon in Washington, still had twomonths of lead-time to announce their decisions and make plans tohost virtual events.
But last-minute cancellations saw many spring conventions
scrambling to cut losses, and in some cases pay for them. Kansas’Naka-Kon was forced to pull the plug by local officials in mid-March,
one day before opening its doors, with customers, performers andexhibitors from around the world already on site, pre-registering andchecking in to hotel rooms.
According to Treasurer Takuya Jay Inoue, Naka-Kon could notrecoup its pre-convention costs and may not survive another year.
“The situation and the timing was the worst it could be,” he said. “Not
only the loss of income hurt, but we had everything set up and readyto go. For us, termination is definitely a possible outcome.”

Virtual Survival
McManus tracked the experiences of convention runners
nationwide. “Not all conventions have contracts that even allow forgovernment intervention,” she said. “In some places, that’s seen as‘big government’, so it isn’t acceptable. There are conventions in the
US that have spent thousands of dollars to cancel their own event.”
Many US providers dropped pandemic insurance coverage as earlyas January, a maneuver that stranded service industry businesses, andleft some conventions with no recourse but to hold a limited version of
their show, or fight even harder to shut it down.
38 Japan SPOTLIGHT • November / December 2020

Anime conventions are now finding a new normalcy online. In amatter of months, virtual events have become practically de rigueur inthe anime industry, partly to engage with its community of supportive
fans, but also, to a lesser extent, sustain the commercial branding andsales of its companies.
Nevertheless, coordinating a virtual convention is uncharted
territory for most event runners, and presenting one effectively
involves having technical skills and hiring third-party operatives toaugment a convention’s in-house staff.
Otakon Online hosted 45 hours of programming on six streaming
channels over the course of a single day in August, including live
streams from Japan. They used Twitch to deliver video, and a cloudbased production site called Stage Ten, reaching more than 61,000 live
views.
Anime Expo’s Ray Chiang, CEO of the nonprofit company Society for
the Promotion of Japanese Animation (SPJA), started thinking about
canceling his physical event in February, when the SPJA’s biannual
industry gathering, Project Anime Tokyo, was shuttered.
“Profit and income were already out of the equation,” he said. “Whatwe cared about was relevancy, engaging with our fans and educating
the public about the industry. A virtual digital platform was our only
option.”The digital replacement, Anime Expo Lite, recorded more than
500,000 views from 70 countries and territories. Roughly half ofAnime Expo’s ticketed fans rolled their purchases over to the 2021
event, and, more significantly, 80% of its exhibitors have committed toreturning next year.
Anime NYC is exploring similar options, but there are hitches. Fansare showing signs of “Zoom fatigue” – a growing weariness withanything online that resembles yet another conference call.
Also, one of the biggest challenges has been converting highviewership numbers into online purchases. Convention exhibitors anddealers are seeing a fraction of their usual sales from this year’s virtual
events.
Anime NYC founder and Show Director Peter Tatara of LeftField
Media said that after a summer of virtual events, it’s time to have
conversations across the industry about what works and what doesn’t.
“The initial approach was to just take what’s on the floor and put it on
the Internet,” he said. “But the reality is that people don’t experience
both the same way. Revenue for artists and distributors has been
pennies compared to what they’d get at a physical show.”In the events business, anime conventions face an additional hurdle:
many have become so reliant upon guests from Japan that even if
Covid-19 is managed domestically in the US, international travel
restrictions and reluctance may hamper future live shows. For bothcreators and fans, the future of anime will be found online – where
innovation is still sorely needed.

Roland Kelts is the author of Japanamerica: How Japanese Pop Culture Has
Invaded the U.S., and a visiting professor at Waseda University. He was also a
Nieman Fellow in Journalism at Harvard University and is now a contributing
editor to the literary magazine MONKEY: New Writing from Japan.