Long before I joined the anime industry as Crunchyroll employee #9 (or even knew what licensing was!), I was just a kid fresh out of high school singing anime karaoke all night in line at Anime Expo waiting for masquerade tickets. The year was 2000 and the venue was the Disneyland Hotel (seriously). I started the line before 11pm the night before, and the group of otaku misfits we formed quickly found ourselves singing anime karaoke from someone’s boom box with burned CD-Rs and romaji printouts of popular anime songs. We may have been camping on the floor like this was our Woodstock, but we had an amazing time, with the night culminating in everyone singing Country Road together from Whisper of the Heart (in an oddly Whisper of the Heart moment).

Does this make me an anime geezer? Yes. But it’s also a moment I draw on when I think about friction in fandom.

Anime Is a Mature Market in Only One Country

Anime fans have evolved past what the anime industry offers. This is not because the industry is failing. Journalists regularly proclaiming “Anime is bigger than ever!” from mountaintops is as true as the Sun rising in the East. The industry that serves Tokyo isn’t built to serve the world. The fans are already here.

In Tokyo, engaging with anime requires near-zero friction. Anime is ambient. It’s everywhere (and by anime here, I’m extending the term to the broader ACG superfandom: anime, comics/manga, and games). A salaryman after work can pick up a Chiikawa keychain at the station kiosk and not think of himself as an otaku. He’s just buying a thing.

Everywhere else, there’s a last-mile problem. Even with all the companies licensing anime, the ones filling the booths at Licensing Expo every year, there still isn’t enough local good stuff. Getting authentic merchandise from Japan means forwarders, long shipping windows, and decrepit websites that haven’t been updated in over a decade. Or you give up and buy a bootleg. Cheap, free shipping, a few days. What’s more appealing to the American anime fan?

Is anime a subculture, or is it a global standard? I’m starting to think it’s the latter. Anime is Spice that flows through broken pipes.

Global Anime Fans Want the Industry to (Shut Up and) Take Their Money

Let’s look at actual fan behavior. They use Buyee to make Mercari purchases of rare anime goods. They pay big shipping fees to buy direct from Japanese websites. They travel thousands of miles to AnimeJapan because not even the monster anime conventions in their home countries come close to what they offer. I estimate turnstile attendance of anime conventions in North America alone will well surpass 2.5 million admissions this year, growing at roughly 12% CAGR. These are people actively participating in anime and spending money. The industry isn’t built to capture them.

Globally, the anime market exceeded $25B in 2024 (according to the Association of Japanese Animations). While overseas has permanently overtaken Japan in total revenue, Japan generates far and away the most revenue on a per person basis. I estimate that an engaged anime fan in Japan monetizes at roughly 3.3x the rate of an engaged fan in the US. But does this mean Japanese fans love anime more than three times as much as American fans? No! It simply means the infrastructure in Japan lets them spend that much more.

Which is why global fans turn to bootleg goods out of necessity. Piracy exists because official channels can’t take their money (it’s not like fans are actively out to stick it to creators). Your favorite offshore cheap shopping app with a cool logo is providing what the industry won’t. Make it easy to find out what’s available and buy it, and then the bootleg market collapses.

Put together, this is billions of dollars of unmet fan demand, waiting for someone to build the infrastructure that captures it. On Roblox, for example, unauthorized anime games are constantly changing hands based on monthly revenue multipliers with the bet that even if the DMCA hammer comes, it will have recouped in time. This shows me that people with capital aren’t going to wait for licensors to figure things out if there is profit to be made now.

On the size of the market, I have a bolder prediction than most analysts: I predict that the global anime market will hit $100B by 2035, roughly 50% higher than the consensus. I see that growth coming from outside Japan, through channels that don’t exist today. Global anime fans are ready to spend. But the industry isn’t there to (shut up and) take their money.

Tokyo Already Built the Thing

Walk around Japan — especially Tokyo — and you’ll see frictionless anime infrastructure everywhere. Countless shops for anime goods, strong e-commerce, and fast cheap domestic shipping. Combined with a population concentrated in Kanto with cheap and reliable public transportation, if someone wants to get something, they can easily get it.

I remember in the late 2000s, in my Crunchyroll days, organizing anisong karaoke gatherings (sometimes all night) at the Big Echo on Showa Dori in Akihabara. Beforehand we’d pregame at a little bar nearby that other industry folks would hit up, too. It had a statue of a hot dog out front that is now gone (RIP).

And things have come further since then. In Akihabara, there are themed karaoke rooms at Pasella. Ichiban Kuji shops. A new wave of game centers with premium prizes. TCG shops with all sorts of card games. In Nakano Broadway, there is still a stronger independent streak, with consignment shops specialized in hyper-specific fandoms (even vintage McNuggets Happy Meal toys). Attending events like AnimeJapan’s public days, Comiket, and Tokyo Game Show is like watching rivers of overflowing salmon swim upstream to their origins. Japan, the one mature market for anime, has built anime at scale, making frictionless fandom possible.

As stated earlier, anime convention attendance in North America is exploding. We see the fan demand. But when fans go to these conventions, we’re still seeing a gap: it’s typically either filled with massive corporate booths with limited sales offerings or with bootleg vendors packing anime goods (sadly, most anime conventions look the other way at bootlegs since these vendors pay big fees). Again, fans are left with the choice to either not get anything or to get the bootleg thing that’s there in front of them, all because the infrastructure isn’t there.

Anime is at scale in Japan right now, so this is more than a portent. We know that fans will respond. What we have to figure out is what the right infrastructure looks like outside Japan.

A Model Built for the Culture Convenience Club

Ask around the industry today, and there are few companies left which adore the production committee (seisaku iinkai) system where a consortium of companies pool money, expertise, and then bring the title to market. This was made for a time when revenues were spread across mediums like domestic TV broadcast, home video (including the lucrative Tsutaya DVD rental market), merchandise, and a small part, overseas (all lumped together). The system was built to spread risk and worked in Japan’s consensus-driven business culture. But as overseas revenue began to increase and as streaming (even in Japan) became meaningful, the way these got built deviated from their original intent. Nowadays, you find consortiums dominated by a single investor trying to get as much of the pie as possible on hit titles. The big problem is that anything overseas is all lumped together in one bucket, which makes it an afterthought.

Whether a licensor is granting “all rights” to Crunchyroll or another company or taking a “some rights” approach, if overseas is just a cell in an Excel spreadsheet, is that a good thing? How would they have the mindshare or resources to support their partners? It doesn’t work.

The upstream concentration of source material reinforces this system. Whether a publisher simply licenses the IP to a committee (and they thereby benefit from higher manga sales) or whether they invest into the pie themselves as a producer for more upside, they are the top of an integrated pipeline that fuels the entire ecosystem.

But you can’t blame the publishers for what’s going on. The singular mission of powerful editors at these publishers is to be in service to the authors. The system itself begets hits, so the problem is further downstream.

The frictionless fandom I enjoy in Japan doesn’t exist anywhere else. There are sprinkles of frictionless moments around the world, but not in the concentration and scale that Japan has. No Nakano Broadway. No anime-themed karaoke rooms. There are local licensees (many with whom I work) making great product, but it’s still not enough to feed demand. The entire overseas market is still below its potential because it is an afterthought.

The pattern I see and that any of my peers who have done these deals will recognize is that a great many licensors want as much money as possible in minimum guarantees to recoup investments, but they also want to build brands. Always. Under the current production committee-overseas licensing regime, these two desires pull in opposite directions. The few licensors who have the vision (like those that bet on us at Crunchyroll in the early days) have reaped rewards by building brands with rising tides these past two decades. The ones who can’t get away from MGs are still chasing MGs. Fragmentation is the foundation of the system. But it doesn’t have to stay that way.

The Neo-Progenitor of Frictionless Fandom

The wall I just described is exactly what we ran into building Crunchyroll, except we didn’t have the language back then. Nobody was calling it frictionless fandom back then. But that’s what we were, the neo-progenitor of it, the first version of a model that hadn’t been named yet.

What we proved at Crunchyroll was one thing: fans show up when you remove friction. They come to watch the content they love, and they experience Absolute Ease. The concept is like aqueducts bringing water to early farmers: once the people have it, they can’t imagine going back.

At Crunchyroll, we solved content distribution. But this was just the start of what fandom needs. What we need now is the expression of fandom itself: the merch, the experiences, the participation. Infrastructure be damned.

How Anime Fandom Reaches the Point of Absolute Ease

When friction approaches zero, fandom hits Absolute Ease. In Japan, it works because of four elements:

• Curation

• Experience

• Specialization

• Scale

All four show up everywhere you experience anime in Japan, and they’ll show up differently outside Japan as innovators build for the next generation.

Curation is a blend of context and hospitality, like when an anime clerk in Ikebukuro knows exactly what you mean when you’re looking for a saucy alternate costume of a popular character (no judgement!). Or like when I meet business partners at Kanda Flux and they put together exactly what I need for my guests (bonus that my name’s on the wall). Curation is giving fans what they need when they need it.

Experience is that feeling of gaining proximity to the content beyond just watching it or buying merchandise. Everything from collaboration cafes to voice actor concerts to AnimeJapan to Virtual Shibuya’s anime activations is a way of bringing people closer.

Specialization is doing one thing extremely well, like the little boutiques in Nakano Broadway, whether for anime cels, vinyl records, jackets, or really anything. This hyper-specificity is what makes these kinds of stores so enjoyable (and as an aside, it’s the same thing we talked about at Netflix that can get a show greenlit).

Scale is anime being everywhere so you can just reach out and touch it with your fingertips. It took Japan decades to build the capital and rights ecosystem, but now the scale is here. Predictable revenue and shared upside have built something in Japan where scale itself reduces friction.

The four elements correspond to what operators outside Japan are starting to build.

Curation: Content Creators, Live Shopping, and Chatbots

Curation blends context and hospitality to help fans decide. It shows up for fans differently based on their need states.

Outside Japan, the strongest curation today is coming through content creators, who have built these parasocial relationships with fans based on trust. I’ve had the pleasure of working with some of the biggest anime names out there (thanks, GeeXPlus/Kadokawa!), but what’s fascinating is that the anime share of the influencer marketing industry — estimated by DigitalApplied at an astronomically high $32B — is still just a tiny fraction of what it could be. By my estimate, the anime content creator space is monetizing at less than 10% of its potential based on the current size of the broader influencer marketing market. That means 10x the business for creators and 10x (or more) product moving through the brands working with them.

Live shopping is exploding, projected to hit $55B this year according to Awisee. The big difference between traditional content creation (YouTube, Twitch) and live shopping (TikTok Shop, WhatNot) is the user intent headed into a platform. Purchasing decisions happen on the former. Actual purchases happen on the latter (they’re built for commerce). Live shopping gives you the curation, the context, and a little hospitality, all at the exact moment you’re ready to buy.

But what about when content creators and live shopping channels hit their limits of reach? This is where chatbots, the emerging third category, come in. To better understand what they solve, imagine this: whether you’re walking into Animate in Akihabara or going straight to Amazon to search, if you have an idea in your head of what you already want, you’re probably going to be fine. But strip away that user intent, and you run into a problem. How many times have you opened up Netflix and just browsed, looking for something to watch, and just given up because there’s nothing to watch? This is me on Friday nights! Because we didn’t have the intention of what to watch (what we called choosing at Netflix). Now imagine talking with a chatbot who gleans a few facts about you and surfaces what you might like. This solves for anything in the catalog that a fan would have wanted to find but couldn’t.

Curation outside Japan isn’t going to be one size fits all. It’ll definitely be interactive. Sometimes it’ll be human, sometimes it’ll be machine, and often it’ll be both. And it’ll be the difference between capturing fan demand and watching it slip away.

Disclosure: I’m building in this space at Henshin AI and am an investor in Moescape AI, and work or have worked with a number of other companies in the space.

Experience: In-Person Moments and Virtual Hangouts

Experience is when fans get to participate in the anime/manga/game that they love. Outside Japan, it shows up in two ways.

In-person experiences are a replication and sometimes local adaptation of what has worked in Japan. The One Piece Cafe in Las Vegas and Los Angeles makes Japanese licensors smile. It’s a high quality extension of the Japan model, well received in market (and delicious, too). And on the retail side, John and his team at Patencio Development set up partnerships in retail at places like Hot Topic and Box Lunch that were never possible before. Instead of just the top 5 anime or a few evergreen titles, fans are now getting access to the new stuff they might never have seen at retail this early on. Spencer and Adrien at ETC took a different approach with deploying the Hololive integration at Dodger Stadium — the first deep integration of VTubers with a Western sporting event. That was more adaptation than replication, but I see all three of these patterns working. Fans want immersion and proximity to the characters and worlds they love.

On the virtual side, what’s happening outside and inside Japan is quite different. Whereas in Japan you might have a one-time event activation in Virtual Shibuya as part of a marketing campaign (e.g. Ghost in the Shell), outside Japan I see huge opportunities for anime to show up in virtual worlds like Roblox, Fortnite, and more. This isn’t more prevalent yet because UGC gaming isn’t well understood in Japan, and the industry’s scale outside Japan is still being built. Part of why fans gravitate to these worlds so much is that Roblox and Fortnite are the new social hangouts, the place to be (rather than a shopping mall). For people who grew up on UGC games during COVID, why not have anime experiences be virtual, too?

Experience outside Japan will look different from the Japanese model. The desire to be inside the worlds fans love stays the same.

Specialization: Single-Category D2C Boutiques

Specialization is doing one thing exceptionally well. In Japan, this lives as in-person boutiques. Outside Japan, it manifests as D2C (direct to consumer).

Instead of the kind of Nakano Broadway-style charming micro-boutiques we see in Japan, what’s happening overseas is single-category D2C websites that sell one thing. One such company I had the pleasure of working with throughout 2024 was Displate as they entered the anime market with premium metal posters. Working together, we repositioned the website offering and onboarded licensor after licensor. Today, Displate is a regular exhibitor at Anime Expo and carries hit IPs like Dragon Ball, Demon Slayer, and many more.

These single-category D2C anime businesses lend themselves well to both performance marketing (paid) and anime community channels (organic). When one really takes off, you see it. More brands like Out of Love, an automotive anime D2C (yes, I have the “Waifu Prison” from them), are building their own specialized slice of the anime industry. And I would be remiss not to mention Boomslank and their fresh take on anime fashion (I’ve lost count of how many shirts I’ve ordered from them over the years).

Curation paired with disciplined marketing (paid and organic) is what makes specialization scale outside Japan.

Scale: Anime as a Cash Accelerator for Private Equity

D2C boutiques can only scale so much on their own. Just like mobile apps, D2C needs growth capital. The galapagos-ization of Japan’s domestic industry has made anime scale a fingertip away inside Japan, but the same model doesn’t export. Anime is growing from different vectors overseas, and the catalyst for scale outside Japan is different too: private equity. And the way PE is doing this isn’t what most analysts assume.

In the run up to this year’s Licensing Expo, marketing materials trumpeted what industry insiders already know: put licensed IP on a piece of merchandise, and it sells 4x faster with 30% higher margins. The power of IP (and especially anime) is real, which is why I see anime as a cash accelerator for private equity. The opportunity isn’t really about licensing fees being too low. The real problem is that most of the licensing world still abstracts marketing from rights deals when they really should be intertwined. The licensor grants the rights, collects the MGs, and figures someone downstream will build the demand. Many licensors are still running the Pre-Peak Anime playbook, assuming titles won’t get drowned out and will just market themselves, leaving licensees to fend for themselves or never reach their potential.

What Paul and Sameer have built through POW! Interactive is a prime exemplar of combining private equity and anime. They bought Jasco Games, added capital and operating expertise, then bought more IP and scaled. Now UVS has a thriving community of players and fans of different Japanese IPs who can play out their dream battles in TCG form. And beyond anime, they’re publishing Riftbound, a little card game for the League of Legends IP.

POW! is the most visible example, but not the only one. Other groups in both the US and Japan are looking at acquisition targets where they can bring serious capital and operating expertise to underbuilt anime IPs. The recent Seven Seas acquisition by Media Do (brokered by Ku Worldwide for $80M) is an example of the recent heat in the space. While that one was strategic rather than PE, the deal flow is real.

Private equity has a complicated reputation. In anime, with the right investors and operating partners, the model is already producing results that don’t need defending.

The Four Elements at a Glance

Who Builds This

The operators who command one or more of the four elements (while also balancing the Japanese and global sides) are the ones who win. They share one thing: they already know the pain points and work within them. Each is building one piece of Absolute Ease outside Japan.

Yet even with knowledge, achievement, and experience, the best operators never take any of it for granted. If you get into “approvals hell” on a product, the contractual “10 business days” is meaningless if you ever want to work in the industry again. The art of nemawashi (getting pre-approval behind the scenes) takes deals a long way.

Just as important as dealmaking is one area too few Japanese IP owners think about: go-to-market. GTM as a job title is one of the hottest things in Silicon Valley, but in anime, it’s badly overlooked. Global and Japanese behavior patterns get oversimplified or confused. Yes, gamers who lean back and watch anime are the biggest segment of fans in the United States, but the most successful campaigns don’t start by only marketing to anime gamers. People like Miles at White Box Entertainment get this. Undervaluing audience insights, or worse, doing them the wrong way, can doom a project before it’s even started.

In my early Crunchyroll days, we knew the production committee wasn’t our enemy (it was just a system to work within). The real enemy was friction.

My 2035 prediction that the most valuable anime company outside Japan won’t own any IP isn’t some random guess. It happens when operators command the four elements while balancing the Japanese and global sides. The most valuable anime company outside Japan will be defined by how it enables Absolute Ease.

The Era of Absolute Ease

Anime spent decades becoming the cultural language of a generation. The infrastructure is about to catch up.

Inside Japan, fans have been living in Absolute Ease for decades. Anime is at their fingertips.

Outside Japan, frictional fandom is the opposing agent of Absolute Ease. It was almost 26 years ago that I camped out on the floor at Anime Expo to grab masquerade tickets because there was no other way to participate. But the next generation of fans won’t have to. Curation will help them find what they need. Experience will immerse them in anime. Specialization will speak to every fan’s taste, no matter how specific. Scale will put anime at their fingertips.

Anime is bigger than ever. And it’s about to be easier than ever to access.

Welcome to the Era of Absolute Ease.

Last year I predicted 2025 would be anime’s inflection point. I was right. Now here’s 2026: the point of no return. The transformation becomes irreversible. Get ready for industrywide henshin (変身 — transformation).

And thus, I share my predictions, below:

1. An Anime Song Charts on Billboard Hot 100 US for the First Time

No anime song has ever reached the Billboard Hot 100 US, but we’ve had a couple songs make waves. YOASOBI’s Idol made the Global 200 and Kenshi Yonezu’s KICKBACK went platinum, yet the Hot 100 eluded both. I’m predicting an anime song to enter the Billboard Hot 100 US this year.

Here’s My Take: With anime’s continued rise, all we need is a big show to have a hot song that pops on TikTok and YouTube, and it can definitely happen. Maybe not to Kpop Demon Hunters-level of success, but I only need one anime song to make the list for history to be made.

2. M&A Consolidation Continues Post-Toho Wave

Toho bought GKIDS in 2024 and Anime Limited in 2025, setting off what I think will be a wave of consolidation across the industry. I’m predicting more anime-related M&A this year.

Here’s My Take: The industry is still too fragmented. The mid tier needs scale, studios that need capital, and international licensors new ways to monetize. The question isn’t if more deals happen, it’s who moves first.

3. Major Anime/Manga Dataset Deals Finally Announced

We’ve seen Lionsgate do a deal with Runway and Disney with OpenAI. Now it’s anime’s turn. I’m predicting major anime and manga dataset deals this year.

Here’s My Take: AI companies need Japanese data and publishers need new revenue streams and ways to reach consumers. Deals will start small, but grow as trust builds. In the background, the Japanese government continues to push for Japan to be competitive in AI, so don’t be surprised to see Japanese players get data first.

4. A Hollywood Studio Goes All-In on Anime

Sony has Crunchyroll. Netflix is a great place for anime (you’re welcome). But the other Hollywood majors? They’ve mostly watched from the sidelines while anime has become a dominant force in streaming and box office alike. I’m predicting a Hollywood studio to finally take anime seriously this year.

Here’s My Take: At least one major Hollywood studio announces a multi-project anime slate or partners with a Japanese production company in 2026. The viewership is too big from them to ignore. I’m betting on content partnerships rather than M&A (for now).

5. Anime-Related Token Market Cap Surpasses $150M

The current market cap of anime tokens sits well below $50M. I’m predicting the collective market cap grows to at least $150M this year.

Here’s My Take: Forget about NFTs. What we’re talking about are tokens that have utility, whether it’s voting rights, creator support, loyalty, special access, etc. As more players present things for tokens to unlock, we can finally shift away from the “buy a JPEG” narrative and find ways to positively impact anime.

6. Legacy Anime Sites Face 20%+ Programmatic Revenue Decline

Popular anime websites have built businesses on ad revenue, but that model is breaking down in the world of contextual AI. I’m predicting that programmatic revenue on these anime websites sharply decline at least 20% this year.

Here’s My Take: Search algorithm changes can already decimate a site’s ad revenue overnight. Now AI summaries and agentic search will hammer programmatic ads even harder. The saving grace: homepage takeovers and skins still command premiums in the brand space. Expect more emphasis on these premium ad units and paid memberships to stay viable.

7. Theatrical Releases 90%+ Franchise-Dominated

Anime is more popular than ever, but at the box office, it’s been franchises like Demon Slayer and Dragon Ball that have dominated. I’m predicting continued dominance by franchise IP at the North American anime box office to an extreme.

Here’s My Take: Studios follow the money. Franchises with built-in audiences are safe bets. Original theatrical anime is high-risk with rising costs. Look Back and Boy and the Heron were exceptions. Even a surprise breakout won’t change the overall mix.

8. Top-Tier Franchise Launches Official AI Fan Tools

Generative AI is already delighting a core set of anime fans today across many different platforms. I’m predicting that a major franchise embraces generative fan creation and launches an AI fan tool.

Here’s My Take: Top anime franchises already have massive fan creator communities participating in their fandoms. A large set of anime fans do not want to see generative AI in official things like shows and merchandise, but I firmly believe that a tool for fan creation for non-commercial use is going to break the ice. This will just be the evolution of fanfics, cosplay, fanart, etc.

9. North American Convention Attendance Hits 2.5M+ Turnstile

I estimate North American anime and anime-adjacent convention attendance passed 2 million in 2024. But anime demand keeps growing. I’m predicting we hit 2.5M+ turnstile convention attendees this year.

Here’s My Take: Just a modest ~12% CAGR, in-person experience for anime just keep getting bigger. Anime Expo and other top conventions are already overflowing, so as they and their peers expand, regional conventions continue to launch and expand everywhere. Whether it’s Disneyland, travel, or anime conventions, the growth for in-person experience coming out of the pandemic seems unending.

10. Anime/Manga on Roblox Surpasses $1.75B

Roblox generated $1.2B in anime/manga-related gross consumer spend in 2024 (source: Gamebeast data). I’m predicting it hits $1.75B in 2026.

Here’s My Take: That’s roughly 20% CAGR, which might be aggressive for other forms of gaming, but not Roblox. The confluence of Gen Z and Gen Alpha with the rise of anime makes Roblox the ultimate growth area for anime in gaming. Roblox grows and the amount of games grow (especially IP deals), so the top line does as well.

Looking At 2026

I’m excited for what we can do as an industry this year. With all this change comes opportunity. I may not hit 100% on these predictions, but directionally I’ve shown that I can see where things are headed. Use these insights to be part of the transformation.

Loved these? Hated these? Let me know!

Happy New Year!

The second half of 2025 went by fast, so let me share my 2025 Anime Predictions scorecard.

The table should be fairly self explanatory, but here are a few quick fire thoughts for each prediction, below:

1. I saw Crunchyroll’s path to 25 million through bundling and emerging markets, but looks like not yet.

2. Bandai Namco has the critical mass to keep dominating anime gaming. And as they grow, other players are making good money in the space too.

3. We didn’t quite get a dedicated “next tier” streamer, but plenty of players are serving viewer needs outside Netflix and Crunchyroll.

4. Not quite the total creator economy convergence I expected, but some promising initiatives moved the needle in 2025.

5. Nonsense was the breakout in anime boutique retail this year. Exciting to watch if they can scale without losing their edge.

6. Low end anime is toast.

7. It’s funny how production AI augmentation is being quietly accepted with tools like Kamikai while localization AI sparked the backlash (this is literally the opposite of what “experts” told me before).

8. AI agents exploded in 2025, and anime-themed agents got some serious traction (Virtuals.io, Kindred). Seems to be ignored by the industry in general so far.

9. Is Web3 the solution to all of anime’s problems? Probably not. But lots of smart people are still betting real resources on it.

10. The massive dataset deals happened, just not in anime specifically yet. The OpenAI-Disney deal was groundbreaking.

Overall, not too bad (and better than last year).

2026 predictions around the corner!

The global anime market is experiencing unprecedented growth, roaring past $30B in 2024, yet Japanese producers are increasingly confronting a fundamental paradox in how they monetize their intellectual property (IP) in Western markets. Instead of relying on traditional sourcing and distribution channels, more organizations are starting to strategically invest to maximize revenue outcomes, both directly and indirectly. Their typical revenue inputs are deceptively simple: streaming royalties and consumer products. Yet, the execution of these strategies has led to what I call Anime’s Great Decoupling Paradox in the West.

The paradox manifests in three areas where producers (who often double as licensors) seek to maximize their revenues through a thesis of decoupling and gaining control, but simultaneously face contradictory challenges as they do so:

1. Source material outside the “Big 4” publishers

2. Marketing and consumer products outside Crunchyroll

3. Merchandise distribution independent of major retail

Understanding the paradox is crucial for any player looking to navigate the complexities of the situation and capitalize on the opportunities within the booming Western anime market.

Source Material

Take a look at the source material behind the Summer 2025 anime season, and roughly three-quarters of all adaptations from manga or light novels come from just four publishing giants: Shueisha, Shogakukan, Kodansha, and Kadokawa. These “Big 4” publishers dominate the adaptation pipeline thanks to their large scale, editorial rigor, and a proven domestic monetization engine. For investors, participating in one of the Big 4’s megahits is often a privilege reserved for “super producers” with longstanding relationships and capital, making it hard for small to mid-sized producers to get a piece of the pie of the kind of hits that travel globally.

Now, the IP landscape is starting to change. While megahits from the Big 4 remain some of the most coveted projects in the industry, recent breakouts like Umamusume (mobile game), Solo Leveling (Korean webnovel), and Lazarus (original anime) show the growing viability of alternate source material. And whereas small to mid-sized producers have been mostly shut out of the Big 4 megahits, they’re taking bets on these new sources of IP to build their business.

The Decoupling Challenge: While diversifying source material offers new opportunities, it can also disrupt a finely tuned ecosystem. Decoupling from the Big 4 risks losing the cadenced pre-launch visibility that multiple arcs of manga releases provide. With the exception of hit video games, source material outside manga and light novels risks being unseen. Furthermore, there is a large cohort of anime production talent who prefer to work on big-budget titles from top publishers, making it harder for non-Big 4 adaptations to attract top talent and gain visibility in the West.

Marketing & Consumer Products

Crunchyroll stands as the undisputed leader in pureplay anime streaming outside Asia, and alongside Netflix, forms the “Big 2” of global anime distribution. Following its acquisition by Sony, “New Crunchyroll” consolidated legacy anime marketing infrastructure (Funimation) with streaming platform reach (“Old Crunchyroll”). The effect has been a behemoth that can monetize top anime from the earliest stages of simulcasts through to consumer products, developing a strong brand along the way.

For Japanese producers, Crunchyroll’s revenue generation ability has been powered by two core areas: streaming royalties (including advances and over royalties) and consumer products licensing. While other categories like theatrical and e-commerce can be meaningful in some cases, these two pillars remain the financial foundation. And with Crunchyroll now past the so-called “point of no return” in market dominance, few aim to disrupt it head on. Instead, licensors are shifting focus: not to replace Crunchyroll, but instead to extract more value from it.

The Decoupling Challenge: This shift increasingly involves producers running their own marketing and consumer products programs directly from Japan, sometimes while maintaining exclusive deals with Crunchyroll and sometimes not. The inherent trade off is that in gaining control of marketing and consumer products licensing, a producer-licensor may end up losing the pre-launch muscle Crunchyroll brings to the table if they go non-exclusive (note that in the world of streaming, non-exclusive titles are treated as retentive, not acquisitive by the big streamers, which affects marketing ROI calculations). Notable exceptions have been Demon Slayer from Aniplex of America and Dandadan from a consortium of Mainichi Broadcasting, GKIDS, and VIZ Media, so it’s not impossible to achieve. Most recently, REMOW is attempting to do this with Tougen Anki.

Retail

In the anime industry, Japanese producers have long coveted placement in three key U.S. retail chains: Walmart, Target, and Hot Topic. With over 7,000 locations between them, this “holy trinity” represents the perceived gold standard of anime consumer products success. Barnes & Noble maintains strong anime relevance thanks to manga sales, but these three remain the primary target in the eyes of most licensors.

However, the unforgiving math of merchandising presents a significant barrier to actually getting placed. Shelf space is limited, physical inventory carries substantial costs (and accrued interest), and buyers tend to favor “safer bets” such as evergreens and cult classics to reduce the chances of returns or liquidations. As a result of getting burned by rushing to “the next big thing” in the past, stores now lean heavily on evergreen hits and cult classics with proven performance. Even breakout titles like Solo Leveling only gained meaningful traction with season two due to the supply chain prioritizing predictability over raw demand.

The Decoupling Challenge: Licensors now face a dual challenge: securing trinity placement for their “top” titles (where “top” is often defined by internal hierarchy, not line manager expertise), and developing go-to-market strategies for niche or emerging IP that may never break into mass retail but still command deeply engaged fandoms. For the latter, the market has already played out in the anime gaming sector where “gacha” mechanics don’t require IP to have a volume of fans, just a depth of fandom. Anime producers are ultimately trying to bring merchandise closer to fans, even if it means they have to write entirely new playbooks. But attempting to decouple across retail is not only harder, it’s contradictory, as producers yearn for placement in the holy trinity of anime retail, despite it being unviable for many titles. Understanding the stratification of retail and developing alternative sales channels (D2C, boutique, pop-up, etc.), poses a significant challenge to producers trying to decouple.

The Enduring Paradox and What’s Next

At the heart of Anime’s Great Decoupling Paradox is an ideal: licensor-producers envision a megahit anime adapted from a Big 4 title, simulcast on Crunchyroll to millions, generating over royalties, and driving a multi-season consumer products program with prime placement at Walmart, Target, and Hot Topic. This remains the clearest path to scale and revenue.

But gaining control over any single part of this interconnected chain often weakens another. Big 4 manga source material benefits from a manga-to-anime pipeline that builds anticipation. Exclusive distribution on Crunchyroll unlocks global marketing muscle. Aligning with the cycles of the holy trinity of anime retail reduces risk from returns and liquidations.

To move forward, licensor-producers — and the broader anime ecosystem — must take a strategic view. Consider:

1. Source Material is Evolving: The Big 4 will remain dominant, but alternative sources like games and webtoons are gaining traction. The challenge lies in activating these fanbases early enough to replicate the built-in hype serialized manga generates leading up to their streaming debuts.

2. Crunchyroll Will Continue to Dominate: Crunchyroll will remain the leading pure-play anime streamer. While some producers will attempt to decouple marketing and consumer products, this approach demands extreme sophistication, and for most, it won’t be the right model.

3. Retail is Stratified: Walmart, Target, and Hot Topic will remain the top tier of anime retail. Identifying which titles go through these channels, and which are better suited for direct-to-consumer or boutique strategies, is critical. Lessons from anime games and their high-spend user monetization may offer new opportunities in niche retail.

Anime’s Great Decoupling Paradox in the West is unfolding in real time. As ever-larger amounts of capital flow into the space, the tension will only grow. Success will hinge on each player’s ability to understand and navigate the ecosystem’s interconnected dynamics: knowing when to couple, when to decouple, and how to execute with finesse.

After all, anime thrives on the fantastic. Today’s paradox could become tomorrow’s portal. And just like in a show, it may take something somewhat catastrophic and extreme (in anime terms, “getting isekai’d”) to transport us to the next world where a new anime ecosystem awaits.

In 2019, I was approached by a well known friend in the executive recruiting space. He was representing a company I had heard of, but didn’t know a ton about: Roblox. I knew a couple people working there at the time, but it just so happened that I was close to finalizing an offer to move back to Japan for Netflix I just couldn’t pass up. And besides, this was pre-COVID, before Roblox had exploded in popularity and became a household name, and I hadn’t yet seen the potential it was about to unleash.

Like many at the time, I had dismissed Roblox as something of a Raspberry Pi for gaming, where kids could create, but more as a means to an end of “moving on” to flashier platforms later. This assessment ended up being quite off as Roblox would undergo explosive growth both into and out of the pandemic, where now it’s doing something outright disruptive in gaming. This is where the framework from one of my favorite books, The Innovator’s Dilemma comes in.

Understanding The Innovator’s Dilemma

The Innovator’s Dilemma is a 1997 book by the late great Clayton Christensen. Let me start with a poignant quote from the book:

When commercializing disruptive technologies, they found or developed new markets that valued the attributes of the disruptive products, rather than search for a technological breakthrough so that the disruptive product could compete as a sustaining technology in mainstream markets.

What The Innovator’s Dilemma is about is how new disruptive technologies can enable downmarket entrants to disrupt big incumbents upmarket.

The downmarket entrants serve needs the upmarket incumbents do not, and even if they’re “lower performance,” they’re “lower cost” and grab an underserved market.

Here are two very different examples:

Blockbuster Video:

In 2007 as Netflix embarked on streaming, the video quality was mediocre (sorry, Reed!), the catalog was limited, and it was not the seamless viewing experience it is today. But it was cheap. In this case, Netflix was downmarket and Blockbuster was upmarket. But because so many people wanted the convenience of Netflix, it was able to compete. As there was more and more user validation, Netflix’s streaming platform got more and more resourced both on the product and content sides alike… and the rest is history.

Intel:

Conversely, Intel was facing competition from AMD and Cyrix downmarket for low-end microprocessors in the late 1990s (remember the K6 and the 6x86?). Even though they weren’t as powerful as the mighty Pentium, people wanted the cheaper lower end processors. Had Intel done nothing, they could have become one of those incumbent carcasses we like to read about in HBR case studies, but instead they did something different: Intel created the Celeron line, but rather than a beefed up MMX (their low-end chip at the time), they essentially “took away” from the Pentium, even if it mean less profit margin. Intel stared into the void and rather than get disrupted by someone else, they “did the disruption” and disrupted themselves, fending off the downmarket.

This list goes on, and you can look at everything from photography to automobiles to hard drives to razors and so on.

How Roblox Started Downmarket

Roblox first released in 2006, positioned as a place for kids to unleash their creativity (think MS Paint meets LEGO but in an online world). The graphics were very basic, but had things customers highly valued: it was free, it let anyone create in an online world, and it empowered connection, ultimately opening up game development to a whole new demographic.

Let’s look at screenshots comparing Roblox in 2006 to Elder Scrolls IV and Gears of War:

Certainly, the AAA games were much higher end, appealing to a fundamentally different audience, but these aren’t even games that the consumers of Roblox would have been playing. Whereas these AAA games had killer graphics, deep, narrative storytelling, and fit the value proposition of premium games, they didn’t offer what Roblox consumers valued: building shared gaming experiences with strong social interaction. And thus, Roblox’s ascent upmarket would begin.

Ascent Upmarket

Over the past 5 years, Roblox’s daily active user (DAU) growth has been nothing short of remarkable, with the company most recently reporting 97.8 million daily active users in 2025 Q1. Roblox’s DAU growth has been incredible, as seen in this graph, below.

For an eye test on Roblox’s graphical evolution, we can compare top popular games over time:

Clearly, the ongoing enhancement in visual fidelity is real. The notion that Roblox has inferior graphics is simply conflated with users’ tastes for popular R6 and R15 avatars, not a lack of technology itself, but rather an intentional choice on aesthetics that transposes onto a shared form factor that enhances creativity.

It just so happens that Roblox’s biggest game, Grow a Garden, is also the biggest game in the world in terms of concurrent users (CCUs), on a truly remarkable all-time historic scale, exceeding Fortnite Galactus and League of Legends alike and on the same order of magnitude as all of Roblox and all of Steam.

For historical comparison, I even looked at Pokémon GO, which broke 45 million daily active users near its initial frenzied launch, but even then concurrent users, which we can say is no more than 10 million CCUs (and most likely something closer to five million).

While its graphics are still not the kind of painstakingly crafted kind you find on PlayStation, its appeal can’t be denied, and there’s no doubt that a lot of time went into the scripting of the game.

The Future

Over time, Roblox’s engine is going to become much more robust in terms of not just graphics, but what the scripting can handle. We’re going to see deeply complex worlds filled with complex game mechanics and systems and thriving sub-economies. And it’s not just “YouTube for gaming” as some people call it, but something more like if Android worked on any device and had a game builder, monetization, and shared community all baked into it.

What happens if Roblox continues to evolve to the point where it reaches near parity with PC and console games in terms of graphic potential — and continues to empower content creation at scale? That’s exactly where we’re headed now,

It’s no wonder there are countless UGC gaming platforms in development, both those that have been announced, but as well as many in clandestine development behind the scenes. But merely making a “UGC gaming platform” for the sake of it without understanding how to fulfill user needs is exactly the trap of The Innovator’s Dilemma and going to be a fatal flaw for the history books. Perhaps at that point we can pull out one of those bags of instant popcorn we so often got in the Blockbuster checkout lines on Friday nights.

If you were to ask any anime fan on the streets where anime is from, you’d get a clear answer: Japan. And if you were to do a quick search, you’d find that while a small number of production studios are scattered elsewhere in Japan, all of the producers are in one spot: Tokyo. But ask a well-informed industry insider what singular city is driving the global growth of anime, and you might be surprised with the answer: Los Angeles.

From well-established local players to the U.S. offices of big Japanese producers, and from decision makers in anime merchandising to the voice actors dubbing our favorite shows, the Los Angeles Metropolitan Area isn’t just an important place for anime, it’s an absolutely critical hub. With overseas revenue now permanently surpassing Japan, anime’s ongoing rise (and health) rely on — will continue to rely on — the global streaming and merchandise deals that flow through Los Angeles.

The devastating fires in the region have highlighted the resilience of Los Angeles and its people, who contribute to many industries, including entertainment. As a former LA resident myself, seeing photos of the fires spreading to different places I’ve known is heartbreaking. In light of this, it feels like an appropriate time to reflect on the vital role the region plays in anime’s global growth. By taking a closer look and spreading the word, we might better appreciate the impact of LA’s people on anime and find meaningful ways to support them in this challenging time and beyond.

Who’s in LA and what are they doing?

1. U.S. subsidiaries of Japanese companies are building bridges.

Why do so many Japanese companies have offices in the Los Angeles Metropolitan Area? At a high level, having a local presence is a bridge to their consumers and provides an increased understanding of the market. And when it comes to dealmaking, many key partners are local. Global streaming players like Netflix, Amazon, Disney/Hulu, and WBD/Max are in Los Angeles (the Hollywood teams drive cross-border productions like Cyberpunk Edgerunners and The Lord of the Rings: The War of the Rohirrim). Hot Topic, based in the aptly named nearby City of Industry, is the most coveted “specialty” retailer where anime brands want to be. Awards like the Annies, Golden Globes, and Oscars are based in Los Angeles, providing a starting point for FYC (“for your consideration”) campaigns. Not to mention all the local U.S. players who touch anime which are based in or have presences in LA we’ll get to next.

Anime Producers: Aniplex of America, Bandai Namco Filmworks, Pony Canyon, Production I.G, TMS Entertainment, Toei Animation, and Toho International. Note that some of these local offices are going as far as theatrical distribution and merchandising, whereas others are focused on mainly on sales and marketing.

Adjacent Companies: 33 USA (public relations & marketing), Amuse (talent), Animate (retailer), Avex USA (music), Bandai Namco Entertainment (games), Bandai Namco Toys & Collectibles America (toys & collectibles), Dentsu (advertising & content), Good Smile Company US (collectibles), Iyuno Los Angeles (dubbing), Marza Animation Planet USA (CG animation), Media Do International (digital publishing), and Sola Digital Arts (CG animation).

Just a few of the big things U.S. subsidiaries of Japanese companies have done in the past year are pictured below:

2. Local U.S. companies are leveraging their passion for anime.

What role do local U.S. companies play in the anime business? As the most basic level, the U.S. is the endpoint monetization for anime in its biggest overseas market. If you zoom out, consider that many U.S. companies’ products and services are global (or at at least ex-Asia). In that sense, Los Angeles is the gateway to the U.S. market, and then U.S. the gateway to the West, thereby allowing anime to properly monetize and money to optimally flow back to Japan. It might be somewhat easy to understand that a portion of the money from your Crunchyroll subscription is allocated towards royalties, or similar for your GKIDS movie ticket of VIZ Media Blu-Ray box set, but what’s a little more abstract is the impact of “adjacent” companies on the industry. Anime Expo, for example, with nearly 400,000 “turnstile” attendees, is a must-attend event for anyone in the anime industry where real business deals happen. Bang Zoom and others create voiceover dubs for popular anime, helping shows reach broader audiences. Creative agencies like Foundry LA are even opening anime practices since the demand for anime to punch through is so high (because when it does, anime goes even more places). In short, LA has developed into a true hub of anime activity.

Full-Service Anime Distributors: Though none of Crunchyroll, GKIDS, or VIZ Media are officially headquartered in Los Angeles, they all have presences in town. Technically, all three are owned or are in the process of being owned by Japanese companies, but not as direct subsidiaries, so I’ve listed them here rather than the first category. MediaOCD is based in town, and while smaller, it is bringing many overlooked classics to home video.

Streaming Companies (Carrying Anime): Amazon, Disney/Hulu, NBCU/Peacock, Netflix, Pluto, Roku, Tubi, WBD/Max.

Adjacent Companies: AAA Anime (wholesale anime goods distribution), Anime Expo / SPJA (conventions), Anime Impulse (conventions), Animé Los Angeles (conventions), Azuki (digital collectibles), Bang Zoom Studios (dubbing), Emerging Technology Company (brand development), Foundry LA (creative agency), Great Eastern Entertainment (merchandise), Hot Topic (retail), HYPLAND (streetwear) NYAV Post (dubbing) Shout! Factory (physical distribution), Skybound Entertainment (co-productions), Studiopolis (dubbing), TokyoPop (manga), and VSI (dubbing).

Individuals/Freelance: From the voice actors, voice directors, translators, and producers who are behind the English versions of anime, to the journalists and content creators keeping us talking about anime, to the event staff (and many volunteers) who work these big conventions, to the consultants and other freelancers providing ad hoc support to the companies above, there are countless individuals who don’t have office jobs yet are a key part of the industry, too.

Just a few of the big things local U.S. companies have done in the past year are pictured below:

Supporting LA in what’s next

Los Angeles’ critical role in the global anime industry is undenied. Local companies, subsidiaries, and countless individuals are driving anime’s global success, ensuring revenue flows back to Japan. By highlighting the incredible work happening in LA, I hope to provide context for the region’s vital place in the anime boom.

The recent fires have been devastating. While there are no reports of anime companies directly affected, many individuals have felt the impact (including people I know). The most important we can do now is to offer support in ways that matter to us.

Support can take many forms. It might mean contributing to a verified GoFundMe, donating to Direct Relief, or extending grace on project deadlines. Even something less direct like choosing to keep business in the area helps. However you choose to support is going to be appreciated, and by continuing to recognize LA’s role in anime, we can ensure a bright future for the anime industry and its people.

This is it. Next year is going to be the year. Everything in anime isn’t going to change overnight, but this will be a year we can point back to as the origin of major directional changes. What do I mean by that? I mean that 2025 is going to be an inflection point of where anime both comes together and splits apart.

Coming together is the convergence of different parts of the anime industry.

Splitting apart is the further fragmentation we’ve already seen in other sectors of entertainment, now transposed on anime.

Here, I have ten predictions for how anime is going to massively change in 2025.

1. Crunchyroll will hit 25 million paid subscribers globally.
   Extrapolating the latest 15 million subscribers number that Crunchyroll announced in August 2024, I believe that Crunchyroll will hit the coveted 25 million subs number in 2025 from two sources: emerging markets and PlayStation Network. For emerging markets, I see the growth coming from India and Southeast Asia with a substantially smaller average revenue per paying user (ARPPU) on average than the United States. Note that the current price of Crunchyroll in these territories is currently around one U.S. Dollar, so what’s going to fuel growth for an already cheap price is Crunchyroll buying “acquisitive” titles (e.g. new anime that drive signups… think exclusive big budget, action titles) and going big on strategic bundles and promotions that leverage Sony’s historic relationships in region. Remember that Crunchyroll has traditionally not invested in Asia due to entrenched players, limited ROI, and a focus on the West, so it’s going to be playing catch up there. On the PlayStation Network front, I see this as Sony’s trump card even in mature markets. Including or offering some version of the Crunchyroll subscription with PlayStation Plus, which boasts nearly 50 million paying members, will unlock millions of more subscribers in high ARPPU territories, so it’s inevitable this happens in 2025.

2. Anime gaming revenue will be bigger than ever.
   Like my friends at wrote, anime is eating the world, and nowhere is that more seen than in gaming. I predict that anime revenue in gaming is going to be bigger than ever. One of the easiest measures of this will be looking at Bandai Namco’s net sales, which are forecast to increase to 1.15 trillion Japanese Yen for the fiscal ending in March 2025 (anime games are one of their biggest segments). And beyond Bandai Namco, we are going to see more entrants and more games, both in Japan and abroad. So we can level set on what we mean by “anime gaming,” I’m breaking it out into three sub-categories: a) games directly tied (from a licensing and marketing standpoint) to anime (e.g. Dragon Ball: Sparking! Zero, b) games based on a manga uncoupled from an anime adaptation (e.g. Fitness Boxing Fist of the North Star), and c) anime-inspired games (e.g. Arcknights). The Association of Japanese Animations annual report is definitely not counting the latter two categories, and from what I can tell, only partially counting the first category, so separate from this prediction, let’s look at properly measuring these three categories so we can see how we did come next year.

3. A streamer for “next tier” anime will emerge.
   A trend of 2024 that continues into 2025 is that the “next tier” of anime titles — that is, neither the top tier of action titles (e.g. One Piece), not the top tier of other breakouts (e.g. Oshi no Ko), are getting licensed by the streamers with any kind of minimum guarantee (MG) confidence. That is, budgets have tightened around the industry, and the glory days of even a “B” show getting high five figures U.S. Dollars MG per episode are gone. Moreover, because the production committees behind Japanese anime operate on a consensus culture and strongly prefer to de-risk rather than play the upside royalty game, they aren’t set up to do distribution deals with streamers and push the titles up the ranks themselves via direct social marketing. This will provide an opportunity for most likely a Japanese player — a domestic operator of anime streaming, an advertising company, a trading company, or affiliate of a publisher themselves — to “scoop up” a large amount of anime titles that are passed on by the incumbents. It’s also possible that a foreign player does this, but if so, I see them being taken to the cleaners on MGs as the most likely scenario. Do not look for a player such as Amazon, Apple, Max, Peacock, or Paramount to scoop up the B titles as they are neither set up for fast localization nor are a massive portfolio of B titles be something they would even go for. This may sound a little bit like Anime Consortium Japan launching Daisuki, but in this case I think it will have a more centralized power structure and not chase the white whales of the big shonen exclusives that never materialize.

4. The creator economy and anime will finally start to converge.
   I’ve written before how Japanese intellectual property (IP) is takaramono (treasure), and must be respected, but also fans who love these IPs, especially outside Japan, want to get their hands on it and have some fun. While I predicted a year ago that the first big public moves would happen in 2024 (and some things have happened behind the scenes), they’re happening in 2025.

5. Merchandise innovation will be led by boutique shops.
   I’ve spoken at length with Japanese IP owners about the dynamics of merchandise in the U.S. market. The holy land for an anime IP owner is to reach Hot Topic, a chain of pop culture retail stores (often in shopping malls) that have been around since the late 1980s. Hot Topic is an incredible retailer and has fueled millions of dollars (sometimes even lots more) to anime IP owners via their licensees for years, providing a key source of income. But the problem with planning your business around a single chain is the only have so many slots for titles, and with a cyclical market, all retailers in general (not just Hot Topic) have refocus at times for evergreen IPs. At the same time, you have also seen many “omni category” licensees that make just about everything that can take an anime franchise and turn it into a product. I have lots of friends at these places, but the dynamic you eventually reach is this: a large number of Japanese IP owners go to a small number of omni category merchandise licensees to try and get into a single chain. While Hot Topic will continue to thrive and be a great place for anime merchandise, we are going to see the true innovation in boutiques that focus on single categories. These boutiques will start with a single physical store or sometimes be online only, develop a strong brand and community, and in many ways be the “Supreme of anime ______” (you name it). Look for more of these to pop up and rise in 2025 and even become household names in the anime community.

6. VTubers and generative AI will siphon away the low end of anime.
   The “low end” of anime (not to be confused with the “next tier” as I call it in Prediction #3) is going to disintegrate over these next years, meaning less anime is going to get made. Part of it will be streamers not overpaying (or even allowing these titles into their ecosystems to earn a revenue share), but part of it is going to be that alternatives are going to be “good enough” for a large number of consumers (a classic Innovator’s Dilemma scenario). I love my high-end, high-budget, long-cycle anime just as much as any purist, but there are going to be people for who these replacements are going to work for now, and then will just get better and better. And with that, the lowest tier of anime, which historically have relied on extreme ARPPUs to stay viable (going back to the packaged video days where DVD box sets were in the hundreds of dollars!), are ripe for displacement. Consider that the profile of these titles is typically airing late at night, often on a smaller broadcaster, in the moe genre, and having some degree of one-sided exploitative relationship between the fan and the content. This value exchange may be interesting to some VTubers, and it certainly will be interesting to AI content creators, especially those of AI agents. Consider the depth a fan can go in either of those spaces, even if the fidelity of graphics (imperfect rigs, text-based chat, or even hallucinogenic imagery) is not as “good” as hand-drawn anime. For clarity, I think VTubing is awesome (I executive produced Netflix’s first VTuber and have plenty of friends who stream regularly), and what I’m predicting here is just how the dynamics of the market will work for some people. One bit of irony here is that the VTuber community is highly against the use of generative AI for artistic purposes, and while I don’t see these two trends converging so much in their overlap, I see them converging in their displacement of “low end” anime. Go figure.

7. Fans won’t care (or even notice) AI augments in anime..
   We saw some very poor attempts to execute “AI anime” in 2024, but 2025 will be the year when we see technology from companies like iKHOR and Parhelion get their tools (which are very different) put into use in actual anime production. Whereas the early narrative for the use of generative AI with anime was “this is taking jobs away, therefore it is bad” (which many industry insiders have debunked on the basis that the pool of competent anime talent is so impacted it actually wasn’t taking jobs away), what these companies are going for is that generative AI is going to enhance and help animators keep their jobs, become more productive, and make more money. We have to see how they look in finished productions, but tools from companies like these that invisibly help animators with things like coloring, cleanup, and in betweens are not going to get the same backlash as some of the things that have come out so far. A small number of fans will be mad, a few will go “oh cool,” but most won’t care or even notice, and that seems to be the current industry thought for now.

8. Anime AI agents will be massive.
   The rise of AI agents was “hot” in the tech scene in 2024. Broadly, AI agents perform tasks without human supervision/interaction, and their use cases are huge (see Microsoft’s AI agents — what they are, and how they’ll change the way we work for more). One flavor of AI agents is the AI agent with an embedded crypto wallet. Coinbase Ventures sees it as such a cornerstone of their investment thesis that the released a blog on Demystifying the Crypto x AI Stack (TL;DR: they see crypto as the driver of interoperability). But one even deeper flavor of the AI agent with an embedded crypto wallet is the anime AI agent with an embedded crypto wallet — what a mouthful! Already, Virtuals.io has built a platform for building autonomous AI agents powered by tokens on their infrastructure, and some of their most popular agents are anime-inspired characters in the “entertainment” category that can post to X on their own for starters. Beyond Virtuals, I know a number of people tinkering in this space, and the initial results are beyond expectations. It’s no secret, though, that if you ask people at an anime convention to check out your NFTs, you’re going to get some glares, so I see the most likely direction this heads long term is the “under the hood” direction where blockchain is simply a technology for connectivity and not financial speculation, but if we’ve seen anything this past quarter (and more broadly, year), there is still a retail appetite for fungible token trading. On the flip side, it’s entirely possible to build an AI agent (and anime one) without web3: imagine someone with a big enough ecosystem like Crunchyroll turning Crunchyroll Hime into an AI agent and letting her add things to your watch list, gaming with you, and even watching (and reacting to!) a new show with you. All of this can be done without crypto in a closed ecosystem, so don’t be surprised to see this sometime in 2025, though it may not happen until 2026.

9. The number of web3 players resourcing anime will increase.
   As of today, the only strongly-resourced companies at the intersection of web3 and anime are Chiru Labs/Azuki, Kasagi Labo, and KLKTN/SFT Studios. All three are aspiring to do something helpful for the anime industry in one way or another. There are other upstarts, but in terms of the level of venture capital, private equity, protocol grants, and/or other resources, it has only been these three (and I am not counting companies that are more broadly playing in content in this number). What I see is that with the explosion of generative AI (which the near entity of web3 industry sees as the best vector for its future), this number will go way up in 2025. Note that what these companies achieve in 2025 is beyond the scope of this prediction, for I am simply predicting the number of companies will go up.

10. Official AI dataset training deals for anime will finally happen.
    Following huge deals in the West like Lionsgate with Runway, we are going to see the first dataset training deals for anime in 2025. The scopes to start will be small, but they will grow over time as long as they are done in a way that respects that the Japanese intellectual property (IP) is takaramono. Look for these to be smaller deals on smaller titles to start, especially in 2025.

Looking to 2025

When I look to 2025, I think of myself in the 2030s, looking back at all the things set in motion for anime in 2025. The convergence of anime and gaming. Generative AI. Changes in distribution. Though it may not all be good, the job of a weatherman is not to predict sunny skies, but to predict all that comes.

Here’s to a strong year ahead for our industry! What do you think is going to happen?

It's time to take score of how our Anime Predictions for 2024 did. For each item, we'll give a score between 1 and 10, with 10 being a perfect prediction and 1 being completely off.

The Predictions:

1. Korean webtoons and web novels will inspire top global hit anime.

2. Anime-infused “sludge” content will take off.

3. The creator economy and anime will finally start to converge.

4. Even less people will be involved in the production of anime in Japan.

5. The notorious “three years’ lead time” will extend to four years for starting anime productions.

6. Artificial intelligence will find a place as an augment to human creativity in anime production.

7. Anime powered entirely by AI will fail.

8. A notable J-pop artist will incorporate AI-augmented anime visuals into a music video.

Korean webtoons and web novels will inspire top global hit anime. 10/10 - Solo Leveling was one of 2024's smash hits, but on top of that, we're hearing about numerous hot webtoons getting adapted into anime (Naver Webtoon, Kakao Webtoon, and more). Webtoons as a source of IP continue to get bigger.

Anime-infused “sludge” content will take off. 1/10 - Sludge as a phenomenon didn't cross over to anime as predicted and instead was dominated by video games and Western cartoons. If sludge doesn't completely die off, maybe next year anime fans will give it a try!

The creator economy and anime will finally start to converge. 4/10 - While anime wasn't quite ready to embrace official UGC in 2024, there are things happening behind the scenes for 2025 that don't make this prediction a total bust.

Even less people will be involved in the production of anime in Japan. 6/10 - The impact of the invoice system didn't drastically reduce the 2024 supply of people working in anime (likely because policy change may be coming and people are holding out), but its effects were felt. Further, NAFCA's successful Kickstarter gives a positive signal on the certification/training side. This gloomy portent won't be one of our 2025 predictions as we are as optimistic as ever for the future of anime!

The notorious “three years’ lead time” will extend to four years for starting anime productions. 10/10 - Holding true for the top top studios. This one was kind of a gimme!

Artificial intelligence will find a place as an augment to human creativity in anime production. 5/10 - Startups like iKHOR and Parhelion and big Japanese tech firms alike are all trying to find ways to work with animators in the production of anime. This 5/10 represents an "in progress" score and may eventually become either a 1/10 or 10/10 in the future based on how things go.

Anime powered entirely by AI will fail. 10/10 - While there are initial promising results on the augmentation of human creativity, "AI anime" has thus far failed in 2024 and rather spectacularly. Between Wafu and Who Said Death Is Beautiful? (technically motion capture plus generative AI), the sentiment from fans was extremely negative for how AI was used. On the flip side, there were absurdist anime videos on YouTube such as Hoshizora no shita, boku wa takuhanki ni naru which actually received positive reactions from the Japanese internet for their comedic, self-aware nature (e.g. GenAI to make it a joke, not replace humans).

A notable J-pop artist will incorporate AI-augmented anime visuals into a music video. 7/10 - While not outright anime, ONE OK ROCK utilized generative AI for their VFX in their video, which currently has 2.2M views on YouTube and a positive reception.

Total Score: 53/80

Predictions Scored 5+: 6 out of 8 (75%)

Look for our Anime Predictions for 2025 soon!

Tokyo Game Show has become more relevant than ever, not just for games, but for anime as well. Gaming and streaming are the two "pillar" monetization categories for anime, so it's no surprise the increased focus we've been having as an industry on finding new gaming opportunities. Given this critical time, Henshin organized a mixer the day after TGS to bring anime and gaming professionals together and make new connections.

Special thanks to Homebase for letting us host our event at your venue.

Henshin was out in full force at Anime Expo 2024, hosting a whopping three side events during the convention! People are what makes the anime industry tick, so investing the time and resources into organizing these events was our big bet. Fun fact: Rob has been going to Anime Expo since 2000 (see the About page) for a photo from AX 2000!

Pre-AX Mixer in Culver City:

AX Dinner in DTLA:

Future of Anime Breakfast:

Over on Anime News Network, you can find Rob Pereyda: 11 Startup Founders I've Met Who Are Shaking Up the Anime Industry. This is the culmination of getting to know some incredible startup founders in and around the anime space, learning about their visions, and then contextualizing things in the bigger picture.

Excited to see what these companies can do.

This past week, I attended Licensing Expo in Las Vegas, my first time going since 2010. Catching up with my old licensees from my Capcom days as well as helping my current clients navigate the world of anime licensing made for an energizing(and exciting!) experience.

Back home in Berkeley, I have five quick takeaways from Licensing Expo 2024:

1. Licensing Relationships Transcend Time

2. Anime Licensing Is Bigger Than Ever (SORT OF)

3. Game Licensing Happens at Licensing Expo

4. A Hot Anime IP Is Only the Start

5. Licensing Is Fun!

LICENSING RELATIONSHIPS TRANSCEND TIME:

Walking the halls of the Mandalay Bay Convention Center, I frequently encountered people I hadn't seen in years. Reconnecting with former licensees from my time at Capcom and elsewhere, we resumed conversations as if no time had passed. And some of these reconnections look like they are even going to lead to new business opportunities, which is really exciting! Truly, the relationships you build in licensing are enduring.

ANIME LICENSING IS BIGGER THAN EVER (SORT OF):

I often write about anime being "bigger than ever" (because it is!), so it's no surprise that anime licensing would be bigger than ever, too. However, there is a caveat I've heard from multiple licensees: physical retail, especially specialty retail, has generally retreated to evergreen anime brands to mitigate risk in a post-pandemic market correction. That's not to say that the "new big show" can't do some damage at retail, but it does mean the barrier is even higher. Meanwhile, online channels (Amazon and D2C alike) are getting more and more interesting, especially for premium SKUs.

GAME LICENSING HAPPENS AT LICENSING EXPO:

Historically, there were not many game licensing discussions at Licensing Expo. Part of this was I believe the calendar: GDC was in March and E3 (RIP) was in June, so Licensing Expo as a third leg in that timeframe was superfluous. But part of this was also the rise of brands outside your traditional Hollywood content alongside the rise of publishers outside your traditional console players. Previously, the only guaranteed anime gaming hits were Japanese console fighting games, making licensing primarily about extending rights to include regions outside Japan for their US subsidiaries. But now, with more IPs viable for gaming and more companies viable as developers and publishers, we finally have a two-sided marketplace for anime and gaming.

A HOT ANIME IP IS ONLY THE START:

There were a lot of anime licensors at Licensing Expo this year. There were so many that the conference became a viable venue for business discussions about anime beyond gaming and merchandise licensing, including title marketing, publicity, content distribution, and more. This got me thinking about which anime licensors have successful licensing programs and which do not. In general, I see licensing success as a function of the consumer and industry popularity of a property relative to internal resources. A hot property is just the beginning; it's only one part of a successful program. Tremendous opportunities for people who can unlock value.

LICENSING IS FUN!:

Since becoming a full-time anime consultant in January, I've been involved in nearly every aspect of the anime value chain through various clients and deals of different shapes and sizes. Some of these include licensing, and getting back in deep has been a true pleasure. It's fitting that licensing is where I started my career (see How Learning the Supporting Functions at Capcom Helped Me Become a Licensing Dealmaker), and it's also where I'm now having a blast.

Anime has the engagement, cultural impact, and financial reach to make it a true powerhouse of a category, but likely due to a lack of understanding and access, it hasn’t been served by the business community. I believe if we can demystify anime a little and help firms access it, this can change.

Anime Dominates Global Pop Culture

The Pundits Say It's Bankable

And The Data Does, Too

Anime Has a Problem: Friction

The ways in which anime is created and IP is treasured in Japan create friction to opportunity.

Intellectual property in Japan is considered “treasure” (takaramono, 宝物) in Japan. Because of this, the level of respect, care, consensus, and alignment to work with the IP creates certain frictions. Further, systemic issues in Japanese business culture (often the “Galapagos Effect” as Japanese call it) slow down Japan’s global business.

I don't know about you, but that looks like a whole lot of friction just to make the shows, let alone monetize them. It's no wonder we see bootlegs of famous IP still proliferate so heavily in 2024, both in digital and physical places.

We Need to Find New Entrants

Venture Capital

Systemic issues with existing IP powerhouses are not fixable; therefore, we must beget new players.

My investment thesis on the venture side is to identify new players in the anime space that reduce friction in the anime ecosystem through new IP, which thereby begets monetization. Just like in the movies, a good story can come from anywhere, and I believe this next generation of anime IP at scale comes from new players.

• genAI

• Community

• Webtoons

• Gaming

• Video

• Merchandise

Private Equity

Good companies monetizing Hollywood IP with strong cashflow are ripe for bringing anime IP (even if the friction is high)

My investment thesis on the private equity side is to identify existing businesses that already monetize non-anime IP well (such as Hollywood IP), and laser focus on creating value with high impact anime licenses. Because of high friction and steep learning curves, focusing on bigger licenses that make the highest impacts to cashflows rather than absolute volume of IPs.

Locations

I see the most activity happening in San Francisco, Los Angeles, New York, and Tokyo, but good new business can really appear anywhere, especially anime hot spots like Singapore and Paris, too.

Venture-backed Category POVs:

genAI: I’m interested in new players who use generative AI to beget IP at scale. Vertically (deep on one IP) or horizontally (massive amounts of bets) are both interesting. I'm really interested especially in players that can "do AI the right way" while still growing and innovating (I think it's possible).

Community: Outside of Crunchyroll, MyAnimeList, and some early Web3 projects, there isn’t really a great business monetizing anime community itself well. Interested to explore.

Webtoons: I'm seeing more and more merchandise licensees get excited about webtoons as a source of IP, so this is a big signal. Overall, I'm interested to see how we can utilize webtoon platforms to drive the anime space in addition to IP plays.

Gaming: This is the most proven "anime investment" model, so I’m looking for players who try new things. Anime gaming-as-media (like Japan launches) is one example, but key is avoiding ultra hardcore with high UA costs.

Video: Is there a next-gen iteration of Crunchyroll out there? Likely, but probably "next generation" probably means something different for content. Really curious what people come up with!

Merchandise: Avoiding high COGS categories and focusing on strong margins as well as service upsells, I see this as a very interesting area since anime fans often use their “anime shelf” as a form of expression and validation (author's note: Satsuki from Kill la Kill guards the outside of my shelf... don't get too close).

Private Equity Category POV:

Overall PE: Identify categories that are ideally new or relatively new to anime rather than crowded spaces if you're looking to acquire licenses for strong businesses. I -- and licensors as well -- get overjoyed when a new viable category for anime can get created.

Looking For Excellent Leadership

On the venture side, I find an excellent founder is the key to a good startup. For anime in particular, I look for three things:

1. Love of Anime. I believe this is a MUST. They don't have to be a hardcore otaku, but they have to love what they're doing and not just be in it for a job.

2. Taste for Product. I like to work with founders who have a real taste, a hard vision, for the product. Imagine Neo standing in the Matrix and seeing the code float by... that's who I want (layered with vision for the anime consumer).

3. Relentlessness. I admire founders who are relentless in trying to achieve their goals. It can mean working hard, unique problem-solving, whatnot, but their success comes from a fire. This one isn't directly anime per se, but the anime business is so intense, I think this quality is needed.

On the private equity side, I find a strong CEO and ideally a product person who loves anime is the winning formula in this configuration:

1. CEO Strength. This is one where I don't need someone who even watches anime (but they shouldn't hate it!); rather, someone who can run a business well and maturely work with an outside group on something as transformational as anime licenses is key.

2. Love of Anime (Product Person). This is where I want to see someone who's a fan, at the product level. Maybe they've cut their teeth on Hollywood IP and they've dreamed of doing something anime for years. Or maybe they never thought it was possible, and now there is an opportunity.

3. IP Experience (Team): Having the successful experience of even just one license together makes a big different so there's no starting from scratch on "What's licensing?" when anime licensing starts.

Conclusion

The anime boom continues, and the entire sector is ripe for investment. Opportunities exist, both on the venture side, in circumventing friction by bypassing major players, and on the private equity side, through injecting successful businesses with major anime licenses. The irony is not lost on me that my theses each for venture and PE are pulling in opposite directions, but as more and more activity happens, one thing is clear: anime is going to be bigger than ever.

DISCLAIMER
The content of this thesis is for informational purposes only and represents the views and analyses of the author, and does not reflect any affiliated entities or third parties. This document is not intended as investment advice nor should it be construed as an offer or solicitation for the purchase or sale of any investment. Information provided is derived from sources considered reliable; however, it is not guaranteed as to accuracy and does not purport to be complete. Readers should not place undue reliance on this content and are advised to seek independent professional advice before making any investment decisions. Any referenced investments or financial instruments are for example purposes only and do not suggest a recommendation to buy or sell.

A couple of months ago, I started working full time as an anime consultant. It’s simultaneously gone by in the blink of an eye, yet it’s also felt like it’s been much longer. Taking the moment in, I thought I’d share a few things I’ve learned in my first two months on the job.

1. The demand for acquiring licenses for anime properties is bigger than ever. Anime has really broken out internationally these past five years, so it only makes sense that licensees’ demand for products has followed suit. I think there are going to be some real exciting opportunities to bring anime licenses to truly new places you’ve never seen before.

2. The demand for investing in and acquiring companies related to anime is bigger than ever. In addition to the obvious plays on companies that create value with anime licenses, I’m seeing interest in companies that play in the broader anime space (e.g. anime mobile games, generative AI, etc.). I fully believe 2024 is going to be the year of anime corp dev.

3. New ways are needed for companies doing business with anime to better reach fans. We have this confluence of anime being “bigger than ever” and changing consumer behaviors from the start of the COVID era, so the old playbooks for reaching anime fans have changed. I see some real opportunities for experienced people who understand anime to help companies build or even rebuild their marketing infrastructure.

The trend across these learnings is that anime being bigger than ever is creating this whole other set of unexpected opportunities. And while it really doesn’t feel like it’s just been two months of doing this, it also feels like I was made for this. Let’s keep going!

It's been an exciting year of growth for anime in 2023, with the media declaring anime more popular than ever and how anime has gone from niche to mainstream. But if this year has been about true growth of anime into the mainstream, next year is going to be about transformation, so let's get into my eight transformative predictions for anime for 2024.

1. Korean webtoons and web novels will inspire top global hit anime.
   Solo Leveling is going lead the charge of Korean IP adaptations next year and likely be up for "anime of the year" in 2024. Good IP can and will come from anywhere, and Korea will solidify its place as a strong origin for anime source material. However, manga serialized in weekly magazines will still be the top source of AAA titles as it has been for decades.

2. Anime-infused "sludge" content will take off.
   "Sludge" has been going strong on TikTok for over a year, but anime hasn't been strongly incorporated yet. But just like how "JoJo's poses" took off and transcended fandom, we're going to see certain anime clips in split screens becoming a staple next to video game live streams, and beget a new generation of memes and meme creators.

3. The creator economy and anime will finally start to converge.
   Anime fans long have made their own unofficial creations, but in 2024, fans will finally start to participate in the ecosystem more officially. IP owners will jump in (for select properties) and multiple platforms will emerge that allow fans to officially create content around their favorite stories.

4. Even less people will be involved in the production of anime in Japan.
   Systemic issues like taxes ("invoice" system), lack of certification/training, and low pay (especially compared to gaming) will mean there are even less people making anime in Japan next year. The number of series being released in 2024 won't face a sharp decline, but the number of series kicked off in 2024 done with end-to-end Japanese pipelines will.

5. The notorious "three years' lead time" will extend to four years for starting anime productions.
   Because less people are going to be making anime, there will be a fight for talent. Bigger studios will monopolize top talent, leaving smaller studios struggling to put teams together, and thus increasing the lead time for starting a new series.

6. Artificial intelligence will find a place as an augment to human creativity in anime production
   To address talent shortages, studios will increasingly use AI, the key unlock being internal/private datasets to enhance the output of their creatives. This "AI with humans" rather than of "AI instead of humans" will become the industry standard.

7. Anime powered entirely by AI will fail.
   As AI tools concurrently get more powerful and widespread, mashing up popular anime to imagine lookalikes will no longer be special and not latch on with fans. Look for these to fail, and creators to make use of personal/private datasets to maintain an element of "human touch."

8. A notable J-pop artist will incorporate AI-augmented anime visuals into a music video.
   J-pop artists have long used anime visuals in music videos (typically with a washed out and faded look) to great success. Look for a notable one in 2024 to make extensive use of AI augmentation in developing anime visuals for the next big J-pop music video.

Looking to 2024
While not all of these may come true, one thing is for sure: anime is going to keep growing, and with that growth, transform before our eyes. Be ready.

When I was first learning Japanese, I often got tripped up with how we used the word mae (前). It means "before" in two very different senses:

• In the physical world, something physically in front of you

• In a sense of time, something that happened previously

Let's drop mae into a simple diagram to see where it appears to a reference person.

I tend to think of time as a long walk along some kind of line, so it was new to me that where mae appeared differeddepending on if we were talking about the physical world or in the context of time. I was a person who often thought the past was behind me, and took that into business as well.

But over the years of navigating Japanese business culture, it started to make sense: what's happened in the past (mae) matters, and it's just as easily right in front of you (mae).

Re-contextualizing this concept into doing business in Japan, a few things become apparent:

• Existing (or even "legacy") business models matter, so if you're playing the market disruptor, consider how your new way still feels familiar

• You can't ignore (but can make up for) past mistakes; apologize to clean up what's right in front of someone you're trying to do business with

• Trying to land a partnership away from existing players? Consider how you make sense in the historical context instead of being the buzzy new thing

Whether it's in front of or behind you, mae (前) always will find a way to be relevant.

When Bandai Namco recruited me in 2011, I had experience with Japanese content from both Capcom and Crunchyroll. I was in the US for Capcom and primarily in Japan for Crunchyroll, but I had never worked in Japan for a Japanese company before. So when I got to Bandai Namco, it's no surprise that I was completely outside of my comfort zone, and it honestly took a while to acclimate.

At first, I tried to fit in -- learning the systems, following the business customs, and just trying to be like everyone else. I remember one day, maybe a month after joining, I was in a brainstorm (in Japanese) and a colleague asked why I was being so quiet. I told them that things didn't really make sense -- not the language, but actually what we were trying to do. It dawned on me that I had never actually brainstormed ideas in Japanese before, and that irrespective of language, the way things were structured was throwing me off.

It was after this moment that I realized I wasn't contributing enough because I was trying to contribute in the exact same way as everyone else. So what did I do? While I still respected the more important traditions, I opened up and was myself. Understanding what I could bring to the table later led me to create Bandai Namco's first IP incubator, and this skill is what I call doing what only you can do.

DOING WHAT ONLY YOU CAN DO:

When you join an organization for a business development, strategy, growth, or similar role, you're joining to somehow transform the business. What I've found over my career, but particularly applicable to launching the IP incubator at Bandai Namco, was that embracing these following three areas really helped me achieve a doing what only you can do outcome:

• Leveraging Diverse Experience: Once I came to realize that being from another country and having wildly different experience than everyone else at Bandai Namco was a selling point and not a deficiency, it supercharged my participation in the company. After all, why hire me in the first place?

• Using Infectious Passion: As I started realizing that people actually liked how passionate I was about anime and games, I brought it to the forefront instead of holding back, taking advantage of it in presentations and meetings. Again, why leave it on the table?

• Leading Own Innovations: After getting settled in and really feeling empowered to come up with new ideas, I noticed that it wasn't just coming up with ideas that mattered, but being able to have a hand in making them happen that set you apart. What's better than suggesting a good idea? Suggesting one you can make happen!

Putting all three of these together is where things get really fun…

CREATING THE IP INCUBATOR:

When it came time to exploring new businesses and internal startup ideas, I saw an opportunity with Bandai Namco's huge library of classic video game properties. Lots of them were just sitting on the shelf, so if we could reawaken them, it would be a huge win for the company.

Enter ShiftyLook, a consumer-facing platform that would use webcomics, animation, games, music, and events to reimagine properties like Galaga, Dig Dug, Katamari, Bravoman, Wonder Momo, and more.

It might sound like a wild idea, but let's look at how I was in a position to make this happen:

• Leveraging Diverse Experience: I drew on experience across comics (working with licensees like UDON while at Capcom), communities (building and experimenting while at Crunchyroll), and events (staffing anime conventions for years) to inform my perspectives at Bandai Namco.

• Using Infectious Passion: As a big fan of classic video game characters and believer that they still had potential, I used my passion to get people both internally and externally on board with the mission of bringing them back through webcomics, something else I also believed in.

• Leading Own Innovations: It wasn't just putting a plan together, but actually being able to lead the plan as an "internal startup founder" that made launching it viable.

Doing what only you can do (not to be confused with doing only what you want to do!) is really about finding those unique things you can bring to the team to drive the transformation the company needs.

Whether you're just getting settled in somewhere or have been in a role a while, thinking about those unique elements which brought you somewhere in the first place might just help you come up with something so unapologetically you it becomes undeniable.

I joined Crunchyroll in March 2008 as their first business hire just five business days after congratulating them on announcing their Series A funding. The next day, we flew to Japan, and within six months we had lined up key Japanese rights holders to support the site with official streaming deals.

This sound like a lot of fun? It sure was! But even more than that, it was a great hands-on experience learning about innovation to take bets on the truly new.

Let's talk about three key things I learned during this time which still help guide my approach to innovation today:

1. Constraints are part of your identity, not barriers to success, so take advantage of them

2. Don't be afraid to do something "good enough" now that can be improved upon later

3. Be ready to adapt and try new things that put your customers first… you'll learn a lot

CONSTRAINTS ARE PART OF YOUR IDENTITY:

Startups often have limited capital, and what they do have, they need to use wisely. If you're a product-focused company, you probably don't want to spend all your money outside product and engineering, either. So if you're making all these investments into your platform and trying to disrupt an industry that has high content costs, you face a constraint on acquiring content against incumbents who have big cash cows to power their bids. But instead of thinking of this as a limitation, consider thinking of it as who you are.

Crunchyroll raised $4.05M in Series A funding right before I joined, but this actually wasn't a huge number relative to what our then competitors were spending on content. Existing deal structures were based on buying a bundle of "all rights" spanning home video, television, merchandise, etc., monetized over a long period of time. With the constraint of our funding, we had to find a way to acquire the content differently than incumbents.

Enter the revenue-sharing subscription video on demand (SVOD) model.

While existing players who licensed anime did share revenue back to Japan, their emerging streaming sub-licensees at the time (e.g. Hulu) actually paid fixed "flat" fees rather than revenue shares for subscription streaming rights. Although we didn't have the bigger resources of those streamers, we knew how the Japanese cared about how their intellectual property was treated and respected, so we flipped this constraint upside down to be able to acquire streaming rights that included a revenue share, something rarely pulled off even today by major SVODs.

"GOOD ENOUGH" NOW, IMPROVE LATER:

Before streaming, the "best" way to officially consume anime was through the high end collectors' boxed sets on DVD and Blu-Ray. In North America, this meant having an English dubbed audio track in addition to Japanese audio with English subtitles, bonus features, HD picture, surround sound, and sometimes a cool goodies like mini toys or art books. The downside was that the cost was high and it could take months -- or even more than a year -- to get the product out to consumers from the time it aired on TV in Japan.

Really, the bulk of consumers just wanted to watch anime fast. Speed and convenience were the unique selling points, so our subscription launched with 720P video (instead of 1080P) and subtitled only (instead of the option for dubs). No extras, no goodies, just the content.

After my time, Crunchyroll would gradually improve upon what "good enough" was as dwindling incumbents still struggled to compete in streaming: 1080P video with better and better encoding, behind-the-scenes content akin to boxed sets, and even dubs in multiple languages released quickly after streaming.

The more you do something to serve an audience, even if it is only "good enough" for now, the more you learn about their needs and the better you get at doing it.

ADAPTING AND PUTTING CUSTOMERS FIRST:

We often think of "customers" as our end users (which is true), but in a business like Crunchyroll's, also of incredible importance are the "customers" (partners) who license the very content that fans love. With Crunchyroll in the middle as the direct-to-consumer platform, our job wasn't just to be a bridge, but become a flywheel that satisfied the needs of both sides while spinning faster and faster until it turned into a perpetual motion machine.

In the early days of an emerging business, trends can change fast, needs of both consumers and partners can evolve, and some bets might just not pay off. Rather than just letting the ship sail as soon as all these streaming deals started pouring in, we wanted to keep adapting, keep testing, and keep trying things that put the customer first.

What was a blessing for us is that more often than not, adapting and coming up with ideas to bring joy to consumers also satisfied content partners. Character birthday sharable landing pages, watch and win campaigns, scavenger hunts, and more, these were fresh and fun for fans and breathtaking for partners whose existing licensees had mainly settled into a status quo for what marketing meant for them. The net effect was building a stronger community and strengthening relationships with content partners all in one go.

Staying in tune with this harmony while also being an upstart maverick is not easy, but if you can pull it off, some real magic can happen.

Looking back, closing the big deals and hitting the flashy milestones were certainly exciting, but long term, it feels to me that having the opportunity first hand to experiment, to build, and to really grow into a lifelong innovator is the true reward.

I got to Capcom as a spunky kid who had worked all of a few months in game testing and run his own anime convention. So how, just a short time after my 2+ year stint at Capcom, did I end up becoming Crunchyroll's licensing guy? Hint: it involves learning all about the supporting functions of licensing!

When people think of entertainment licensing, the fast-paced world of dealmaking might come to mind. Business dinners. Cutting deals. Big presentations. These are all the "cool parts" of licensing, but what I was hired to do was less glamorous: keeping an eye on licensing contracts, royalty reports, and approvals. I would soon learn that these are just as important to licensing as the actual shaking of hands.

First, let's level set with definitions of the three supporting functions:

1. Licensing Contracts

2. Royalty Reports

3. Approvals

LICENSING CONTRACTS:

A party ("Licensor") controls the rights to an intellectual property (e.g. the characters, world, etc.), so someone else ("Licensee") needs to get permission if they want to exploit those rights. A licensing contract is what governs how long those rights last ("Term"), where they can be used ("Territory"), what they are for ("Category"), and the financial terms ("Advance," "Minimum Guarantee," "Royalty Rate").

When you're a non-legal person dealing with licensing contracts, you help bridge the parties to minimize legal's work, such as tracking and filing, making sure products fit categories, and even getting things as prepared as possible for them (such as deal summaries or even draft agreements).
So in my first several months, I worked to learn contracts inside and out.

ROYALTY REPORTS:

Royalty reports keep track of how much money a licensee owes a licensor by looking at activity in given periods (typically quarters). If any money was paid in advance (advance payment) and/or is guaranteed during the term (minimum guarantee), the reports keep track of the over/under as well.

The job of a non-finance person dealing with royalty reports is to get everything organized and in order (such as chasing late reports and payments when they happen) to minimize finance's time involved.
During my early time at Capcom, I learned to not just be fluent with the reports themselves (Microsoft Excel files), but with where the information from a report flows afterwards.

APPROVALS:

Approvals ensure that whatever a licensees is doing is properly representative of a brand. Typically, product designs at key stages get submitted, feedback is given, corrections (if any) are made, and production keeps going. A good approvals process is flexible enough to allow for creativity, but also sets standards for quality, so navigating it can take a bit of nuance and back and forth sometimes.

The job of an approvals person is to bridge what the licensees want to do with what the creative lead's vision for the property is (alongside the company's strategy), and to minimize the creative lead's time involved (such as by getting a product "as close as possible" before even submitting it).

In those early months, I focused on learning not just the basics of approvals communication, but on the specific visions of different creative leads.

TRANSITIONING TO DEALMAKER:

There is no one specific "event" that got me from being an effective point on the supporting side to dealmaker, but if I had to pick a few, I'd say it were these kinds of things:

1. Doing strong work on the supporting side as well as innovating and making things better

2. Raising my hand on new ideas, and also having a path to execution on those ideas (versus just making "suggestions")

3. Being curious and learning how other functions worked so I could have fluency in the business

Starting off by learning the supporting functions of licensing (contracts, royalties, and approvals) and then being a strong performer (see above), I believe I was able to make that transition to dealmaker in a relatively quick period of time. Game franchises Street Fighter, Mega Man, and Resident Evil I still love to this day, and am glad I could have an impact on.

It seems hard to believe that I went from the "unglamorous" support side to the "flashy" dealmaking side, but to me, those functions are still just as cool.

Japanese manga, anime, and video game characters are beloved across the globe (and happen to generate big business), but when it comes to Japanese intellectual property ("IP") rights, have you ever heard things like "They won't accept any deals!" or "They won't approve anything!" from your colleagues and peers? Such a reputation may cause newcomers to either enter the space with misconceptions or give up entirely.

The world of Japanese entertainment rights may be different, but it's not an impenetrable fortress. Over the past 17 years (nine in Japan, eight in the United States), I've worked with creators, producers, studios, TV stations, game companies, toy makers, and more, and come to understand three principles which universally show up in successful players in the space, which I will call the Three Universal Principles of Japanese Entertainment Rights.

These principles are rooted in Japanese business culture which are in turn derived from Japanese culture itself. If you already have some understanding of Japanese culture, they may feel like connecting dots. If you are totally new to Japan, they may feel shocking or even illogical to you (and that's okay). While understanding and learning the Three Principles of Japanese Entertainment Rights certainly won't guarantee your success in brokering deals and working with hit IPs, it is my hope that it can inform your strategy and decision-making as you start working with Japan.

THE THREE UNIVERSAL PRINCIPLES OF JAPANESE ENTERTAINMENT RIGHTS:

Principle 1: Character IP is a treasure

A lot of craft goes into creating the characters and worlds of manga, anime, and video games. Think of the people who create these as craftspeople of the highest order, who impart some of their essence onto their creations. The resulting IP isn't a thing just be bought and sold, but something unique and useful to the world. It is a treasure (takaramono - 宝物 - in Japanese).

Thinking of these character IPs as treasure, respect is a key word that comes to mind, both in how you work with the IP once you've made a deal and in making the deal itself. Imagine yourself at a fine antiques shop in Kyoto and spotting an immaculate vase from the Meiji Period. Would you insult the shop owner by offering them five dollars for the vase? Definitely not! If you were famous for painting over antique vases and the shop owner knew who you were, would they sell you something their ancestor worked on? Unlikely. The same goes for character IP.

Principle 2: "Strict" approvals are only a thirst for excellence

Have you heard some of the typical approvals "headaches" for Japanese IP before? Like when a contract might call for a five or even ten business day response period, where just one response (not even a good one!) can reset the clock. Or stories where after ideas are submitted, nearly everything or even everything is outright rejected? "If only the Japanese knew how to do business here!" is something I've heard time and time again.

Let me tell you something: there are no creators, editors, managers, producers, etc., in Japan who just make things difficult for fun. Remember, character IP is treasure, so we have to treat it accordingly. The representatives of these IPs simply want something that is excellent to come about. Of course, the definition of "what is excellent?" often comes up, which is where bridging cultures, negotiating, and just having plain amazing creative direction can come in (outside the scope of this article),

Principle 3: "Upside" respects the craft of the IP, regardless of the chances for a windfall

We all know that not every IP is going to be a billion dollar property. Representatives for franchises in Japan both big and small realize this, too. So how do we still respect the treasure of character IP in putting together proposals and deals? The answer is having a plan for upside.

Upside can be a backend royalty, it can be the lift in something (whether the deal is royalty accruing or flat fee), or it can even be something else. What's important is that a structure is in place so that if something does take off, even a little bit, the property can benefit. Remember, the IP is something that was crafted and that the stakeholders want what's best for it. This is why I've seen big companies sometimes do small volume merchandise licensing contracts where the overhead is greater than the upfront deal value, and why I've seen licensees with better revenue sharing potential get picked over much bigger players. In both cases, the upside was there.

Working with Japanese entertainment rights holders may be different than what you're typically used to, but if you can treat their IP as treasure, understand their thirst for excellence, and find ways to give them upside, you're already off on the right start.