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How Netflix could give new life to Japanese anime

US company breaks mold in a bid to secure original content

Five Japanese anime production houses might have hit the jackpot by signing long-term partnership deals with Netflix.

TOKYO -- Netflix, the world's top video streaming service provider, could become a savior of sorts to Japan's anime industry.

In 2018, it began forming comprehensive alliances with anime studios and now has five of these partnerships.

They have already proved to be win-win deals. The U.S.-based streamer has gained the ability to turn out original anime, and the Japanese studios have gained stable revenue streams.

They have been a game changer for a tradition-bound industry that has refused to shed outdated business practices.

Since it became a premium TV channel, the one-time DVD rental company has been following a business model in which it buys shows from studios one at a time. But its partnerships in Japan are much more comprehensive; each will last years and span multiple titles.

Taito Okiura, Netflix's director of anime who works for the company's Japanese subsidiary, explained the logic.

"Good production companies and creators are scarce resources," Okiura said. "We want to make it possible to distribute attractive Japanese anime in a more stable manner."

Netflix said it would spend $8.5 billion producing and acquiring content in 2018.

One of its five anime partners is Anima, based in Tokyo's Takadanobaba neighborhood.

Anima is now producing its first original show for Netflix. "Altered Carbon: Resleeved" portrays a future world where humanity can transfer consciousness from one body to another.

"Altered Carbon," the live-action original, is already playing on Netflix, and there are high expectations for the anime spinoff.

Production I.G., based in Tokyo's Musashino, has also partnered with Netflix. Their first collaboration will be "Ghost in the Shell: SAC_2045," which will hit the internet in the spring of 2020.

Although Production I.G. has a sales subsidiary in the U.S., it is pinning its hopes on its new distribution partner, which in April reported it has 148.8 million subscribers, 60.2 million of whom are in the U.S.

"Partnering with Netflix will enhance our company's name recognition," said President Mitsuhisa Ishikawa. "Distributing [our anime] around the world will also help cope with piracy."

For years, Japanese anime houses have been plagued by overseas pirates, who rip episodes almost as soon as they air in Japan, subtitle them in foreign languages and post them on free websites.

Netflix's partnership arrangements in Japan have the industry questioning old business practices. Anime production committees, a kind of consortia that contribute funds to anime producers, are coming in for especially close scrutiny.

The drawbacks of a committee full of people throwing around opinions about how someone else's story should be told are obvious.

"Since there are many people involved in the committee method, so many requests are made about a work that it takes time to nail down decisions and produce a series," said an executive at one studio that has tied up with Netflix. "The Netflix method offers much greater flexibility."

As viewers discard old habits in favor of easier and less expensive ways to consume video entertainment, the production committee business model is nearing its expiration date.

Before Netflix arrived, Japan's anime industry was under constant pressure to produce big hits. Blockbusters bring the kind of stature and cash that gives studios a big boost heading into their next project. Flops bring existential dread that racks management and hard-pressed creatives alike.

Now the five Netflix partners have some breathing space. Shinya Sasahara, Anima's representative director, said his house's Netflix deal "allows us to produce [cartoons] with a sense of security over the long term."

There are also strong expectations that Netflix's unusual foray into anime will lead to better working conditions for animators, the lifeblood of the industry.

According to a survey by the Japanese Animation Creators Association, based in Tokyo's Chiyoda Ward, animators in 2019 will earn an average salary of 4.4 million yen ($40,620) and take 5.4 days off a month. The salary figure is at least average in Japan, but average is far from ideal for an industry that is trying to attract "scarce" talent.

If the current situation continues, creative talent could end up shunning the industry, and the quality of Japanese anime could suffer.

According to the Association of Japanese Animations, also based in Tokyo's Chiyoda Ward, the size of the industry's market in 2017 increased 8% from the year earlier to 2.1 trillion yen, topping 2 trillion yen for the first time.

The 2017 total also represents a 60% increase from 10 years earlier.

This recent growth has been driven by increasing overseas sales, a trend that would likely pick up pace were Netflix to broaden its Japanese partnerships.

But an expanding global audience would also be fickle. And harsh. If a Netflix series proves to be unpopular, it will be canceled.

It is a meritocratic world, after all, and the quality of anime from China, India and elsewhere has improved in recent years.

One key to continued growth in Japan is wringing more value out of anime characters and titles. Another is to attract talent, but earning $40,000 a year and dealing with opinionated committee members is not exactly hitting the jackpot. Netflix could help in both regards.

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