00:00Production IG brought us Ghost in the Shell, WIT Studio brought us the first three seasons of
00:06Shingeki no Kyojin. Between them, these two studios have produced some of the most highly
00:11regarded works in modern Japanese animation. And yet, their parent company, IG Port,
00:18has just reported a 46.3% drop in operating profits. Yes, you read that right. Today we're
00:27going to break down exactly what's happening, why it's happening, and what this means for the future
00:32of the anime these studios produce. Welcome back to The Best Anime Here. Today we're talking about
00:39business and numbers, but I promise to keep it simple, without unnecessary jargon. Let's dive
00:45right into the data. Let's look at the facts. IG Port, the parent company that oversees both
00:51Production IG and WIT Studio, released its financial results for the fiscal year ending
00:57in May 2026, and the numbers left the community quite concerned. What's strange about the report
01:04is that on the surface, it should look good. Overall sales for the animation division actually
01:10increased. More viewers, more contracts, more work. But that didn't translate into more actual
01:18money for the company quite the opposite. The company generated more than 8 billion yen
01:23in sales, but the losses were staggering. The video division posted an operating loss of over 1
01:30billion yen, dragging the company's overall profits down to that 46.3% year-over-year decline
01:38I mentioned at the beginning. To put this into perspective with figures that might be easier to
01:43understand, that loss in the animation division amounted to approximately $8.22 million, and the
01:51harshest part of the report is that IG Port ended up missing its own operating profit forecast
01:57by nearly 57%. In other words, not even they themselves expected it to be that bad.
02:05Here's the most interesting part. More sales, but less profit. How is that possible?
02:11The short answer is that producing high-quality anime has become more expensive than what the
02:17companies themselves can afford with the revenue they receive from these projects. Executives
02:23pointed to endless delays in production schedules and excessive price increases across absolutely every
02:29creative area as the main cause. Specifically, paying fair wages to staff, covering the costs of
02:37expensive CGI scenes and relying increasingly on subcontracted studios has driven budgets so high that
02:44several projects will end up costing more than the company will receive for them. And this led to a
02:50rather serious accounting issue. The company had to record what are called provisions for anticipated
02:56losses on contracts. In simple terms, this means that IG Port literally already knows in advance that
03:04some projects currently in production will cost more money than they will generate, and it had to set
03:10aside emergency funds just to cushion that blow when it hits. Think of it this way. It's as if a
03:17restaurant knew, before finishing a dish, that it's going to spend more on ingredients than it will
03:23charge for selling it, but it's already so far into the process that it can't just stop halfway through.
03:28Now, so as not to paint a completely apocalyptic picture, it must be said that not all of IG Port's
03:35divisions are in the red. The divisions dedicated to copyright management and publishing manage to
03:41keep the ship afloat, cushioning much of the overall financial collapse. Basically, while direct
03:48animation production is losing money, licensing and publishing those works remains profitable.
03:53Sales of official merchandise also posted positive results, although they fell short of the internal
03:59targets the company had set for itself. And here it's worth mentioning something significant.
04:05Netflix alone paid IG Port more than 3.5 billion yen during fiscal year 2024, which shows that
04:14international streaming remains an important source of revenue for keeping these studios afloat,
04:19as traditional production becomes increasingly less profitable on its own. And this is where
04:25things get more serious, because this isn't just a problem for IG Port, it's a symptom of something
04:31much bigger across the entire anime industry. Wit Studio President George Wada had already sounded the
04:37alarm about this in a previous interview, pointing out the growing disparity between the ever-increasing
04:43quality of anime and the current pace of production. His statement was quite direct.
04:48He doesn't believe it's possible to maintain this pace, and he argues that the only way to sustain it
04:54is for the number of anime fans worldwide to continue growing, so that companies can keep investing the
05:01money needed to maintain that level of quality. And this isn't the first financial crisis this group of
05:07studios has faced. As early as 2021, Watt Studio had reported a drop of more than 40 percent in its
05:15revenue,
05:16losing more than 500 million yen in profits in a single fiscal year. This problem dates back years.
05:23It didn't just appear out of nowhere. And they aren't the only ones. Studio KAI, another well-known
05:30production company in the industry, recently reported losses of 565 million yen, nearly double its deficit
05:39from the previous year. The pattern repeats itself studio after studio. Demand for anime is higher than
05:46ever, but business models are failing to translate that demand into sustainable profits.
05:51In practical terms, this can manifest in several ways that we've already been noticing in the industry.
05:58More delays in release dates, studios increasingly turning to outsourcing, which sometimes affects an anime's
06:05visual consistency, and production committees being more cautious before greenlighting ambitious and costly projects.
06:14It's not that the industry is going to collapse overnight. It remains a massive business with growing global demand.
06:20But it does confirm that the current model, where increasingly polished animation is demanded while budgets aren't growing
06:27at the same rate, has a real limit. And studios like Witt and Production IG, no matter how prestigious they
06:34may be,
06:35are not immune to this. And that's the whole story. Let me know in the comments.
06:40Have you noticed any more delays or changes in quality in recent productions from these studios?
06:46If you liked this analysis, give it a like, subscribe, and turn on the notification bell,
06:53because I'm going to keep tracking this topic. See you in the next one. Take care.
07:10See you in the next one.
07:12See you in the next one.
07:12See you in the next one.
07:12See you in the next one.
07:12See you in the next one.
07:12See you in the next one.
07:12You
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