Netflix bets on anime to battle Disney, Apple in streaming wars

AS NETFLIX INC. prepares for a bruising battle against the Walt Disney Co. and Apple Inc. for streaming subscribers, it’s playing a card that may deliver enough of an edge to fend them off in Asia: Japanese anime.

Although Netflix has featured animation for years, the leading streaming provider of 158 million users is stepping up its anime

efforts as new rivals such as Apple, Disney, and WarnerMedia’s HBO Max roll out their services. All of them have identified animation as a way to lure viewers — from Disney’s historic archive to a recent victory by HBO Max in clinching the coveted US distribution rights for most of Hayao Miyazaki’s Studio Ghibli films.

Facing such competition, Netflix is extending its strategy of paying for original content to new animated shows such as Ultraman and Eden.

It’s also holding out for a chance to feature Ghibli’s content, including the Oscar-winning Spirited Away and My Neighbor Totoro, in Japan and other countries outside the US. Netflix has also approached the renowned animation studio to secure the up-for-grabs streaming rights for its home country, according to John Derderian, Netflix’s director of Japan & Anime.

“Japan is certainly among the top two creators of stories in the world with Hollywood,” said Derderian, who confirmed that there have been talks with Studio Ghibli, without offering any specifics.

The studio had long resisted offering its films for streaming, favoring theatrical releases and physical media. That’s changing as more viewers choose to access libraries of shows and movies on smartphones, tablets, and computers for a fixed monthly price. Netflix — which has made inroads in Japan, adding millions of subscribers — is betting on Japanimation to both defend its turf in the country, and push deeper into Asia.

In fact, most of Netflix’s anime

viewers are outside Japan, according to Derderian. Shows such as Dragon Ball or Attack on Titan

continue to attract a global audience. Overseas sales of Japanese animation content has quadrupled to almost $10 billion since 2012, according to Humanmedia Inc., a Tokyo-based research firm.

Even so, Asia remains a mostly untapped market for the major streaming services. It will probably take a few years until HBO Max, Disney Plus and others to get serious about gathering streaming services in the region. Crunchyroll, a San Francisco-based on-demand streaming service for anime fans outside Japan, has about 2 million subscribers.

Demand for Japanese animation is especially high in Southeast Asia, Europe, and Latin Americas, according to Derderian. A spokeswoman for Studio Ghibli declined to comment on business relationships with Netflix, Amazon or other streaming platforms.

“Netflix will have to sustain investment into high-budget, Hollywood-like works and multinational content in order to set itself apart as other players join the market,” said Masahiro Hasegawa, an analyst at HumanMedia.

Netflix’s average spending for top shows has jumped about 30% in the past year, content chief Ted Sarandos said in a post-earnings conference call on Oct. 17. Netflix is raising funds with a $2 billion bond issue, it said last week. Disney Plus, which launches Nov. 12 for $6.99 a month, will cost about half as much as Netflix and offer a library of movies and TV shows backed by its huge franchises, including The Avengers and Star Wars, to The Simpsons and Toy Story.

“Because Disney has pre-existing media and an established brand, Netflix will have to make sure its viewers retain a lifestyle in which they watch Netflix daily,” Hasegawa said.

To gain an edge, Netflix is bringing its strategy of developing original exclusive shows to anime as well. The film Roma was nominated in 10 Academy Awards, categories and series such as The Crown have won Golden Globe Awards.

Now, Netflix says it is developing a library of exclusive anime shows, clinching long-term partnerships with five of Japan’s notable animation studios.

The result of that partnership is Ultraman,

a animated reboot of the classic Japanese show of the silver-suited hero battling giant monsters. The exclusive series was developed with Kenji Kamiyama, the anime director who’s works include a series for Ghost in the Shell, and Shinji Aramaki, another well-known director whose designs were behind the Gundam series.

The two directors said developing shows for Netflix gave them more control over the story and content, such as being able to show gory scenes of monsters being vanquished, which is usually suppressed for on-air shows. “I see distributors such as Netflix as another turning point for the anime

industry,” Kamiyama said.

Netflix isn’t the only player invested in Japanese anime to give them an edge. Amazon Prime and Apple’s iTunes also offer some of Japanese anime shows, and Amazon has also released an original anime series, Blades of the Immortal. Disney will have new Star Wars and Marvel animated series available on their service, seeking to attract core fans from the two works.

But Netflix is confident it can ride out the competition. With long-term partnerships with local studios that are slated to bring original series one after another, Netflix is set to have a steady flow of Japanimation under the belt. The company has also gone beyond to dabble in experimenting with new type of animation along with partner Production I.G., announcing that they’re developing the world’s first hand-drawn, 4K HDR animation series.

“We’re going to partner with studios for five years, 10 years, so they can take that money to have certainty of revenue and invest in space and tool and people,” said Derderian. “We’re in an anime boom, but we’re not investing in boom-or-bust cycle.”