Toei Animation Taps AI, Overseas Market

For nearly seven decades, animation studio Toei Animation Co. has relied on recognizable franchises, including pirate adventure “One Piece” and fantasy “Dragon Ball,” in making itself a leader.

But publishing platforms are now such that just about anyone can distribute animation, or so be moaned Toei Animation president Katsuhiro Takagi two years ago.

“I feel that the number of hits is small compared to the number of works that are out in the world,” he says. “How do you now make a profit from animation works that are expensive to produce?” The pandemic proved to be a challenge of another sort. But investors are sanguine that the company can come up with an answer to the president’s question — its stock price has more than doubled over the past year — and advances in technology and a further tapping of the overseas market will be keys.

Despite its success, the industry suffers from labor shortages. For that, Toei Animation is utilizing AI.

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In March, the company announced it will be using the AI tool Scenify, by technology firm Preferred Networks Inc., to convert real landscape photographs into animation-like images. A task that might typically take four hours and 50 minutes will be reduced to a mere 50 minutes with Scenify.

To showcase the collaboration, Toei Animation posted the experimental film “Urvan” on its YouTube channel in February.

Toei Animation also said this year that it was utilizing another AI technique to quicken the coloring of the clothes of characters.

Such techniques were likely the furthest from the collective mind of Kenzo Masaoka and Zenjiro Yamamoto when they founded what would become Toei Animation in 1948. The studio, headquartered in Tokyo, became a subsidiary of Toei Co. eight years later. Since then, it has gone on to garner acclaim worldwide for more than 400 television and film productions.

Reduced box office receipts, suspended production of television productions and cancelled events were among the factors that led to a slump in sales of nearly 6% for 2020 over the year before, the company said.

With theaters closed, Toei Animation was forced to postpone releases of films, such as the latest installment in the “Pretty Cure” franchise. Though streaming is taking off worldwide, this proved to be problematic given that the movie theater remains a force in Japan — a point driven by the box office smashing success of “Demon Slayer” (by Ufotable Inc.).

“We see animations on TV and in theaters as still being important if a producer expects to make an IP popular among all generations nationwide,” says Shinnosuke Takeuchi, a leisure analyst at Jefferies.

The overseas market is shaping up to be crucial. For the past fiscal year, overseas revenue accounted for 59% of the company’s total, a significant increase over five years before, when it was 34%.

Contributing to that success is the streaming of legacy content, including on the site for distributor and publisher Crunchyroll. As well, “Pretty Guardian Sailor Moon Eternal” began streaming on Netflix worldwide (excluding Japan) in June.

The company cited in its most recent annual report a solid performance from the licensing of the IP for “Slam Dunk” and “Dragon Ball” for games in Europe, the Americas and parts of Asia. Down the line, Toei Animation will continue to have success overseas through strategies like these, says Roland Kelts, the author of “Japanamerica: How Japanese Pop Culture Has Invaded the U.S.” “Streaming in particular enabled Toei Animation to leapfrog the middlemen distributors of physical media like DVDs who were scraping off a huge chunk of global profits,” Kelts says. “Today, Toei Animation can mine their own inventory for stalwarts like ‘Slam Dunk’ and ‘One Piece’ and go directly to the international consumer through borderless streaming media and online games. The company’s on fire now.”

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