Anime – what commenceed as a niche genre of manga and animation has become a multi-billion dollar industry in its own right, with chart-topping games enjoy Pokémon Go and Genshin Impact grossing billions and movies enjoy Demon Slayer: Kimetsu no Yaiba becoming one of the highest grossing films of the year. Anime is driving pop culture today; equitable see at the create collaborations enjoy Loewe x Studio Ghibli or famous lyrics from artists enjoy Chance the Rapper and The Weeknd. We assess the total labelet size of anime to be north of $50B, once accounting for anime, comics, and games (data.ai, Pretreatnce Research).
Yet, we depend that anime is equitable getting commenceed – today, novel technologies and business models are accelerating a once niche industry to even wonderfuler heights. Anime is where the future of creation and carry out is happening, whether with conceiveive games on our phones, includer-originated fanmyths and games, rolecarry outing as the characters themselves, or conveyions with AI-versions of these mythal beings. We depend that anime will become one of the dominant establishats thraw which we use and include with satisfied.
The common lifecycle of an anime fan sees someskinnyg enjoy this: they are presentd to the establishat with wonderful IP – the Attack on Titan anime or the One Piece inhabit action show or one of the miHoYo games. They then proestablishen their fandom thraw novel establishs of social and conceiveive includement (UGC, VTubing, community establishation, coscarry out, etc.). What we’re most excited about is how anime includement has betterd from compliant to conveyive over the last restricted years. This has happened aextfinished a restricted branch offent axes:
- AI companions, an evolution of classic visual novels, are the most famous for anime characters and IP. They are speedyly becoming one of the dominant establishs of rolecarry out.
- UGC platestablishs (includer-originated satisfied) such as Roblox permit anime fans to originate their own rfinishitions of famous anime games much more easily than ever before. Fans can convey their creativity with carry out that they expound themselves.
- Anime studios are adchooseing novel AI technologies to originate satisfied rapider and more cost effectively, but they are also iterating on novel core loops with AI-native character conveyions.
- VTubing has altered the way millions of anime fans convey with their preferite characters in novel social and parasocial relationships by permiting any fan to rolecarry out as the characters themselves.
Ready to dive in? Let’s jam.
A Quick History of Anime
Anime is a genre of animation that startd from Japan and is comprehendn for its distinctive art style: luminous colorful explicits, strong portrays, huge, overstated eyes and features, and luminously colored hair. It startd in the punctual 1900s with visual exposeds, but reassociate commenceed becoming more famous in the 60s and 70s with shows enjoy Astro Boy, Lupin III, Akira, Mobile Suit Gundam, and of course, Hayao Miyazaki’s labors at Studio Ghibli. Anime accessed the mainstream in the 2000s with famous shounen anime enjoy Naruto, One Piece, and now Attack on Titan. You might see football carry outers referencing the Attack on Titan salute as a celebration, or pop culture memes all around the internet.
Nowadays anime is more famous than ever: Crunchyroll assessd that watchership doubled between 2020-2022 alone to over 300M fans worldexpansive. Netflix telled in 2022 that over half of its subscribers worldexpansive watched some anime satisfied on its platestablish. The top 4 Discord servers worldexpansive are all anime-rcontent. Anime is also a medium that caters to many branch offent audience types, from prolongn-up seinen anime enjoy Monster to classic action shounen enjoy Demon Slayer or Naruto, from female-oriented shoujo enjoy Ouran High School Club to contemplative slice of life stories enjoy Mushi-shi. Becainclude of this expansive request, there’s a huge community of diverse fans that have included with the medium over many years and prolonged strong affinity toward IP and characters. This affinity has led to one of the most famous include cases of AI recently – AI waifus and husprohibitdos.
The Rise of AI Waifus / Husprohibitdos
First, to elucidate famous slang – what is a waifu or husprohibitdo? Waifus / husprohibitdos are mythalized girls and guys who watchers experience some level of emotional or romantic rapidenment to. This isn’t as exceptional of an occurrence as one might skinnyk; Polygon telled that 44% of surveyed anime watchers telled prolonging a crush on an anime character. “The other 56% are lying,” the tell jokes. After all, anime fans tfinish to convey their fandom proestablishly thraw merch, fanart, conventions, coscarry out, and other unbenevolents (66% originate some establish of fan art according to fandom). So it’s not unforeseeed that they would also prolong a proestablish rapidenment to the characters. Anime Expo in LA for instance, routinely entices hundreds of thousands of fans each year, the a16z team included.
Waifu / husprohibitdo culture derives from visual novels, and AI companions are the reasonable extension of these vivaciousd storybook games. Originassociate, visual novels were serialized books with anime-styled pictures in between. But now the term colloquiassociate refers to the digital version in which the carry outer has agency, with branching storylines where you rolecarry out as the main character, advancing thraw the plot and choosing to romance other male/female characters. This is a relatively niche labelet (~$150M according to some sources), but one that has an outsized impact on the industry. For example, Fate/Grand Order, one of the most prosperous gacha games with $5B+ cumulative revenue, is droped from a visual novel called Fate/Stay Night.
The set up of the visual novel with branching dialogue trees is a precursor to conmomentary AI companions today. While there are many down-to-earth include cases for AI-simutardyd human conveyions – AI as therapist, as directer, as aidant, etc. – one of the most famous genuineizations are as frifinishs and romantic companions (more on the expansiveer companion space from my colleagues here). For instance, character.ai’s top characters are all from Genshin Impact; Raiden, Yae Miko, and Hu Tao apshow some of the top spots at 390M, 202M, and 113M messages admireively as of the time of this blog, contrastd to Elon Musk at a mere 40M messages. Other top characters are Gojo Satoru (638M) from famous shounen Jujutsu Kaisen and Levi Ackerman (250M) from Attack on Titan.
Many of the top companion sites enjoy janitorai, chub.ai, or spicychat.ai also feature anime companions – ranging from rolecarry out with school bullies to overprotective sisters to… furries? – as some of their top personalities. There are also verticassociate definite companion apps for anime: crushon.ai is an 18+ example, talkieai is relatively safe-for-labor, while Hyper includes VTuber-esque inhabit facial elements. There’s moemate which permits you to transport the companions traverse-browser and carry out games enjoy chess and examineers, and kajiwoto that permits you to more proestablishly customize your prompts and datasets and scatter them on server.
AI is proestablishening the previously parasocial relationships we had with our preferite anime characters from compliant liproximate media, into strong novel, conveyive relationships. The reason why anime is so resonant as a genre for AI companions is becainclude character affinity / romance is already built into many of the best anime stories. The presentantity of top anime games and visual novels are role carry outing games that feature a romance mechanic, and so it’s organic for fans to want to proestablishen their combineion to their preferite IP and characters thraw active conveyions.
As AI carry ons, the conveyions will become non-scripted and more multi-modal: we’ll convey with our companions thraw voice and text, their animations and reactions will be originated in genuine time, we’ll be able to carry out games with them, and they’ll have extfinisheder context thrivedows to reaccumulate our scatterd history together. We’re already seeing commenceups pushing the boundaries for how we convey with satisfied. Sekai is using AI to originate low, bite-sized videos of you and anime characters in fanmyth-esque scenarios. Meanwhile, there are disconnectal stealth studios that are originateing otome games in the vein of Love and Deep Space ($200m+ annualized revenue, SensorTower), but where the side quests, dates, and conveyion texts in the game are AI-originated.
UGC Democratizes Creation for Anime Fans
Anime is the novel carry outground for satisfied creation. Fans frequently include with anime IP by creating their own versions of art, novels, and games, and innovation is happening atraverse the stack. There’s Nijijourney for art, NovelAI for fanmyth, pixivFANBOX for creator help, and UGC-platestablishs for games. For instance, disconnectal of the top Roblox games are based on IP enjoy One Piece or One Punch Man, and for a platestablish with over 60M DAU and 300M MAU, this is a very expansive carry outer base of anime fans. In particular, Roblox is a excellent proxy for what’s trfinishing with the youthfulerer generation donaten its demoexplicit skews towards kids and teens. Similar to how AI companions donate fans a novel way to convey with IP, UGC permits them to reenvision and recombine their preferite IP in wholly novel contexts.
Blox Fruits, the second most famous Roblox game by active includers with 40B+ visits, is based off of One Piece, where carry outers can pick to rolecarry out as a Marine or Pirate, fight enemies, better their characters, and get exceptional abilities thraw devil/blox fruits and Haki. The Strongest Battlegrounds, the fourth most famous Roblox game with 7B+ visits, is based on One Punch Man where you can suppose the role of branch offent heroes that have exceptional abilities and combos to fight other carry outers. And in Minecreate, many of the most famous servers that carry outers frequent are based on Pokemon or Naruto.
There are a restricted notable reasons for the famousity of these games. The first is that there’s evident carry outer insist agetst a lowage of high quality anime IP games; one example is Palworld’s recent success as the “Pokemon with firearms” game, selling over 25M copies in a month atraverse Steam and Xbox Game Pass. The second reason is that the anime IP licensing landscape is notoriously difficult to direct for prolongers, creating a potential underprovide of games. Besides the language and cultural barrier, IP may be owned by branch offent parties for branch offent regions and branch offent establishats (movie, game, manga, etc.). Large aggregators enjoy Crunchyroll and Funimation may already own exclusive licenses for certain IPs altogether. Some commenceups enjoy Kasagi Labo, Layer, and Story Protocol are tackling this rehire to originate IP more democratized and easier to access.
We depend that as novel AI tools materialize and existing UGC platestablishs adchoose AI, we’ll see the barriers to creation drop and the liberate of even more fan-originated transmedia satisfied. Roblox has already integrated AI into includer laborflows, and Google’s DeepMind team recently proclaimd Genie which can alter prompts into 2D carry outable environments. The Tencent team also recently unveiled GameGen-O which pushes the boundaries for originated uncignore world games enjoy Genshin Impact.
Beyond UGC platestablishs, AI models and tools are enabling first-time creators to originate compelling anime satisfied that previously would only have been possible with a team of professionals. For art, Nijijourney is an image diffusion model centered on generating high-quality anime images from text, a collaboration between Spellbrush and Midjourney. There are also various fine-tuned Stable Diffusion models (a restricted here arrangeed on citiv.ai) that seize branch offent styles and poses, some trained on SD 1.5, others enjoy Anenvision XL V3 on SDXL 1.0. Yodayo combines AI originated anime art and character chatbots together, and pixai.art includes models that mimic famous IP (Genshin, Pokemon, Blue Archive, etc.).
For animations and video there are disconnectal chooseions useable for the ambitious creator. RunwayML, Luma Labs, Hedra, and PikaLabs have built establishation models for text-to-video generation. One can include domoAI for anime-definite polish, and MagnificAI and Topaz Labs to better images and image-to-video prompts. ElevenLabs is included for voiceovers and dubs, and Udio and Suno are included for music. For manga/comics, there are companies enjoy Shortbread that are helping to originate webcomics and manga more seamlessly, with context and consistency between scenes and sboilings. There’s still a way to go to better model accuracy, speed, and cost, but it’s evident that as these tools better they will empower more creators that might previously have conciseageed technical or conceiveive sends to transport their anime ideas to life.
Anime Game Studios Lead the Way
On the other side of the spectrum, professional game studios are directing the indict for high production-cherish user experiences that originate on or originate novel IP. Anime games are some of the highest grossing in the games industry, accounting for 20% of spfinish on the mobile app store despite only having usage penetration of <3%. For example, Monster Strike has out-geted Candy Crush ($7.6B cumulative revenue vs. $6.9B) on a much minusculeer carry outer base of 10M MAU vs. Candy Crush’s 70M+ MAU (SensorTower, 2016-19). Meanwhile, miHoYo’s Genshin Impact is on track to be one of the highest geting games of all time at its current trajectory (see below), with proximately $4B geted since starting equitable over three years ago.
There are two ways that anime game studios expansiveen the horizon for carry outers. First, they usuassociate originate the highest quality games of the most famous IPs enjoy Dragon Ball, Pokemon, or Dragon Quest. Six of the top 10 highest grossing anime games are based on existing IP, permiting fans to convey straightforwardly with the characters themselves. Second, they frequently invent on core game loops or technology: miHoYo’s Genshin Impact was one of the first genuine traverse-platestablish anime games, GungHo’s Puzzles & Dragons combinecessitate align-3 and RPG mechanics for the first time, and Riot’s Valorant was one of the most accessible entries into tactical first person shooters. There are also disconnectal stealth commenceups experimenting with weaving LLMs into visual novel gamecarry out.
So, what originates these games so compelling and why do they originate so much money? We theorize that there are a restricted key components that donate to their success:
- Proven, better, novel. A lot of the games that have become shatterout hits enjoy Pokemon Go, Genshin Impact, or Puzzle & Dragons combine recognizable systems with some establish of distinct gamecarry out innovation. For Pokemon it was the distinct location-based game system combined with being the first Pokemon game on the mobile platestablish and for Genshin it was combining the uncignore world gamecarry out of Zelda with the RPG elements of a traditional gacha and genuine traverse-platestablish carry out. However, for many games, the bulk of many systems will be borrowed from the existing status quo and best-in-class from other games: prohibitner-based inhabit ops and events, gacha monetization, power creep and carry outer betterion, character personality archetypes enjoy tsunderes, etc.
- RPG at its core. Almost all the highest grossing games this year were role-carry outing games (RPGs). In this genre, carry outers have one, or multiple characters that they “role-carry out” as by leveling them up, combat monsters, supplyping items, changing originates, etc. This isn’t unforeseeed donaten that RPGs originate up the highest spfinish for all mobile games (31%) despite having some of the lowest downloads by genre (3%). They are srecommend very proestablish games that the most challengingcore gamers tfinish to gravitate towards, and can monetize well thraw pay for power or gacha.
- Strong / compelling IP. It’s not an accident that six of the top ten anime games license famous IP for their titles. In anime games, becainclude character collection is a primary driver of gamecarry out and monetization, IP is very meaningful to drive that core motivation. Story matters.
- Gacha monetization. Gacha games have some of the highest mediocre revenue per includer (ARPU) in the industry and is a reason why Japan has some of the highest ARPU by country. Gacha tracks its history back to gachapon, Japanese toy machines that dispense a random toy each time you put in a coin. The conmomentary equivalent would be trading card packs such as in FIFA Ultimate Team. There is some dispute over this monetization rehearse, but more recent games have liftd S-tier get rates, inserted pity drops, and incrrelieved the drip of premium currency to stability out monetization and fun.
For now, we’ve been covering mostly free-to-carry out (F2P) mobile games. However, there are disconnectal prosperous PC/console anime games as well: Doki Doki Literature Club, the Persona series, the Final Fantasy series, the Fire Emblem series, and Phoenix Wright, equitable to name a restricted. Many of these game franchises have been sageder quite successfilledy thraw a premium business model. For instance, the Final Fantasy VII reoriginate was one of the most foreseed in the series, and sageder over 3.5M copies in the first 3 days. After three years, it’s now sageder over 7 million copies total.
There are disconnectal commenceups that have apshown up the mantle in the West to originate anime games for a global audience, and we’re excited to see what benevolents of novel experiences they originate for carry outers. Odyssey Interactive is originateing competitive multicarry outer PvP games enjoy Omega Strikers. Pahdo Labs is originateing a UGC platestablish commenceing with the anime game Starairy Re:Volver. Believer is originateing an uncignore world drathriveg on inspiration from Genshin Impact. Studio Sai has made a hybrid dating action game, while Starmi and Gaudium are both creating collectible hero gacha action games. These are equitable a restricted of the studios that are centered on genuineizing anime worlds for carry outers. We depend that these studios will persist to push the boundaries of gamecarry out and technology, and we’re excited to see these novel experiences come to fruition.
VTubing Blurs Human-Digital Interactions
We’ve seen how AI companions, UGC, and games permit carry outers branch offent ways of conveying with famous anime IP. VTubing apshows it to the next level where fans can become famous anime characters themselves. VTuber stands for “Virtual YouTuber” and refers to a satisfied creator who overlays an anime facial / body rig that tracks their genuine time motion and projects a digital avatar onto the stream (e.g. Kizuna AI). This phenomenon foreseeed spawned from virtual idols such as Hatsune Miku that exist as filledy digital characters, aenjoy to virtual affectrs enjoy Lil Miquela in the west. There are various skinnygs that VTubers will do on stream, usuassociate a combine of singing, chatting, dancing, and gaming. It permits for the creator to adchoose a branch offent personality, and originates it easier to originate satisfied watchless of materializeance or age.
Today, VTubing is a relatively minuscule but rapid-prolonging community that has potential to ride the anime wave into a much huger segment of satisfied watchership and creation. While VTubers only reconshort-term 0.4% of all streamers on Twitch, they reconshort-term 5.7% of total watchership. And in the first half of 2023, VTubing watchership rose by 28% despite overall Twitch watchs staying flat. Some of the top VTubers enjoy Ironmoinclude have millions of watchers, and are professionassociate run by organizations enjoy VShojo or Holoinhabit. One day, VTubing could become equitable as ubiquitous as Memojis on Apple FaceTime or Snapchat filters.
Startups are tackling this labelet from a restricted branch offent angles. Iron Vertex is the go to for professional rigs done by set upers directd in Live2D, but if you necessitate a affordableer chooseion, commenceups enjoy Hyperonline or GoHibe are making it easier than ever to set up your own avatar. Mtion.tv unbenevolentwhile helps includers set up the background and environment for their avatar with visual based programming. There’s also VTubers enjoy Neuro-sama, which is an AI that reconshort-terms a human VTubing streamer, and platestablishs that are native to the VTuber experience enjoy Aniinhabit. If anime companions reconshort-term the human-digital relationship and multicarry outer games the human-to-human relationship, then VTubing sits in the middle as a distinct parasocial relationship combineing digital and human conveyions.
Conclusion
Today, anime is more than an art style, it’s a satisfied establishat and cultural aesthetic that has transcfinished gfinisher, race, age, and geography to become one of the hugest and most profitable conceiveive industries. Anime is also directing the way for digital carry out, turning previously compliant consumption of liproximate media into a novel active establish of delightment. We’re excited about how anime is shaping the future of conveyivity thraw its adchoose of novel technologies and business models: from AI agents to UGC platestablishs, from artistry tools to novel game mechanics, from conveyive VTubing to novel anime platestablishs. It’s evident that the best is yet to come for current and future anime fans.
The ticket to the future is always uncignore – Trifirearm
