Recently, Kadokawa Corporation announced its financial results for the first quarter of fiscal year 2026 (April to June 2026). The report showed that the company recorded an operating loss of 660 million yen (approximately $4.14 million) in its animation and live entertainment businesses.
It should be pointed out that this does not mean the anime titles distributed by Kadokawa are performing poorly. In fact, revenue in this segment grew by 27.4% year-on-year, and live entertainment business revenue also increased by 22.8%. The company specifically highlighted that anime series such as Re:ZERO -Starting Life in Another World- and Classroom of the Elite have performed strongly both globally and domestically in Japan.
However, Kadokawa noted that the overall profitability of this segment has "significantly declined due to continuously rising anime production costs." This is a widespread phenomenon in the Japanese anime industry in recent years—referred to by Teikoku Databank as a "profitless boom": while anime titles are becoming increasingly successful and demand continues to grow, soaring production costs are causing studios' profit margins to shrink, even leading to losses.
Another recent example is IG Port, the parent company of renowned anime studios Production I.G and Wit Studio, which reported an operating loss of about $8.22 million in its animation business for the fiscal year ending May 2026. The company similarly pointed out that revenue growth was offset by skyrocketing anime production costs, particularly in labor, CG production, and outsourcing. Additionally, CloverWorks, the studio behind Spy x Family, has seen its financial losses widen over the past two fiscal years, while Silver Link has been in the red for three consecutive years.
Turning to Kadokawa, the company stated that the number of anime projects in which it participates directly as chief producer or co-producer is expected to increase from the second quarter onward, which will further drive revenue growth. Notably, starting next quarter, Kadokawa's animation business will begin reducing expenses by approximately 200 million yen (about $1.25 million)—a result of the voluntary retirement (layoff) program implemented earlier this year.
What do you think? Do you believe Japanese anime is in decline? Feel free to join the discussion in the comments section.