Production I.G: Challenging the Status Quo

In July 2006, Mitsuhisa Ishikawa wondered how he could further enhance the success and visibility of his animation production company headquartered in Tokyo, Production I.G. For the year ended May 2006, Production I.G. had sales of 5,439 million yen ($47.3 million), operating profit of 404 million yen ($3.5 million), and 184 employees. Its recent film Innocence: Ghost in the Shell 2 competed at Cannes Film Festival in 2004, and the company had gone public in December 2005. These were no small accomplishments for a Japanese animation production company. Indeed, despite the global success of Japanese animation, the industry was fragmented with about 430 animation production companies and dominated by distributors--TV stations, movie distributors, DVD distributors and advertising agencies, which held the lion's share of content copyrights. Distributors controlled the funding and contracted the production out to animation production companies. As a result, most of the latter were small companies laboring in obscurity. As such, no Japanese animation production company came even close to the size of Walt Disney Co.: in 2005 Disney had revenues of $32 billion, whereas Toei Animation, the largest animation production company in Japan, had revenue of only 21 billion yen ($175 million). To Ishikawa's mind, one of the key decisions concerned the mix of the "contents garden" that his company should aspire to. Should he increase the share of animation productions based on manga (comics and print cartoons) relative to original-productions (i.e. animation stories created entirely by Production I.G.)?