Kadokawa recently released its financial performance for the first quarter of its fiscal year (April to June 2026). According to reports, the company’s animation and online game services business suffered an operating loss of 660 million yen.
It’s worth noting that this doesn’t mean that the anime produced by Kadokawa is bad. In fact, the animation department’s revenue increased by 27.4% year-on-year, and the online game services department’s revenue increased by 22.8% year-on-year. The company highlighted the strong sales performance of anime series such as “Re:Zero,” “Youkoso Jitsuryoku Shijou Shugi no Kyoushitsu e” and “Himekishi wa Barbaroi no Yome” in global and domestic markets.
However, Kadokawa said the division’s profitability “has declined significantly due to the continued rise in animation production costs.” In recent years, the Japanese animation industry has seen a trend called “profitless prosperity” by the Imperial Database. That is, animation has become more and more successful and demand has increased, but production costs have led to a decrease in profitability or even losses for production companies.
Another recent example is IG Port, the parent company of the famous animation studios Production IG and Wit Studio. For the fiscal year ending in May 2026, its animation business operating losses were approximately US$8.22 million. The company also noted revenue growth, but that growth was outpaced by rising animation production costs, such as personnel, computer graphics and outsourcing costs. Likewise, CloverWorks, the studio behind Spy x Family, has seen mounting financial losses over the past two fiscal years, as has SilverLink over the past three years.
Returning to Kadokawa, the company said that the number of animation projects it is directly involved in as a main producer or co-producer will increase from the second quarter, which is expected to further increase revenue. It should also be noted that the animation division will cut costs by approximately 200 million yen starting next quarter, the result of a series of layoffs Kadokawa made earlier this year.