Netflix’s Animated Double-Down

Producer Jed Schlanger and actor Karl Urban
Producer Jed Schlanger and actor Karl Urban at the premiere of Netflix's The Sea Beast. Photo: Rodin Eckenroth/Getty Images
Julia Alexander
July 24, 2022

In the entertainment business, there are generally two types of acquisitions: the mega-deals, like Discovery and WarnerMedia, that bring the market to a halt and invite endless speculation and redefine the landscape, at least momentarily; and then there are the smaller deals that barely register for years until their output can be deemed a success or failure. Within the last week, however, two smaller deals were announced that seem to eminently herald major strategic initiatives for the general streaming economy. Netflix and Nintendo’s recent acquisitions of Animal Logic and Dynamo, respectively, suggest the latest iteration of the entertainment industry’s optimism about the power of animation to drive subscriptions and revenue.

Demand for animated content has grown consistently over the last several years, making up just over 7 percent of the total global demand share for content in 2020, according to research firm Parrot Analytics, where I work as director of strategy. On top of that, demand for adult-oriented animation and adult-oriented anime has consistently grown, with a projected global market share of $43.73 billion by 2028, according to global marketing research firm Brand Essence. 

Netflix, of course, has largely been acquisitive-shy in the past, preferring instead to build from within. (The exceptions have generally coalesced around its nascent gaming strategy.) But its purchase of Animal Logic, and the simultaneous restructuring of its animation film executive team, foreshadows an intriguing recommitment to a division that the company once touted as core to its central offering. Nintendo, meanwhile, like so many of its gaming competitors, is exploring new linear pathways to broaden its sizable audience. There’s already a Super Mario movie in the works from Universal’s Illumination Pictures. Now, Dynamo can help create new anime titles for streaming platforms using Nintendo’s wide-breadth of I.P., similar to what Netflix did with Konami’s Castlevania franchise, the 80s semi-legendary fantasy video game. 

Both are key developments for different reasons, but if integrated and executed effectively, they’ll demonstrate how animation can accomplish three major feats for studios and OTT platforms like Netflix. First, doubling down on animation can create so-called “sticky” entertainment that increases consistent engagement. Second, it affords the opportunity to build out franchise “gateways” for a new audience. Third, it deepens the perceived value of a platform for an entire household.


Most, but not all, of a cohesive animation strategy is built around kids. Of course, children watch, rewatch, and then rewatch some more. This is one reason why Encanto remains one of the most in-demand films on Disney+, and continues to top Nielsen charts week after week. Cocomelon is almost consistently on Netflix’s Top 10 list despite only having a dozen or so episodes on the platform. Spongebob Squarepants and Paw Patrol are top Paramount+ demand performers. Netflix surely sees this and recognizes that its animation strategy is still heavily reliant on licensed fare. 

Now, Netflix has made some impressive original moves in the animated space. The Sea Beast, its most recent animated feature, has racked up 101.6 million hours viewed in its first two weeks, which translates to about 53 million household views. It’s remained the top performing Netflix film over the last two weeks, and has garnered strong critical acclaim. But it’s unclear how “sticky” The Sea Beast is, or how sticky other Netflix animated programming may be, especially compared to the fare that Disney’s Pixar or Comcast’s DreamWorks produce. When the latter’s Shrek returned to Netflix, it was on the global Top 10 list for nearly eight weeks. Shrek is a 21-year-old movie, but it has the type of adoration and fanfare that leads to people watching and rewatching the film when it’s available. 

To better understand Netflix’s animation strategy, I reached out to Emily Horgan, who worked for years within Disney’s franchise content planning team and is now an independent consultant on kids programming. She told me that “doubling down on broadly hitting animated hits across film and TV made sense.” But she wondered aloud why Netflix, which “had numerous kids hit-makers on their roster for a while,” hadn’t seen more dividends from the strategy. Considering all the investment Netflix has spent on animation in the past—such as its acquisition of Sony’s The Mitchells vs. the Machines, which was nominated for a Best Animated Feature Oscar, and Over The Moon from former acclaimed Disney animating legend Glen Keane—the previous results had been surprisingly underwhelming.

Why? “One issue is content discovery,” Morgan told me. “Kids franchises take nurturing to find an audience. We saw this with Paw Patrol and PJ Masks. Kids binge, but it’s not in the same pattern that adults do. You can’t write off a series just because it hasn’t found an audience in the first 28 days.” It will be interesting to see how Netflix can incorporate this sort of patience into its algorithm, accounting for the fact that parents also help guide viewing suggestions, and that word-of-mouth and fellow-parent-tested credibility are key to figuring out what to stream for a kid.

For gaming companies like Nintendo, animation can expand audience reach for a fraction of the price that a live-action movie or TV show requires while capturing a growing audience base who are clamoring for good animated expansions of their favorite games. Just look at the success of Riot Games (League of Legends), PlayStation, Bungie (Destiny 2), and Ubisoft (Far Cry). 

Taking beloved gaming properties, partnering with global streaming platforms, and finding new ways to tell those stories is integral to further developing flywheel strategies that create a revenue ouroboros. Fans go from playing games, to watching TV series, to enjoying theme park expansions, to buying Funko pops and t-shirts, before playing the next game in the series. This strategy also opens new gateways for different audiences. An audience may not have shown interest in League of Legends as a video game, but perhaps the Netflix series Arcane opens the door. That’s partially why Netflix’s franchise development strategy seems to rely pretty heavily on including animated series and spinoffs for its biggest franchise attempts: The Witcher, Army of the Dead, and Bright, for example. 


In my day job, I sometimes advise clients on franchise expansion strategies. There are a list of guidelines I offer and there are generally three key components: 1) using different mediums to increase the total addressable market; 2) always offering something new; 3) and making that franchise feel special for all types of audiences. Star Wars: The Clone Wars was the most important installment in the franchise because it ushered in a new generation through its animation style, and became the first major Star Wars television series that introduced characters now being mined for Disney+ live-action series. 

For a company like Nintendo, branching out into fully developed animation and anime series can help accomplish all three goals without breaking the bank and leaning into an area where there’s growing demand. Similar to how Arcane saw an increase in League of Legends players using those character skins in-game (think of them like digital identifications), Nintendo can reach non-players through animated series, or simply deepen the love for its own characters in a new way. 

If the content is sticky, or if it brings in fictional worlds that subscribers love, animated series can deepen the perceived value of a subscription for an entire household. Parents will continue to pay for access to their kids’ favorite shows and movies they want to watch over and over again. Teenagers and young adults will stream animated spin-offs of their favorite video games, and the newest animated feature can become a family’s entire Friday night. And it’s relatively cheap to produce, which is important as Netflix executives are being forced to be more intentional with their budget following major subscriber losses, declining stock, and concerning economic headwinds. 

For all of these reasons, animation is Hollywood’s big, understated, optimistic bet on building the next crown jewel franchise. We’ll know soon enough from Netflix’s self-reported ratings, and accompanying subscriber numbers, whether the strategy will produce any meaningful results. 

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