The Animation Industry is Strapped for Cash. What’s Next?

The global animation industry is currently facing significant challenges.

A market correction in the United States, along with a commissioning landscape that has not yet rebounded to pre-strike levels—and may never do so—has had worldwide implications, instigating contraction and uncertainty in an industry that had previously expanded immensely to meet the relentless demand from streaming services.

Interestingly, the sector’s varied ecosystem is more united than ever in identifying issues and proposing solutions. The agreement is evident: the animation industry requires enhanced support. The unresolved question is where that backing will originate.

“Traditional broadcasters and streaming platforms are reducing their investments,” states Katell France, Chief Commercial Officer of Mediawan Kids & Family. “There’s a substantial discrepancy between the viewership of animation and its financing—which currently lacks a clear resolution. This poses difficulties for both creators and producers, yet it also provides a chance to rethink and transform the entire model.”

Recent gatherings in the industry, including the Cartoon Forum co-production sessions in Toulouse and a streamlined MipJunior in Cannes, have effectively refocused their agendas around this pressing concern—giving attendees, all grappling with similar difficulties, a venue to network, share experiences, and strategize. Concurrently, these events have reflected a sector that is rapidly redefining itself.

The situation is particularly intense in France, which has hosted both events and boasts one of the largest animation sectors globally, following the U.S. and Japan. The local industry is experiencing a significant downturn, with studios that grew rapidly during the boom years now facing layoffs, halted productions, and financial pressures. Previously prominent entities such as Cyber Group Studios, known for “Gigantosaurus”, have closed, while others like Andarta (“Lana Longbeard”) and TeamTO (“City of Ghosts”) have explored buyouts and bankruptcy proceedings.

“This is not merely a contraction; it’s a reformation,” asserts investment consultant and Act & Play founder Youssef Safraoui. He points out that AI and the political volatility in France are particularly destabilizing, noting, “Salaries are continuously rising, prompting studios to minimize production costs to innovate the system. Alternative financing will be crucial, including revising CNC co-production rules to lower thresholds and promote international alliances, especially with Asia, the Middle East, and Latin America.”

“Our aim isn’t to relocate work overseas,” Safraoui adds. “Balancing local employment with new funding sources and, most importantly, restarting stalled projects demands low operational costs and flexibility. Successful companies must adapt their workforce size from 50 to 300 employees based on specific projects, hiring as needed rather than having permanent staff. That adaptability will be vital.”

At last month’s Cartoon Forum, a sense of caution prevailed, with many projects presented relying substantially on established IPs and proven successes to entice broadcasters and commissioners who are increasingly constrained by budget considerations. The emphasis was unmistakable: concepts like “Alien Dunk,” led by Victor Wembanyama, and the kids’ comic adaptation “Vampirette & Me” recognized past investments as vital for driving sales.

Conversely, the shared challenges of the industry fostered a renewed sense of unity, with UK representatives reintegrating into the European landscape post-Brexit. Participants expressed hope that a newly forged bilateral agreement established by France’s CNC and the UK’s BFI could extend throughout the continent. Aardman also made its first appearance, aiming to cultivate European partners for its show “The Adventures of Robin Robin.”

“We must establish this as a future direction,” proclaimed Animation UK leader Kate O’Connor. “Regardless of the hurdles, whether relating to different funding structures, regulations, or tax breaks, we need to start breaking them down. It’s imperative for us to make it work, and together we must pursue a path forward.”

As traditional channels of commissioning diminish, the industry’s focus has transitioned toward digital-first strategies, with YouTube rising as both a testing site for original series and a launchpad for new intellectual properties.

Alexis Rice, YouTube’s global head of youth partnerships, notes that interest in the platform has “been gradually building over the past two to three years,” as major players and newcomers alike explore opportunities on the platform for anything from shorts to full episodes—monetizing through its ad-supported model or its premium subscription service, each yielding a 55/45 revenue split.

“In the past, there was more reluctance and genuine concern as production companies were unfamiliar with the platform and its audience,” explains Rice. “However, now that they can monitor their own performance, producers exhibit far more confidence in how YouTube can contribute to—not detract from—the broader ecosystem.”

“Since we don’t license content, producers maintain complete creative authority,” she continues. “We impose no deadlines or dictate creative direction. Our role is to assist and elevate their storytelling. It’s a unique model that helps them develop their business on our platform, rather than dictating how they create. Furthermore, we’re accessible in over 100 markets—a rarity among platforms.”

YouTube Kids prominently featured at this year’s MipJunior, with Rice in attendance for the first time to celebrate the service’s 10th anniversary and highlight its increasing significance within the children’s content space.

Of course, this wider transition in animation is fundamentally driven by viewer trends.

“Children are spearheading the digital transition,” observes TheSoul’s VP of streaming and content, Jonathan Shrank. “They are the first to move away from conventional broadcasting, gaining independence in their viewing choices. The industry is racing to develop methods to engage and retain viewers in this fragmented landscape.”

For studios, this shift creates an obstacle: audiences are migrating online, frequently to platforms that do not offer the pre-sales or commissions typical in traditional broadcasting. To reach these viewers, production companies must discover innovative financing and distribution methods tailored for digital platforms.

For example, Mediawan has partnered with Hispanic YouTube network El Reino Infantil to co-produce “Wadoo,” a digital-first preschool initiative. AI-aided shorts will be introduced in a preliminary launch, testing tone and characters while informing development prior to a complete rollout. Similarly, TheSoul Publishing has aligned with Banijay Kids & Family on “Ava & Digger,” a self-financed, digital-first series focused primarily on YouTube.

Both initiatives were introduced at MipJunior ahead of a full launch, illustrating a growing comfort with real-time adjustments and a belief that YouTube’s extensive subscriber base can serve as a powerful tool. Engagement analytics and viewer insights will refine narrative, pacing, and character development, helping to build a loyal audience that can later be used to negotiate broader streaming agreements.

“Exclusivity no longer holds its previous weight,” adds Shrank. “With the market fragmented, budgets constrained, and a reluctance to take substantial risks, platforms are pursuing IPs with established traction. Whether it’s an existing property or something new developed on YouTube at a low expense, demonstrable reach is now the priority. Flexibility is crucial—the more visibility an IP gains across various channels, the more advantageous it is for everyone.”

However, this new model necessitates a collaborative approach.

“Now, more than ever, organizations must join forces to create quality content at reduced costs,” asserts Katell France, CCO of Mediawan Kids & Family. “Collaboration is not only advantageous—it’s becoming vital for the industry’s sustainability.”