If you’ve ever looked into the details of how animation studios operate and seen just how much work goes into every single animation project, you may have wondered to yourself, “How do animation studios make money?”
You’re definitely not alone. While millions of people enjoy watching animated movies and television, very few understand the common operations of the animation industry.
We also need to consider the fact that there are many animation studios out there, and they don’t all operate in exactly the same way.
That’s especially true right now as internet exposure and remote collaboration options have opened up new ways for these studios to fund their projects.
We’re going to look at a few of those options here today, alongside the most traditional ways for studios to make money.
Selling Projects to Distributors
Ok, so this is probably the most obviou one. Animation studios can make money by selling their projects to distributors, streaming sites, etc.
A studio may begin work on an animated movie long before they’ve sold the project to anyone. Maybe they’re considering releasing the movie independently, but independent releases can only reach a very limited audience.
In contrast, selling a movie to a big company could mean that many more people are going to watch the movie, and it can also mean that the bigger company will pay the animation studio a bunch of money for that project, though the specific amount would be negotiated based on the studio in question and the projected viability of the movie.
If an animated movie is mid-production, the bigger company might even provide additional funding so that the studio can actually get the movie finished.
By far, this is the most common way for animation studios to make money.
One of the funding options that animation studios now have at their disposal is crowdfunding. Sites like Kickstarter and Indiegogo give creators the opportunity to pitch a project and ask regular people to chip in some money to fund the project.
Crowdfunding would definitely be a more advisable option for a brand new animation studio than for an established studio with a great deal of name recognition.
In other words, Studio Ghibli probably shouldn’t start a crowdfunding campaign. They have many other ways of obtaining the funding they need, including their own savings.
But if, on the other hand, a small group of amateur animators want to create their first feature and need some money to do it, they could definitely get the money they need, or even more, from online fans.
Have you ever heard this piece of advice before: if you want to support a band, buy a t-shirt from them, not their music.
This speaks to an unfortunate reality of individuals and companies working in creative industries. Making something and selling it to people isn’t always a great way to make some real money from the work.
That’s because both musicians and animation studios often need to work with much larger companies that handle distribution, streaming, etc., and those larger companies are almost always going to have the better end of the deal.
As a result, even if a viewer ends up paying about $10 to watch a movie from their favorite animation studio, the studio may only get about $3 of that sale, or even less. Revenue sharing varies heavily from company to company.
But this is all to say that plenty of animation studios have to find other ways to make money from their work, and one of the best ways they can do that is to do some merchandising.
If an animated movie or show features cute characters that fans really seem to like, then making some merchandise based on these characters is an excellent option.
Depending on how the studio produces and sells this merchandise, they could potentially make more money from their merchandise than they did from releasing the work itself.
In fact, let’s use Studio Ghibli as an example once again …
Ghibli is one of the most well-known animation studios in the world, and their classic movies are considered to be timeless by many fans.
On top of it all, many of those classic movies feature cute, well-designed characters that are extremely likable and visually appealing.
This is a perfect recipe for successful merchandising:
1. There are millions of fans who love these movies and characters.
2. There’s a ton of source material to draw from when creating merchandise.
3. A big portion of the fanbase is now older, meaning they likely have disposable income to spend on merchandise.
For smaller animation studios, starting another feature-length film directly after finishing a feature probably isn’t going to be possible.
For one, depending on how the previous movie performed, the studio might not even have enough money to get started on a new project.
So what can a studio like this do to bring in some more cash? Well, one common answer to this question is to take commissions or complete sponsored work for various clients.
Have you ever seen an animated commercial or just a commercial or website with animated elements?
Well, even relatively small jobs like these can bring in lots of money for an animation studio that really needs a cash injection.
There are so many small animation jobs out there, and if an animation studio can point to some high-quality work that they’ve done in the past, then they’ll have an easier time courting clients.
If clients are satisfied with their work, it could then lead to some very positive word of mouth, leading to even more commissions. It’s possible for animation studios to survive entirely on these kinds of jobs, and in fact, there are some studios out there that specialize in this type of work from day one.
While commissioned work for advertising or branding may not be the most creatively satisfying animation projects for some animators, there’s no denying that this can be yet another way to make some money, especially in between larger projects.