American Cultural Diplomacy and Anime: The Other Army of American Consumers

Overview of Transnational Trends

Recently, Japanese film producer and distributor Toho made headlines by announcing that it was acquiring GKIDS, “a New York-based distributor of award-winning feature animation for both adult and family audiences.” Although neither is a household name in America, both are behind many of the media franchises that are. Toho, one of Japan’s “Big Four” film studios, is often considered the Japanese equivalent of Hollywood giants like Universal or Paramount. The studio is best known for its iconic Godzilla franchise. Meanwhile, GKIDS is best known for being the North American distributor of Studio Ghibli’s movies, which include such classics as “Princess Mononoke,” “Howl’s Moving Castle,” and “Spirited Away.” Both occupy adjacent positions on the commanding heights of the emerging global digital content economy.

Those who remember fears of a hostile takeover by “Japan, Inc.” during the peak of its economic growth might be reminded of Sony’s purchase of Columbia Pictures in 1989. Though on the surface this appears to be a simple matter of “Godzilla” versus “Bambi,” upon further inspection this is part of a deeper trend that involves everything from “Dragon Ball” to Luce, the anime girl mascot chosen as the Catholic Church’s mascot for the upcoming 2025 Jubilee. U.S. cultural diplomacy has historically taken the global dominance of American companies in film, music, gaming, and especially digital content as a given — some might even say taken it for granted. Having relied heavily on the U.S.’s global influence as a cultural producer to inform their decisions in the past, American policymakers must now learn how to effectively leverage the U.S.’ role as a cultural consumer.

Like the other three major film studios in Japan, Toho also has extensive involvement in theatrical anime movie releases, including “Demon Slayer: Kimetsu no Yaiba — The Movie: Mugen Train,” which became the highest-grossing Japanese film in history despite being released during the COVID-19 pandemic. This success was due in large part to “Mugen Train’s” success in international box offices, earning 404.3 billion yen domestically (approximately $350 million using January 2022 exchange rates) and $457 million overseas.

While Toho produces plenty of live-action films, and GKIDS licenses and distributes plenty of non-Japanese animation, this acquisition is motivated by the one industry where their interests do intersect — the international market for Japanese anime. Toho’s purchase of GKIDS is a sign of major power shifts within the global digital content industry. Rather than a potential takeover of American pop culture, the Toho purchase is a sign that the American entertainment industry is truly no longer insulated from the rest of the world’s tastes. Digital content is becoming truly transnational, and that has big implications for American soft power strategy in the future. This phenomenon extends beyond Japanese anime, although anime forms a key aspect of the globalization of digital content. Therefore, this brief will analyze animation, gaming, and webcomics, three industries in which the declining influence of American economic actors are especially apparent — and how they are all connected.

Animation: Filling Seats, Captivating Audience

Japanese animation has made notable waves in Western media during recent years. As the Association of Japanese Animations (AJA) noted, overseas sales of anime and related merchandise outpaced domestic sales for the first time in 2020 due in large part to increased interest in licensing and distributing anime titles by major Western streaming platforms like Netflix, Amazon Prime, and Hulu. These services have created thousands, if not millions, of casual anime fans, but dedicated fans tend to move on to platforms specifically dedicated to anime. Because of the business model of on-demand streaming, licenses must be renewed for a show to remain on the catalog. Since anime is not the priority for these mainstream platforms, it is particularly common for the major streaming platforms to remove popular anime after several years when they no longer bring in new subscribers.

When it comes to platforms dedicated to anime, Sony Pictures has effectively had a monopoly on legal anime streaming in the West ever since it purchased the two largest anime streaming platforms — Funimation and Crunchyroll in 2017 and 2021 respectively — before merging the former into the latter in 2022. While Crunchyroll is a relative minnow within the wider internet streaming ocean, it is by far the biggest fish in the pond of anime in the West. At Sony Group’s corporate strategy meeting last May, President of Crunchyroll Rahul Purini stated that the company “[wants] to create amazing experiences for our fans across every touchpoint they have with anime — whether it be streaming, theatrical movies, games, merchandise or events.” As one of the section headers from the press release put it, “We want to be everything for the anime fan.” Quotes like these reinforce the notion that Crunchyroll is trying to build a monopoly, as do allegations that Crunchyroll is engaging in “predatory” tactics in its expansion into the licensing of Japanese anime mobile games.

For this reason, in adjacent industries where its foothold is less secure than on-demand anime streaming, such as theatrical movie releases, Crunchyroll has been facing increasing competition. GKIDS is one of its biggest competitors in this space. Like Netflix or Hulu, GKIDS does not solely focus on Japanese animation. However, it is not a large company and is considered an indie distributor whose business model specifically relies upon acquiring licenses for foreign animated films that big conglomerates miss. Ironically, while Toho is one of Japan’s “Big Four” movie studios, Sony Pictures is one of the U.S.’ “Big Five” movie studios. If any more proof is needed that creative industries can no longer be divided cleanly by national boundaries, this is it.

Gaming: Enter the Monkey (King)

As Baker Institute China Studies Program scholars have written in a previous policy brief on the economics of the anime industry, what many Westerners refer to as “anime” or “manga” is really the creative output of a number of interrelated content industries based largely in Japan, but increasingly in other countries as well. This is why Chinese-speaking fans of Japanese animated media often refer to the whole package of Japanese anime and related media as “ACG,” a pseudo-English initialism standing for “animation, comics, games,” the three largest and most prominent branches of the larger global “anime industry.” Analyzing these two other branches reveals that the wider industry is not as distinctly Japanese as it once was.

This is best demonstrated with the only other superpower capable of threatening U.S. pop culture hegemony — China. Chinese pop culture is a veritable paradox, a mix of hugely successful and hugely unsuccessful exports alike. Although it originates from a different country and medium, China’s latest international hit, “Black Myth: Wukong,” highlights important issues facing the American entertainment industry.. By September, only one month after its Aug. 20 release, “Black Myth” had already sold 20 million copies. By October, two months after release, the game had already brought in over $1 billion in revenue from sales on Steam alone.

While Chinese games like “Genshin Impact” and “Mahjong Soul” have been successful (and have provided important insights into the future of digital soft power), “Black Myth: Wukong’s” success is notable because it is a triple-A game, one whose profitability relies on sales of the game itself rather than microtransactions and monetization schemes that look disturbingly close to gambling. As Eliot Chen of The Wire notes, the success of “Black Myth: Wukong” is “is unlikely to be a one-off” as other Chinese developers are already preparing triple-A titles such as Tencent’s “Last Sentinel.”

The Effect of Overseas Audiences and Media Coverage

Western media coverage of Chinese creative industries, such as gaming, often emphasizes familiar geopolitical issues. For instance, the BBC reported renewed concerns over political censorship when “Wukong” developer Game Science warned Chinese gamers not to bring up “feminist propaganda, fetishisation, and other content that instigates negative discourse” during livestreams. However, as Professor Haiqing Yu at Australia’s RMIT University notes in that BBC report, such warnings are common in China as a way for creators to avoid legal liability for whatever their players say or do in-game. In fact, Chinese developers with large international fanbases often do their best to skirt Chinese government restrictions when possible, since developers like miHoYo (who were behind hit mobile game “Genshin Impact”) often take the blame from international fans for being forced to follow Chinese laws.

This is the flip side of cultural influence: the power of overseas audiences to affect a domestic creative industry. As Baker Institute China Studies Program nonresident scholar Aynne Kokas argues in her book “Hollywood Made in China” (University of California Press Books, 2017), the temptation of China’s large consumer market allowed its government to wield outsize influence on overseas entertainment industries, including Hollywood and the NBA. China has historically relied on its consumers to expand its soft power, while the U.S. has historically relied on its producers. The ongoing transformation in global entertainment and digital media is disruptive to both established and rising cultural powerhouses alike.

The International Appeal of ‘Wukong’

“Wukong’s” appeal to Chinese and Western audiences alike is simple to grasp. “Black Myth: Wukong” is based on “Journey to the West,” one of China’s four great classical novels. “Journey to the West” is a fictionalized version of the monk Xuanzang’s journey to India to retrieve Buddhist scriptures for the Tang court. Although Xuanzang was a historical figure who really traveled to India, “Journey to the West” features supernatural elements such as monsters and both Taoist as well as Buddhist deities. Xuanzang is protected by his three disciples, especially his senior and most famous disciple, the Monkey King Sun Wukong. If you’re familiar with only one work of Chinese classical literature, it is likely “Journey to the West” and the adventures of the Monkey King. For Chinese gamers, “Black Myth” is the first time one of their country’s most popular works of literature has been adapted as a triple-A game. For Western gamers, “Black Myth” is something genuinely new, a story few are acquainted with as well as their Chinese counterparts.

In other words, while it is not strictly anime, “Black Myth: Wukong” holds a similar appeal as Japanese anime; it is an authentic work of storytelling primarily made for domestic audiences whose popularity overseas comes from being a breath of fresh air. And unlike Japanese anime’s recent rise in popularity, the rise of Chinese gaming has raised plenty of concerns, some valid and some less so. As argued elsewhere, Chinese games become popular largely due to their genuine appeal rather than anything particularly underhanded.

Issues Facing These Creative Industries

As with any other economic activity, barriers to entry matter. Large media conglomerates’ desire to appease shareholders leads to the short-term milking of valuable franchises without investing the proper resources to sustain these franchises’ value. The Japanese gaming industry suffers from its own issues as well, which is one of the big reasons Chinese gaming has been able to rise in the first place. Creative industries can only boost a country’s economy if they are connected to that country’s other economic sectors. Conversely, the opposite is also true: A nation’s creative industries cannot thrive unless the broader economy is robust enough to support its growth. In other words, cultural soft power is not a free tool for economic growth that can be endlessly exploited.

Webcomics: Manga and Marvel, Meet Webtoons

Ironically, comics — the oldest of the three pillars of the wider anime industry — are undergoing some of the most dramatic changes due to digitization. Whereas Japan’s famous manga industry is controlled by legacy publishers who still prioritize print, Korea specializes in webtoons, online comics that are episodic in format and optimized for reading on mobile devices. This digital-first strategy is tailor-made for a globalized content industry where online word-of-mouth is the most potent way of growing a fandom. In the digital content economy, Korea has emerged as the major rising star in comics, surpassing both China and Japan. While China’s webcomic industry has seen sustained growth, primarily domestic, its international popularity has been less pronounced compared to the global rise of Korean webtoons.

The Korean webtoon industry is a particularly insightful example of the transnational potential of digital creative industries. Valued at $4.7 billion in 2021, the industry is projected to grow to $60.1 billion by 2030. Because its relatively small population made Korea an export-focused economy, its cultural industries have similarly developed an international orientation in their expansion plans. The webtoon industry is largely dominated by two entertainment conglomerates, Kakao and Naver Webtoon, both of which have diversified interests beyond webtoons. Notably, Naver’s Webtoon Entertainment, a publicly traded subsidiary on NASDAQ, had its IPO valued at $2.67 billion, according to the BBC. While both platforms prioritize international expansion, they have followed two very different strategies. Whereas Kakao has focused on deepening its presence in established markets in East and Southeast Asia where Korean comics are already popular, Naver has instead focused on growing into new markets, particularly the West. For instance, in 2018, Kakao acquired a majority (68.81%) stake in the Indonesian webcomic platform Neobazar for 13.8 billion South Korean won ($12.2 million). Korean webcomics are already popular in much of Southeast Asia, including Indonesia. Further, Kakao plans to use Neobazar as a hosting platform for licensed and translated Korean webtoons (naturally, ones published by Kakao). Meanwhile, Naver has focused on fostering local creators in new markets, including in the West.

Entering the Western Market

This dichotomy reflects a phenomenon apparent in East Asian media as far back as least the 1960s, when Japanese anime was only just starting to expand beyond its borders.  The first Japanese anime to reach the U.S. was “Astro Boy” in 1963, and “Ninja Fujimaru” first aired in Thailand in 1965. Whereas Southeast Asia has long been a reliable market for East Asian cultural exports — as noted by John Clammer and Eyal Ben-Ari, Koichi Iwabuchi; Nissim Otmazgin, Ariel Heryanto, Sunyoung Kwak, and Ryotaro Mihara, among others — the West has often been viewed as a lucrative, but difficult, market to enter. Many scholars — such as Frederick Schodt, Mihara, and Michal Daliot-Bul and Otmazgin — have written about the historical challenges faced by Japanese anime when expanding into Western markets, especially the U.S.

A consistent theme is the influence American entertainment companies exert as gatekeepers, a challenge that Korean export industries like K-pop had to overcome as well. Kakao’s focus on Korean creators and a regional audience is arguably the more traditional path, while Naver’s strategy of promoting both Korean and international artists, alongside its global marketing efforts, is the bolder and riskier path.

Pop Culture Shift Aided by Trade Networks

The 2020s have marked a shift in the globalization of pop culture originating outside the West. For instance, in 2020, at the height of the COVID-19 pandemic, the Japanese VTuber agency Hololive opened an English branch, hiring native English speakers to stream with anime girl avatars. Since then, Cover Corporation, Hololive’s parent company, has gone public. As of December 2024, Cover’s market capitalization was 167.88 billion yen ($1.10 billion). The company does not disclose the revenue breakdown for its different language branches. However, Japanese industry figures estimated that Hololive English received approximately 6 million hours’ worth of views in November 2024, compared to around 24 million hours for the original Japanese branch. Companies like Cover in Japan and Naver in Korea are optimistic about these figures, viewing it as a sign that the West is a massive growth market with much more potential.

The trade networks that set the ground for Japanese anime’s popularity in East and Southeast Asia are now also benefiting K-pop, K-dramas, and — most importantly for the purposes of this brief — webtoons. Although in many ways, Japanese and Korean cultural exports are competitors, the two industries also enjoy a mutually beneficial relationship. Despite the increasing prominence of Korean webtoons, early indications suggest that Korean webtoons may not necessarily be competition for Japanese manga, but a complement. While Korean webtoons are optimized for the digital age, Japanese manga still dominates print by far. For instance, Kadokawa, one of Japan’s major manga publishers, recently experienced success with a push towards licensing and publishing more translated titles in Thailand and made plans to do the same in Indonesia, the same market that Korean webtoon publishers have been targeting digitally. Even so, the most successful Korean webtoons often expand into print, as selling print copies is still the marker of mainstream success. Indonesian publisher Gramedia Asri Media is hoping to take advantage of the popularity of both in order to license and publish both Japanese and Korean titles. As the Korean example shows, the publishing industry, whether online or in print, might be where the most visible signs of the new transnational anime-manga-gaming industry is headed.

God, Anime, and the Other Army

What should policymakers take away from this analysis? At the very least, they should recognize that cultural diplomacy goes beyond relying on artists to enhance the country’s image. As much as the rise of Chinese creative industries has benefited the Chinese government, it has given Chinese regulators plenty of headaches as well, as explained in an analysis earlier this year. Unlike traditional state-sponsored propaganda, which is usually tailored for a domestic or a foreign audience, Chinese media that becomes popular overseas tends to be popular domestically as well.

According to a Crunchyroll survey conducted in 2017, 90% of anime fans identified as gamers, with 54% identifying as “hardcore” gamers. More recently, a 2024 Polygon survey revealed that 71% of respondents bought gaming-related anime merchandise at least once a year. The connection between China’s large domestic audience for Japanese anime and the rise of its gaming industry is clear. The success of early exports like “Azur Lane” and “Arknights,” which were nearly indistinguishable from similar Japanese games in the genre, gave way to international hits like “Genshin Impact” and “Honkai: Star Rail.” Although recent Chinese overseas hits still tend to have the Japanese anime aesthetic, like “Zenless Zone Zero” or “Wuthering Waves,” the financial side of the industry does not differentiate between genres. In other words, despite not having any connection to the anime aesthetic, the success of “Black Myth: Wukong” is inextricably linked to anime due to the Chinese gaming industry’s relationship with Japanese anime.

Government attempts at soft power diplomacy traditionally focused on promoting and marketing domestic creative works. Under this model, having a distinct aesthetic played a key role, as it did in helping to set Japanese anime apart from American animation. However, future diplomats may look to the Catholic Church instead. Surprising as it may seem, the Holy See is pointing the way forward to a new cultural diplomacy for the digital age. Days after the Catholic Church announced Luce, a blue-haired, blue-eyed anime girl, as the official mascot for their 2025 Jubilee, fanart and cosplays of Luce appeared all over social media from both Western and Japanese artists. Luce’s blue hair and eyes may reference the Virgin Mary, traditionally associated with the color blue. Her eyes also feature highlights shaped like scallop shells, a symbol for pilgrimage and the central theme of 2025’s Vatican Jubilee Year. In a testament to Luce’s popularity, cosplayer Neneko recently shared an Instagram post of herself dressed as Luce that had over 17,000 likes as of December 2024. Luce appeals to both Catholics and anime fans alike due to her design’s careful balance: simple enough to be easily reproduced — making her popular with fan artists and cosplayers — yet still distinctive, incorporating elements drawn from traditional Catholic symbolism.

The Catholic Church’s embrace of Japanese anime’s aesthetic is not simply an amusing anecdote, but a path forward for the future of cultural diplomacy. Despite its workforce of over one million priests, monks, and nuns being seemingly ill-equipped to create anime fanart, the Church has harnessed its soft power to get thousands of works of art made by Catholics and non-Catholics alike, just from one original design.

The prospects of countries’ creative industries in the digital age remains to be explored in future research. Encroachment by foreign companies is of concern in terms of data collection, access to physical and digital infrastructure, and other aspects of national security and defense. However, Toho’s purchase of GKIDS is a classic sign of creative disruption that yields new opportunities as well as challenges. And if the last century of American soft power has taught anything, it is that Americans are creative and skilled at solving challenges. There is no need to fear competition.

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