Japan anime in delicate dance with overseas markets

TOKYO (Reuters) - Banners flare and sparks fly from the hooves of horses as warrior hordes race across the plains.

The scene is from an animated film of a Chinese epic being produced by firms from Japan and China, the latest step in a delicate dance by Japan's animation industry to expand global market share while avoiding losing skills to animators overseas.

"Japan is a giant in animation and there's many things that we can learn. There's still a huge gap in skills," Zhou Feng Ying, president of the Beijing Glorious Animation Co, told a seminar at the Tokyo International Anime Fair on Thursday.

"It's very important for us to grow through cooperation," she added, referring to the animated "Romance of the Three Kingdoms" currently being produced by her firm and Future Planet, a Japanese company.

That cooperation brings Zhou's company access to international distribution and Japanese animation know-how honed over decades, while Future Planet gains a sharp cut in production costs and a chance to tap the potentially vast Chinese market.

Such ventures are now seen as key for the industry, since despite decades of global dominance and a boom in the popularity of anime and manga comics, Japan's foreign anime profits are still surprisingly small compared to the money made at home.

In 2005, anime exports -- including broadcast rights and merchandising -- totaled some 19 billion yen ($192 million), according to Dentsu Communication Institute. In the same year, domestic profits hit 324 billion yen ($3.3 billion).

The anime fair, which features 289 companies and groups, 79 from overseas, is one effort to reach out.

Some non-Japanese participants said that while Japanese techniques were top-class, the industry was in danger of limiting itself by becoming too niche-oriented.

"Rather than targeting ordinary people, the Japanese industry seems to be focusing on geeks," said Lee Young Hoon, at the Korea Culture and Content Agency's Japan office.

"But the Korean market is small so we need to appeal to groups like families. We're working on joint projects with Japan but really we work more with the United States and Europe."

TOO BEAUTIFUL?

Others said that some of Japan's anime trademarks -- characters with huge, round eyes and a prevalence of busty women -- might also be a drag on its popularity.

"The characters are not very real, too beautiful," said Bill Hsu, senior marketing manager at Digimax Inc, a Taiwan company whose short film "Adventures in the NPM" took grand prize at the 2008 Tokyo Anime Awards earlier this month.

"They know how to merchandise and create new characters, but I think their design is too focused on Japan. For animated movies, I think Hollywood is the best."

The Digimax film, about three sculptures in a Taiwan museum that come to life, is three-dimensional and completely done with computer graphics, in contrast to the line drawings and graphics that still dominate much of Japanese anime.

Some Japanese anime commentators have worried that their industry is in danger of hollowing out in terms of skills, with younger animators increasingly drawn to the game industry.

"The young people who started 20 to 30 years ago are still in the business, but the average age is getting high. If nothing's done it could all die out," said Ryusuke Hikawa.

But some firms, such as Tezuka Productions Co Ltd -- named for industry groundbreaker Osamu Tezuka, creator of classics such as "Atom Boy" -- try to cover all fronts by training Chinese staff who work at a company Tezuka Productions set up in Beijing.

"Current Chinese regulations mean the market for Japanese firms is still limited," said general manager Yoshihiro Shimizu.

"But in the future Chinese companies won't be able to fill demand, so if we can supply them with anime then, we'll be in a good position."

(Reporting by Elaine Lies)