The international animation sector is currently navigating a period of significant contraction and uncertainty, a direct consequence of a market correction in the U.S. and a commissioning landscape that has yet to recover to pre-strike levels. This global reverberation has led to a challenging environment for an industry that had previously expanded rapidly to meet the demands of streaming services. Despite these difficulties, there's a strong consensus within the diverse animation ecosystem that the sector requires stronger financial backing to bridge the growing gap between where animation is watched and how it is financed. As Katell France, CCO of Mediawan Kids & Family, notes, this situation, while creating challenging times, also offers an opportunity to rethink and reinvent the entire model.

Industry gatherings like the Cartoon Forum in Toulouse and MipJunior in Cannes have transformed into forums for delegates to commiserate and collaborate on these shared challenges, reflecting a sector in real-time redefinition. These growing pains are particularly acute in France, home to one of the world's largest animation industries outside the U.S. and Japan. The local sector faces a sharp correction, with studios that boomed previously now experiencing layoffs, stalled productions, and financial strain. Examples include the liquidation of Cyber Group Studios, producer of 'Gigantosaurus', and buyouts or receivership for others like Andarta and TeamTO.

Investment consultant Youssef Safraoui of Act & Play describes this period as a “transformation” rather than just a contraction. He highlights AI and political uncertainty in France as disruptive factors, emphasizing the need for studios to cut production expenses due to rising salaries. Safraoui stresses the importance of alternative financing, including revising CNC co-production rules to lower thresholds and encourage international partnerships, particularly with regions like Asia, the Middle East, and Latin America. The goal is not to outsource work but to achieve low overheads and high flexibility, allowing companies to scale their teams per project to balance local employment with new funding and restart paused projects. Agility, such as scaling from 50 to 300 people on a case-by-case basis, is deemed essential for survival.

Caution has become a dominant theme at events like Cartoon Forum, with pitch projects heavily favoring proven track records and established IPs to secure funding from broadcasters and commissioners operating with tightened budgets. Titles like “Alien Dunk” and “Vampirette & Me” exemplify this strategy. Simultaneously, the shared challenges have fostered a renewed sense of collaboration, with UK delegates re-engaging with the European fold post-Brexit. Hopes are high for bilateral accords, such as the one between France’s CNC and the UK’s BFI, to extend across the continent. Notably, Aardman, producer of 'Robin Robin', attended Cartoon Forum for the first time to seek European partners for 'The Adventures of Robin Robin', illustrating this collaborative shift. Animation UK head Kate O’Connor underscored the imperative to dismantle barriers, whether financing structures, legislation, or tax incentives, to find a collective way forward.

As traditional commissioning streams dwindle, the industry's focus has shifted towards digital-first models, with YouTube emerging as a crucial platform for both testing original series and launching new IP. Alexis Rice, YouTube’s global head of youth partnerships, notes a building interest over the past two to three years, as companies leverage YouTube’s ad-supported or premium subscription revenue programs (both operating on a 55/45 split). Producers, initially hesitant, are now more optimistic, recognizing YouTube's potential to build, rather than cannibalize, the wider ecosystem. YouTube offers full creative control, no deadlines, and global availability in over 100 markets, supporting creators in building a business on the platform rather than dictating content direction.

YouTube Kids’ growing prominence was highlighted at MipJunior, marking its 10th anniversary, underscoring its centrality in children’s content. The broader shift in animation is primarily driven by evolving viewer preferences; as Jonathan Shrank, TheSoul streaming and content VP, explains, kids are leading the digital migration, becoming increasingly independent in their content choices. This presents a challenge for studios, as viewers move to platforms that often lack traditional pre-sales or commissions. Consequently, production outfits must innovate to finance and deliver content directly to digital spaces.

This new paradigm is exemplified by projects such as Mediawan’s “Wadoo,” a digital-first preschool series co-produced with Hispanic YouTube network El Reino Infantil, which uses AI-assisted shorts for testing tone and characters before a full rollout. Similarly, TheSoul Publishing, in partnership with Banijay Kids & Family, has self-funded “Ava & Digger,” a digital-first series prioritizing YouTube. These projects were unveiled at MipJunior without a full launch, indicating a growing comfort with real-time iteration and leveraging YouTube’s vast subscriber base for fan building. Engagement metrics and viewer feedback are vital for fine-tuning narrative and characters, creating a built-in fanbase that can later be leveraged for wider streaming deals. Shrank emphasizes that in this fragmented market, “exclusivity isn’t what it used to be,” and “proof of reach” is paramount, whether for known properties or new content built on YouTube at low cost. Flexibility and maximizing attention across channels are key for success.

Ultimately, this evolving model necessitates a fundamental shift in how production outfits collaborate. Katell France reiterates that “collaboration isn’t just beneficial—it’s becoming essential for the industry’s survival” to produce quality content at lower costs in the current market.