Earlier today, Production I.G.’s parent company announced that they terminated a contract for an unnamed project with another company. The company cancelled their agreement due to their client’s defaulting on payment, even though Production I.G. already committed 144,358,000 yen ($1,837,677.35 USD) to the project as of June 30. Production I.G. asked their client to return all materials produced for the project, and is currently discussing how to recover the costs sunk by the project. In addition, IG Port, Production I.G.’s parent, will report on any revised projections once a thorough investigation is conducted on the cancellation’s fiscal effects.

In a number of forums, we’re beginning to see this announcement devolve into a combination of “the sky is falling” and “it had to be [Insert Series Here] that was canned.” Unfortunately at this point, though, we simply don’t know enough about what was cancelled, or how much will be recouped yet. At this point, we only know the stated facts:

  • Production I.G. terminated a contract with an undisclosed client
  • Production I.G.’s client defaulted on its payments to Production I.G.
  • Production I.G. committed $1.84 million to the project, which must be recouped

We can also observe that this isn’t the first time Production I.G. had to toss a project into the circular file. In their 2011 fiscal year, the company saw reduced profits after they had a TV series cancelled, and pending payments to the company for work done on two theatrical films. I won’t lie and argue that everything is fine: this will hurt the company’s overall performance over the fiscal year. Just how much damage it will actually inflict remains to be seen.

I don’t expect to see Production I.G. fold after this. However, after massive losses in fiscal 2011 and a potentially rocky 2013, I wouldn’t be surprised if we see the company begin to shift to a more conservative stance. In this position, we’d see more investment in already profitable properties and genres, and of a less willingness to work with certain potential partners. Doing so would serve both as a means to right the company’s finances, as well as prevent a shareholder revolt. This would be a temporary measure, of course, as I would fully expect the reigns to loosen a bit once the company’s finances begin to improve. By how much, though, would be a combination of factors, which range from the members sitting on the board, to the economic conditions at the time.

This is but speculation, of course. We won’t know what happens until IG Port makes a formal announcement. We will continue to report on this situation as it develops.