2026 Predictions for the Animation Industry

Welcome back everyone. Another year, another 2026 Animation Predictions list. What does 2026 have in store for us in the animation industry?

To be candid, the last few years have been difficult. The shift towards AI, the cost of living crisis, the mergers and cancellations left-and-right. And that’s not counting some very scary things going on in the world in general. Still, what is life without art? We’re super proud of what we’ve built here at Cut the Mustard, and we’ll continue to ride the waves of change to keep up in this beautiful, messy industry. 

1- Netflix Merger = Cancellations

Let’s start on a negative (naturally, after that intro). Warner Brothers is up for sale. One of the big, foundational film studios, it’s sad to see something like this happen, but with costs rising and an ever-growing hoarding of wealth at the executive level, films are costing more to make, making bigger losses. The acquisition of a studio isn’t necessarily a bad thing, but the worrying parts are (1) the buyer and (2) the aftermath. 

Netflix is eyeing the company, a huge merger that would have massive effects on the industry. Namely, all those IPs they will have access to, and how a streaming platform may influence and change a traditional film studio into something unfamiliar. These types of activities almost always lead to cancellations and a stalling in projects / commissions, as the buyer needs to immediately cut costs to absorb the debt they’ve inherited. Unfortunately as we’ve seen with Netflix’s track record, this usually begins with animation first. There are some stirrings about Paramount's counter-offer, but the aftermath is the same either way. It’s a dangerous situation to be in when all roads are leading to a mega singularity owning the industry, but maybe such an event will lead to a future implosions and gold rush for studio IPs down the line.

2- Rise of the (animated) vertical drama

A big thing on the horizon is sure to be the vertical drama. If you have a phone, they have already been advertised to you. Clickbaity, often highly-sexualised stories that play over a series of short (90 sec) reels. Designed to be binged across your swiping experience, woven into your social media landscape. It’s a burgeoning new form of storytelling, born off of that one time you watched a whole movie in 125 parts on your phone (we’ve all done it).  

This has grown massively over the last year, and will be sure to be breaking ground in animation eventually. Is this a good thing? In business terms, yes. In cultural terms, probably not. Companies like ReelShort are pumping out dozens of these, many of which are derivative or completely over-sexualised. Still, any emerging media will eventually produce solid art and have legitimate cases cut through the noise, and this will be the case for animation too. Expect either a prominent indie or studio-backed vertical drama to blow up next year. 

3- Indie Animation: The Awkward Teenage Years

We love Indie Animation. And with our deep dives into the subject being our most popular pages on this site, it’s clear to see they are popular with the public too. It’s been amazing to see the genre grow over these last few years, with TADC, Hazbin Hotel and more becoming household names, selling merch on shelves and having loyal fans cosplay as characters at cons. 

Due to this boom (and the slowness of animation), we’re about to enter the age of Independent, especially if there’s cancellations from the top down. However, as we enter this age, more pros are going to look at jumping on this train, so naturally there will be questions about how to make this system work for everyone. Indie animation is a bit like the wild west or the gold rush - for those who hit big, they become stars. But for those who don’t, it’s a question about how everyone involved is going to get fairly compensated for their work. While studios like Glitch have a ‘proper’ company setup, for many others any potential profit will lie in the hands of the creators. It’s not all bad obviously, indie is helping many people keep the lights on, or students gain crucial experience of working in a pipeline. It’s just worth keeping an eye on the horizon, as people look for legitimacy in the form. How can indie be legitimate, without falling into the trappings of the studio system it looked to replace? Creator-owned IP or profit sharing systems are a great start. Let’s hope as things grow and change that indie can be better for everyone and lead to a more inclusive and stable industry. 

We’ll do another indie blog soon, talking all about money and funding.

4- Finales as movies 

Movies are harder than ever to finance and get made. Double so for something as labour-intensive as animation. But one trend that surprisingly dominated the box office was finales of shows (anime, in this case) being feature-length and exclusive to cinema. Both Chainsaw Man and Demon Slayer had films out that massively overperformed internationally. It’s easy to see the effect this will have on studios and their approach on how to guarantee a box office return. 

Since 2023 studios have been scheming how to recreate the success of Barbenheimer, which is basically an impossible task. As they all infer the wrong lessons (toy movies, crossover release days) it’s clear that with rising costs, the cinema has changed from a weekly excursion to an event-based experience for many. See K-Pop Demon Hunters coming to cinemas for one weekend, or any of the hype around Wicked. It’s impossible to engineer this level of cultural hype, but one way to bet on it is to have a strong story lead its audience from the TV to the cinema. While both mentioned movies will likely be snubbed by the Oscars (with so much lore missed out on) we’ll see how the west adapts this trend with the Mandalorian and Grogu, moving two Star Wars TV characters onto the big screen. While it lacks narrative lead-in to make it essential viewing, if it’s remotely successful this is the direction I can see original animated blockbusters moving in. 

5- AI: the gold rush reaches its 11th hour

Every year we've talked about AI in some capacity. We've predicted wrong and right, positive and negative things. It's a topic that goes bigger than a blog like this can encompass. It's bigger than any one person can describe or one industry can encompass.

What I can talk about is the AI bubble, a phrase you will hear thrown around more and more across this next year. In a basic sense, money is being pumped into the AI industry at a record level. This bubble is being played by investors, stockbrokers and those looking for short-term gain. The issue is, some of these companies with huge investments, are yet to see a return on investment. OpenAI, the poster boy of the movement, is still operating at a loss in 2025, and eventually that will cause this digital gold rush to burst. This will be catastrophic for most of these companies, as investments are pulled at once by investors  and the world likely plummets into a new recession. We've seen similar bubbles emerge in the dot com era, the housing crisis and the social media age, but this is accelerating faster than anything before.

What exactly this will mean for AI in the creative industries is unsure. We're not saying it's going away by any means, but I would expect the business model to perhaps change from readily available and free to a more exclusive and paid service. Perhaps, after gaining crucial data from the public, this was exactly the plan. Culturally, the age of AI is here. And because the bubble won't burst in 2026, expect to see a year where AI finds its way into every single application of your life, no matter how useless or trivial. This will be the year of overreach and mass expansion before the snap.

6- Soft Advertising 

This is a trend coined over the last few years as a pushback to advertising infiltrating every crevice of the social media landscape. As brands finally ‘got’ creator-made social content, they began to imitate the style, using lo-fi techniques to look like they were user-made. When you weren’t watching that, your favourite short-form creators were likely directly sponsored by those same brands. 

As AI has accelerated the speed of which people have become mentally checked out with this format, brands have had to switch it up in a big way, a way that’s going to welcome big opportunities for animators. This is soft advertising, a trend where a brand is advertising its vibe, its feeling or its audience, rather than its product. We’ve already seen this with a few luxury brands (like luxury fashion, which is already quite ‘vibes based’), but it will continue down to everyday brands trying to sell you a vision rather than a product, in a bid for attention in subtle brand building you won't swipe away from.

Not to pat our own backs, but our client Meet You at Six has been doing this with us for years, selling their beach-hut-for-hire via the beautiful, Norfolk-coast animations we’ve made with them. 

7 - Collage Core

Another design trend, this is towards a kind of lo-fi, messy collage style in design. Think mixed-media, using digital and traditional textures together to make something eclectic and personal. These types of posts have become popular on instagram, and will become a staple in animation too. I see three main reasons for this style becoming so popular. One, the rise of softwares like Canva that makes design easier to make than ever, leading to this purposely scrappy but wholesome approach to showcasing one’s life. Second, the aforementioned corporate-dominance of short-form video has forced people to seek lo-fi authenticity elsewhere. Third, AI and its usual look is very clean, so for humans, messy is in. 

Obviously collage work has always been popular in motion graphics (see: Vox) but this signals a movement away from gritty textures and more towards mixed-media self expression.

8- Oscar Contenders 

A quick look at the 2026 Oscars in March. Of the 35 eligible candidates, I predict the five nominees will be - Zootopia 2, K-Pop Demon Hunters, Boys Go to Jupiter, Arco and Elio. This will prove a controversial set of choices, with Dreamworks off the list entirely and lots of Elio discourse earlier this year. Ultimately K-Pop Demon Hunters will take the (expected) win. Ne Zha 2 was not submitted for consideration, leaving the race pretty open. Notably the feature length finales for Chainsaw Man and Demon Slayer will likely be ignored, starting a debate about the academy and their cultural blind spots. 

For the shorts, I’ve unfortunately not been as on the ball as usual (with no visits to a major film festival in 2025 - womp, womp). The three I’m pretty confident we’ll see are The Snow Bear, The Shyness of Trees and The Girl Who Cried Pearls. I could see Aaron Blaise’s labour of love Snow Bear getting the award.

9- Biggest films of the year

And looking forward to the year ahead, what do we have in store for 2026 in terms of animated cinema? The five I’m the most excited for have to be:

1. Ray Gunn, Brad Bird’s return to film with Skydance. Based on an idea he’s had for years, it’s a detective story set in a sci-fi world. While apprehensive (Skydance did hire Pixar’s disgraced John Lasseter) Bird is phenomenal animator and writer with a unique tone and style that’s often more realistic than the usual kids animated lineup. 

2. Wildwood, the long awaited next film from Laika studios since 2019 (!!!). I got to see some puppets, props and sets for this at an exhibition in London, and hopefully this is a huge success for them. With a mystery plot and a seriously stacked cast, hopefully people show up for stop motion. 

3. Super Mario Galaxy Movie. While the Illumination-made first movie didn’t blow us away, it’s hard to resist seeing such a popular character brought to life for a second time. If the first film can turn around from laughable casting choices to the best grossing film of its year, the second will be able to reach for the stars (literally).

4. Hoppers. Pixar has had a rough time of it (see: Elio vs K-Pop debates) and, truthfully, I don’t see Hoppers fixing anything. For casuals, it may fall too close to Turning Red, and it doesn’t show off enough of Pixar’s signature heart, genius or maturity. Still, I’d absolutely love to be proven wrong, and We Bare Bears’ Daniel Chong is a delightful creator we’d love to see get his flowers. 

5. The Legend of Aang. Though recently we’ve learned this film will be coming straight to streaming instead of cinema, never underestimate the power of Avatar fans. Now all grown up on-screen, our main trio will match the age of the fans that watched them. As a cult classic kicking off a whole new era for Avatar, I see this one culturally doing really well. 

Special shoutout to Coyote Vs Acme, which finally seems to be coming out after being long shelved as a notorious initial example of streamers canning films for tax reasons. 

Obviously, these films are not going to be the top grossing, which will probably belong to Minions 3, Mario 2 and Toy Story 5. Special shoutout to GOAT, which could be the underdog winner of the year. As always, smaller films we don’t even know of will also blow us away between now and 2027. Demon Hunters wasn’t even on the 2025 list!

10 - Cut the Mustard

And finally, as always, a look ahead for Cut the Mustard. We’ll leave it brief. Last year, we worked with more agencies than ever before, making the studio more and more of an iceberg. Once upon a time, everything we had on the website was everything we’d ever made. Nowadays, it’s just the tip of that iceberg, with a wealth of NDA and white label work under the surface. With so much work we’re not able to show or even talk about, we’ll be changing the way we do socials to connect with others and demonstrate this side of the business by focusing on results, the team and our process, over the end product. 

We’ve started this year with our first pitch to a major network for an original story we’ve been helping a client bring to life. This is very much a direction we’d love to explore, and hopefully we’ll be creating more IP and pitching more home-grown stories. 

Thanks to anyone who has read these predictions over the years. I’d love to know what you think, if you agree/disagree, and what the future looks like for you in the animation industry.