The eagerly anticipated cartoon film "Legend of Deification" will finally make its debut during the National Day Holiday after a delay of almost 10 months. Made-in-China animation films are gaining substantial box office earnings these days, but the companies backing the movies are still having trouble turning a profit.

The animation films may not need physical sets or locations to shoot, but they require hard work from the creative teams, and also, they need movie theaters to be open to earn some of the money back. The cinemas were hit hard by COVID-19 when they needed to shut down.

Of the country's nine listed animation companies, five recorded profit drops in the first six months of the year. Enlight Media, the producer of "Legend of Deification" and the animation hit "Ne Zha" had profits of some 19.6 million yuan in the first half. 

The figure seems impressive but was down more than 80 percent from the same period last year as movie showings were canceled over the Lunar New Year Holiday. Crucially, it turns out China's animation companies have not yet learned how to develop derivative products that can help cushion hard times.

"Viewership of all films relies on offline cinemas and offline animation exhibitions, and animated films are no different. So, the COVID-19 pandemic definitely gave a significant shock to the animation industry," Qi Wei, professor of Shanghai film academy at Shanghai University.

In fact, the animation industry in China is so young that it always had a problem making money on its films in an important area, sales of derivative products outside the cinemas. Though the blockbuster "Ne Zha" made a box office earnings of 5 billion yuan last year, ranking it second in China's film history, its derivative products chain was noticeably absent. It's a widespread problem across China's animation industry.

"China's film industry is still growing. The big movie names are leading the whole industry to develop, but the box office earnings don't do enough for the animation companies overall. They should be developing the whole industrial chain - derivative products, games and sales rights on TV and the internet," Professor Qi said.

A report from iResearch said the number of China's animation fans will reach 400 million by the end of this year. Now, it's on the animation makers' hands to figure out additional ways to drive the fans' interest and wallets.