The Anime News Network is reporting that the major anime studio Production I.G. (Ghost in the Shell, Blood+, Tsubasa) has decided to merge with manga publisher Mag Garden citing a sluggish market for animation DVDs and a slowdown in sales of manga magazines due to the increasing importance of online distribution of manga.  Mag Garden has released 106 different manga properties, sold over 26 million volumes, and sold and financed the animation of eight of its titles, most notably Aria, which sold some 300,000 units. 

For the year ending in March Mag Garden posted the loss of nearly $1 million on sales of over $15 million, while Production I.G. earned about $2.5 million on sales of $44 million.  Production I.G. already owns 15% of Mag Garden and a stock swap of one I.G. share for two Mag shares will formalize the merger.

The merger will provide Production I.G. and its subsidiary Xebec with a plentiful source of potential properties to animate (Xebec has already produced an anime TV series based on Mag Garden's Elemental Gelade manga), while the deal will give Mag Garden the resources and clout to compete in the increasingly difficult and changing manga market in Japan.