We have a lot of consumers and with that high demand comes a big industry. But this industry is mostly in Japan. There are a few non-japanese doujin circles I know of, and those are mostly fairly small. My point wasn't that Touhou is smaller than other indie's but that most discussions either mention that Touhou is leagues bigger than all other indies or that Touhou is non-existent. That point nags me.
Well it's perfectly logical to happen for something that grew without any marketing and that was never intended for a western audience. Either you know about it, either you don't, you can't really blame people for not knowing about Touhou. But that statement is actually true if you place it in their region, Touhou is the biggest indie in Japan by far, Touhou is almost on-existent in the west. But that's the case for many Japanese niches. Touhou is just a bit special because it's enormous in Japan (bigger that other niches), and usually things that big in Japan tend to go overseas, but this doesn't happen with Touhou because there is no company behind it. So Touhou has created probably the biggest regional popularity discrepancy ever, with 2 main ingredient : viral expansion and not looking for money (pretty unlikely combination).
But in my opinion, Touhou wouldn't be very popular in the west anyways, its root are too deep into japanese culture and folklore, and it's still very anime looking. For example, Hastune Miku is big in Japan, there is more marketing behind it, but still the west doesn't care much about it. But at least people usually know the name, that's the main difference.
Also, I wouldn't say Touhou has nothing to do with anime. I know the old meme of asking if Touhou related stuff is anime to annoy some fans but Touhou has multiple official mangas finished and still going, a ton of merchanide like PVC figures, keychains, pillow covers and such. In Akihabara is even a store dedicated to Touhou (Akiba Hobby, worth to check out) with tons of stuff. Anime are, for the most part, adaptations of mangas so both mediums are fairly similar. And we've even gotten a still running unofficial anime with good art and animation. No voice acting though, what I find surprising.
I am more surprised that Touhou didn't get an official Anime by now.
Touhou anime is still only fanstuff, it would be like saying Touhou is porn because there is lots of porn of it. But that's why I said they are connected, both fandom have a lot in common but that's it, Touhou has officially nothing to do with anime. As for why there isn't an Touhou official anime, obviously the market is here, but I believe ZUN specifically stated that he didn't want an anime for a few reasons :
1 - He doesn't want to create a new official entry point that would misrepresent Touhou as he sees it, especially if that new entry point is bound to be more popular than the games
2 - He doesn't want to work too much with big companies because he fear he wouldn't have enough control on the result
Basically he doesn't want Touhou to be misrepresented by something official. He has changed is mind a bit over the years but it still small steps.
That's why I personally never believed in Reimu for Smash until that recent interview because I was sure he wouldn't want it and that was the biggest hurdle for Reimu in Smash. Now I think he's right to trust Smash for this, because we know Sakurai really cares about accuracy in representation when he add a new character.
I know its not "that" bad but still niche. I compared to other "niche" titles I currently play, like Noita or Hearts of Iron 4 and might have drawn my conclusion to early but still, compared to juggernauts like Halo, Devil May Cry or Crash Bandicoot, Touhou is just a small niche. Unfair comparison, I am aware, but still a part of the discussion when it comes to popularity on the other extreme.
Why would you compare Touhou with western Juggernaut ? It's definitely not fair, all of these had millions in marketing behind them, of course they would be more popular. Keep in mind that Touhou has achieved something other games can only dream of without spending any money : A huge dedicated fanbase of content creators, probably the biggest one ever. This fanbase being in Japan isn't really an issue, we already got a few Japan niches in smash : Fire emblem in melee, Dragon Quest recently, even Terry is debatable.
It's such a shame that we've never gotten any official english translations for the mainline games. The translation is already done and the translators did a fantastic job with their easy to use patchers and all. But you still have to go through extra hoops to install a translation patch for a japanese game. A hurdle that is really off putting for many. Imagine if we would have a english steam version of the games and the games ported for the switch. Of course, the games wouldn't make Touhou mainstream, the genre itself is still fairly unpopular, but it would definitely help newcomers, dipping their toes in the water. I wonder why ZUN never reached out to anyone on the translation crew and actually hire or cooperate with them.
ZUN just didn't care for that until very recently. There was an interview with Toby Fox recently, and Toby Fox told him the same thing, that he should localize the games, etc. ZUN said something like he never intended for Touhou to be for the west and that he was always surprised that Touhou fans actually existed in the west. Didn't find a full translation but :
https://clarste.tumblr.com/post/179204742441/interview-with-toby-fox-undertale-and
I mean, the fangames that get brought over to the west are, for the most part, quite mediocre. Such are fangames that get published without any or much alteration: The games are unpolished, don't look that good and feel quite clunky compared to other games on the Switch. Kobuto V, Sky Arena, Azure Reflections, etc. are all medicore and didn't garner much attention. Those games are intended for aleady existing fans of the series. Still waiting for Luna Nights and AoCF. Then again, the number of released fangames on the switch is a sign that their is demand.
Yep the fangames are mostly pretty mediocre, but they are also our only chance to get a actual good Touhou game. Since, at this point, it seems the main games will stay in the last century, sadly. We know it's possible, Luna Nights seems really good. But I hope it can get even better.