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1. Home
2. Digital
3. News

Mar 17, 2022 9:30am PT

SONY FATTENS UP CRUNCHYROLL’S MENU: WHY ANIME IS ITS BIGGEST STREAMING BET

The conglomerate continues to invest in its digital strategy catering to anime
superfans

By Todd Spangler

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TODD SPANGLER

NY Digital Editor

xpangler

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Courtesy of Crunchyroll

Most major entertainment companies looking for the pole position in the global
streaming road race have a go-big-or-go-home strategy — they’re building massive
vehicles with broad, four-quadrant appeal.

Sony has taken a different tack. Its primary direct-to-consumer streaming video
business is Crunchyroll, geared to the Japanese art forms of anime and manga.
Instead of pouring tens of billions into content to vie against the likes of
Netflix and Disney Plus, it is flooding the zone for a distinct and passionate
fan subculture.

“The thesis is quite simple: We aspire to be everything to someone, not
something to everyone,” says Colin Decker, CEO of Crunchyroll. “We’ve always
been by and for anime fans and creators.”

Adds Decker, “Our business has more in common with fans of the NFL than users of
Netflix.”

This month, Sony took a big step toward making its anime division an even larger
global force: Starting March 1, Crunchyroll subscribers have access to library
and simulcast content previously available exclusively on Funimation, which Sony
Pictures Television bought in 2017.

The move brings more than 1,600 hours from more than 50 newly added titles in
Funimation’s lineup to Crunchyroll, which Sony bought for $1.18 billion in cash
from AT&T last year. At the same time, Sony says it won’t be raising prices on
Crunchyroll’s packages.

That consolidates the company’s anime efforts around Crunchyroll, which now
stocks more than 40,000 subtitled and dubbed episodes — the biggest bucket of
anime available anywhere. Anime fans can watch favorites like “My Hero
Academia,” “Tokyo Ghoul,” “Yu Yu Hakusho,” “Cowboy Bebop” and “Mushoku Tensei:
Jobless Reincarnation.” This week, Sony added three popular Dragon Ball anime
series, formerly exclusive to Funimation — comprising more than 500 episodes —
to the Crunchyroll lineup as well.

The 28-year-old Funimation brand is set to be phased out: Future new anime
series will be exclusive to Crunchyroll starting April 1, and Funimation will
continue to add new episodes of current series only. Sony is committed to
building on Crunchyroll’s momentum. Today, Crunchyroll has more than 1,000
employees in 14 offices worldwide and is looking to hire more than 100 staffers.

But don’t call anime a “genre.” Where the Western entertainment sensibility
thinks of it as a niche, Decker says, “the anime community thinks of it as a
lifestyle — it’s a POV on the world. It’s much more than linear entertainment.”

As a form, anime encompasses numerous genres like horror, sci-fi, rom-coms and
dramas, says Decker: “There’s an anime for everyone.” And the anime industry
provides a steady and prolific output of high-quality material; Crunchyroll and
Funimation have presented 20-30 simulcasts of new Japanese anime shows per
quarter, according to Decker. “People enjoy kind of the infinite depth,” he
says. “It’s like an achievement to get through these shows with hundreds of
episodes.”

The core Crunchyroll business revolves around streaming video, but the brand
also extends to mobile games, theatrical film releases, merchandise, live events
(like the Crunchyroll Expo, set for Aug. 5-7 in San Jose) and DVDs.

“We certainly have hit shows and franchises — but really, the value proposition
is belonging to a community,” Decker says.

Sony does own some other streaming businesses, including SonyLIV in India and
Pure Flix, a Christian-content streaming service it acquired in 2020. And Sony
Pictures continues exploit the streaming economy as a content wholesaler: Last
year, for example, it cut a rich, multiyear movie-output pact with Netflix. But
Crunchyroll is Sony’s main owned-and-operated field unit in the streaming wars.

If you want to call anime a niche, it’s one of the most successful niches in the
world — attracting more fans than other interest-based entertainment services
geared around, say, horror or faith-based programming. As of August, Crunchyroll
had more than 5 million paying subscribers worldwide and 120 million registered
users in 120-plus countries. Decker won’t say what those numbers are today, but
it’s a good bet they’re higher now that Sony is steering Funimation users over
to Crunchyroll.

Indeed, the Justice Department’s antitrust review of Sony’s purchase of
Crunchyroll took more than six months. The concern was that the combined entity
would harm competition. Decker insists that it’s a very competitive space. “It
was a matter of helping them understand the dynamics of the market,” he says.

To be sure, streamers like Netflix, Hulu, HBO Max and Amazon’s Prime Video have
sought to capitalize on anime’s popularity by adding a selection of content
(some of it sublicensed from Crunchyroll or Funimation).

And AMC Networks is also hoping to cash in on anime, and expects to step up
competition with Crunchyroll. In January, the cable programmer acquired Sentai,
which operates the Hidive anime streaming service. “The anime audience has
historically been underserved by linear TV,” says Miquel Penella, president of
streaming services at AMC. Sentai’s business has historically been focused on
content licensing, but going forward AMC’s primary goal is to expand the content
and reach of Hidive.

A priority for AMC in developing Hidive and its other streaming services like
Acorn TV, Allblk and Shudder is to remain authentic in the eyes of the target
fanbase. “We don’t want to go to the broad market,” Penella says. “These are
audiences with unique sensibilities.”

Anime is “an area Sony should dominate,” maintains Gen Fukunaga, founder of
Funimation, who sold the company to Sony for $156 million. Fukunaga, who left
Sony in 2019 after serving as Funimation’s chairman and is now a venture
investor, notes that the company was smart to set up the anime division as a
joint venture between Sony Pictures Entertainment and Aniplex, a subsidiary of
Sony Music Entertainment Japan.

Crunchyroll may be outbid by major streamers for some of the hottest anime
titles, he observes. Today, some of the bigger shows can have production costs
that run $200,000-$300,000 per television half-hour, he says.

But “the big boys tend to be hit-focused,” he says. “If you’re a true anime fan,
Crunchyroll is the only game in town.”

(Pictured above: “My Hero Academia” Season 5, dubbed versions of which came to
Crunchyroll this month after previously being available only on Funimation)

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