Merger Creates Anime Powerhouse

In a sign that we are still in the opening moves of the Streaming Wars, AT&T has sold off its anime-centric Crunchyroll service to rival Funimation for a staggering $1.175 billion in cash. The sale is part of AT&T’s broader strategy to focus on its HBO Max service, which has lead to the company shutting down various other standalone streamers with niche audiences such as FilmStruck or merging the content into its flagship service, such as with DC Universe.

For companies that are both deeply involved in the distribution and promotion of Japanese anime, they are both American companies. Funimation was founded in 1994 by the husband-and-wife team of Gen and Cindy Fukunaga as a production company licensing the US rights for Japanese cartoons, starting with the Dragon Ball franchise. The success of Dragon Ball Z on Cartoon Networks Toonami block allowed the company to license more productions for cable broadcast as well as home video sales.

For most of the 80s and 90s, most fans’ introduction to Japanese anime was through bootlegged videos, often with poorly dubbed translations. This lead to a brief cottage industry of satirically mis-dubbed videos starting with You Say Yamato, using Star Blazers footage. A southern California group known as Pinesalad Productions produced the most notorious send-ups using Robotech episodes, creating the infamous How Drugs Won the War and Why Don’t You Come Over for a sip of Sherry? However, it was their Dirty Pair Does Dishes with Kei’s voice being a riff on Arnold Schwarzenegger and Yuri sounding like the epitome of a Valley Girl (“Like, ohymygod, totally!”) with completely silly and suggestive dialog that ironically increased interest in the actual genre of anime.

It was Funimation’s professional quality redubs and distribution of this previously hard-to-get material that grew the fandom in the US. Eventually the company partnered with Universal Pictures Home Entertainment and later became the distributor for Crunchyroll’s home video catalog. Sony bought controlling share of Funimation in 2017 for $150 million and operates it as a joint partnership with Aniplex, another division of Sony. Sony does not release numbers regarding users or paid subscribers for Funimation.

Where Funimation focussed on re-dubbing Japanese dialogue, Crunchyroll’s strength was in subtitles. Founded in 2006 as a video upload and streaming site specializing in East Asian video content. It also had a fair amount of fan-dubbed (and bootlegged) content until it began securing legal distribution rights, including Naruto Shippuden in 2009 which lead it to purging the unlicensed content the next year. Crunchyroll secured exclusive North American distribution rights to a number of properties including 5 Centimeters Per Second and Attack on Titan. In 2014 it came under the control of Otter Media, a joint venture between AT&T and The Chernin Group with a commitment to produce original content. By 2015, it had achieved 700,000 paying subscribers and in 2016 it had landed more worldwide (excluding Asia) distribution and streaming rights from major studios which included the ability to simulcast new Japanese shows within an hour of their release in their home country. Crunchyroll has its own annual convention, Crunchyroll Expo and has also been a major sponsor of AnimeNYC since since its first show in that same year as well. It had been co-producing new shows and announced this year that it would create new shows in-house. It had also set up Crunchyroll Games to localize Japanese mobile games based on anime properties, and bought up the European arm of VizMedia, a manga publisher and anime distributor.

Despite being competitors, Funimation and Crunchyroll frequently collaborated and cooperated. In addition to Funimation handling distribution of Crunchyroll’s physical home video media, the two companies streamed each others’ titles on their respective services. Ironically, Funimation is currently helmed by Colin Decker who had previously served as Chief Operating Officer at Crunchyroll.

Since 2015, Sony has been building its portfolio of international streaming services with a heavy emphasis on anime. Before acquiring Funimation in 2016, it purchased Wakanim, the French anime service. In 2018, Australia’s Madam Anime and AnimeLab also came under Sony’s ownership and the services were combined under the Funimation name offering over 13,0000 hours of video to 49 countries. Crunchyroll is a much bigger service, with 90 million active users with 3 million of those paying for the ad-free subscriptions. The merger brings in Crunchyroll’s non-streaming strengths to areas where Funimation was lacking, giving Sony considerable power in the global anime industry that goes far beyond merely distributing others’ content. The collective studios have been creating original shows for some years now.

Between the two companies, they had licensed or co-produced some 30-40 new titles each year. It is unclear whether that rate will continue or, without competition and the need to recover some of the cash outlaid for Crunchyroll, Sony might pursue fewer new shows. For anime fans, the combining of two anime streaming services is a largely a good thing as the various exclusivity agreements meant that one had to subscribe to five separate streamers to get all the latest shows. While it remains unclear how the two services will actually be combined – or how Funimation’s $5.99 per month or Crunchyroll’s $7.99 per month subscriptions will change, it does appear that that Crunchyroll’s presence at Sony will be more than the afterthought it was at AT&T. In announcing the deal, Tony Vinciquerra, the CEO of Sony Pictures Entertainment said, “Together with Crunchyroll, we will create the best possible experience for fans and greater opportunity for creators, producers and publishers in Japan and elsewhere.” WarnerMedia’s Chief Revenue Officer, Tony Goncalves was equally optimistic about Crunchyroll’s future, “Crunchyroll’s success is a direct result of the company’s culture and commitment to their fans. By combining with Funimation, they will continue to nurture a global community and bring more anime to more people.”

Anime is a growing market in the US and overseas bringing in $19 billion between 2017 and 2018 and Sony has already announced that the anime based on its Fate/Grand Order video game, Fate/Grand Order – Absolute Demonic Front: Babylonia will stream exclusively on its own service for a month before being available through other outlets. The series was produced by it’s Aniplex division and animated by CloverWorks, an Aniplex-owned studio with the music by Sony Music Entertainment Japan (SMEJ) artists with dubbing by Funimation. Sony becomes one of the four primary venues carrying the largest libraries of anime and producing new series, the others being Amazon Prime, Netflix (with Shinichiro Watanabe’s Carole & Tuesday and upstart HiDive.

While Sony can’t match Netflix or Amazon in overall size, among the anime providers, it is now the 600-pound gojira.

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