Crunchyroll may be on the block as debt-strapped AT&T ransacks its larder for salable assets. But that uncertainty isn’t keeping the venerable anime-focused streaming service from rolling out new initiatives as it moves past 3 million subscribers and any old-school definition of “niche.”
This week, the site launched two higher-priced tiers for its most devoted fans, a seemingly counterintuitive move amid the pandemic, new competitors and a burgeoning recession. But it’s exactly the right move to give Crunchyroll’s most ardent fans more of what they love, said General Manager Joanne Waage, speaking in a Zoom webinar this week.
"As you move down the spectrum [of site users], you have people who are collectors,” Waage said. “They are looking for exclusive merchandise. It’s almost like owning a piece of the show. We really try to cater to those while not cutting off anyone else. We're creating pathways that allow for the maximum amount of exposure to all fans while catering to those who want a bit more.”
The site already has 3 million “Fan” subscribers who pay $8 a month for access to 1,000 animated series with 30,000 episodes, and day-and-date access to new shows when they debut in Japan. Popular series include Dragon Ball Super, One Piece, Black Clover and Boruto: Naruto Next Generations.
That paying subscriber base sits alongside 70 million registered users in 200 countries and eight languages who access the service from free, ad-supported services around the web and beyond.
Now, the most devoted fans will have even more options.
The new “Mega Fan” tier will cost $10 a month, and adds offline viewing and access to four concurrent video streams. Mega Fan subscribers also get deals on Crunchyroll merchandise.
If that all isn't enough, the $15-a-month “Ultimate Fan” tier provides six ad-free concurrent streams, a “swag bag” of merchandise every year, and members-only access to even more merchandise tied to specific shows.
"They want to do more, they want to interact, they want to create and they want to own," Waage said.
For all the focus here on the “whales” among its fans, that’s not to say the company doesn’t value its free, ad-supported users, Waage said.
"Internally, we celebrate the 70 million," Waage said. "That is the base of people who've been introduced to anime primarily through Crunchyroll.”
Crunchyroll’s website, in multiple languages, is loaded with forums, news, opinion, images, and other material. And Waage said its social-media accounts boast a prodigious 40 million followers.
Crunchyroll depends on the free tier for "opening up and expanding the top of the funnel," Waage said. The service cultivates those registered users, trying to convert casual viewers into paying subscribers, website users, and consumers of merchandise, events, games and other products.
"We will always never not be free," Waage said, meaning the service will always have a free tier.
Crunchyroll was founded in 2006 by an anime super fan Kun Gao, who couldn’t get the shows he wanted through traditional media. In the early days, Waage says frankly, “It was a pirate site.”
Eventually, the site cleaned up its act, helped by more openness among Japanese animation studios and distributors to sign deals for overseas online rights. The company’s subscriber base grew slowly at first, taking a decade to hit its first million, then two more years to hit 2 million. Crunchyroll hit 3 million subscribers earlier this summer, just 18 months after hitting 2 million, Waage said.
The company super-serves its fan base in a variety of ways, like watch parties that celebrate the debut of new series. It’s a way to engage potential fans to shows they might not hear of otherwise, and feeds that funnel.
“We build franchises,” Waage said. “We don’t just take something and put it behind a pay wall and hope the algorithm brings people to it.”
Next week, the company will hold its annual Crunchyroll Expo. Normally, 35,000 to 40,000 fans, many dressed in cosplay outfits from their favorite shows, would descend on the San Jose Convention Center.
That won’t be possible this year, but the company is trying to make the expo a compelling fan experience nonetheless, focused on, “How do we keep people connected and make lemonade out of lemons?” Waage said.
"This year with Covid [-19], we had to look at it differently, to think of it as a virtual global event," Waage said. "We'll be having all the big panels translated into French, Spanish, German, Russian" and other major languages.
Crunchyroll’s international focus had already accelerated the past couple of years, Waage said, helped by initiatives like adding Portuguese to its language offerings. That move opened up the huge Brazilian internet market, and another corner of Europe.
Earlier this year, Crunchyroll bought manga publisher and anime distributor Viz Media Europe, beefing up its presence in Germany and France. Waage said France in particular is one of the world’s largest anime and comic/manga markets, building on home-grown institutions such as Tin Tin, Cowboys and Aliens, Blueberry and Asterix and Obelix.
The company also has moved into profitable areas adjacent to the $20 billion anime market, especially mobile games based on its series. Anime-based mobile games are a $4 billion-market: Fate/Grand Order’s game alone generates $1 billion in annual revenue, Waage said.
Now, Crunchyroll has jumped into that sector in a big way.
“It’s a huge opportunity here that we’re delving into," Waage said. “We have six games in the market, two on the way, with the announcement of a [game based on a] massive IP coming later in the year.”
The company is also getting into original programming, rather than relying on licensing from existing suppliers amid increased competition. Two original series have already debuted, with another dozen on the way, including three that Waage said haven't been announced yet.
The shows themselves come from a variety of sources. Some were created on contract with Japanese studios, others come from the U.S. or other international providers who bring a different sensibility that may translate to broader audiences, Waage said.
"We see this as an opportunity to open up the medium quite a bit," Waage said. “There’s an opportunity to shift the pipelines to produce content that resonates more with that Western audience. We're leveraging our data to push the market and super serve our audience."
All this activity comes amid sale rumors. AT&T acquired Crunchyroll parent Otter Media when it bought out partner Chernin Media amid the far bigger 2018 acquisition of Time Warner. That $85 billion deal helped saddle AT&T with what is now a net debt total of $152 billion, according to the company’s most recent quarterly earnings.
Between getting HBO Max launched, reorganizing WarnerMedia with hundreds of layoffs and investing in the capital-intensive rollout of its 5G mobile network, AT&T has been looking for cash to pay down some of that debt. Accordingly, reports surfaced that AT&T was in talks with Sony – which already owns anime competitor Funimation – about a possible $1.5 billion sale of Crunchyroll.
For the moment, HBO Max and Crunchyroll remain stablemates, and business partners. HBO Max spotlights Crunchyroll content, which Waage said helps both services.
“It’s front and center [on HBO Max] because they get it,” Waage said. “When people see the [viewership] numbers, they get it.”
Those numbers have attracted interest in anime programming from other streaming services competition, including Netflix, which has a significant investment in the genre, and its own hits such as Legend of Korra. Amazon has tried to do the same, with less success. Even HBO Max separately features movies from Studio Ghibli, including Oscar winner Hayao Miyazaki’s sublime films.
But Crunchyroll’s secret weapon might be its tight focus on the devoted anime-consuming community. might be its secret weapon.
"Most of those [competitors] are utility players. They feel like something you go to but not a home you come to," Waage said. "But we are able to be that home for fans because we are fans. I don’t think we could do it otherwise."
