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Crunchyroll takes anime to a live level

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Summer is high season for live celebrations of Japan’s pop culture exports. The two largest events in the West, Japan Expo in Paris and Anime Expo in LA, drew hundreds of thousands earlier this month. August will see the U.S. East Coast’s biggest anime convention, Otakon, move from Baltimore, Maryland, into more spacious environs in Washington, D.C., and later, the California debut of Crunchyroll Expo, a convention hosted by the most popular dedicated anime streaming service outside of Japan.

Since it began licensing anime directly from Japanese producers over eight years ago, Crunchyroll has been building a ubiquitous brand presence at anime conventions worldwide, its bright orange logo emblazoned on stand-alone booths, posters, backpacks, bandanas and heaps of promotional swag. But the company’s decision to host its own live event underlines both the tribal power of a niche user base, and the fierce battle among streaming platforms over anime content and its devotees.

“The idea (to host a convention) was bouncing around Crunchyroll for several years,” says Dallas Middaugh, head of content management at its San Francisco headquarters. “When it became clear late last year that we were going to hit one million users, we knew the time was right.”

Crunchyroll has become one of the top 10 online subscription services in the U.S., ranking with outlets for cable TV giants such as Showtime and HBO Now. The competition for the anime-loving audience, however, is coming not from TV but from the drivers of cord-cutting consumers — viewers who drop their cable subscriptions to switch to streaming.

Over the past six years, deep-pocketed U.S. internet giants Hulu, Netflix and Amazon have dived into anime acquisition, licensing and co-producing titles and series for their global audiences. All three have offices in central Tokyo. Amazon launched a dedicated channel, Anime Strike, via its Prime service earlier this year, giving users the option to download content for offline viewing (Crunchyroll says it will soon follow suit). Netflix is producing exclusive content for its Netflix Originals brand.

“It’s an interesting time to be in this market,” Netflix Japan Vice President David Lee told me last spring at the company’s base in Omotesando. “We entered, and then Amazon launched at right about the same time, and Hulu is now stepping up its investment. The competition doesn’t really worry us. We’re big fans of anime. It’s one of the very few global content categories out there.”

The three U.S. online entertainment behemoths take a long-tail approach to content, offering a wide range of niche titles and categories (many of which are commercial duds) to reach a broad and variegated audience. If only a few mega-hits emerge, the consumer base grows and the strategy remains fiscally sound.

The result has been a spike in upfront licensing fees paid to the anime industry that many Japanese producers are calling a “mini bubble,” with bidding wars leading to figures two-to-four times higher than during earlier peaks.

But for anime fans, the impact has been less positive. The expanding range of streaming platforms and growing list of anime exclusives means that fans are shelling out more cash to subscribe to several services for their favorite shows — or resorting to piracy.

In response to the onslaught, Crunchyroll inked a partnership last year with veteran Texas-based U.S. anime distributor Funimation to share their extensive content libraries and explore other synergies via licensing and distribution deals. Content owned by one company can be seen by subscribers to the other, either for a fee or for free with ads, and the two agreed to share dubbing, subtitling and home distribution services.

“The problem is, the market was fragmenting up a bit,” said Funimation President Gen Fukunaga when the merger was announced last fall. “You had other players coming in, (like) Amazon (and) Hulu. … The issue with some of those big players is that they’re maybe not as concerned with the fan experience as Crunchyroll and Funimation.”

Fostering the fan experience is at the core of tribalization: cultivating the younger demographic of digital natives who were raised on the internet, smartphones and tablets, and enabling them to seek out niche content and form vibrant communities via bottom-up appeal versus top-down advertising. The challenge for Crunchyroll is to ride the anime streaming wave by catering to its dedicated users while edging into mainstream viewership through word-of-mouth and education.

“We started to ask ourselves what people really thought of the Crunchyroll brand,” says Middaugh. “Did they care about it? We’d seen huge engagement at conventions and online, but did fans really trust it enough to support something new?”

That “something new” is next month’s convention in Santa Clara, California — the first to be financed and hosted by an American anime content provider. It’s doubtful Netflix, Amazon or Hulu will ever test their anime mettle by managing a live festival in the U.S., but if Crunchyroll succeeds, who knows?

“We’re looking to E3, Blizzcon and SXSW as our aspirational goal,” Middaugh says. “We want to do some subtle things, like play with lighting and sound in ways that attendees might not even notice, but will be more enjoyable than the standard white-light-flea-market you often see in the exhibit halls (at other conventions).

“I’m especially excited about our CRX Chats, a series of short presentations about anime and manga styled after TED Talks,” he adds. “Most presentations will be only about 15 to 20 minutes and won’t feel like a traditional panel at all.”

As online eclipses TV and SNS supplants the telephone, critics fear fragmentation and a loss of interpersonal human engagement. But the growth of passionate fan communities has become a force behind real-life encounters in the physical world — live events that both transcend and enhance the content that formed them, and help distinguish niche providers from streaming’s new mass media.

Roland Kelts is the author of “Japanamerica: How Japanese Pop Culture has Invaded the U.S.” He is a 2017 Nieman fellow in journalism at Harvard University.