• Reuters, Bloomberg

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Sony Corp. will buy AT&T Inc.’s animation business Crunchyroll for $1.175 billion (about ¥120 billion), the two companies said Thursday, as the electronics conglomerate aims to strengthen its entertainment content and distribution businesses.

The deal will give Sony access to Crunchyroll’s 3 million paying subscribers across more than 200 countries and regions, helping Sony compete more globally with entertainment giants such as Netflix.

Sony’s Funimation Global Group, a U.S. animation distributor with 1 million paying subscribers, will own Crunchyroll, which is currently part of AT&T’s WarnerMedia segment.

AT&T has been looking to monetize its noncore assets since CEO John Stankey took over in June. The latest deal will allow it to invest in other focuses of WarnerMedia, including content creation and gaming.

Despite Crunchyroll’s loyal following among anime fans, AT&T felt the streaming service was too niche for the broader audience its streaming service HBO Max wants to pursue, a source familiar with the company said.

The proceeds will be paid in cash at closing, AT&T and Sony said.

Sony is boosting gaming and entertainment businesses under Chief Executive Kenichiro Yoshida’s strategy to increase recurring revenue streams that cushion the impact of volatile hardware sales cycles.

The animation business has been thriving recently on the record-breaking success of the animated film “Demon Slayer,” which is co-distributed by Sony’s music unit Aniplex Inc.

The film will be heading to the United States in early 2021. It will be distributed by Funimation, now jointly held by Sony Pictures Entertainment Inc and Aniplex.

“We have a deep understanding of this global art form and are well-positioned to deliver outstanding content to audiences around the world,” Tony Vinciquerra, chairman and chief executive officer of Sony Pictures Entertainment, said in the statement. “Together with Crunchyroll, we will create the best possible experience for fans and greater opportunity for creators, producers and publishers in Japan and elsewhere.”

The deal also makes it easier for Sony to promote its music because theme songs for the cartoons are often made by the company’s artists, said Atsushi Osanai, a professor at Waseda Business School.

AT&T said it hopes to complete the deal as soon as possible, but didn’t give a timeframe. Crunchyroll has about 550 employees, with 250 in the U.S. — mostly in San Fransisco and Los Angeles — and about 200 in Europe.

Crunchyroll was one of the first purchases made by Otter Media, a streaming-video partnership formed in 2014 between AT&T and Chernin Group. The original purchase price wasn’t disclosed.

AT&T has sold billions of dollars in assets in the past year including its Puerto Rico wireless business, data centers and its Hudson Yards New York offices, in an effort to raise cash and lessen a massive debt load.

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