Thursday, November 24, 2011

Crunchyroll, Funico and streaming anime - latest @ Yomiuri

SOFT POWER HARD TRUTHS / Overseas anime market online only

The paradox at the heart of the North American anime market is common knowledge to industry insiders: Plummeting DVD sales and shrinking TV exposure coincide with record-breaking attendance figures at anime events across the continent and surging activity online.

At least the knowledge is common to insiders who are actually in North America. Here in Japan, it's still being treated like news--often unwelcome news.

Anime fans outside of Japan turned to the Internet long ago to feed and fuel their habit, and the prospect of them returning to overpriced, hard-to-find and long-delayed DVD releases is not in anyone's rational vision of anime's future. But try telling that to the folks who make the content.

"Our biggest challenge has always been educating Japanese companies," concedes Kun Gao, cofounder and chief executive officer of, the largest and longest-running online portal for anime and related content outside of Japan. "The biggest hurdle is convincing the licensors to give us the rights to their content. Not every company [here] is progressive."

I sat down with the diplomatic Gao in Crunchyroll's Tokyo office last week during his brief trip from company headquarters in San Francisco.

Gao knows his hurdles. Five years ago, he founded Crunchyroll as a fansite with four American friends, all of whom were driven by their passion to moonlight as Internet anime pirates. As the site's popularity skyrocketed, he quit his day job to manage it full-time.

Other fansites proliferated, while anime producers in Japan saw DVD profits dwindle. Crunchyroll and its founders, operating the most popular pirate portal, realized they were choking off the very roots of their own growth. As I wrote three years ago in this column, they bit the bullet in 2008, officially going legitimate (i.e. legal) on New Year's Eve 2009--but not until they'd spent a full year trekking across Tokyo obtaining licenses to Holy Grail titles like Naruto and Bleach.

"It's always about the risk," Gao says. "The conventional way of watching anime in Japan is still on TV. There's no platform like ours in Japan.

"The producers and licensors are not thinking, 'Can I do something that's a little risky and get benefit?' It's more like: 'If this thing has a little bit of risk, it will only hurt my business. It can't help.' And I think that's the environment in Japan. It's easier not to take a risk than to do so."

Running any business risk-free is impossible, of course, and changes within the Japanese market are fast rendering it unaffordable, too.

Gao points to the diminishing domestic youth audience for anime in Japan as a key pressure point in Crunchyroll's efforts to motivate licensors who are hesitant to leap online. There's no way you'll have growth at home, he tells them, so you better go global now.

"As entrepreneurs, our goal is to minimize risk and maximize opportunity. One of their fears is that a title will be leaked online before its domestic TV broadcast. That has never happened with us, and we're the only company who can say that. We try to get [licensors] to understand," Gao says.

The past couple of years have been tumultuous for North American purveyors of Japanese pop culture. Bankruptcies and fire sales have become routine.

Earlier this year, TokyoPop--a pioneer in the overseas manga and anime markets that introduced millions to the seminal Sailor Moon series--closed its remaining office in Los Angeles.

The abrupt liquidation of Borders, one of the largest bookstore chains in the United States, was "the last straw," according to TokyoPop founder and CEO Stu Levy. "They owed us close to a million dollars," he says, "and represented about one-third of our total sales."

The industry response has been equally swift, focused on streaming video and online simulcasts of Japanese TV programming. Last month at the New York Anime festival, DVD distributor Funimation announced a tie-up with Japan's NicoNico, the video file sharing site whose global portal,, launched in April with a party at Seattle's Sakura-Con.

Christopher Macdonald, CEO of, the largest online anime news Web site outside Japan, wrote that the partnership, called Funico, was "more important than many people may realize," adding that he hoped more joint ventures between distributors and streaming sites would follow.

"The thing about anime is that it has to focus on online," he says now. "It can't wait for TV. The quantity [of anime programs] on TV has diminished. Young networks that carried anime in the past, like Cartoon Network, have realized that it's more profitable to own a franchise than to license it.

"In North America, the industry forced people for years to buy anime they hadn't actually seen," he says.

With piracy and streaming options, he adds, that's a luxury no longer available. But here's the hitch: Both Gao and Macdonald worry about the quality of anime currently being produced in Japan. In a tight market, content producers cling to the "tried and true," says Gao.

This often means so-called moe narratives, featuring cute--and sometimes eroticized--young-looking female characters. The genre has a dedicated following in Japan, but is unlikely to find an export market.

"Moe [and other niche genres] are a safe bet for making money over one season," says Macdonald, "but the problem is that they don't grow the audience."

"Quality is actually more important to us than quantity," adds Gao. "In Japan, this is not the golden age of anime."

Kelts is a visiting scholar at the University of Tokyo who divides his time between Tokyo and New York. He is the author of Japanamerica: How Japanese Pop Culture has Invaded the U.S. and the forthcoming novel, Access.
[more @YOMIURI]


Anonymous said...


Thanks for the article.
I worked as an animator in the Japan industry for some years and experienced firsthand the miserable state of the industry then.
The quote at the end of your article rings true. There is no interest in growing the audience, and by extension no interest in growing their local talent or ultimately the industry itself.
Why is Japanese animation overpopulated by doe-eyed Lolita moe-units?
This is because more and more the only people who can survive and make it to the upper ranks are those who have no need of human experience or relationships outside of the confines of their own fetishized reality.

They can only tell one story… their own.

Roland Kelts said...

Thanks for your insights. I'm very keen to hear more, given your experiences.
Otaku are now making anime--for other otaku: