Launched in 2006 as yet another fansub/piracy site, Crunchyroll went legit about two years later and became a driving force in the Western anime fandom, now reaching three million paid subscribers. Throughout that time, control over Crunchyroll has shifted even as it makes it own deals (like recently taking majority ownership of VIZ Media Europe), and today, it is fully under AT&T’s umbrella.
…For now.
A Potential Reunion
Several years ago, Crunchyroll and Funimation announced they were entering into a partnership. This created an anime streaming juggernaut that allowed both sub and dub fans to get their seasonal and backlog fixes. But eventually, as AT&T bought Crunchyroll’s parent and Sony took control of Funimation, the joint venture dissolved, and Crunchyroll grew closer to Sentai Filmworks/HIDIVE again. But recently, The Information reported that AT&T offered Crunchyroll to Sony for $1.5 billion.
Sony already has been consolidating its streaming services around the world, including adding more Aniplex titles to FunimationNow. But according to The Information, they “balked at” the pricetag. That would be equivalent to $500 per subscriber; in 2017, the service was valued by AT&T at about $400 per subscriber. In that same article, analysts told The Information AT&T’s asking price “is well above recent values for other niche streaming services”.
AT&T’s Struggles
So, first off, why is AT&T trying to sell Crunchyroll considering its recent milestone and the fact many of its series are airing on HBO Max? Anime is obviously a part of HBO Max’s strategy, as they got exclusive streaming rights to Ghibli titles. Well, the answer is a common reason why both large companies and single individuals tend to sell things: to pay off its bills. The media communications company currently has over $150 billion in debt.
While that doesn’t represent its record highs from a few years ago, it’s still one of the — if not the #1 — most in-debt companies in the world and biggest borrower who is not a finance company. Plus, AT&T had a horrible second quarter due to the pandemic despite people consuming more media and needing communication tools like phone/Internet more than ever. The CEO doesn’t expect its third quarter to be much better.
In addition, The Motley Fool notes how AT&T is one of the companies that pays its stockholders more and more each year, and that next to Exxon Mobil, that dividend yield is the highest among these businesses.
AT&T has taken out more loans recently to help during COVID-19, but it has also laid off a number of employees. AT&T is also considering selling their game division to raise some more money, but they may be changing their minds and keeping Warner Bros. Interactive Entertainment.
Reunited But Will It Feel So Good?
So AT&T could decide to keep Crunchyroll as-is, especially if they don’t think they’re going to get near their $400-per-subscriber purchase price. FunimationNow had about 300,000 subscribers in 2018, so even now, it probably has 500,000 or so. So a Sony-owned Crunchyroll would dramatically increase their paid numbers, and I’m sure that’s very tempting. And while $1.5 billion may be too much, perhaps they may be willing to pay $1 billion, which Variety reports is AT&T’s minimum asking price. The article adds that Sony is “one of the potential buyers”, so perhaps there are other interested parties, but who knows if anyone else is serious or not.
Even $1 billion is a lot. Amazon didn’t pay that much for Twitch in 2014, although technically it had less users than Crunchyroll has now (55 million vs 70 million). I could see the two reaching a deal around the $800-900 million mark, which might technically be a loss for AT&T but would still have other parts of Otter Media to own or unload. Or maybe even then it’s too much of an investment for Sony or anyone else to take considering AT&T’s track record with its various acquisitions hasn’t been the greatest.
Crunchyroll also needs some improvements. The manga app on iOS, for instance, is downright awful. On my iPad, I get the “could not connect to the server” message that requires reinstalling in hopes of getting it to work…only to fail again within a week, sometimes next day. Not saying Funimation doesn’t have its own issues (it does), but it also required a lot less money ($143 million vs $1 billion). Still, assuming roughly 300,000 subscribers in 2017, that’s $477 per subscriber, so not too far off from AT&T wanting $500 per Crunchyroll paid member. Of course, if they get $1 billion, at $333 per subscriber, that’s a better deal than Funimation was for Sony.
Of course, then that means Sony will want to pay off that purchase price. Currently, signing up for the cheapest option for both platforms is around $13 a month, but could Sony do both for about $10? That was possible with VRV, another Crunchyroll brand, which also included additional content like Boomerang. After Crunchyroll and Funimation’s partnership ended, HIDIVE took Funimation’s spot, with VRV still $10 a month.
Nowadays, though, both Crunchyroll and Funimation have three tiers, so perhaps Sony could start the price for these two services around $13-15 but throw in some of their better benefits like free shipping or offline viewing? I could see people upset about any real or perceived price increases, but perhaps getting most of the new anime each season and only really worrying about Netflix and HIDIVE would perhaps balance that out. Plus, streaming prices have slowly been ticking upwards due to the Great Streaming Wars. Even the basic Netflix plan is $9, so around $12 for a niche market with added benefits like manga is not outrageous.
If Sony were to buy Crunchyroll, who knows if they would slowly fade one brand or they would kind of be like, say, the TJ Maxx and Marshall’s chains — two stores that are very similar and have the same owner but have slightly different focuses. Changes probably would have to happen gradually due to contracts, but maybe Crunchyroll could focus more on subs and older titles while Funimation has the seasonal shows and dubs.
HIDIVE’s Place
Still, we can’t forget that part of the reason AT&T is struggling right now is because they went on a buying spree. And less competition in the anime streaming market comes with dangers like less need to innovate and higher pricing.
Perhaps the most significant threat of such a merger is the one to Sentai Filmworks/HIDIVE. They already struggled when it was the odd-man-out of the big three anime services, but a Crunchyroll-Funimation merger or integrated partnership would be even tougher for them to navigate now. Because there’s almost surely no way Funimation’s titles could just be added back to VRV and stay around $10.
And regardless of how Crunchyroll and Funimation were named and divided, if I were HIDIVE, I’d be very worried right now. Perhaps we all should have seen the signs with so many Sentai Filmworks titles being removed this month, but even with subs and dubs and roughly half the cost of a Funimation-Crunchyroll joint membership, it would not be able to compete. Not so much in the current number of titles but in trying to get new ones. This combined anime-streaming Sony could just overbid on some titles just so they can brag on the number of exclusives — or put money upfront to be on the production committee.
HIDIVE could try to reinvent itself, but you already have smaller platforms like RetroCrush, which is free. Plus, the cost of making dubs means it can’t just make the money back with ads. Physical media sales are trending downward, and Funimation also competes in that marketspace.
The Future of Crunchyroll
Sentai Filmworks may be rooting for another company to swoop in so that Sony can’t claim a near-monopoly. As to who else would be interested in Crunchyroll, there aren’t a lot of options. $1 billion isn’t the sort of money that most investor groups would put up for streaming in times where conglomerates like Amazon, Disney, Netflix, and more are all competing for market share. Maybe Crunchyroll could go independent since they have the funds and clout to enter into other various deals like with VIZ Media Europe, but again, that’s a lot of money to raise. Not having a conglomerate’s backing may also make their various partners more skeptical about doing business with Crunchyroll.
As to a new owner…Well, Disney has a small, kid-friendly anime block on its Disney XD channel, but they’re big enough they can pad their service with their own content to try to keep Disney+ price low. They do own Hulu though, which Funimation has a partnership with. NBCUniversal recently launched Peacock for as low as free with ads, and they have no anime content, so it could be a way to get into a genre they don’t have. ViacomCBS via NickSplat already teamed up with Crunchyroll through VRV, and they are preparing for their upcoming relauch of CBS All Access. Crunchyroll would be a great addition to brands like Nickelodeon, Comedy Central, and MTV since I’m sure they share a lot of the same core demographics. The Crunchyroll Studios brand may also fit better there under a Western umbrella to blend its Western-Eastern animation versus the more Japanese-centric Sony.
But in the end, like it or not, AT&T would probably do best trying to hammer out a deal with Sony. A Japanese company getting Crunchyroll’s positions on various anime production committees and dramatically increasing their buying power on new series to counter Netflix et al makes the most sense. Since Funimation also has a deal with Hulu, they could also potentially get some additional revenue by letting that service get first-look rights on Crunchyroll titles too. More anime could also boost Sony’s game division, allowing its PlayStation brand to do some cross-promotion on anime-related games.
But if Sony and AT&T can’t reach a deal, the fact that AT&T is shopping around Crunchyroll at a time when media consumption is at or near record highs means I can’t imagine them wanting to keep Crunchyroll in the long term. It’s not going to be shut down like DramaFever, but AT&T is probably not going to make Crunchyroll a priority in its portfolio. That may be a bit of a reprieve for HIDIVE to try to make themselves stand out from the crowd, as I would hate for the Great Streaming Wars to claim another victim.