The Crunchyroll-Funimation merger is proof that niche video is hard
Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Thursday, we’re taking a closer look at Sony’s decision to merge Crunchyroll with Funimation, the deplatforming of RT and the comeback of location-based VR pioneer The Void.
Sony doubles down on anime
This week brought some welcome news for anime fans looking for a distraction from an otherwise bleak news cycle: Sony is merging the libraries of its two anime services, Crunchyroll and Funimation, under the Crunchyroll brand, giving paying subscribers access to more than 40,000 episodes of anime content. Crunchyroll and Funimation will coexist as separate services for the time being, but Sony is nudging subscribers to switch to Crunchyroll by making new shows exclusive to the service.
Uniting the two services under the Crunchyroll banner is a logical next step for Sony, which spent close to $1.2 billion last summer to buy Crunchyroll from WarnerMedia. But it’s also an admission that niche-centric video subscription services have largely failed, with anime being the sole exception to the rule.
Crunchyroll has long been a niche success story. The service surpassed 5 million subscribers and 120 million registered users last year, with subscription fees ranging from $7.99 to $14.99 per month.
- Crunchyroll also has a growing game and merchandise business and has been hosting in-person events since 2017.
- Soon after its launch in 2006, Crunchyroll was looking to expand into other content genres.
- Those plans got turbocharged when The Chernin Group acquired Crunchyroll in 2013, and AT&T entered a joint venture with Chernin called Otter Media in 2014.
- The idea at the time was to take Crunchyroll’s niche-centric approach and adapt it to other genres with passionate audiences, signing up millions of paying subscribers in the process.
- Crunchyroll launched Kdrama.com for Korean dramas in 2014, and it briefly experimented with a Chinese content service as well. There were also plans for a Vietnamese-content-centric service.
- Otter Media even acquired a craft video site, Creativebug, to branch out beyond its anime-obsessed core audience.
Building niche subscription services turned out to be a lot more complicated, and less popular, than expected. As Netflix was adding millions of subscribers every quarter, and aggressively spending for content from around the world, a bunch of niche streamers were forced to throw in the towel.
- Crunchyroll sold its Korean drama business to Viki in 2015 and abandoned the idea of launching other niche services.
- The company switched to an aggregator model instead, complete with a new brand: VRV.com was supposed to become a kind of hipster post-cable bundle, offering access to AT&T-owned and third-party streaming services for one monthly price.
- Those efforts quickly lost steam, in part because Funimation content left VRV in 2018.
- VRV got further sidelined by AT&T’s focus on HBO Max, which launched with some Crunchyroll content in 2020.
- VRV found its way to Sony as part of the Crunchyroll acquisition, but it’s clearly on its way out. A Crunchyroll spokesperson told me that there are no “current shutdown plans” for VRV, but that the company is “actively encouraging users to cancel and move to Crunchyroll.”
There may not be a whole lot of room for niche video subscription services outside of the anime world, as proven by the demise of VRV and continued success of Crunchyroll. But that’s not just a content issue: Crunchyroll began as a fan-focused site, with audience members supplying their own subtitles for their favorite Japanese anime shows.
The company kept that spirit alive over the years by engaging with fans on message boards, making collectibles for their favorite characters and even hosting fan conventions. In the end, Crunchyroll is not just a video library, but, first and foremost, it’s also a thriving community of millions of fans around the globe — something that is virtually impossible to recreate from scratch.
— Janko Roettgers
RT is being deplatformed globally
It’s been a bad week for RT, the English-language TV network funded by the Russian government. Accused by the West of spreading propaganda about the Russian invasion of Ukraine, the network has been banned and restricted by a number of companies in recent days.
- Microsoft was first among the big tech companies to sever ties with the network, removing the RT app from its app store earlier this week and deranking its search results.
- The EU issued a ban of RT on Sunday, giving tech companies cover to restrict access to the channel in Europe as well.
- Meta, YouTube and TikTok did just that Tuesday, banning access to RT across the continent.
- Twitter and Google also began limiting the visibility of RT content globally this week, and Google dropped RT from its respective revenue sharing programs.
- Apple removed RT from its app stores outside of Russia Tuesday.
- Roku announced late Tuesday that it would remove the RT app globally. The streaming device-maker had previously restricted access to RT in Europe.
- DirecTV dumped RT America on Tuesday and indicated that the channel had already been on the chopping block ahead of a potential renewal this year.
- Spotify removed all RT content, as well as content from the Russian news agency Sputnik, from its service yesterday.
- The network has also seen a massive staff exodus, with a number of journalists quitting the network in protest.
- Among the defections: Berlin-based video agency Maffick Media and financial journalist and bitcoin enthusiast Max Keiser.
This has led to a predictable backlash in Russia, where the regime has started to take retaliatory steps against Meta and Twitter. There’s also a possibility that the bans could backfire against tech companies in the future, with repressive regimes forcing them to remove apps and accounts from media companies they don’t agree with.
But how did RT get so popular in the West in the first place? There are some obvious political answers, which include a broad popularity of conspiratorial content since the rise of Donald Trump. But there’s another explanation that has a lot more to do with the economics of online media.
- U.S. news media companies have long struggled with their online video strategy, frequently striking potentially lucrative deals with tech companies, only to see those partnerships evaporate soon after. (Remember Go90? Or Quibi? Or the industry’s infamous pivot to video, for that matter?)
- Public and state-sponsored international broadcasters like Al Jazeera, TRT and RT, however, have had less pressure to chase ad dollars, allowing them to build massive audiences on YouTube, Facebook and elsewhere just by iterating on what works for them — whether that’s a bigger focus on international conflicts and social movements or pro-Russian propaganda.
- RT, for instance, claims to have surpassed 10 billion views across its YouTube channels.
The flip side, of course, is that although these broadcasters may not be financially dependent on ad dollars, they still need Big Tech’s platforms to reach an audience. And if they’re being deplatformed, that audience can disappear overnight.
— Janko Roettgers
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In other news
Google has been busy acquiring audio startups and IP. The company has spent tens of millions of dollars on technology and teams that could be key to helping it take on Apple’s AirPods.
AppLovin has acquired Wurl for $430 million. The acquisition is another proof point for the growing popularity of linear streaming networks.
Netflix is defying Russian regulations. The company is supposed to add Russian TV networks to its service this month, but now has no plans to do so.
Why TikTok wants longer videos. Can the service become YouTube before YouTube becomes TikTok?
Twitter may be adding podcasts to its app. It will be interesting to see whether the company will tie an expansion into podcasts to its Spaces platform.
Electronic Arts strips Russia from its FIFA and NHL series. The publisher said it would remove the Russian national teams and Russian clubs from the latest entries in its soccer and hockey franchises.
Netflix scoops up another mobile developer. The streaming service said it plans to buy Finnish mobile studio Next Games, which it worked with on a “Stranger Things” puzzle game, for $72 million.Epic is making a metaverse music push. The Fortnite creator announced its acquisition of music marketplace Bandcamp yesterday, with both companies saying their values on the creator economy are aligned.
One more thing
Protocol readers may already know that location-based VR pioneer The Void is plotting a comeback. This week, the company took one more step toward its eventual return: It relaunched its website, which had been offline for around a year. “The Void returns bigger, stronger, and better than before,” the site promises, without offering many additional details. Fans of the company were nonetheless excited, and former Protocol editor Mike Murphy couldn’t stop himself from commenting that it “looks like they’re filling a void.” Mike, seriously. But he’s not wrong!
— Janko Roettgers
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