Crunchyroll CEO: making online anime pay

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Crunchyroll CEO: making online anime pay

Postby Roy Mustang » Tue Dec 16, 2008 4:27 pm

Crunchyroll CEO: making online anime pay part 1


ICv2 wrote:In a little over two years, Crunchyroll.com became the number one anime Website by offering a multitude of user-uploaded anime videos, many without the permission of the licensor. Now it is making a major change by offering only licensed videos on its site beginning in January, including some, such as Naruto Shippuden episodes, almost immediately after the initial broadcast of the new episode in Japan (see “]
Maybe you could start out by giving us a history of Crunchyroll. [/B]

Crunchyroll started in the middle of 2006. Three other founders and I were friends. We met at UC Berkeley. We’re all electronic engineering and computer science majors. Back then anime was really picking up everywhere--in the dorms, on campus, people were watching it. We got really into animation.

After we left college in 2004 we all went our separate ways, some of us going to grad school, others working in industry, mostly on consumer facing Websites. Eventually we all met back again and we decided to work on anime as a nights and weekends passion project. We still had work during the day and we were sinking quite a bit of our own money in and maxing out credit cards because the bandwidth bill was so high. It eventually got to a point around the middle of 2007 when all we could do was keep the site up. There were so many things to do.

We voluntarily quit our jobs. It was really a very scary moment because we didn’t know how things were going to turn out, but we had a lot of faith that because we were servicing a lot of passionate fans and were building a site that fans can enjoy, it would turn out for the best.

After that we started talking to venture capitalists. They became very interested because there were so many passionate fans on the site--they were not just into watching content, but also community and the full social networking experience. We received funding from Venrock (that’s the venture arm of the Rockefeller family), in December of 2007. From then on we’ve been very aggressively licensing content, and taking down unlicensed content.

We’ve set up an office in Japan. We actually have a subsidiary now in Japan talking to all the license holders and licensing all the content that we can get our hands on. That’s pretty much where we are now.

You mentioned Venrock, and a month or two ago we did a story about Gonzo also being an investor. Are those the only two investors?

Venrock is the only institutional investor. We have a number of other strategic investors including Gonzo.

What was the original monetization strategy?

I don’t think it’s changed. There haven’t been too many external factors that affected our business plan. What we’ve always looked for are ways to monetize online digitally. Once we monetize we look to revenue share with licensors. That way they can tap into this audience that they’ve never been able to monetize before. The three ways we’re doing that now are:

With ad supported free streaming. That way people can watch content for free but we can serve an ad and we revenue share that with the publishers.

The subscription plan which we’re launching January 8. This includes the hit shows that we’ve licensed such as Naruto Shippuden, Gintama, Skip Beat, Shugo Chara. People can, if they pay a few dollars a month they can watch one hour after it airs in Japan. It’s never been done before. It’s a very exciting time.

We also offer other options such as DTO and also we’re starting to explore virtual merchandising.

We offer a lot of different options for publishers to monetize their content.




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Postby Roy Mustang » Tue Dec 16, 2008 4:29 pm

ICv2 wrote:How many videos are on the site now and how many will there be on the site after the changeover in January?

How we see it, it’]Is there going to be a change in the number of videos available on the site because of the new policy in January?
[/B]

There’s definitely going to be less videos at the very beginning. But the difference is that the videos we’re going to have are going to be really the best content. Naruto, for example, is the number one anime online. That’s going to be on Crunchyroll. The only place to access it one hour after airtime is to purchase the subscription plan on Crunchyroll.com. Right now we really have a lot of long tail content. Some of this content, it’s a shame, but there are really no more committees for it. There’s no more approval process. There’s really no way for us to get the license sometimes. Unfortunately that will be lost but we’re replacing that with much more quality content going forward, and hopefully that will draw a lot more audience to our site.

How much is your subscription fee?

Normally it’s about twelve dollars. Right now because it’s pre-order we’ve discounted it to about six dollars. So six dollars a month, you can lock in that price if you order now, between now and January 8 when we start the program. We’ve only announced a handful of shows but in the next few weeks we’re going to announce many more shows, much deeper coverage of the content that you’ll be able to watch early as well as high definition.

What are your plans for hi-def—are you going to be delivering any hi-def content?

Yes we are. That’s one of the value propositions that we bring to our subscription plan. People who pay a few dollars a month the not only watch Naruto Shippuden and a number of other shows one hour after it comes out in Japan, they also get it in hi-def. For us hi-def is 720p currently. But we also offer other options—if the bandwidth is not fast enough or the computer might not be able to handle 720p. Some demo clips that we’ve posted online, if you go to the pre-order part of the site you can see what the quality’s going to look like come January. And it looks great.


Part Two

We’re curious about your perspective on two other means of delivering content to fans, DVDs and television, and what the impact of online delivery the way you’re doing it will have on them. What do you think the impact will be of increased online delivery on those two distribution channels?

In terms of DVD, I would classify that as more physical media, physical merchandise. I firmly believe that having more audience, having more people watch your show, getting more exposure is going to drive more purchase of physical media as well as physical merchandise. That’s not just me; there’s a number of people in the industry that feel the same way. For example, I read an article on your site with a spokesperson from Viz saying exactly the same thing. There are people in Time Warner and so forth who have said this as well.

In terms of television I think the one really significant event that happened was Cartoon Network dropping the Toonami service, which is very unfortunate. I grew up watching Dragon Ball, Gundam and other shows on Toonami when I was a kid. What I think is very significant for us and it really positions us in a great way is that Crunchyroll is now the number one way for people to watch anime for free, not just online but on television as well. There’s really no other way for people to watch the breadth and depth of content that we have on our site. We hope to drive more audience, and grow the anime fan base. I firmly believe that will converge into more people who want to buy the physical merchandise, buy the DVDs, and so forth.

So you see the online delivery as sort of replacing what has been lagging a little bit on television, giving fans an opportunity to see content in more ways?

Yes, definitely. It’s a little bit funny because everyone complains, “Oh. I guess the kids in Japan can watch anime for free on television. They just turn it on. Why can’t we watch it?” Hopefully with Crunchyroll we can bring that to them. We see ourselves as replacing Toonami as the number one portal for people to watch anime both online and on television.

We see you’re starting to put your toe in the water in manga. What are your thoughts on manga and the future of Crunchyroll?

Manga is something that we will continually explore. It’s definitely a different type of medium for us. Things are very initial right now. I can’t really make promises on how far we’ll get into that. It’s going to be a little bit different monetization strategy mostly because you can monetize a lot better on print. Print is a very good format for people to carry. So initially it will probably start online as more of a promotion and going forward we’ll have to explore different business models to monetize the manga segment.

We do see some parallels in the sense that there are a lot of illegal scanlations out there of manga. It’s the same kind of situation as anime. It appears in Japan, a day later it’s available translated online free. License owners aren’t making any money.

Definitely. These are things that we’d love to explore. Right now we’re very focused on bringing the video part of the business and really building audience and revenue sharing and giving a good value proposition for publishers.

How do you see the situation developing—you’ve got Crunchyroll which is targeted at a particular portion of the audience. Then you’ve got competing sites like Hulu or Joost that are trying to deliver very broad content. Do you see those coexisting? Or do you see one or the other model prevailing?

Definitely coexisting. The reason is because we see ourselves as a little bit of a different audience, like you said, versus Hulu. For example we see ourselves as the core anime fans in the U.S. and the rest of the world. The reason I believe that is that people on our site prefer to watch it sub-titled rather than dubbed. Hulu is targeting a little bit more of a mainstream audience who might not be the anime fan but may like a certain show or a certain genre. Really it starts at the core. You have to really build your core audience and then you can start growing your brand to become broader.


On the download to own side, who’s your competition and how do you differentiate yourselves?


On the download to own side we just offer one option, one possibility for licensers to up-sell their videos via download to own. We’re definitely very happy working with publishers if instead of driving the traffic to our download to own they want to drive it to iTunes or Xbox, or some of the other proprietary platforms. That’s something that we’re totally fine with. It makes licensers more money and just because people watching the shows for free or for subscription want to download it on a different platform doesn’t mean we shouldn’t be working with those guys.


What’s your view of the coming months?

I think the winds of change are upon us. It’s really happened a lot quicker than I think anyone really anticipated, even us. I’m really excited about being able to offer our subscription plan. It took a lot of effort and energy to put together but being able to bring the content one hour after it airs in Japan for a very low fee, a few dollars a month, for people to enjoy everywhere else outside of Japan is really exciting. Hopefully people will really embrace this.




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Postby ChristianKitsune » Tue Dec 16, 2008 6:06 pm

If I understand this correctly:

Crunchyroll will be sometning we have to pay for now? Or is that just to watch the anime RIGHT after it airs? I'm a bit confused by that...

Are they going to be taking off the anime that is currently unlicensed and probably won't ever be licensed, what about the dramas and movies?

If they are then the anime fan in me will probably be a bit disappointed because of the amount of unlicensed anime/ Dramas that won't be seen...

but the part of me who wants the anime industry to be saved...is thankful for this... Its a great solution to a severely growing problem...
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Postby Momo-P » Tue Dec 16, 2008 9:09 pm

I like it...but isn't it a bit unfair?

"You want Shugo Chara and Naruto...well then you also pay money so you can watch other shows...even if you don't want them! 8D AWESOME HUH?!"

No, not really. ._.;

Personally I don't even watch either of those shows, but as of late, no real anime has come out that I've cared for. The only series I'm waiting for is Umineko and I honestly have a bad feeling Crunchy WILL get it...then I'll be forced to pay extra for shows I won't even want. Why can't there be like so many cents for each episode? At least then you'd be paying for what you actually watch and not for "possibilities".
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Postby Nate » Wed Dec 17, 2008 12:54 am

Momo-P wrote:I like it...but isn't it a bit unfair?

"You want Shugo Chara and Naruto...well then you also pay money so you can watch other shows...even if you don't want them! 8D AWESOME HUH?!"

That's like complaining "You have to pay money for satellite/cable to watch ESPN and Lifetime even if you never watch those channels!"

It's a flat fee and you get access to as much or as little as you want to watch. It's exactly like television service. I...I fail to see how this is unfair?
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Postby ChristianKitsune » Wed Dec 17, 2008 6:27 am

Nate (post: 1276176) wrote:That's like complaining "You have to pay money for satellite/cable to watch ESPN and Lifetime even if you never watch those channels!"

It's a flat fee and you get access to as much or as little as you want to watch. It's exactly like television service. I...I fail to see how this is unfair?


That is a REALLY good point.
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Postby Roy Mustang » Wed Dec 17, 2008 11:25 am

To answer your question Kit,

The change will take place on Jan 8 and Crunchyroll will not accept fansubs or videos from members.

So, from what I get out of it is, they will still show unlicensed anime, but they have to get from the company.

But we will just have to wait and see. I'm thinking they will get to show unlicensed anime, but they will not be fansubs.

Then again, some of the fansub groups never gave Crunchyroll the okay to put their subs up at all and then they were really mad, when if you wanted to watch a better version of it, you had to pay.

I feel this good as Crunchyroll is trying to clean up their act. I don't know how many times a fansub group have ask them to take subs off the site or ask when it became licensed and they never did.

But after they got a deal with some of Japan studios, they were really trying to get all that stuff off their site.

I hope it works out for them as it looks like they really really want to try and be fair.

Now, you still have Hulu and Joost that you can watch anime for free as well and its legal.

Now the question is, will Hulu and Joost do the same thing down the road?


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Postby whisperingloon » Wed Dec 17, 2008 12:12 pm

I don't think Hulu or Joost (not sure since I'm not as familiar with Joost -- the interface really didn't endear myself to them) will go to a paying model. They have advertisers, and that's how they are able to pay licensing fees.

I HOPE they don't go to that! That's how I get my Battlestar Galactica fix without paying for cable! And that's how I catch Terminator and Heroes when I miss them! (Which is pretty much every week.)

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Postby Roy Mustang » Wed Dec 17, 2008 1:58 pm

whisperingloon wrote:I don't think Hulu or Joost (not sure since I'm not as familiar with Joost -- the interface really didn't endear myself to them) will go to a paying model. They have advertisers, and that's how they are able to pay licensing fees.


That is true, but never say never. With money worries, companies will cut back and advertising would be one of them.

If they start to feel a pinch, they may look at other paying models to get their money.

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