On August 9, Monday, media giant Sony Pictures officially acquired anime heavyweight Crunchyroll from AT&T for a whopping $1.175 billion.
The acquisition is Sony’s second after it purchased a controlling stake in Funimation in 2017 for $143 million (Variety).
Sony wants to broaden its distribution of anime content, the demand for which is ever-increasing. The intention is to expand offerings and to “create a unified subscription experience as soon as possible,” said Tony Vinciquerra, CEO, Sony Pictures.
First, what in the world does that even mean?
Second, can you hear the bells toll, heralding consolidation?
Sony Pictures completes $1.175 billion acquisition of Crunchyroll
Anime content may not be mainstream. It pales in comparison to primetime television, let alone Hollywood content. However, the appetite for it is still enormous.
According to Grand View Research, the anime market’s value was estimated to be nearly $22 billion in 2019. Although, the figure does not just account for content distribution and broadcasting, but also merchandise, live entertainment, games, and other anime-related sales.
Crunchyroll has a big hand in those sales.
Founded in 2006, Crunchyroll is a content distributor and streaming service that offers more than 1000 anime shows, over 200 East Asian dramas, and over 50 “manga” titles to more than 5 million paying subscribers and over 120 million registered users worldwide, spanning 200 countries. It also distributes mobile games and anime merchandise and has over 50 million followers on social media.
However, before it was acquired by Funimation, the anime-producing subsidiary of Sony Pictures, Crunchyroll was acquired by AT&T from Otter Media, a subsidiary of The Chernin Group, which bought a controlling stake in Crunchyroll in December 2013, for $100 million, reportedly (VentureBeat).
Crunchyroll is an ideal example of a streaming platform that has successfully scaled despite producing niche content. And it is that scale after which AT&T and now Sony Pictures were after.
The investment was certainly worth AT&T’s money.
In 2014, it merged with The Chernin Group to launch and heavily invest in a new venture, an OTT service under the holding company called Otter Media. In 2017, the platform had 700,000 paying subscribers. In December, last year, when talks of acquisition with Sony Pictures advanced, the platform reported having 3 million. Today, less than a year later, it reports having more than 5 million.
When AT&T took over, it ventured to invest $500 million in the project. In August, last year, when it was first approached by Sony Pictures, the purchasing price was reported to be $1.5 billion (The Verge). Despite selling Crunchyroll for little over $1 billion, AT&T has made almost double of what it had invested.
The question is, is the investment worth Sony’s money?
Perhaps yes. Combined with Funimation, Sony would be able to cast a wider net, just as AT&T had planned, broadening distribution and expanding offerings. Besides, Funimation, given its enormous success, would arguably be more capable of capitalizing on Crunchyroll’s potential.
It is not clear what a “unified anime subscription experience” refers to, but one can guess that the intention is to perhaps offer a wide variety of anime content, across different genres, packaged in a seamless, on-demand experience. As Vinciquerra explained, Sony has “an unprecedented opportunity to serve anime fans like never before and deliver the anime experience on any platform they choose…everywhere and in every way, they want to experience their anime.”
Now, that, on paper, is a win-win for both Sony and anime fans, as Sony gets to control and offer a wide range of anime content — theatrical, entertainment, games, live events, linear TV — while fans get the best of on-demand anime in one place.
So, that is a “unified anime subscription experience”, a dream that has cost Sony $1.175 billion, making it one of the most high-profile acquisitions of the decade.
The age of acquisitions
Crunchyroll’s acquisition by Sony to expand its user-base and offerings is not the first, and certainly won’t be the last.
Netflix and Amazon, too, had their eyes on anime, with the former’s CEO, Reed Hastings, even calling it a “core area” back in 2015 (The Verge). Then, it had north of 4 million subscribers. Today, it has north of 200 million. Instead of producing content in-house, bigger players like Sony and Netflix can simply acquire smaller players to gain subscribers more efficiently.
Amazon, in fact, recently acquired MGM (Metro Goldwyn Mayer) for an estimated $8.5 billion (NPR), gaining licenses to a treasure trove of content. After acquiring The Chernin Group, in 2018, after a much-heated legal dispute, AT&T acquired Time Warner (now Warner Media) for a mind-boggling $85 billion (CNBC), taking over HBO, Warner Bros., and Turner cable networks.
Acquisitions enable businesses to gain expertise and strengthen their assets. However, acquisitions so frequent and at such a massive scale are signs of consolidation.
Consolidation represents the opposite: a lose-lose. Smaller companies’ only chance of survival is selling. While the lack of competition robs consumers of choice.
Gone are the days when countless platforms offered a variety of new, innovative, path-breaking content at shockingly low prices. As things are going, all streaming platforms could soon be owned by a handful of unimaginably wealthy and powerful conglomerates.
Content — Art, indeed — in all shape and form, would live and die by their word.
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