Why the DOJ Is Overthinking the Sony-Crunchyroll Deal

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Yinchen Niu/Variety Intelligence Platform

The U.S. anime market may be headed toward a dangerous level of consolidation. 

That’s the thinking of the U.S. Justice Department at least, which is now examining whether Sony’s $1.2 billion December acquisition of Crunchyroll would give it dominance in the anime streaming market, The Information reported last week. 

The DOJ’s scrutiny could delay Crunchyroll’s sale to Sony, which already owns another major U.S. anime streamer called Funimation, by several months and may even kill the deal completely.  

A main concern with the Sony-Crunchyroll deal is that overseas anime studios will be at a disadvantage with fewer distinct platforms to choose from for distribution. 

Yet this type of thinking seems unsound given how other video streamers, with reaches that surely dwarf those of Funimation and Crunchyroll, are placing greater emphasis on growing their anime libraries. 

For example, Netflix (which The Information estimates is over 16x bigger than Crunchyroll by U.S. subs), will release 25 live-action and anime titles from Japan in 2021. Between October 2019 and September 2020, over 100 million households globally watched anime, up 50% year-over-year, according to Netflix. 

Meanwhile, Amazon may not have been historically as active with anime originals, but it told the Financial Times in January that it’s “fully committed” to anime and global fans “will see more coming from us in that genre.” From 2017 to 2019, anime titles such as “Made in Abyss,” “Dororo” and “Vinland Saga” have debuted on Prime Video. 

This growing anime appetite should help ensure there remain attractive distribution alternatives to the would-be Crunchyroll-and-Funimation-controlling entity as the Japanese anime industry potentially expands by as much as 40% between 2019 and 2026. 

While it’s true that many U.S.-based anime diehards might lean toward streaming their favorites on Crunchyroll and Funimation, the ubiquity of services like Netflix and Prime Video could still make them appeal to anime distributors that prioritize reaching as many eyeballs as possible, not to mention distributors that prize the pretty payouts deep-pocketed tech giants can provide.  

Seeing as how anime initiatives by SVOD giants are ongoing anyway, shouldn’t the DOJ want Funimation and Crunchyroll to be able to join forces, so as to not keep Netflix and Amazon’s reach advantage over other services so glaring? 

Meanwhile, original content ambitions from smaller video streaming platforms, notably those in the AVOD space like Roku and Tubi, are growing. And these platforms could also present new attractive anime distribution channel alternatives as Funimation and Crunchyroll join forces.  

Fox’s Tubi has discussed spending as much as $4 million an episode on new TV series, Bloomberg reported in early March.  

We may not hear more on the DOJ’s examination of Sony’s Crunchyroll acquisition for a while, but it seems clear that blocking the deal would be counterproductive to promoting video streaming competition, especially as the viability of niche SVODs come into question

If acquisition becomes less of a viable exit path, some would-be streaming founders might start to become even more intimidated by the thought of starting their own OTT ventures.