Recently, officials of Japan’s major animation companies, including TV Tokyo Corp, Toei Animation Co., Ltd and Pony Canyon Inc, have been holding frequent meetings with officials of Crunchyroll, a small U.S.-based venture company with about 20 employees.

San Francisco-based Crunchyroll offers video-sharing services on the Internet. The company’s video-sharing site has 225 million page views monthly, and it has more than 4 million registered members.

In January 2009, about 20 Japanese animation companies will start, in cooperation with Crunchyroll, subscription-based animation distribution services targeting animation fans outside of Japan. More than 200 titles of Japanese popular animations are expected to be offered on Crunchyroll’s video-sharing site, including “Hokuto no Ken,” “Slam Dunk” and “NARUTO.”

Crunchyroll to distribute new animation videos on its site just an hour after they are aired in Japan

On video sharing sites, users can freely post and view videos. There are many other video-sharing sites, including Google’s YouTube. But Crunchyroll’s site differs from others in that it exclusively handles animation videos.

Japanese animations are enjoying overwhelming popularity in overseas markets. Kun Gao, chief executive officer of Crunchyroll, said only a limited number of Japanese animation titles are currently available in overseas markets. There are plenty of people in many parts of the world who want to view Japanese animations that have never been aired in overseas markets, even if they must pay for them, he added.

The 26-year-old Crunchyroll CEO is a big fan of Japanese animations. When he was a student at the University of California, Berkeley, he launched an animation site for his own enjoyment. Eventually, the management of the animation site has become his career choice.

Crunchyroll has a solid customer base comprising devoted animation fans. This enables the company to offer subscription-based animation distribution services.

By paying a monthly fee, subscribers can view on Crunchyroll’s site high-definition, full-version animation videos with English subtitles, about one hour after they are aired in Japan.

Although the company has yet to set the amount of the monthly fee, it is likely to be around $7, Gao said. It is also possible to buy each animation video by downloading the video file from the site.

Crunchyroll will split profits from the sales of animation videos with the Japanese animation companies, based on the total amount of monthly fees and the total number of animation video files sold on the site.

Moreover, Crunchyroll plans to earn advertising revenues by distributing animation videos with advertisements, free of charge, one week after those animations are aired in Japan or at a later time. In addition, the company aims to sell various animation-related products on its site.

Animation video-sharing sites meet the needs of Japanese animation industry seeking new distribution channels

Animation video-sharing sites, like Crunchyroll, have long been criticized by Japanese animation companies because rampant illegal downloading of animation videos from such sites has significantly reduced sales of their animation DVDs.

Currently, however, animation companies are willing to link up with the animation video-sharing sites. “Such sites will meet the needs of the Japanese industry, which wants to expand their distribution channels,” said Yukio Kawasaki, animation business manager of TV Tokyo.

“By forming tie-ups with video-sharing sites, Japanese animation companies can secure new distribution channels of animation videos on the Internet.”

Behind this trend is the recent business downturn in the Japanese animation industry, Kawasaki said. The sluggish business can be attributed to overseas broadcasters’ dwindling intentions to buy Japanese animations, and has nothing to do with the expanding Internet business, Kawasaki noted.

Under these circumstances, it is difficult for Japan’s animation companies to develop online distribution channels by themselves for both technical and financial reasons. That is why Japan’s major animation companies are eager to form partnerships with Crunchyroll.

To date, Crunchyroll has expanded its customer base by allowing them to post illegal animation videos to its sharing site. The company will drastically change this policy and allow users to post only videos of animations created by its partner animation companies from January 2009.

Also, it is making preparations for helping animation companies remove illegal videos of their animations from the site by providing them with pirated-video-detecting software.

These measures will likely enhance animation companies’ confidence in Crunchyroll. But, at the same time, they could deprive the sharing site of its vitality and result in a decline in the number of its users.

Experts in Japan’s animation industry are closely watching Crunchyroll’s new business to determine whether the partnership with such a video-sharing site will become a new revenue source for the Japanese animation companies.

(Satoshi Ebitani, Staff Writer, Nikkei Business)