I joined Crunchyroll in March 2008 as their first business hire just five business days after congratulating them on announcing their Series A funding. The next day, we flew to Japan, and within six months we had lined up key Japanese rights holders to support the site with official streaming deals.
This sound like a lot of fun? It sure was! But even more than that, it was a great hands-on experience learning about innovation to take bets on the truly new.
Let’s talk about three key things I learned during this time which still help guide my approach to innovation today:
- Constraints are part of your identity, not barriers to success, so take advantage of them
- Don’t be afraid to do something “good enough” now that can be improved upon later
- Be ready to adapt and try new things that put your customers first… you’ll learn a lot
CONSTRAINTS ARE PART OF YOUR IDENTITY:
Startups often have limited capital, and what they do have, they need to use wisely. If you’re a product-focused company, you probably don’t want to spend all your money outside product and engineering, either. So if you’re making all these investments into your platform and trying to disrupt an industry that has high content costs, you face a constraint on acquiring content against incumbents who have big cash cows to power their bids. But instead of thinking of this as a limitation, consider thinking of it as who you are.
Crunchyroll raised $4.05M in Series A funding right before I joined, but this actually wasn’t a huge number relative to what our then competitors were spending on content. Existing deal structures were based on buying a bundle of “all rights” spanning home video, television, merchandise, etc., monetized over a long period of time. With the constraint of our funding, we had to find a way to acquire the content differently than incumbents.
Enter the revenue-sharing subscription video on demand (SVOD) model.
While existing players who licensed anime did share revenue back to Japan, their emerging streaming sub-licensees at the time (e.g. Hulu) actually paid fixed “flat” fees rather than revenue shares for subscription streaming rights. Although we didn’t have the bigger resources of those streamers, we knew how the Japanese cared about how their intellectual property was treated and respected, so we flipped this constraint upside down to be able to acquire streaming rights that included a revenue share, something rarely pulled off even today by major SVODs.
“GOOD ENOUGH” NOW, IMPROVE LATER:
Before streaming, the “best” way to officially consume anime was through the high end collectors’ boxed sets on DVD and Blu-Ray. In North America, this meant having an English dubbed audio track in addition to Japanese audio with English subtitles, bonus features, HD picture, surround sound, and sometimes a cool goodies like mini toys or art books. The downside was that the cost was high and it could take months — or even more than a year — to get the product out to consumers from the time it aired on TV in Japan.
Really, the bulk of consumers just wanted to watch anime fast. Speed and convenience were the unique selling points, so our subscription launched with 720P video (instead of 1080P) and subtitled only (instead of the option for dubs). No extras, no goodies, just the content.
After my time, Crunchyroll would gradually improve upon what “good enough” was as dwindling incumbents still struggled to compete in streaming: 1080P video with better and better encoding, behind-the-scenes content akin to boxed sets, and even dubs in multiple languages released quickly after streaming.
The more you do something to serve an audience, even if it is only “good enough” for now, the more you learn about their needs and the better you get at doing it.
ADAPTING AND PUTTING CUSTOMERS FIRST:
We often think of “customers” as our end users (which is true), but in a business like Crunchyroll’s, also of incredible importance are the “customers” (partners) who license the very content that fans love. With Crunchyroll in the middle as the direct-to-consumer platform, our job wasn’t just to be a bridge, but become a flywheel that satisfied the needs of both sides while spinning faster and faster until it turned into a perpetual motion machine.
In the early days of an emerging business, trends can change fast, needs of both consumers and partners can evolve, and some bets might just not pay off. Rather than just letting the ship sail as soon as all these streaming deals started pouring in, we wanted to keep adapting, keep testing, and keep trying things that put the customer first.
What was a blessing for us is that more often than not, adapting and coming up with ideas to bring joy to consumers also satisfied content partners. Character birthday sharable landing pages, watch and win campaigns, scavenger hunts, and more, these were fresh and fun for fans and breathtaking for partners whose existing licensees had mainly settled into a status quo for what marketing meant for them. The net effect was building a stronger community and strengthening relationships with content partners all in one go.
Staying in tune with this harmony while also being an upstart maverick is not easy, but if you can pull it off, some real magic can happen.
Looking back, closing the big deals and hitting the flashy milestones were certainly exciting, but long term, it feels to me that having the opportunity first hand to experiment, to build, and to really grow into a lifelong innovator is the true reward.