From Piracy to Legitimacy: The Rise of Crunchyroll and the Exploitation of Digital Labour

Jacqueline Ristola

York University

March 5, 2016
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1. Introduction and Background

Founded in 2006 by Kun Gao and Vu Nguyen, Crunchyroll.com is a for-profit streaming

site based in the United States that specializes in anime (Japanese animation) and other video

content from East Asia. Until 2009, however, the site hosted illegal fan-subtitled, fan-uploaded

bootlegs of anime without copyright permissions. When Crunchyroll acquired a $4.05 million

investment from the venture capital firm Venrock in December of 2007,1 American anime

distribution companies FUNimation and Bandai Entertainment cried foul, criticizing the site for

continuously profiting from illegal materials and being rewarded for it.2 By January 2009, after

announcing a new deal with Japanese broadcaster TV Tokyo, the site committed to removing all

illegal content, and has since only grown internationally as the largest legal streaming anime site

of anime in the world, streaming content in up to 7 different languages3. The site is doing better

than ever, with over 20 million registered users and 700,000 paid subscribers, and recently

announced a partnership with the Japanese conglomerate Sumitomo to create their own anime

production company.4

While the site’s current popularization of streaming is notable, it is its previous illegality

that is particularly worthy of study, especially considering the site’s increasingly popularity

within the anime distribution world. As Crunchyroll received more company investments from

1 “Crunchyroll CEO: Making Online Anime Pay,” ICv2, last modified December 15, 2008, http://
icv2.com/articles/comics/view/13922/crunchyroll-ceo-making-online-anime-pay.
2“Video Site with Unauthorized Anime Gets US$4M Capital,” last modified March11, 2008, accessed
December 14, 2015, http://www.animenewsnetwork.com/news/2008-03-11/video-site-with-unauthorized-
anime-gets-us$4m-venture.
3"Crunchyroll Launches Its Services in Italy,” Crunchyroll, September 9, 2015, http://
www.crunchyroll.com/anime-press-release/2015/09/09/crunchyroll-launches-its-service-in-italy.
4"Crunchyroll, Sumitomo Announce Partnership to Create Company to Co-Produce Anime (Updated),”
Anime News Network, accessed December 28, 2015, http://www.animenewsnetwork.com/news/
2015-10-22/crunchyroll-sumitomo-announce-partnership-to-create-company-to-co-produce-anime.
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such corporations as The Chernin Group and TV Tokyo,5 Crunchyroll’s profile has only

increased. But this success was due in no small part to the exploitation of free labour in the form

of fan translations, downloads, uploads, and other media circulation.

This paper will analyze the rise of the anime streaming site Crunchyroll and how the site

significantly relied on unpaid labour for its success. Using a Marxian analysis of labour, this

paper will investigate the ways Crunchyroll capitalized developments in digital streaming video

and reconfigured the anime industry, both terms of anime distribution within the United States

and anime production in Japan. Crunchyroll is a fascinating nexus between anime production,

distribution, and consumption, and its history illuminates how digital piracy rapidly alters media

industries and how social media corporations exploit digital labour.

2. Marxian Analysis of Labour

To analyze the role unpaid digital labour played in the rise of Crunchyroll, we must first

determine what labour is itself (2.1). We will then look at the role of the audience commodity

(2.2), and how it is shaping the debates of digital labour today (2.3).

2.1 Defining Labour

Within this paper, I use the Marxian definition of labour, as differentiated from the term

‘work’. This distinction arises from Karl Marx’s “anthropological characterization of work.” 6 But

in German, there is one word for work and labour: arbeit. This linguistic peculiarity leads to

what can be a confusing discussion of labour within Marx’s writing, depending on translation.

5"Chernin Group Purchases Majority Stake in Crunchyroll,” Anime News Network, December 2, 2013,
http://www.animenewsnetwork.com/news/2013-12-02/chernin-group-purchases-majority-stake-in-
crunchyroll.
6Christian Fuchs and Sebastian Sevignani, "What Is Digital Labour? What Is Digital Work?
What’s Their Difference? And Why Do These Questions Matter for Understanding Social
Media?,” Triple C 11, no. 2 (2013): 239. Accessed December 19, 2015. http://
www.triple-c.at/index.php/tripleC/article/view/461/468.
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Friedrich Engels’ acknowledges this potential confusion, noting within Marx’s Capital Volume I

that, by contrast,

“The English language has the advantage of possessing two separate words for these two
different aspects of labour. Labour which creates use-values and is qualitatively
determined is called 'work' as opposed to 'labour'; labour which creates value and is only
measured quantitatively is called 'labour', as opposed to ‘work’.”7

Christian Fuchs and Sebastian Sevignani take Engels’ distinction and use these definitions of

work and labour to avoid confusion. They explain that

“Labour is a necessarily alienated form of work, in which humans do not control and
own the means and results of production. It is a historic form of the organisation of work
in class societies. Work in contrast is a much more general concept common to all
societies. It is a process in which humans in social relations make use of technologies in
order to transform nature, culture and society in such a way that goods and services are
created that satisfy human needs.” 8

With this definition, we see how labour, particularly the digital labour of social media

sites, are separate from work itself. Whereas work “satisfies human needs,”9 the fruits of labour

under capitalism are appropriated from the workers, creating alienation. As Fuchs and Sevignani

summarize, “Marx makes clear which elements of alienation there are in capitalism: the worker

is alienated from: a) herself/himself because labour is controlled by capital, b) the material of

labour, c) the object of labour, d) the product of labour.”10 It is in the very act of alienation within

capitalistic production, Marx explains, that a worker’s “surplus labour … has now been posited

as capital.”11

7 Karl Marx, Capital Volume I (New York: Penguin, 1976), 16n.

8 Fuchs and Sevignani, "What Is Digital Labour?,” 240.
9 Christian Fuchs, Digital Labour and Karl Marx (New York: Routledge, 2014), 27.
10 Fuchs and Sevignani, “What is Digital Labour?,” 245.
11 Karl Marx, Grundrisse (New York: Random House, 1973), 452.
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With this definition of labour set, we must now turn what constitutes digital labour. And

for that, we must also consider the Dallas W. Smythe’s work on the audience commodity, whose

work deeply influences digital labour debates today.

2.2 The Audience Commodity

The work of Dallas Smythe in the political economy of communication cannot be

overstated. As a founder of the field in academia, Smythe “taught the first course in the field.” 12

His theory on how audiences are commodified has had a resurgence on popularity with the rise

of what scholars have termed “digital labour,”13 “immaterial labour”14 or, more recently,

“immaterial labour 2.0.”15

What Smythe contributed was a radical new way of viewing audiences and their

relationship to commodities and capitalism. Smythe argued that the

“material reality under monopoly capitalism is that all non-sleeping time of most of the
population is work time. . . . Of the off-the-job work time, the larges single block is time
of the audiences which is sold to advertisers. . . . In ‘their’ time which is sold to
advertisers workers (a) perform essential marketing functions for the producers of
consumer’s goods, and (b) work at the production and reproduction of labour power.”16
He asserted that “because audience power is produced, sold, purchased and consumed, it

commands a price and is a commodity.”17 As capitalist mass media perpetuates consumeristic

12 Vincent Mosco, The Political Economy of Communication, (Los Angeles: Sage Publications, 2009), 82.
13 Fuchs and Sevignani, “What is Digital Labour?,” 237.
14
Maurizio Lazzarato, “Immaterial Labour,” Generation Online, accessed December 27, 2015, http://
www.generation-online.org/c/fcimmateriallabour3.htm.
15 Mark Cote and Jennifer Pybus, “Learning to Immaterial Labour 2.0: Facebook and Social Networks,”
in Cognitive Capitalism, Education and Digital Labour, ed. Michael A. Peters and Ergin Bulut, (New
York: Peter Lang, 2011), 170.
16Dallas Smythe, “Communications: Blindspot of Western Marxism,” Canadian Journal of Political and
Social Theory 1 (1977): 3.
17
Dallas W. Smythe, “On the Audience Commodity and its Work,” in Media and Cultural Studies: Key
Works, ed. Meenakshi Gigi Durham and Douglas M. Kellner (Oxford: Blackwell, 2001), 256.
 6

impulses and produces “audiences prepared to be dutiful consumers,”18 audiences “work to

market . . . things to themselves.” 19 This dispels the notion of “leisure” or “free time,” as Smythe

notes that “people have always had to work - one way or another - when not at the job in order to

prepare themselves to work tomorrow,” 20 but now also “work to create demand for advertised

goods.”21

While Smythe uses the term “work” in a generalized sense, distinguishing it from wage

labour, he observes “alienation in the processes of work under capitalism.”22 Throughout his

work, it is clear he considers the commodification of audiences as a form of alienation, as

workers create value and are sold as commodities to advertisers. Smythe’s work aligns well with

Fuchs and Sevignani’s exploration of digital labour as exploitative and alienating. While much

can be said about Dallas Smythe work on audience commodification, we will mainly analyze his

work in the context of its resurgence due to its applicability in the digital age.

2.3 Digital Labour

As Christian Fuchs notes, “Dallas Smythe’s . . . analysis of the audience commodity has

gained new relevance today in the digital labour debate.” 23 The labour of audiences Smythe

wrote about created “surplus labour, i.e. labour that goes beyond the time necessary for satisfying

basic human needs,”24 quite applicable to the audiences of the internet and other digital

18 Dallas W. Smythe, Counterclockwise (Boulder, CO: Westerview Press, 1994), 250.

19 Dallas W. Smythe, Dependency Road (Norway, NJ: Ablex, 1981), 4.
20 Ibid., 270. Emphasis in Original.
21 Smythe, “Audience Commodity,” 266.
22 Ibid., 256.
23 Fuchs, Digital Labour and Karl Marx, 100.
24Fuchs and Sevignani, ”What Is Digital Labour?,” 244.
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technologies. Whereas Smythe interrogated how radio and television industries commodify and

exploit their audiences, contemporary scholars analyze how “contemporary corporate Internet

platforms [are] based on the exploitation of users’ unpaid labour.”25 It is here we now turn to

Crunchyroll, and examine how the site directly exploited its users for profit.

3. Crunchyroll: Past and Present

To analyze Crunchyroll’s exploitation of digital labour, we must first understand the site’s

infrastructure, such as its history of monetization (3.1), investments (3.2), and content

management (3.3).

3.1 Monetization: Past and Present

Crunchyroll currently profits from licensing and streaming anime series both classic and

contemporary. Similar to other streaming sites such as Hulu, ad revenue from commercials

playing between breaks in programs and visual ads on the site’s pages generate income for the

site. Crunchyroll also features a subscription program (see figure 1) for greater access to series

otherwise restricted, either unlocking entire select series or the most recent episodes of certain

anime series currently broadcasting in Japan. Crunchyroll’s profits from paid subscriptions were

estimated at US$2,780,000 month in late 2014,26 and the site has apps for a variety of digital

devices to support these paid subscriptions, from digital media players like Apple TV to game

consoles like Playstation 4.

Before Crunchyroll’s slow shift towards legal streaming beginning in early-2008, the site

restricted its higher-quality video to those who “donated” money to the site.27 Crunchyroll co-

25 Ibid, 237.
26"Crunchyroll Streaming Service Has 400,000 Paid Subscribers Listed,” Anime News Network,
November 23, 2014, http://www.animenewsnetwork.com/daily-briefs/2014-11-23/crunchyroll-streaming-
service-has-400000-paid-subscribers-listed.
27 "Video Site.”
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FIGURE 1: Crunchyroll Paid Subscriptions

700000
700,000

525000

400,000
350000

175000 200,000

100,000
70,000
0
2011 2012 2013 2014 2015

Sources: http://www.animenewsnetwork.com/daily-briefs/2014-11-23/crunchyroll-streaming-
service-has-400000-paid-subscribers-listed.
http://www.animenewsnetwork.com/news/2015-10-22/crunchyroll-sumitomo-announce-
partnership-to-create-company-to-co-produce-anime/.

founder Vu Nguyen asserted that these donations, along with external advertisements on the site,

only funded site infrastructure such as servers and bandwidth, and never went towards the

Crunchyroll staff, a dubious claim.28 Rewards aside from access to high quality video without

ads also include badges to prove one’s supports the site,29 one of the many incentives

Crunchyroll offered to lure in digital labourers.

28Zac Bertschy, "Interview: Crunchyroll's Vu Nguyen,” Anime News Network, March 25, 2008, http://
www.animenewsnetwork.com/interview/2008-03-25/vu-nguyen. In this interview, the figure of $6USD is
mentioned, though goes unspecified for the amount of access to Crunchyroll’s HD videos. It’s likely this
amount was for a one month’s “donation”.
29“Crunchy Supporter,” Crunchyroll, last accessed December 21, 2015, https://web.archive.org/web/
20070504051824/http://www.crunchyroll.com/donate.
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3.2 Investments

Crunchyroll’s first investment was from the investment firm Venrock in late 2007,

allowing Crunchyroll’s founders to better cover bandwidth and maintenance costs, while also

expanding the site’s staff.30 From there Crunchyroll has continuously received funding from

various investment firms and media companies to a total of at least US$30 Million (see figure 2),

further pushing Crunchyroll’s dominance into the anime streaming market, a gain previously

achieved through the unpaid digital labour of its users.

Figure 2 - Timeline Amount (in US$) Company

Late 2007/Early 2008 $4.05 Million Venrock

2008 $2 Million GDH/Gonzo

2010 $750,000 TV Tokyo

2010 $750,000 Bitway

2013 “Majority stake purchased” The Chernin Group

2015 $22 Million Chernin’s Otter Media

Source: http://www.animenewsnetwork.com/news/2015-11-22/otter-media-invests-usd22-million-
in-crunchyroll-parent-company-ellation.

3.2 Content Management

The site’s history with copyright before and within its transition towards legality is worth

noting.31 On November 6, 2006, a few months after the site had launched, 32 new links appear at

the bottom of the main site page: one for “downloads” and one for “uploads.” 33 These pages

30
Zac Bertschy, "Vu Nguyen - Page 3,” Anime News Network, March 26, 2008, http://
www.animenewsnetwork.com/interview/2008-03-25/vu-nguyen/3.
31Specific details about the state of the Crunchyroll site derive from archival research of the site through
the Internet Archive Wayback Machine at archive.org.
32archive.org’s first archive of the site is from July 19, 2006. https://web.archive.org/web/
20060719040427/http://www.crunchyroll.com/
33 https://web.archive.org/web/20061106084825/http://www.crunchyroll.com/
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overtly encouraged users to upload content to the site, giving detailed information on how to

upload, format, and title videos for Crunchyroll. While the upload page instructed users not to

upload materials that are “licensed or copyrighted,” 34 Japanese copyright is largely honoured

around the world, making uploaded anime to Crunchyroll illegal whether it has been licensed in

the United States or not. It is to this illegal content that we will now turn.

While Crunchyroll’s wikipedia entry downplays the essential role bootlegs played in

Crunchyroll’s infrastructure, 35 searching crunchyroll.com through the Internet Archive Wayback

Machine illustrates how prevalent anime piracy was on the site. Pirated copies of media formed

the vast majority of content Crunchyroll hosted. Throughout researching the site’s archives, the

author was unable to find any non-pirated materials uploaded to the site. Unlike YouTube, a site

that capitalized on user-uploaded content legal and illegal alike, Crunchyroll’s focus from the

beginning was illegally uploaded anime and other Japanese media related content.36 And much

like YouTube, the site shifted to legality and larger profitability once it received large

investments.

Crunchyroll was similar to YouTube in another way, in that its “DMCA polity [was]

almost word-for-word identical to the copyright policy on YouTube.”37 Like YouTube,

Crunchyroll attempted to shield itself from copyright litigation by claiming it was a “third-party

34
“How do I Upload?,” Crunchyroll, November 6, 2006, accessed December 15, 2015, http://
www.crunchyroll.com/popup_upload
35 “Crunchyroll," Wikipedia, last modified December 14, 2015, https://en.wikipedia.org/wiki/Crunchyroll.
36The closest this author could find to user-generated content were anime music videos, known as AMVs.
These videos combine anime clips and music tracks to create a remixed music video. While these works
are arguable fair use, it is yet another example of Crunchyroll, like Youtube, profiting from user-generated
content.
37
Zac Bertschy, "Vu Nguyen - Page 2,” Anime News Network, March 25, 2008, http://
www.animenewsnetwork.com/interview/2008-03-25/vu-nguyen/2.
 11

‘online service provider’ under America’s Digital Millennium Copyright Act,”38 protecting the

company and blaming users for uploaded illegal content. This policy first appeared on January 1,

2007,39 and while Crunchyroll would comply with copyright notifications by licensors, American

anime distribution companies like FUNimation and Bandai Entertainment were required to

tediously request Crunchyroll remove videos in writing. By the time Crunchyroll would remove

select pirated materials, even more pirated materials would be uploaded to the site, with few to

zero copyright screenings on uploaded materials.

4. Crunchyroll and Labour

With this site history as a illustrative background, we can now turn to Crunchyroll’s use

of digital labour. To analyze how Crunchyroll profited from unpaid digital labour, the chain of

user labour (4.1), fansub communities (4.2), and animators (4.3) will be analyzed. A case study

of the Gonzo animation studio (4.4) helps illustrate how digital piracy affected this company and

how Crunchyroll’s growth affected the anime industry in general (4.5).

4.1 User Labour

As discussed by Fuchs and Sevignani, “Digital labour is alienated from itself, the

instruments and objects of labour and the products of labour.” 40 This labour is often obscured by

Internet corporations, as “exploitation does not tend to feel like exploitation because digital

labour is play labour that hides the reality of exploitation behind the fun” 41 of the site’s

communications infrastructure, connecting individuals to to others and fulfilling the needs of

38 "Vu Nguyen - Page 3.”

39"Copyright Infringement Notification,” Crunchyroll, January 1, 2007, https://web.archive.org/web/
20070101204747/http://www.crunchyroll.com/dmca_policy.
40 Fuchs and Sevignani, ”What Is Digital Labour?,” 288.
41 Ibid.
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communication. Through digital media sites users upload content such as blogs, videos,

photography, or share, link, and circulate media. The majority of these activities are on for-profit

websites, meaning that “most web usage is digital labour that cerated commodities and profit that

is owner by private companies. The Internet is largely dominated by the exploitation of digital

labour.”42

Crunchyroll is no exception. While the site’s current form capitalizes on the unpaid

digital labour of anime fans, encouraging anime fans to share their favourite anime on social

media and thus promote Crunchyroll’s own streaming service, Crunchyroll’s previous

incarnation from 2006 to around 2009 exploited the labour of every aspect of the anime industry,

and will serve as the nexus of our analysis.

Crunchyroll’s exploitation of site users was essential to its profitability, as were the users

themselves, who uploaded and compiled digital videos on the site. This amounted to tens of

thousands of videos, ranging from anime tv series, to films, to music videos, to game trailers, and

more. Anime were either translated by fans, or digital copies of professionally translated and/or

localized by American anime distribution companies like FUNimation or Bandai Entertainment.

Just as Smythe described, these user audiences “work[ed] to market . . . things to themselves.” 43

Users uploaded all the content for the site, with both uploaders and translators going unpaid.

Crunchyroll offered the allure of free anime paid with the price of communities of digital

labour and “donations” to the site. To watch videos, users were required to register with the site,

with HD content behind a paywall. Such registration encouraged users to participate on the site

itself aside from watching videos, such as commenting on videos or in forums, further fuelling

42 Ibid., 266.
43 Smythe, Dependency Road, 4.
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activity on and attraction to the site. The site also monitored user activity, awarding “CR points”

based on the amount of participation the user contributed to the site (amount of videos watched,

comments made, etc.). This forced registration and incentives like points and badges helped

build the Crunchyroll community as an alluring site with free anime and an active user

community. In one of Crunchyroll’s first public presentations in August 2008, co-founder Vu

Nguyen called this growth “organic” (i.e. without any online advertising), boasting the site had

“a passionate community of over 4 million users.”44 This is an incredibly misleading statement,

as users did not register because they wanted to, but rather, they had to in order to access the site

at all.

Structuring such a “passionate community” no doubt greatly fuelled the forums as well,

often used by the administration to brainstorm new ideas for the site and collect feedback.

Forums threads such as “Anime Duplicates/Wrong Tags/Corrupt Videos” encouraged users to

monitor the quality of uploads and assist in administration of the site. Specific site developments

also incubated within forums. For instance, a poll dated from February 22, 2008 noted the site

admin45 asking its users whether they would like manga (Japanese comics) on Crunchyroll.46 The

response was overwhelmingly positive, and the staff eventually made this a reality, opening its

own digital manga distribution service bundled into its paid subscription program in October

44Mikhail Koulikov, "Anime Expo 2008 - Keynote Address: Vu Nguyen, Crunchyroll,” Anime News
Network, last modified August 15, 2011, http://www.animenewsnetwork.com/convention/2008/anime-
expo/keynote-address-vu-nguyen-crunchyroll.
45
Before receiving funding from large investment firms, the co-founders of Crunchyroll, Kun Gao and Vu
Nguyen, were anonymous, with Gao working on the site as an administrator known only as “shinji”.
46"Crunchyroll - Forum - Do You Guys Want Manga on Crunchyroll?,” Crunchyroll, February 22, 2008,
accessed December 23, 2015, https://web.archive.org/web/20080306141649/http://www.crunchyroll.com/
forumtopic-106327/Do-you-guys-want-manga-on-crunchyroll.html?.
 14

2013. Crunchyroll’s site design encouraged users to become producers as well as consumers,

reflecting the “conflation of production and consumption”47 in the rise of digital labour.

4.2 Fansub Communities

Such “prosumer” structuration also emerged from fansubbing, the practice of anime fans

outside of Japan who “digitize, translate, add subtitles to, and make available online

unauthorized copies of TV series and films.”48 These copies, referred to as fansubs, are produced

by anime fans for anime fans, and are distributed for free, most often taking the form of digital

files and torrents. While free distribution is part of the “code of honour” many fansub

communities follow, and many fansubbers “halt all work on a title once it has been licensed in

the US,”49 such a code of ethics is ultimately grounded in market principles, as “fansubbers tend

of view their actions as contributing to an increase in anime fans,” and “would like to see a

widening anime market.” 50

The irony of course is that fansubbing often deters instead of enabling U.S. anime

licensing. The fansub “code of ethics” largely rests on cognitive dissonance propelled by both a

simplistic grasp of copyright law and purposeful ignorance of what it entails. While fansubbers

often claim that their fan translations help make anime more popular in the United States, and

therefore help grow the anime market, “fansubs routinely remain available long after the

commercial release and are often sold by third party bootleggers who are not affiliated with the

47 Mark Cote and Jennifer Pybus, “Immaterial Labour 2.0,” 171.

48Ian Condry, "Dark Energy: What Fansubs Reveal about the Copyright Wars,” Mechademia 5 (2010):
194.
49“Fansub," Anime News Network, accessed December 28, 2015, http://www.animenewsnetwork.com/
encyclopedia/lexicon.php?id=63.
50 Condry, “Dark Energy,” 195.
 15

original fansubbers.” 51 Crunchyroll is a key example of this, as the site derived value from the

free labour of the fans translating the videos, as well as the labour of site users and the original

animators themselves. These files formed the backbone of what users uploaded to Crunchyroll,

with subtitling and translation work going unpaid, capitalizing on the fansub communities’

ethical commitment to free labour.

4.3 Animators

While Crunchyroll exploited both its users and anime fansubbers, they also exploited the

work of the Japanese animators themselves, and tremendously impacted their production. To

understand the implications of digital piracy for the creators, we must first understand how the

anime industries are primarily supported by freelance labour. Animators in Japan are paid by the

amount of work completed, not an hourly wage, resulting in the majority of animators paid well

under the Japanese minimum wage of 888 yen (US $7.45).52 As one American animator working

in Japan put it, “It’s an ‘illegally harsh’ industry. They don’t pay you even remotely minimum

wage, they overwork you to the point where people are vomiting at work and having to go to the

hospital for medicine.”53 Many other animators working in Japan have openly admitted to the

harsh practices ingrained into anime production since its beginning in the early 1960s. The harsh

working conditions have even coined a phrase called “anime syndrome,” when animators must

be hospitalized for exhaustion as a result of the “unremitting late nights, irregular diets of junk

51 “Fansub.”
52Chris Nishijima, “Animation Veteran Claims That Industry Newcomers Only Make 120 Yen An
Hour,” Anime News Network, February 25, 2015, http://www.animenewsnetwork.com/interest/
2015-2-25/animation-veteran-claims-that-industry-newcomers-only-make-120-yen-an-hour/.
53Bamboo Dong, "American Animator in Japan Offers His Take on the Industry's Wages and
Work Environment,” Anime News Network, March 9, 2015, http://www.animenewsnetwork.com/interest/
2015-03-09/american-animator-in-japan-offers-his-take-on-the-industry-wages-and-work-environment/.
 16

food and cramped, repetitive labour.”54 These freelance workers often work 10 hour days, 6 days

a week, with no guaranteed employment and minimal benefits, and thus work in a precarious

environment.

It is this precarious labour of animators that is exacerbated even more by digital piracy of

anime series. Not only do top creators such as the director and writer (those with royalty rights)

receive a lesser gain in profits due to piracy, those without such benefits (such as the freelance

animators) suffer job precarity as studios scramble to break even. One particular anime studio

demonstrates the harm caused by the chain of unpaid digital labour facilitated by Crunchyroll.

4.4 Case Study: Gonzo

While Crunchyroll received investment from Venrock and other investment firms, more

significant was the investment by GDH, the corporate parent of the Gonzo, an animation studio

in Japan. Not only did GDH invest around US$2 million in 2008,55 but the studio was the first to

offer their content for exclusive international streaming. The streaming of Gonzo’s series The

Tower of Druaga: The Aegis of Uruk and Blassreiter in April 2008 on Crunchyroll was the first

instance of simultaneous broadcasting (‘simulcasting’) in the history of anime distribution, 56

paving the way for the elision of time between Japanese and English releases of anime.

One might ask why Gonzo would support such a site that previously profited from their

media without recompense while also diverting consumers from legally buying the series on

DVD. The reason is because Gonzo was severely suffering financially at the time, and saw

54 Jonathan Clements, Anime: A History (London: Palgrave McMillan, 2013), 103.

55"Gonzo's GDH Gets Capital, Reveals Crunchyroll Investment,” Anime News Network, last modified
September 11, 2008, http://www.animenewsnetwork.com/news/2008-09-11/gonzo-gdh-gets-capital-
reveals-crunchyroll-investment.
56"Gonzo Works to Be Streamed Simultaneously with Airing,” Anime News Network, last modified
March 21, 2008, accessed December 22, 2015, http://www.animenewsnetwork.com/news/2008-03-21/
gonzo-works-to-be-streamed-simultaneously-with-airing.
 17

digital streaming as one of the many options available to stave off bankruptcy.57 The studio

reduced its number of anime shows in production in 2009, reducing its creative staff from 130 to

30.58 While these efforts were unable to prevent the Tokyo Stock Exchange from de-listing

Gonzo on July 30, 2009,59 the company eventually bounced back, focusing their efforts in on

intellectual property management, particularly licensing their products for online streaming. 60

This turn represents the ultimate irony, as Gonzo’s financial troubles arose specifically

from rampant online piracy of their shows. In a 2007 interview, Arthur Smith, the president of

GDH International (the parent company of Gonzo), condemned fansubs, asserting that “illegal

file sharing and postings on streaming sites like YouTube are destroying our industry.”61 When

pressed about how much GDH/Gonzo was affected by fansubbing and illegal downloaded, his

answer was “significantly.”62 In an subsequent open letter to the American anime industry, Smith

emphasizes that he’s “not exaggerating,” 63 and indeed, the Japanese government had just filed a

57"Gonzo's Earnings Rise, But So Do Losses in Annual Results,” Anime News Network, last modified
June 3, 2009, http://www.animenewsnetwork.com/news/2009-06-03/gonzo-earnings-rise-but-so-do-
losses-in-annual-results.
58 "Gonzo to Restructure, Reduce Staff Count from 130 to 30 (Update 3),” Anime News Network,
February 12, 2009, http://www.animenewsnetwork.com/news/2009-02-12/gonzo-to-restructure-reduce-
staff-count-from-130-to-30.
59"Tokyo Stock Exchange to Delist Gonzo on July 30,” Anime News Network, last modified June 29,
2009, http://www.animenewsnetwork.com/news/2009-06-29/tokyo-stock-exchange-to-delist-gonzo-on-
july-30.
60"Anime/Game Studio Gonzo Posts Higher Earnings, Profit,” Anime News Network, last modified
January 2, 2013, http://www.animenewsnetwork.com/news/2013-01-02/anime/game-studio-gonzo-posts-
higher-earnings-profit.
61
"Arthur Smith - President Of GDH International - Interview on Anime Piracy,” Activeanime.com, last
modified December 21, 2007, https://web.archive.org/web/20100829090335/http://
www.activeanime.com/html/content/view/2171/36.
62 Ibid.
63 ArthurSmith, "Open Letter from GDH International's Arthur Smith,” Anime News Network, December
13, 2007, http://www.animenewsnetwork.com/industry-comments/arthur-smith-open-letter-on-
fansubbing.
 18

formal request to the Unites States government only a few months prior asking for help in

preventing anime piracy.64 As Chris Anderson notes, piracy is a special class of theft in that the

creators don’t “suffer a loss, but rather a lesser gain.”65 What is also necessary to understand is

that anime studios in Japan make the majority of their profits from DVD/Blu-ray sales and

merchandising rather than through broadcast advertising, a practice hurt even more through

digital piracy.66 Through the piracy facilitated by sites like Crunchyroll, the creative labour goes

unpaid, and labourers working in precarity suffer as a result. Gonzo’s capitulation to Crunchyroll

represents a grand irony: pushed into financial troubles by online piracy and the financial crisis

of 2007-8 dragging down the economy, Gonzo turned to online streaming to create revenue,

working with the very company that leeched from Gonzo’s profits in the first place.

4.5 Changes Within the Anime Industry

The interactions between consumers/fans and the culture industry change remarkably

with the advent of digital technologies, from augmenting production and distribution processes

of the industry, to enabling an explosion of piracy enhancing through digital technologies. As

Nicholas Garnham notes, “because there is no inherent scarcity, . . . there is a great resistance to

paying for cultural commodities.” 67 In many ways, digital technologies make it is easier for a fan

64 "Japan Asks America to Stop Illegal Net Releases of Anime,” Anime News Network, last modified
October 23, 2007, http://www.animenewsnetwork.com/news/2007-10-23/japan-asks-america-to-stop-
illegal-net-releases-of-anime.
65Chris Anderson, Free: How Today's Smartest Businesses Profit by Giving Something for Nothing (New
York: Random House, 2009), 71.
66Justin Sevakis, ”The Anime Economy - Part 2: Shiny Discs,” Anime News Network, March 7, 2012,
http://www.animenewsnetwork.com/feature/2012-03-07.
67Nicholas Garnham, “The Political Economy of Communication Revisited,” in The Handbook of
Political Economy of Communications, ed. Janet Wasko et al, (Oxford: Wiley-Blackford, 2011), 50.
 19

to consume cultural goods such as television shows and films illegally with less effort than

seeing those products legitimately.

Garnham’s point underlines the ironic twist within Crunchyroll’s growth. In announcing

Crunchyroll’s shift towards legality, co-founder Vu Nguyen asserted that their “model has been

user-uploaded content and [that they] realized that the model is broken,”68 asserting that in order

to transition to a proper revenue model, Crunchyroll will “need help and assistance form the

industry to make this happen.”69 Under normal circumstances, no anime industry representative

would want to collude with those who drained their bottom line. But for companies in dire straits

like Gonzo, who found themselves at the mercy of online piracy and desperate for revenue,

eventually succumbed to the growing titan.

Crunchyroll’s growth also significantly changed the fansub community. As the site shifted

towards legitimacy and legally licensing anime for streaming, Crunchyroll dramatically reduced

consumption of fansubs, as Crunchyroll had a guaranteed quality in both video and translation in

one easy website destination. Fansubs, by contrast, required work to search and download, and

did not guarantee a quality effort in video or translation. Justin Sevakis notes these changes to

the fansub community, remarking that Crunchyroll sucked the life out of the fansub community

by culling both pirate traffic and the pirating translators themselves:

“The changes in the fansub scene over the last five years have been, frankly,
transformative. It used to be that any fan who wanted to keep up with the current shows
on Japanese TV were utterly dependent on fansubs, but thanks to legitimate streaming,
most fans don't even bother with torrents anymore. Pirate traffic is way, way down. It
used to be that a popular fansubbed series would see download numbers well into the
hundreds of thousands per episode, but now most fansubs are lucky to limp across the
10,000 mark. Most of those downloaders, I'm guessing, are living in countries where

68 Koulikov, “Anime Expo.”

69 Ibid.
 20

legal streams aren't yet available. More than that, the fansub scene as a whole has largely
fallen apart. Many of the best fansub editors and translators have "gone pro" and now
assist with the simulcast subtitles that you see on sites like Crunchyroll.” 70

As Crunchyroll grew, the site staff poached the best of the fansub community, diminishing anime

piracy, but only because Crunchyroll extensively benefitted from such piracy before it shifted

towards legal streaming.

5. Conclusion

Vu Nguyen asserted that “people want [streaming anime] and [that] there is definitely a

demand.”71 He is right in that fans want streaming anime, a desire largely facilitated by digital

technologies and sites like Crunchyroll itself. Digital technologies such as digital video and

streaming services are unsettling previous channels of power and control over cultural goods, as

digitization allows for massive replication and distribution with minimal effort. While consumers

are interacting with content in new, unregulated ways, and the industries have had to change and

adapt to consumer’s desires, mass media marketing shapes these desires through what the

Frankfurt School terms “false consciousness” and what Smythe identifies as mass media

industries preparing audiences for consumption.

Digital streaming has also shifted market relations between the United States and Japan, a

shift largely propelled by Crunchyroll itself. Anime distribution companies in America now

juggle between licensing a show for Blu-Ray/DVD and digital streaming, reconfiguring when

and what content to distribute over a given period of time. This shift has influenced how

audiences consume anime as well. Whereas previously anime fans usually purchased a series of

70Justin Sevakis, "Answerman - The Changing Tides,” Anime News Network, April 3, 2015,
http://www.animenewsnetwork.com/answerman/2015-04-03.
71 "Keynote Address: Vu Nguyen.”
 21

DVD and watched a series in its entirety in a brief period of time, many anime fans now watch

episodes each week soon after they air in Japan. The streaming revolution, pushed by

Crunchyroll with its reliance on unpaid digital labour, shifted the industry further into what Marx

called “the annihilation of space by time,”72 with digital technology accelerating anime

consumption by international audiences.

Crunchyroll paved the way for anime streaming, but largely because it got its head start

by exploiting digital labour and copyrighted content. The site’s founders built their success from

the grand pool of unpaid labourers contributing to the site, from the original animators, to the fan

translators, to the users uploading the translated content to Crunchyroll. They capitalized on “not

just audience labour, but prosumer labour”73 enticing anime fans who wanted to watch anime to

contribute to building their site while alimentative them from their surplus labour. From that

strong user base, Crunchyroll’s financial success in paid subscriptions and investments (see

figures 1 & 2) has grown exponentially. With Crunchyroll’s recent partnership with Sumitomo

and investments from Otter Media, the site is moving towards anime production and continues to

dominate the anime market in America and abroad. What began as an illegal anime content

provider turned into a legitimate streaming service, becoming the biggest legal anime streaming

provider, while other companies such as FUNimation and VIZ Media ––with long histories of

legitimate ties to the industry––struggle to catch up.

One of Crunchyroll’s earliest website taglines in 2006 was “anime for the masses!” Yes,

anime for the masses, at the expense of the masses. As “life has become a factory,”74 such

72 Marx, Grundrisse, 524.

73 Fuchs, Karl Marx and Digital Labour, 132.
74 Ibid., 107.
 22

exploitation becomes commonplace as sites like Crunchyroll present themselves as “a form of

participatory culture and democracy,”75 a shallow claim at best and outright deception at worst.

What lies ahead in digital media technologies is uncertain, but what’s needed is actual

democratization of digital technologies, and the end of exploitative digital labour.

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