In a waning economy, a small social networking start-up focused on Japanese pop cultural material, may offer an effective marketing platform for manga and anime aimed at the American market.

Originally a fan-oriented site offering pirated anime and manga, Crunchyoll now caters to the anime and manga fan with a wide variety of licensed content that includes Japanese anime like Naruto and translated manga from publishers like Udon and Tokyopop. Manga and anime in the U.S. are unique industries in that they are separate categories that also intersect at various critical points. Both cater to the same audience, work with the same type of material and rely on the exuberance and passion of the fanbase. Crunchyroll is different from publisher websites (both manga and anime publishers) and an important site because of the organic social network that has developed around it and that network’s ability to bring together a community of manga and anime fans in one place.

“There’s no great social network for anime fans,” says Crunchyroll CEO Kun Gao. “Crunchyroll is a social network, a network where the members just happen to love anime content.”

When Crunchyroll first started out in 2006 as an anime website, it was something like a YouTube for anime. Visitors to the website could register as members and then upload and share their favorite anime episodes. They could also post user-generated content such as music videos using their favorite anime scenes merged with their favorite Japanese pop song. Word spread about the site, more visitors came to visit and before long, a Crunchyroll community had grown. Then in 2007, the founders of the site took a bold step to legitimize their business: they began going to Japan to talk directly to anime studios about licensing anime for their site.

“We’re working on finding a legitimate solution,” Gao says, emphasizing the site wants to provide a legal alternative to watching anime online or reading manga online that has been posted without permission of the copyright holders. Gao and three cofounders of Crunchyroll decided to pull pirated content from the site, much of which is obtained via shareware such as bit torrent, and all of which made Crunchyroll a hot destination in its infancy. “We very carefully scrutinize user generated content because we want everything to be 100% clean on the site.” Gao says.

With the downward turn of the economy, publishers are looking for ways to reach old fans and attract new readers and online distribution has become a very attractive option. In North America., Crunchyroll began by striking deals with manga publisher Udon to start an online manga anthology, Udon Combo and with Udon’s Street Fighter titles as well as a new manhwa series, 1520. Crunchyroll also has a deal with Tokyopop to release its Princess Ai: Encounters series.

“Our audience is online,” Tokyopop associate publisher Marco Pavia says. “It’s the best way to get to them.” Pavia would know. When Tokyopop released the entire Loveless series up to volume eight on the Tokyopop company website,, it saw a 30% increase in sales on all volumes.

Likewise, Udon chief of operations Erik Ko, who’s 1520 launched recently on Crunchyroll, looks at the site’s community this way: “If we have 100,000 readers for 1520,” Ko says, “even if 1% of them buy the book after reading it online, that's 1000 more copies in sales for us.”

In fact, American fans often learn about new manga titles when manga-derived anime is broadcast on Japanese television—which is then often illegally siphoned off and posted on YouTube—and manga publishers become recipients of a built-in brand awareness when the titles are available in English. Come September, Del Rey Manga expects that Moyashimon, aka Tales of Agriculture, a manga series about an agriculture student who can communicate with bacteria, will likely receive attention from fans who have watched the anime on Crunchyroll.

For Crunchyroll, the road from piracy to legitimacy has been short and relatively smooth. In 2007 the cofounders applied and received a venture capital grant from the Rockefeller Foundation to grow Crunchyroll and take it in its current legalized direction.

Recently, the company set up an office in Japan with two full-time employees and has begun working directly with Shueisha (one of the two Japanese parent companies of Viz Media) whose licenses include Slam Dunk! and the epic international bestselling series, Naruto. In addition to anime and manga, the site is host to Korean television dramas and movies from both Korea and Hong Kong.

Gao says that he and the other cofounders of Crunchyroll are excited for 2009. The company has plans to expand to include as much licensed content as possible, with a concentration on anime. Whether the founders will find a way to monetize and build a stream of revenue from their site remains to be seen. In the midst of an international economic downturn, 2009 is already proving to be a trying year for all industries. In the meantime, manga publishers, regardless of whether they distribute their licenses online with Crunchyroll, may find themselves benefiting from the start-up’s transformation from pirate to partner.