One of the most popular options on Hulu, ranking alongside mainstream TV hits like “Modern Family” and “Glee,” is an animated series about an adolescent ninja and his pink-haired love interest battling a mysterious organization.
The show, “Naruto: Shippuden,” a Japanese anime set in a fantasy land reminiscent of Okayama Prefecture in Japan, represents a growing business for Hulu, the streaming video service.
As Hulu and other streaming services like Netflix grapple with Hollywood studios and TV networks to acquire rights for expensive prime-time series, they’ve found easy-to-get content in anime and other niche foreign programming.
What the stylized form of Japanese animation lacks in mass appeal it makes up for in price. Hulu typically pays anime distributors only a portion of advertising revenue. Netflix pays a relatively small licensing fee.
In contrast, earlier this month Netflix announced a deal worth an estimated $1 billion to gain access to shows on the CW network. On Friday, Hulu struck a five-year deal worth significantly less to broadcast CW shows like “Gossip Girl” and “Vampire Diaries.”
Typically shown with subtitles and known for characters with wide glimmering eyes and elongated bodies, anime stands at the center of Hulu’s strategy to differentiate itself from TV watched the old-fashioned way. “Networks might be happy to get a show that 20 million people kind of like,” said Andy Forssell, Hulu’s senior vice president for content. “We’re more interested in finding a show that a million people love to death.”
In Japan, anime varies from children’s programming to sports, romantic comedies and even public service announcements and pornography. The shows that resonate in the United States tend to be action-driven, with lots of violence, as well as sexually provocative shows. The small but avid audience is made up of mostly male viewers aged 18 to 34. Distributors said comedies, sports shows and anything aimed at women tend to not work.
Hulu has 9,500 episodes of anime titles. Earlier this month it signed a deal with the anime distribution company FUNimation Entertainment to show five new subtitled series within 48 hours of their original broadcast in Japan. Netflix offers 4,000 anime episodes for streaming.
This month four of the top 40 titles on Hulu and its subscription service, Hulu Plus, are anime. “Naruto: Shippuden,” a continuation of the popular “Naruto,” which shows the young ninja leave his village to train, is the sixth most popular series on Hulu Plus, competing with episodes of “Family Guy” on Fox and “The Office” on NBC.
Hulu is expanding its offering of foreign shows with similarly devoted audiences. In May, a Hulu executive flew to Seoul to attend a presentation by South Korean broadcasters and producers. Held at the luxurious Shilla Hotel, the lecture, titled “The Potential for Korean Drama in the U.S. Market,” reinforced Hulu’s push into Korean dramas. It now offers 90 different shows.
They appeal largely to non-Korean viewers who listen to Korean pop music or love soapy dramas, according to Suk Park, co-founder of DramaFever.com, a Web site that streams Korean dramas in North America and struck the deal with Hulu. The company is seeking other trendy Asian programs to bring to the United States. (Hulu, coincidentally, has Chinese roots. The company was named after the Mandarin words that roughly translate to the “holder of precious things” and “interactive recording.”)
This month, Hulu, a joint venture of the NBCUniversal division of the Comcast Corporation, News Corporation, Walt Disney and Providence Equity Partners, announced a deal to carry Spanish-language telenovelas and other shows from Univision, the most-watched Spanish-language network in the United States.
Internet streaming services have upended the business model for Japanese animation. A decade ago when the genre exploded among the young comic book set in the United States, viewers mostly watched pirated versions. These online videos posted on fan Web sites with sloppy English subtitles left the Japanese anime industry powerless to profit from even the most popular titles overseas.
Officially dubbed versions of anime often took a year or more to come out on DVDs or on cable in the United States, leaving an opening for piracy. “There’s a hard-core fan group that wants to see this as soon as possible,” said Gen Fukunaga, chief executive of FUNimation. “We were missing that entire market by making them wait the 18-month lag for dubbing.”
Anime also had to abide by United States decency standards if it ran on television, avoiding things like alcohol, cigarettes and sexually provocative content.
By contrast, Hulu can offer anime in its raciest and rawest form, though the company said it included ratings on episodes and avoided acquiring anything too sexual. “We thought we can be a clean, well-lit place for anime, a legal alternative to piracy,” Mr. Forssell said.
Advertising revenue from Hulu amounts to a tiny portion of FUNimation’s profits, which mostly come from DVD sales. But “we can control the brand so it doesn’t get tainted,” Mr. Fukunaga said. After “Fullmetal Alchemist: Brotherhood,” about alchemist brothers who lose their bodies trying to raise their mother from the dead, ran on Hulu with subtitles, FUNimation produced a cleaned up, dubbed version for Turner Broadcasting’s Adult Swim.
Often based on Japanese comic books called manga, anime has existed in the United States since at least 1963 when “Astro Boy” became a hit among boys who gravitated to its grittier storylines over the usual Looney Tunes gags. In the late 1990s, Pokémon entered the pop culture pantheon, with the Halloween costumes and children’s backpacks to prove it. In 2003, the anime “Spirited Away” won an Oscar for best animated film.
Anime-related DVD sales, movies and character goods accounted for about $2.74 billion in the United States in 2009, down from a peak of $4.84 billion in 2003, according to the latest study released by the Japan External Trade Organization, a division of the Japanese government.
Hulu’s strategy mirrors the approach of fledgling pay-cable channels in the 1990s and early 2000s. Networks like IFC, Spike, G4 and Starz all featured artsy Japanese animation to try to attract a young, hip audience. Because anime was so readily available free online, these cable networks paid tiny licensing fees.
“We’re not interested in paying a lot of money for anime because that targeted audience has so many different ways to see it before it goes on our air,” said Mike Lazzo, senior vice president for programming and production at Adult Swim. That pricing structure has persisted, making it cheap for Netflix, Hulu and others to get online rights.
“Every once in a while we look and say we could gain a rating point here and there, but we’d rather be more interesting and edgy from a programming standpoint, and that means anime,” Mr. Lazzo said.
Hulu wants to strike a balance between a lineup of prime-time shows like Fox’s sitcom “New Girl” and shows that appeal to users with more alternative tastes.
“The mission statement we’ve stayed true to is to provide premium content and make it easy for viewers to find,” Mr. Forssell said. “But premium content is in the eye of the beholder.”
