Global Animation Industry: Strategies, Trends and Opportunities. Page 1

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1 Global Animation Industry: Strategies, Trends and Opportunities Page 1

2 Table of Contents Global Animation Industry History and Evolution EMERGENCE OF THE ANIMATION INDUSTRY PIONEERS OF THE INDUSTRY FIRST INDUSTRY CRISIS POPULARITY OF FEATURE ANIMATION Why is Animation Different Industry Characteristics ANIMATION INDUSTRY SUPPLY CHAIN ROLE OF TECHNOLOGY MERCHANDISING OPPORTUNITIES DISTRIBUTION OF ANIMATION CONTENT COMPETITIVE LANDSCAPE OF ANIMATION STUDIOS RISKS FACED BY ANIMATION STUDIOS DEMAND DRIVERS OF THE INDUSTRY Market Opportunity Global Animation Studios Distribution and Capabilities Animation Segments Market Segmentation D ANIMATION D ANIMATION VISUAL EFFECTS WEB ANIMATION Page 2

3 CORPORATE SERVICES Computer Games CROSS OVER BETWEEN GAMES AND MOVIES Computer Generated Imagery (CGI) PRODUCING CGI ANIMATION ADVANTAGES OF PRODUCING CGI ANIMATION DISADVANTAGES OF PRODUCING CGI ANIMATION INFLUENCE OF CGI ON CEL ANIMATION CHALLENGES CRITICAL SUCCESS FACTORS FOR CGI PRODUCTIONS Stop Motion Motion Capture Forecasting Animation Content Demand Animation Content demand from TV Channels in Europe Animation Content demand from TV Channels in the Us and Canada Animation Content demand from TV Channels in Asia Animation Content demand from TV Channels in Rest of the World Total Animation Content demand from TV Channels Worldwide Size of the Global Animation Industry Future Developments Animation Software Market Landscape D Animation Software Marketplace Animation process using a 2D animation package Page 3

4 3D Animation Software Marketplace INDUSTRY OVERVIEW D ANIMATION SOFTWARE MARKET SEGMENTS FREE ANIMATION SOFTWARES PLUG-INS TO PRODUCTS Analysis of key players in 3D Animation Software Market MARKET SIZE MARKET SEGMENTS Japanese Anime Production Softwares PROMINENCE OF 2D RETAS - SOFTWARE FOR ANIME PRODUCTION MANGA STUDIO - SOFTWARE FOR MANGA PRODUCTION Proprietary 3D Softwares of Animation studios Collaboration between Animation Studios and Software Firms Content Creation Content Creation Workflow in 2D Animation CONCEPTUALIZATION PRE-PRODUCTION PRODUCTION POST-PRODUCTION Content Creation Lead Time Calculation in 2D Animation SCANNING AND FILTERING INK AND PAINT COMPOSITING AND DOPESHEET PREPARATION Digital processing in 2D Animation WORKFLOW PRECEEDING DIGITAL PROCESSING Page 4

5 Content Creation Workflow in 3D Animation CONCEPTUALIZATION PRE-PRODUCTION PRODUCTION POST-PRODUCTION PARALLEL ACTIVITIES Time Line of a Sample 3D production workflow Role of Animation Software in the 3D Production Workflow Production Management GOVERNANCE ISSUES TASK DIVISION AND PEOPLE ALLOCATION ISSUES TECHNOLOGY ISSUES Audience Dynamics Marketing Strategies for Animation Studios MARKETING PROGRAM PROFILING AND TARGETING THE RIGHT AUDIENCE Strategies of Successful Animation Films LESSONS FROM PAST MISTAKES Profile of a 3D Animation Studio: Pixar PIXAR S TECHNOLOGICAL ADVANTAGE Economics of Animation Economics of Animation Copyrights DYNAMICS OF COPYRIGHTS Guidelines for Setting up an Animation Studio Investments Needed for Setting up an Animation Studio Page 5

6 Specialised Hardware and Software Investments Managing an Animation Studio Key Issues of Concern Formulating the Long Term Strategy Animation Content Outsourcing Offshore Computer Animation Production BUSINESS AND REVENUE MODELS Drivers Animation Industry in Europe Winds of Change DEMAND FOR TV CONTENT FEATURE FILM INDUSTRY MARKETING AND MERCHANDISING Collaboration Among European Studios Drivers for Success Trends in Europe Germany CHANGING STRATEGIES KEY PLAYERS IN THE INDUSTRY UK INDUSTRY SUCCESS KEY PLAYERS IN THE INDUSTRY Italy Page 6

7 KEY PLAYERS IN THE INDUSTRY France KEY PLAYERS IN THE INDUSTRY Spain KEY PLAYERS IN THE INDUSTRY Denmark KEY PLAYERS IN THE INDUSTRY Animation Industry in USA Market Size Challenges Key Trends Production and Post-Production Market MARKET SIZE KEY TRENDS Animation Value Chain Asian Animation Industry Establishment Of Local Animation Industry Early Trends In Animation Outsourcing To Asia ANIMATION OUTSOURCING IN CHINA ANIMATION OUTSOURCING IN INDIA ANIMATION OUTSOURCING IN SOUTH KOREA ANIMATION OUTSOURCING IN PHILIPPINES ANIMATION OUTSOURCING IN TAIWAN ANIMATION OUTSOURCING IN VIETNAM Page 7

8 Local Content Productions Trend Towards Co-Productions CO-PRODUCTIONS IN JAPAN CO-PRODUCTIONS IN CHINA CO-PRODUCTIONS IN KOREA CO-PRODUCTIONS IN INDIA CO-PRODUCTIONS IN TAIWAN CO-PRODUCTIONS IN PHILIPPINES Popularity of Foreign Animation Controversies Surrounding Foreign Animation PHILIPPINES SINGAPORE KOREA MALAYSIA INDONESIA Animation in Asian Societies Successful Business Models Animation Studios In Asia Animation Industry in Japan Key Trends MARKET OVERVIEW COLLABORATION BETWEEN JAPANESE AND OVERSEAS STUDIOS OUTSOURCING TO OTHER COUNTRIES SUCCESSFUL BUSINESS MODELS CHALLENGES Anime Exports Page 8

9 OVERSEAS INFLUENCE OF ANIME Globally Successful Japanese Animes THE POKEMON PHENOMENON Japanese Anime Production Models PROMINENCE OF 2D Future Trends Animation Studios in Japan Animation Industry in Korea Emergence of the Industry Functioning of Korean Animation Studios Changing Business Models GOING BEYOND SUBCONTRACTING INVESTMENTS BY INDUSTRIAL GROUPS CHANGES IN INDUSTRY STRUCTURE SUCCESS IN OTHER COUNTRIES Current State of the Industry GOVERNMENT SUPPORT COLLABORATION WITH OVERSEAS PARTNERS KEY TRENDS LOCAL CONTENT Challenges Market Opportunity SIZE OF THE KOREAN ANIMATION INDUSTRY Future Outlook Animation Schools in Korea Page 9

10 Animation Studios in Korea Animation Industry in Canada Industry Drivers ANIMATION FUNDING Challenges Strategies for Animation Studios in Canada Data on Animation Studios in Canada Animation Industry in Australia Competition from Asian Studios Challenges Government Support Strategies for Animation Studios In Australia Data on Animation Studios in Australia Animation Studios in Australia Page 10

11 Figures and Tables FIGURE 1: EARLY ANIMATIONS TABLE 1: ANIMATION MOVIES ADAPTED FROM TELEVISION FIGURE 2: EARLY CGI BASED ANIMATIONS TABLE 2: LIVE ACTION MOVIES FEATURING CGI CHARACTERS FIGURE 3: SIZE OF GLOBAL ANIMATION INDUSTRY FIGURE 4: GEOGRAPHICAL BREAK-UP OF THE GLOBAL ANIMATION INDUSTRY FIGURE 5: GEOGRAPHIC DISTRIBUTION OF ANIMATION STUDIOS IN THE WORLD FIGURE 6: BREAK-UP OF ANIMATION STUDIOS BASED ON CAPABILITIES. 71 TABLE 3: LEADING ANIMATION STUDIOS IN THE WORLD TABLE 4: ANIMATED FEATURE FILMS FROM PROMINENT STUDIOS FIGURE 7: BREAK-UP OF GLOBAL ANIMATION INDUSTRY BASED ON MARKET SEGMENTS TABLE 5: GAMES BASED ON ANIMATION MOVIES TABLE 6: ANIMATION MOVIES BASED ON VIDEO GAMES TABLE 7: CGI FEATURE FILMS TABLE 8: PROMINENT STOP MOTION ANIMATION MOVIES TABLE 9: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN EUROPE Page 11

12 FIGURE 8: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN EUROPE FIGURE 9: CABLE TV WATCHING PATTERN IN THE US TABLE 10: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN THE US AND CANADA FIGURE 10: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN THE US AND CANADA TABLE 11: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN ASIA FIGURE 11: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN ASIA TABLE 12: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN THE REST OF THE WORLD FIGURE 12: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN REST OF THE WORLD TABLE 13: WORLDWIDE ANIMATION CONTENT DEMAND FORECAST TV CHANNELS FIGURE 13: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS WORLDWIDE FIGURE 14: GLOBAL ANIMATION INDUSTRY BREAK-UP BASED ON APPLICATIONS TABLE 14: CLASSIFICATION OF ANIMATION SOFTWARES TABLE 15: LEADING 2D AND 3D ANIMATION SOFTWARES Page 12

13 TABLE 16: KEY PLAYERS AND THEIR PRODUCTS IN 3D ANIMATION SOFTWARE MARKET TABLE 17: FREE ANIMATION SOFTWARES TABLE 18: PRICING STRUCTURES OF ANIMATION SOFTWARE PACKAGES FIGURE 15: COMMERCIAL 3D ANIMATION SOFTWARE MARKET SIZE FIGURE 16: 3D ANIMATION SOFTWARE MARKET BREAK-UP BY SEGMENT FIGURE 17: 2D ANIMATION PRODUCTION WORKFLOW FIGURE 18: 3D ANIMATION PRODUCTION WORKFLOW FIGURE 19: 3D ANIMATION WORKFLOW USING 3D SOFTWARE FIGURE 20: PIXAR S PRODUCTIONS TABLE 19: CAPITAL EXPENDITURE FOR SETTING UP AN ANIMATION STUDIO TABLE 20: PROFILE OF EMPLOYEES REQUIRED TO MANAGE THE STUDIO TABLE 21: ANIMATION STUDIOS IN GERMANY TABLE 22: ANIMATION STUDIOS IN THE UK TABLE 23: ANIMATION STUDIOS IN ITALY TABLE 24: ANIMATION STUDIOS IN FRANCE TABLE 25: ANIMATION STUDIOS IN SPAIN TABLE 26: ANIMATION STUDIOS IN DENMARK TABLE 27: LEADING ANIMATION STUDIOS IN THE US Page 13

14 TABLE 28: LEADING ANIMATION TV CHANNELS IN THE US TABLE 29: KEY ANIMATION STUDIOS IN ASIA TABLE 30: MOST POPULAR JAPANESE ANIMATION MOVIES TABLE 31: LEADING ANIMATION STUDIOS IN JAPAN TABLE 32: IN-HOUSE CONTENT DEVELOPED BY KOREAN ANIMATION STUDIOS FIGURE 21: SIZE OF KOREAN ANIMATION INDUSTRY TABLE 33: ANIMATION SCHOOLS IN KOREA TABLE 34: KOREA S LEADING ANIMATION STUDIOS TABLE 35: ANIMATION STUDIOS IN CANADA FIGURE 22: NUMBER OF ANIMATION STUDIOS IN CANADA FIGURE 23: BREAK-UP OF ANIMATION STUDIOS IN CANADA BASED ON SIZE FIGURE 24: CLASSIFICATION OF ANIMATION STUDIOS IN CANADA BASED ON CAPABILITIES FIGURE 25: BREAK-UP OF ANIMATION STUDIOS IN CANADA BASED ON APPLICATIONS TABLE 36: ANIMATION STUDIOS IN AUSTRALIA FIGURE 26: NUMBER OF ANIMATION STUDIOS IN AUSTRALIA FIGURE 27: BREAK-UP OF ANIMATION STUDIOS IN AUSTRALIA BASED ON SIZE FIGURE 28: CLASSIFICATION OF ANIMATION STUDIOS IN AUSTRALIA BASED ON CAPABILITIES Page 14

15 FIGURE 29: BREAK-UP OF ANIMATION STUDIOS IN AUSTRALIA BASED ON APPLICATIONS Page 15

16 Global Animation Industry Key facts In the past, animation series were aimed at children aged nine and below. TV stations have been producing animation series for teenagers, adults and the whole family. The rapid advancement of computer technology has made computer animation available to the masses. The major animation markets include the United States, Canada, Japan, France, Britain, Korea and Germany. The emerging animation countries are China and India. The outsourced computer animation production market is increasingly being tapped by North American film and television program producers. The major factors behind outsourcing of animation content to the Asia/Pacific region are the availability lower labor rates. The bulk of the outsourcing happens for 2D animation content with some amount of 3D content. The demand for animated entertainment has expanded with the increase in broadcasting hours by cable and satellite TV along with the growing popularity of the Internet. Animation generally does not become outdated as quickly as live action programming, allowing an animated program to be enjoyed by each new generation of children and generally providing a longer life cycle for merchandising and licensing of products relating to such programming. Children are the primary target market for animated television programming and feature films. Growth in advertising spending targeted at children and the expansion in the number of television channels dedicated to children s programming around the world have contributed to an increase in the demand for animated television programming. Several major studio releases continue to demonstrate the mass appeal of computer generated (CG) animation to family audiences. DreamWorks Shrek 2, Shrek The Third, The Walt Disney Company (Disney) and Pixar s Finding Nemo and The Incredibles each out grossed the more traditional 2D animated releases. This appeal has been worldwide, with foreign box office revenues equaling or exceeding domestic revenues on these films. Moreover, as demonstrated by worldwide success of television shows such as The Simpsons, The Rugrats Movie, South Park, Spongebob Squarepants and King of the Hill animation content has broad appeal across traditional gender, demographic and cultural barriers. Page 16

17 In the past, animation series were aimed at children aged nine and below. TV stations have been producing animation series for teenagers, adults and the whole family. Animation series like The Simpsons and King of the Hill have been successfully aired on primetime TV. The major markets include the United States, Canada, Japan, France, Britain and Germany. Licensing operations for T-shirts, caps and other items have also been a major source of revenue for animation companies. In Japan, several successful computer games have crossed over and have become animated series like Pokemon, Monster Farm, Power Stone and Detective Conan. More broadly speaking, animation is increasingly used in video games, and movies are also increasingly reliant on animation and computer graphic special effects. Ever since Film was invented around the year 1900 and up until the last decades of the 20th Century, animation has played second fiddle to Live Action. Despite the fact that feature film length animated movies have been produced since the 1930s, Live Action in Movies and TV have been the dominant entertainment media, and animation has made up a small part of the market in terms of both number of productions and turnover. This scenario has, with the development in computer-based animation, changed radically. Options of production and economic potential have developed considerably. Classical animation, computer generated animation, hybrid forms of live action and animation, along with the development of computer games, have turned animated products into a large commodity on the market for audiovisual media entertainment and narrative art. Serving as basis for games production animation has provided the foundation of a turnover, roughly matching that of the entire market for moving pictures. At Page 17

18 the same time animation combined with the new technology provides opportunity for development of new narrative styles and fictitious universes. The rapid advancement of computer technology has made computer animation available to the masses, and this new software genre has become one of the fastest growing industries in the current decade. Owing to the increase in computing power and the reduction in computing costs, we are seeing more and more of the global computer animation production output taking place outside of North America. This is a pattern we have seen for the past three years, with the resultant growing importance of the outsourced computer animation production market, which is increasingly being tapped by North American film and television program producers. The major factor behind this shift of computer animation production to the Asia/Pacific region continues to be the availability of low cost, powerful computer animation platforms and much lower labor rates in the Asian and Pacific Rim countries compared to North America and Europe. The bulk of the outsourcing happens for 2D animation content with some amount of 3D content. Today, just about every theatre film, and a great many television programs, use some form of computer animation, and effects in their production. Computer animation has now become just another tool, device, or component available to film and television program producers. With the production budgets coming under increasing scrutiny, film and TV producers are striving to keep production costs down. This, in turn, is putting added pressure on the producers of that computer animation to reduce their production time requirements, and corresponding costs. Hence Page 18

19 there is a need and an opportunity for an animation service provider offering low cost high quality solutions. Animation softwares are developed to help people create their own visual effects. Computer animation became known in the 70s when foreign filmmakers used the computers as an aid for creating sci-fi objects and special effects. The filmmakers of Star Wars, Indiana Jones series, Star Trek, etc. invested large amounts of money on computers and softwares. The computers, mostly graphical workstations, were designed to generate and simulate real-life images. As a result, filmmakers became very much impressed on the performance and the quality of results computers generated in filmmaking. Furthermore, computers produced more impressive art pieces. The worldwide growth in multi-channel television has fuelled the development of children s and other thematic channels that rely heavily on animated output. The success of The Simpsons and other series such as South Park has demonstrated the adult appetite for animation. Adult animation now appears on many mainstream channels and on themed comedy channels like the UK s Paramount Comedy Channel and Comedy Central in the USA. There have been consistent attempts by broadcasters across the world to find products to match the success of The Simpsons and hence adult animation has been an area of growth. Animation has also proved popular for feature films. Films like The Lion King, Toy Story are among the biggest Box Office successes of all time, grossing more than US$500 million each. They have also earned substantial incomes in the video and DVD sell-through markets. Shrek is one of the fastest selling videos and DVDs of all time. The success of animated feature films is Page 19

20 underlined by the decision of the American Academy of Motion Picture Arts and Sciences introducing a new animated feature film award for The Oscars this year. History and Evolution Of all the uses that computers can be put to, probably, the most interesting, exciting, and challenging to graphic artists is animation. From television commercials to major Hollywood blockbusters, it is used to produce highly distinctive images that can intrigue, impress, and dazzle the viewer. It is one of the brighter things in the world these days. Graphic artists are more interested in visual effects because it is one way of treating projects with distinctiveness and innovativeness. Animation is simply defined as the sequencing of a series of static images to generate the illusion of movement. Most people believe that actual drawings or creation of the individual images is the animation, when in actuality it is the arrangement of those static images that conveys the motion. Animation is any sequence of images that creates the illusion of motion. Animation is the process of giving the illusion of movement or life to cinematographic drawings, models, or inanimate objects. Animated drawings predate cinema proper. From the 1830s onward, optical toys such as the phenakistoscope (a revolving disk with figures arranged around the center), zeotrope (an optical toy in which figures on the inside of a revolving cylinder are seen through slits in its circumference), and the Praxinoscope (a device that used reflections of objects to achieve the illusion of movement) were designed to demonstrate or exploit the physical phenomenon of persistence of vision. Such instruments used a Page 20

21 technique comparable to the modern cartoon film: drawings of successive stages of an action were presented so rapidly that they produced an illusion of movement. Animation, the art of movement, is a way of making inanimate objects move. This may be materialized by sets of drawings which are photographed in sequence on successive motion picture frames. These photographed drawings when run in film produce smooth flowing and continuous actions. Throughout the years, animators together with producers have thought of several ways to be able to improve its quality and substance. Animation ended into a highly sophisticated art form and motion picture technique, as well as an effective way for communications, as certain techniques and equipment were developed. EMERGENCE OF THE ANIMATION INDUSTRY The nineteenth century was full of incredible inventions, particularly for film. In the mid-1800s, two scientists, Dr. Simon Ritter von Stampfer and Dr. Joseph Plateau, independently stumbled upon an amazing discovery. While von Stampfer was in Austria developing his Ritter phenakistiscope, Plateau was in Belgium inventing his stroboscope. Both were the first contraptions used to watch animation. William George Homer made a hybrid of the Plateau-Stampfer inventions in It became known as the zoetrope, and it relied on this most rudimentary principle of animation, the persistence of vision. The zoetrope is a cylindrical object with slits around the side. A strip of sequential drawings can be placed around the inside of the cylinder. When you spin the zoetrope and look Page 21

22 through the slits on the outside, the flickering result is animation in its purest form. A few decades later, British photographer Eadweard Muybridge began his enormous contributions to the beginnings of what would soon be the booming industry of animation. Leland Stanford, then governor of California, had to settle a bet he had made with another politician. The governor surmised that as a horse galloped, at some point all four hooves left the ground. To prove himself correct, he hired San Francisco landscape photographer Eadweard Muybridge. When Stanford explained what he wanted, the eccentric photographer gasped. The idea was radical, and the technology to capture such speed had not been invented. Remember, to take one picture in the 1860s, you had to stay still for tens of seconds. Almost ten years and many experiments, arguments, and dollars later, the bet was settled. On June 19, 1878, Muybridge came to a racetrack in Palo Alto, California and set up a series of 24 cameras connected to tripwires. Each camera would rapidly fire off an exposure as the wires were broken by the passing horse. The resulting images recorded true stages of motion for the first time in history. Muybridge proved that when a horse is in full gallop, at some point the animal is completely off the ground. Not only are all its feet off the ground, but its legs are tucked in underneath its body. For centuries, masterpieces had been painted showing galloping horses always with one foot on the ground. At this time in history, the idea that all four feet leave the ground seemed absolutely outrageous. Muybridge continued to photograph movements of all sorts of animals and people performing various actions. His photographic studies were turned into Page 22

23 popular zoetrope strips during the late part of the century. Today animators still use Muybridge s work for reference. The jump from simple still images being flipped to a seamless sequence of images is credited to the Lumiére brothers of France. Although numerous inventions of decades past helped the Frenchmen, they began what is now known as modern film. On December 28, 1895, Louis and Auguste Lumiére sent people screaming from a Parisian theater when they filmed an oncoming train pulling into a station. While watching the arrival of a train at the station, many people in the audience thought the train was going to plow right through the seats. It seems funny to us now, but back then people had never seen anything like this. James Stuart Blackton created the first animated film, entitled Humorous Phases of Funny Faces. Fascinated with special effects, Blackton featured an artist s real hands drawing the faces of a man and woman, which begin to interact with one another. He used chalk and cutouts to achieve his illusion of movement. The pivotal pioneer s 1906 short was very crude in terms of its animation, but he inspired others, such as Winsor McCay, Sidney Smith, and Gregory La Cava, to produce higherend shorts using more refined techniques. In particular, McCay would take the idea of combining live action with animation to a new level. In 1914, he amazed audiences with his short, Gertie the Dinosaur, in which he interacted on stage with the prehistoric beast. He decided to use a dinosaur so he could not be accused of tracing photographs. Another one of McCay s shorts, Little Nemo, required him to draw more than 4,000 drawings by hand. It was during the production of this short film that McCay figured out a way to register his drawings. In other words, he was the first person to Page 23

24 align his drawings perfectly in sequential order using hash marks, thus preventing the jiggling that accompanied many early animated shorts. Nevertheless, animators were still drawing each frame of action over and over, including backgrounds and cycles. Page 24

25 FIGURE 1: EARLY ANIMATIONS Page 25

26 A battle that still is being fought today in animation began to unfold in the early 1900s. It became time versus money. The laborious process was becoming too costly for many of the small fledging studios of the time. Imagine having to draw each frame, background, props, and characters together on one sheet of paper. To expedite this costly process, an animator by the name of Earl Hurd began to use celluloid sheets at the JR Bray Studios in This invention was the turning point in modern animation. Using these clear sheets, Hurd figured he could hold certain static elements while animating the characters on another layer. Hurd s cels, as they were called, allowed the animators to work on only the moving elements of the film. Backgrounds and props could be held underneath or over the primary action. This paved the way for what would become known as overlays and underlays. Try to imagine the impact on time and money that the use of cels would have on the industry. The gold rush in animation was beginning. As the Depression trudged on, many studios began offering animated shorts before their features. A sense of escapism began to take hold, especially with the advent of synchronized sound in film. In 1926 Lotte Reiniger produced the first feature-length animated film, The Adventures of Prince Achmed. In the mid-1920s Otto Messmer created Felix the Cat, which was the first animated character that the general public could easily identify. It was also the most commercially successful cartoon of that time period. The late 1920s saw the beginnings of the Walt Disney studio s reign on the world of conventional animation. The animators at Disney studio were instrumental in a number of major technical developments and refinements, including cel animation, the multiplane camera, the use of sound, and the use of color. Steamboat Willie Page 26

27 (1928), starring Mickey Mouse, was the first animated film to use synchronized sound; furthermore, Mickey went on to become one of the most identifiable animated personalities ever. The Disney studio was the source of the first major advancement of animation. By 1945 the first modern computer, named ENIAC, was completed. And so the prototypes of all three disciplines were now present. The convergence between computer technology and the other disciplines began slowly in the mid- 20 th century. The first computer with a Cathode Ray Tube (CRT) was built in the early 1950's in order to display solutions to differential equations. By the early 1960's, Boeing employees Fetter and Bernhart created a computer animation of a plane landing on a runway by plotting 3D drawings onto paper, one at a time, and then photographing them in the traditional manner, using an animation stand. This laborious process gave way to the first interactive graphics system, called Sketchpad. Sketchpad was developed at MIT by Ivan Sutherland and allowed users to interact with simple wireframe elements using a light pen. Artists began using computer technology for artistic expression in the 1960's. CG films were faced with the severe limitations of hardware at the time. Furthermore, computers useful for these tasks were so expensive that only universities, government agencies and a few large and forward thinking companies could afford them. In the late 1970's Alvy Ray Smith and Ed Catmull calculated that to make a CG animated film at that time would cost one billion dollars. However they also foresaw that given enough time to develop, computer animation would actually become more economical than traditional animation. They based their prediction on Moore's Law, a dictum that computers for a given price will double in Page 27

28 power about every eighteen months, and, conversely, that prices will drop by half every eighteen months for a given amount of computational power. WALT DISNEY Part of being successful in any industry is being able to see down the road a few years. A young creative talent named Walt Disney looked beyond that point. His creation of a mouse, originally named Mortimer, would change the world. In 1928, his tiny studio of a dozen artists released a short film entitled Steamboat Willie, starring a mouse named Mickey. Disney figured out a way to sync up sound with his animation, and he sunk every last dollar into this endeavor. With nothing to lose, he gambled on the fact that his studio had something nobody else had a cartoon with sound. Disney s incredible vision, mimicking the popular Buster Keaton shorts of the time and using sound in an innovative way, made Steamboat Willie a unique success. Walt Disney Studios was propelled to the forefront of animation. Characters such as Donald Duck, Goofy, and Minnie Mouse would become household names in the years to come. Mickey dominated the theaters in the 1930s and 1940s; people would go to the movies to see whether "a Mickey" was playing. Warner Bros. Studios was soon in on the game, and in those years they created hundreds of classic zany shorts. Approaching animation with a different aesthetic look, the studio hired animation directors such as Chuck Jones, Bob Clampett, and Tex Avery. These men and their contemporaries would indelibly leave their mark on the world with such hilarious characters as Bugs Bunny, Daffy Duck, Droopy Dog, and Porky Pig. Page 28

29 The stylistic difference between Disney and Warner Bros. is important to note. While Disney cornered the market on the shorts with sentimental favorites such as Mickey and Minnie, other talents of the time went in the opposite direction. Tex Avery produced numerous cartoons that contained the element of cuteness but had an underlying adult humor and wild action (especially in the shorts produced under him at MGM). Avery truly busted open the principles of animation and played with people's perceptions of physical reality. As animation found a home in the theaters, numerous studios began to compete for commercial success into the 1950s. Although we all grew up watching these six-minute shorts of Bugs and Daffy, the knowledge of their demise is not common. In those days the major studios produced these shorts, which were shown preceding features in the movie theaters. As we marched into the 1950s, household names such as Tom and Jerry began to establish themselves. But as their popularity grew, so did their cost. Disney began venturing into feature films, producing classics such as Snow White and Bambi, while other studios continued to make shorts. These six-minute gems came with staggering price tags because of the quality of animation back then. While the backgrounds and props were being held on cels, the characters were still being redrawn over and over. The character animation was so smooth and dynamic that it required each animator to laboriously craft hundreds and hundreds of beautiful drawings. By 1955, the cost of a six-minute Tom and Jerry short was more than $50,000! That s without any voices high even for today s standards. The Disney Studios have been the main source of animation innovation since the very beginning of animated film. The studio's first Page 29

30 success was with Mickey Mouse as Steam Boat Willie in Their first full length animated feature, Snow White, debuted in 1937 and has been a classic ever since. The animation of Disney was widely regarded to be the best, and they have had no competition in feature length animated films for a long time. Other huge animated hits included Fantasia (1940), Pinocchio (1940), Dumbo (1941), Bambi (1942), Song of the South (1946), Cinderella (1950), Alice in Wonderland (1951), Robin Hood (1952), Peter Pan (1953), Lady and the Tramp (1955), Sleeping Beauty (1959), 101 Dalmatians (1961), The Sword in the Stone (1963), and The Jungle Book (1967), among many others. After the death of Walt Disney in 1966, the animation division of Disney languished, and in 1979, several key Disney animators, led by Don Bluth left the company, citing deterioration in the studio's artistic standards. This coincided with a general lack on market interest for family oriented features, Disney's main product theme. During the 1980's, several management changes reoriented the company, and Disney became a market leader again. Michael Eisner, along with Jeffrey Katzenberg, managed to revitalize the animation division with such animated hits as The Little Mermaid (1989), Beauty and the Beast (1991), Aladdin (1992), The Lion King (1994), Pocahontas (1996), The Hunchback of Notre Dame (1996) and Fantasia Continued (1997). PIONEERS OF THE INDUSTRY Before the turn of the century, the French conjurer and filmmaker Georges Melies had demonstrated the possibilities of the stop-motion photography, frame-by-frame technique by which animated films have generally been produced. By 1907 J. Stuart Blackton in the United States had made an Page 30

31 animated film, Humorous Phases of Funny Faces; and a year later, in Paris, Emile Cohl embarked on a series of witty cartoon films. Cohl s successors in the silent period included such distinguished animation artists as Robert Lortac, Benjamin Rabier, and Joseph Hemard. The earliest American animated films were derived from newspaper comic strips, where characters such as Mutt and Jeff, Happy Hooligan, The Katzenjammer Kids originated. The first American artist to draw for film was Winsor McCay, with his Gertie the Dinosaur and a series called Dreams of a Rarebit Fiend. The most famous cartoon personality before Walt Disney s Mickey Mouse, however, was Felix the Cat, created by the Australian cartoonist Pat Sullivan and animated by Otto Mesmer. Meanwhile, the Russian Ladislav Starevich used other silent animation methods, such as stop-action techniques, to animate his exquisite little puppets as early as Lotte Reiniger, a German artist who adapted the ancient techniques of the shadow show, completed the world s first fulllength animated film, Die Abenteuer des Prinz Achmets (The Adventures of Prince Achmed), in With the arrival of sound, Walt Disney rapidly achieved preeminence through imaginative use of sound and color with the vitality of his gags largely inspired by early slapstick films. Disney s The Three Little Pigs (1933), with the optimism of its theme song (Who s Afraid of the Big Bad Wolf?), came to be a symbol of the era of sound. In 1937 Disney made his full-length animated films such as the extraordinary Fantasia in 1940 and developed techniques that combined animation with live action. On the other hand, experiments with these hybrid animations also had been under way in the Soviet Union for instance where, in The New Page 31

32 Gulliver (1935), Aleksander Ptushko combined live actors and cartoon figures in the same scenes. The 1940s and 50s saw reactions against the Disney style. Such artists as Bill Hanna and Joe Barbera, Tex Avery, Paul Terry, Walter Lantz, and Chuck Jones continued in the same style of animation but added a new anarchic and surreal comedy. The artists working for United Productions of America (UPA) most of whom, including Art Babbit and John Hubley, had broken away from Disney reacted against the detail and naturalism of the Disney style with spare, non-naturalistic drawing inspired by contemporary art and such practitioners as the Romanian-born Saul Steinberg. In Canada, animator Norman McLaren experimented with stereoscopy (two-dimensional depictions that through perspective appear three-dimensional), synthetic sound, and other techniques, many of which were further developed by the school of animators he built up. Among McLaren s colleagues and disciples was George Dunning, who subsequently worked in Great Britain, where the animated cinema was vigorous after Other notable animators working in Britain included John Halas and Joy Batchelor, who were already considered established during World War II; Peter Foldes; Bob Godfrey, an inspired exponent of low comedy; and Richard Williams, a Canadian whose studio sought to emulate the Disney craft traditions. In Eastern Europe in the mid-20th century, the most notable animated films were created in Czechoslovakia, where Jiri Trnka developed a singular tradition of animation work with puppets, and Yugoslavia, where the Zagreb Studios produced such distinguished practitioners as Vatroslav Mimica, Dusan Vukotic, and Nikola Kostelac. Page 32

33 The Flintstones paved the way nearly 40 years ago, with Top Cat and The Jetsons following closely in its footsteps. They were the first wave of animated primetime shows aimed at adults. The second wave came much later, but made quite a splash. Around that time, cable was also getting a piece of the primetime animation action. In 1993, MTV: Music Television's Beavis & Butt-head began really pushing the envelope, in terms of taste and content. Then Comedy Central broke even more boundaries with the edgy South Park, and it paid off handsomely. South Park became a ratings and merchandising bonanza for the network. And Comedy Central's distribution took off because of the show. Hence, the programming formula du jour for primetime is animation. The ad agency BBDO has cited animation as one of the hottest programming trends for the coming season. And both cable and broadcast have staked their claims in that genre for primetime, trying to duplicate the success of South Park and The Simpsons. There has been a sea change in how animation is perceived. Baby boomers grew up with cartoons, and they still think it is fine to watch them -- which was not always the case. Television networks emphasize that adult acceptance of animation as an important contributor to its primetime boom. Cable programmers, in part, turn to animation because of advances in technology: Computer-generated characters are less expensive than traditional animation. Animation also allows programmers more freedom, from being able to bring historical figures back from the past. See Table 1 for a list of Animation Movies adapted from Television. Page 33

34 TABLE 1: ANIMATION MOVIES ADAPTED FROM TELEVISION 1. The Simpsons Movie 2. The Rugrats Movie 3. Pokemon: The First Movie 4. The SpongeBob SquarePants Movie 5. Rugrats in Paris: The Movie 6. Beavis and Butt-Head Do America 7. South Park - Bigger, Longer and Uncut 8. Pokemon: The Movie The Wild Thornberrys 10. Rugrats Go Wild 11. Recess: School's Out 12. A Goofy Movie Page 34

35 13. The Care Bears Movie 14. Jetsons: The Movie 15. Yu-Gi-Oh! The Movie 16. Doug's First Movie 17. Duck Tales: The Movie 18. Pokemon 3: The Movie 19. Hey Arnold! The Movie 20. The Powerpuff Girls Movie 21. The Smurfs and the Magic Flute 22. Digimon: The Movie 23. The Care Bears Movie The Chipmunk Adventure 25. Teacher's Pet 26. My Little Pony 27. Transformers: The Movie Page 35

36 28. Batman: Mask of the Phantasm 29. Aqua Teen Hunger Force Colon Movie Film for Theaters 30. Rainbow Brite and the Star Stealer 31. Tom & Jerry - The Movie 32. Heathcliff: The Movie 33. The Care Bears Movie Pokemon 4Ever 35. GoBots: Battle of the Rock Lords 36. Cowboy Bebop 37. Pokemon Heroes Page 36

37 FIRST INDUSTRY CRISIS Studios were buckling under the pressure of a new invention called television, and they deemed animation too expensive for it. And so it was decided that animation was on its way out. Remember, in those days nobody had heard of a rerun. By 1957, the last of the big studios had closed the doors of its animation division. MGM had no choice but to follow Disney and Warner Bros.' leads and close down their animation division. By 1960, most animators in Hollywood found themselves out of work or picking up brief work on animated commercials. HANNA BARBERA It took two animation directors coming from MGM, William Hanna and Joseph Barbera, to not only save the genre but also to reinvent it. Hanna and Barbera knew they could harness their skills to create a cheaper system of animation by utilizing their talent pool. The two men invented the limited animation system, which was based on reusing animation, utilizing strong staging, and creating simple gags. Their first production, entitled The Ruff & Ready Show, was a half-hour show that cost $2,800 to produce. They changed the perception of how animation had to look, feel, and move. Fifty years later, the same principles would become the principles of Web animation. By economizing the artwork, Hanna-Barbera dramatically drove down the cost of production and was able to bring thousands of artists back to their drawing boards. Hanna-Barbera would become known as the "General Motors of animation" for the twentieth century. Page 37

38 POPULARITY OF FEATURE ANIMATION In the 1980s, while feature film animation experienced another renaissance period by marrying traditional techniques with dazzling computer technology, television animation suffered. Many studios were turned over to business conglomerates that were looking for cheaper ways to produce Saturday morning cartoons. Legendary animators-turnedproducers were pushed out of the studios to make way for business school graduates. The bottom line became the priority to the corporations. Overseas studios, particularly in Asia, began to take outsourced work from American studios for the lowest dollar. Many animators in the United States found themselves out of work, and the quality of television animation suffered tremendously. Sadly, the trend has continued today. While offering corporations a more economical solution, cheaper overseas labor forces have not been as skilled or savvy in using technologies such as Flash. The growth in computing speed and the fall in computing cost have been key drivers for the animation industry. The computer has become an incredible tool for animation studios. While many studios have taken to 3D programs such as Maya, the animators who work with complex creatures, such as Shrek, possess all the knowledge of their predecessors. Although computers have made life easier for animators in terms of time saved, the principles of movement are more important now than ever. The computer animator who does not understand and appreciate animation from the past will create lifeless work. The people who devoted their lives to this genre and to understanding how to create that illusion of movement live on through today s modern exemplary work. Page 38

39 Why is Animation Different Of all the uses that computers can be put to, probably, the most interesting, exciting, and challenging to graphic artists is animation. From television commercials to major Hollywood blockbusters, it is used to produce highly distinctive images. Animation doesn t just look different; there are some things about the way it is made which mediate its passage through the marketplace, although new technologies are redrafting the rules. By comparison to live action, animation is often: 1. More labor intensive 2. Frequently suited to shorter formats than live action. 3. More suited to international markets because of the possibility of the increased shelf life of animated programs 4. More expensive in the short term (for more traditional types of animation) but with greater potential for returns The animation market is exploding worldwide. It currently represents 25% of the world audiovisual market, a figure that is only set to increase with the introduction of new delivery systems, changing scheduling patterns, and a proliferation of new media forms. Animation is poised to take advantage of the new media landscape, because the format lends itself to a highly graphic digital environment. This flows through from established cinema to TV and on to commercial applications and sites on the internet. Because not only are more live action features using increasingly sophisticated digital animation technologies, but the visual and digital nature of contemporary animation content is well suited to use in online applications. Page 39

40 However, animation is a distinct art form, with its own catalogue of production techniques and processes, as well as specific genres, categories and scheduling practices which set it apart from usual drama and comedy programming. Animation also has distinct characteristics in terms of its ability to access global markets because it possesses; a universal visual language which can be easily revoiced; a greatly extended shelf life; both a well established children s markets and a burgeoning adult market with no apparent limits on growth in the short to medium term; and a range of different times and formats that it can sell through, having established short-form series as a commercially acceptable format worldwide (in contrast to live action which generally sells only in half hour or hour blocks). But there are significant hurdles which face animation in the development and early production phase, because animation is highly labor intensive and expensive in the short term, which need to be addressed in order for the long term rewards of animation production to be possible. The animation industry has undergone rapid expansion in and holds tremendous potential for further growth. Multi-channel television, the popularity of computer games, the Internet and the opportunities for cross-platform exploitation have all contributed to this growth. Animated productions are easier to export than live action programmes. It is also simpler to dub animation into different languages. Animation is less likely to date and can hence be exploited for much longer periods than live action Disney s Snow White still gets theatrical releases in cinemas even though it was produced in Many children s programmes can be repeated at regular intervals as the target audience is constantly renewing as children develop. Page 40

41 Industry Characteristics The industry is known for being highly cyclical, and the prospects of partial work over the year or regular layoffs frustrates artists in both the US and other countries. This has been exacerbated of late with business boom and bust cycles, rapid technological change, and other factors. Globally, the industry saw a strong revival in the 1990s, as Disney recorded a few blockbusters, including The Lion King and the Beauty and the Beast. This led to a boom in investments, which eventually turned into a bubble, before a downturn for studios in the last two to three years. In particular, Disney and Fox closed all of their 2D studios, mainly to focus on 3D animation, where marketing executives saw opportunities for greater profits. 3D in computer graphics terms means that the characters forms and actions are based on algorithms and specifications in the three dimensions of the virtual space. This is also affiliated with great deal of computer power and algorithms to render the precise outlines, colors, textures and other aspects of the form. 2D on the other hand is often based on freeform sketching and drawing, although it is increasingly computer aided. Both 2D and 3D have advantages native to themselves, and lend themselves better to different styles and uses. For instance, a 2D sight gag or slapstick joke can be depicted easily by simply drawing, while in 3D, the artist has to figure out how to render these in algorithms first before the system can depict them. The relative gross takings of US$ 100 million for Disney s D release Treasure Planet and US$ 339 million for Finding Nemo suggests that consumers prefer 3D over 2D. This was made more stark by the fact that Finding Nemo cost US$ 94 million, which was less than Treasure Planet s US$ 100 million cost, which is at the very high end of 2D. The Page 41

42 same conclusions, however, have also been criticized as misguided perceptions, since 2D animations like Disney s Lilo and Stitch and Hayao Miyazaki s (i.e., Studio Gibli s) mostly-2d Spirited Away have been great successes. It is also commonly observed that it is the story and style that has led to a particular film s success, and not the technology. Even though the breed of 3D computer animation companies capable of making feature length films is small in number, it is steadily increasing. These include Pixar, whose first hit was in 1995, Fox s Blue Sky Studios, Dreamworks SKG (the producer of Shrek), and now, Disney itself (which is internally orienting its capabilities towards 3D). Competition in 3D can also come from firms that specialize in special computer graphics effects for movies, such as Industrial Light and Magic (ILM), Tippet Studios (which did the effects for the final Matrix movie), and WETA (which did the effects for The Lord of the Rings). The budget for an animated feature film could be as low as US$15 million and as high as US$100 million or more for an A list feature. Further, for TV series, the budget can range from US$250,000 per episode up to US$1.5 million for a show like The Simpsons. The Pixar production model is quite costly, with pictures running at about US$ 100 million per film (although lately, well done 2D animated features could cost as much). At the same time, 3D animated movies have been well received, and have generated far more revenue than 2D animated films (Disney s D hit, The Lion King held the record, until Finding Nemo overtook it in 2003). In animation, the average crew ranges widely, depending on the length of the film. The average Pixar crew has been about 150 or more, working for an average of four years on a project. At the end of Finding Nemo s Page 42

43 development, there were 180 employees on the project. Of Pixar s crew of 180 on A Bug s Life, about 40 percent were artists, 40 percent were technical people (consisting of the people who interface artists with the programming code), and 20 percent were managers. These were supported by a crew of film recording technicians, software developers, and the studio s animation tools department. ANIMATION INDUSTRY SUPPLY CHAIN The development and production of CG animated programming, together with the exploitation of related proprietary rights, generally involves: (i) the creation or acquisition of programming properties and their development; (ii) funding; (iii) production; (iv) distribution, both domestically and internationally; (v) merchandising and licensing of certain rights with respect to the use of proprietary characters and properties; and (vi) building a library of proprietary programming. Creation or Acquisition and Development: Studios create or acquire proprietary animation properties that are unique characters with broad appeal. Creation of proprietary programming is a high risk high return business. Funding: The production of programming involves a substantial amount of risk, particularly because costs of programming are payable when incurred, while revenues from programming, if any, are received at a later time and depend in part on the ultimate success of the programming. Such risks are managed securing funding to cover the production costs of its programming prior to beginning production. The Page 43

44 funding for production costs comes in primarily through one or more of the following sources: distributors, television networks, or cable operators for audiovisual exploitation of the program; government incentive programs; and licensors of merchandising and home video rights. Third party providers of production funding are frequently entitled to receive a portion of the profits of the production as compensation for assuming some of the financial risks associated therewith. Such participation often includes rights to share in revenues generated by the commercial exploitation of related or ancillary applications, which diminishes the realizable value of studios but also mitigates the financial risk associated with production. Production: Once a storyline is chosen, the studio selects a story editor to supervise the preparation of each episode s script. The studio then develops computer models of characters, sets and props. Voices are recorded and the recordings are analyzed and timed so that the animation can be synchronized to the voice track. Key frames are then set up, depicting the characters and settings for a particular scene. The episode director then allocates scenes to computer animators who animate the assigned scene. Upon completion of the animation for an episode, a postproduction process occurs which includes creating sound effects, adding the musical score and inserting any special visual effects. Distribution: Studios typically uses third parties to distribute and broadcast its programs. After the initial network, cable licensing or first run syndication period (generally two to three years), the program would be available for further commercial exploitation on cable. Fees payable to the distributors typically range from 25% to 35% of gross Page 44

45 receipts. The governance of animation production (i.e., where decisions on the supply chain) is dictated by the institutions which control whether content is produced and how it is distributed. Increasingly, these two aspects are connected. In the US, the distribution of animation is essentially controlled by the large TV channels such as the Fox Network, the specialized channels such as Nickelodeon and Cartoon Network, the larger distributor/studios or other content providers such as Disney. It is only when a production studio gets large and wellknown enough that it can effectively dictate its own future. Since most animation series are carried by TV studios, and since these studios may be in the broadcasting rather than production business, they rely heavily on contracting with creative talent of outside production studios. Merchandising and Licensing: Control of merchandising and licensing rights provides the studios with an opportunity to earn revenue from the sale of products bearing or utilizing the likenesses of the studio s proprietary characters and properties. Building a library of proprietary properties: Once complete and delivered, the copyrights form part of the studio s continually growing library. The company can re-license them at no additional cost. Additionally, the Company can take characters from these shows and produce spinoffs that will generate further revenue beyond the original production. Specialized animation channels usually keep some internal preproduction and postproduction operations, and sometimes even hold onto the production internally. That is, they have their own creative talent, either Page 45

46 for developing animation in-house, or for spotting or identifying concepts in the conceptualization and preproduction phase, which are then outsourced to animation studios. Post-production is often done in-house as well since it is really a follow-up stage that ensures that production meets the preproduction specifications. Unlike animation, the film industry has outsourced their computer graphics (CG) effects for the most part. This is partly because of the flexibly specialized nature of film production, which allows outsourcing, and partly because of the fact that the film industry has traditionally been dependent only on physical assets such as actors and locations. Increasingly, however, computer graphics effects are becoming more and more useful in film, blurring the line between film and CG or CGI animation. Nowhere was this more evident than in the Lord of the Rings trilogy: All three movies used CG effects extensively for the main battle scenes, redefining the notion of what assets are needed for epic scenes or to define a movie. ROLE OF TECHNOLOGY Though the initial development of interactive computer systems and computer animation and imaging technology occurred in the 1950s and 1960s, before the advent of microcomputers in the mid-1970s, virtually none of the computer animations produced were done so with artistic or entertainment-related intentions. The early computers and corresponding graphics technology were fairly expensive, limited by hardware, and quite difficult to operate, requiring significant programming expertise. Almost all early computer graphics applications were of a practical nature; they were Page 46

47 generally associated with the military, manufacturing, or the applied sciences. Government agencies started using computer animation in the 1970s to create simulators for training and war games. This was followed in the 1980s in the commercial sector through adoptions of computer animation enhancements to computer aided design (CAD) and modeling (CAM) software, by adding new levels of realism through 3D modeling and utilization of special effects such as computer generation of surface textures over wire-frame models, rotation techniques, refinements in shading and lighting effects. While early adaptations required large dedicated mainframes, the rapid advancement of computer technology has made computer animation available to the masses, and this new software genre has become one of the fastest growing industries in the current decade even though it is by many measures still in its infancy. In the early days, dedicated proprietary systems, often based on both hardware and software, were the rule of the day. In the mid to late 1980s the arrival of the workstation and the first professional off the shelf graphics animation software spelled the beginning of the end for the top tier of computer graphics (CG) production companies. In 1974 Rene Jodion and Peter Foldes produced and animated Hunger/La Faim using a computer animation system that relied on object shape modification and line interpolation techniques. It was among the earliest computer-generated animations to be considered successful. It was also the first computer animation to be nominated for an Academy Award. Page 47

48 FIGURE 2: EARLY CGI BASED ANIMATIONS Page 48

49 Thanks to advancing technology and the subsequent lower capital equipment costs, coupled with the explosive growth of the workstation fueled the growth of today s larger studios. These studios rely on proprietary software to maintain competitive advantage. Today s smaller studios are taking advantage of the current wave of technological advance, the collapse of workstation price performance and the ascendancy of increasingly powerful Windows NT personal computers. Off the shelf animation software that maximizes work-group output while minimizing much of the need for staff programming is gaining in popularity. New technology has had a significant impact on the growth of animation. The production of high quality animation has always been time consuming and labor intensive, but computer technology has enabled considerable savings in time and costs even for traditional drawn animation. It has also had a significant impact on production techniques, enabling the development of ever more realistic-looking 3D animation. This has helped to promote the popularity of the medium. Computer animation has also enabled the development of ever more complex and realistic special effects for television programmes and feature films. For example, several science programmes use animated sequences to illustrate the workings of internal organs for the human body. The Internet has also demonstrated its potential as a distribution platform for animation. Presently it is difficult to deliver high quality live action pictures to all but the highest bandwidth subscribers, but certain types of animation lend themselves well to the Internet. Software programmes like Flash and Shockwave have been of considerable assistance to the growth of online animated programming. In the past, 2D technology Page 49

50 was quite unaffordable for all but the specialized studios, but the advent of new software and technologies such as Macromedia s Flash has put animation tools within the reach of many smaller studios, as well as nonanimation industry people. Flash software is also helping web sites and studios alike to develop simple animation content at lower cost. As a result, many studios are gearing up to work with Flash. As computer technology and techniques continued to develop, commercial animations began to proliferate in the 1980s. At this time a number of commercial animation production houses formed, houses specializing in 3D computer animation; much of this animation was created for entertainment purposes, including for films and television commercials. The 1982 Disney Production s feature film TRON was significant for its relatively substantial use of computer animation within a full-length film; it had over 20 minutes of computer animation. TRON was also one of the first films to composite computer animations with live action footage. In this case, the imagery and animations were not intended to simulate reality. In 1985, The Last Starfighter incorporated a substantial amount of computer animation. See Table 2 for a list of Live Action movies featuring CGI characters. The 1990s brought the arrival of the first full-length entirely computer animated films, beginning with Disney/Pixar s Toy Story in 1995, and followed in 1998 by both PDI/Dreamworks Antz and Disney/Pixar s A Bug s Life. The 2000s witnessed the release of movies such as Dreamworks Shrek, Shrek 2, Shrek the Third, Madagascar, Kung Fu Panda, Pixar s Monsters, Inc., Finding Nemo, The Incredibles, Ratatoullie, Cars, Page 50

51 Wall-E, Warner Brothers Happy Feet, The Polar Express, Blue Sky Studios Ice Age, Ice Age: The Meltdown. Page 51

52 TABLE 2: LIVE ACTION MOVIES FEATURING CGI CHARACTERS 1. King Kong 2. Alvin and the Chipmunks 3. Scooby-Doo 4. Stuart Little 5. Godzilla 6. The Incredible Hulk 7. Hulk 8. Casper 9. Scooby-Doo 2: Monsters Unleashed 10. Garfield: The Movie 11. Stuart Little Small Soldiers 13. Dragonheart 14. Garfield: A Tail of Two Kitties Page 52

53 Computer-based animation tools act as assistants to the traditional hand-drawn animation process, e.g. CAPS (Computer Animation Production System) developed by Pixar for Disney. When using CAPS, animators scan all of their drawings into digital images. The animators then use CAPS to color these digitized images, check them for inconsistencies, and eventually composite the layers to form the final animation, which is then transferred to film. In fact, through the use of this system, Disney has replaced the use of physical cels with digital cels. First used in 1989, Disney has used CAPS for every traditional animation since Beauty and the Beast in Though the physical cel disappeared, and though the animators rely heavily on computers, the final animation is produced in a manner similar to traditional animation, with its individually created and composited layers. MERCHANDISING OPPORTUNITIES Significant revenues can be generated from the licensing of proprietary characters and properties embodied in a television program or feature film, and rights to manufacture and distribute CDROM, video and other games, toys, clothing or merchandise derived from characters or other properties of a television program or film. Numerous animated productions, including Beast Wars, were initially produced in large part to support the sales of merchandise associated with these programs. Animated characters can also be exploited beyond the small screen. Many programmes have seen spin-off products such as toys, books, games and collection cards. Merchandising has become a major source of income for broadcasters and production companies, often earning more than the Page 53

54 production from which they were originally spun out of. This again has fuelled the demand for animation. The industry has therefore developed globally, with successful products being exploited in many different ways across the world. It has also become a highly competitive as a successful product can have huge revenue potentials when fully exploited. However, animation costs more to produce than live action films and the industry relies heavily on co-production agreements and attracting finance from overseas. Additionally, production can often take place across different territories, with the creative development taking place in the home territory, but with much of the physical production being contracted out to other territories where labor costs are cheaper. Animation is therefore a truly global industry. The potential revenues that can be earned from associated merchandising have also fuelled demand for animation. A successful product on screen, can lead to substantial sales of toys, books, games, clothing, soft furnishings, gift-wrapping, lunch boxes etc, all carrying animated characters as extensions of the brand. Sometimes the revenues from merchandising far exceed those from the original animated product, so there is a huge incentive to commission animation that might spawn other consumer products. Sometimes successful consumer products such as toys or games might be made into television programmes or feature films. Animation has also proved its worth as a commercial medium. It is frequently used for advertisements and promotional films. Many pop videos now use animation and in the case of The Gorrillaz it has provided the basis for the development of a virtual pop band. Page 54

55 Computer games, which use the techniques of animation production, have grown substantially. The success of Tomb Raider games and the feature film Lara Croft: Tomb Raider demonstrates the potential crossover between computer games, films and television production. While it is evident that the animation industry as a whole has undertaken phenomenal growth, no attempt has been made to quantify the value of the whole industry at a global level. DISTRIBUTION OF ANIMATION CONTENT The three key channels for distribution of animation content are television, feature films and home videos. 1. Television: Suppliers of television programming include the production divisions of major motion picture studios, independent production companies, broadcast television networks, station owners and advertising agencies. These suppliers sell programming to broadcast networks or television stations for a fixed cash fee per episode, by barter or by a combination of cash and barter. Broadcasters of children s television programming consist primarily of networks (both over the air broadcast television networks and basic cable networks) and independent television stations. Distributors of children s programming generally sell television series to networks on a cash basis. Networks typically pay a distributor a fixed cash license fee that entitles the network to a specified number of runs of a series over a defined period of time. Networks are generally entitled to retain 100% of the advertising revenues generated by the broadcast of a series and sell advertising spots to advertisers on the basis of guaranteed ratings. Page 55

56 2. Home Video/DVD: With the advent and growth of the DVD and home theatre market, consumers can now enjoy the theatre experience in their own living rooms. As a result, there has been tremendous growth in the home video/dvd market, both in the sales and rental markets. These proprietary copyrights will provide animation companies with ongoing franchises for direct to video projects. By investing in copyrights, and controlling their development and production, animation studios can position themselves to own and control all worldwide distribution, licensing and merchandising rights and their accompanying revenue streams. In addition, the acquisition and production of these proprietary copyrights will expand the studios library holdings, leading to long term value as a holder of rights in completed features. This is especially the case in family entertainment, since this form of product tends to age well and can be successfully broadcast and distributed on video year after year. 3. Feature Films: The feature film industry encompasses the production and theatrical exhibition of feature length films and their exploitation in home video, television and ancillary markets by major studios and independent production companies. While the major studios, such as Universal Pictures, Warner Bros Inc., Twentieth Century Fox, Sony Pictures Entertainment (Columbia/TriStar), Paramount Pictures and Disney dominate the feature film industry, independent production companies have played an important role in the production of feature films for the worldwide feature film market. The consolidation in the feature film industry has resulted in the elimination of many independent producers that have historically supplied independent Page 56

57 distributors in territories around the world. This has, in turn, created an increased demand for the remaining producers of independently produced feature films. 4. Other channels of distribution include video-on-demand (VOD), payper-view, pay television, network, basic cable and syndication, nontheatrical exhibition, such as airlines, schools and armed forces facilities etc. Certain characteristics of successful animated feature films tend to enhance their overall financial prospects. For example, the themes and characters of these films often transcend traditional cultural boundaries thereby enhancing the prospects for international appeal. Moreover, the family orientation of these films, coupled with the propensity of children for repetitive viewing, make these films well suited for home video purchase and rental. As a result, home video sales of successful animated feature films may also result in substantial proceeds. In 1995, Disney released Toy Story, the world s first entirely CG animated feature film, which was developed and produced by Pixar. Toy Story 1 has achieved worldwide success, yielding U.S. box office revenues of over US $192 million and Toy Story 2 clocked global box office revenues of over US $ 245 million. Pixar and Disney collaborated to produce A Bugs Life, which achieved U.S. box office revenues of over US $163 million, Monsters, Inc. (released 2001), which achieved U.S. box office revenues of over US $255 million, Finding Nemo (released 2003) which achieved U.S. box office revenues of over US $339 million. Page 57

58 Other studios have also produced entirely CG animated feature films with varying success, such as Shrek (2001), and Shrek 2, the highest grossing animated film of all time (released 2004; gross revenues US$441 million), Ice Age (released 2002; gross revenues US$176 million) and Ice Age-The Meltdown (released 2006; gross revenues US$195 million) by Blue Sky. Other releases which have proven a consumer preference for CGI feature films include The Incredibles (released 2004; gross revenues of US$ 261 million). The Incredibles was the fifth highest grossing film of 2004 in North America and fourth Worldwide. It is the third highest grossing superhero film of all time, after SpiderMan and SpiderMan 2. CGI films are no longer only for children. Releases, such as DreamWorks Madagascar (released 2005; gross revenues US$193 million) have been geared primarily to the adult market. COMPETITIVE LANDSCAPE OF ANIMATION STUDIOS Animation production is a highly competitive market. Studios compete with a variety of companies for the service work, access to time slots for broadcast of television programs, access to theatrical outlets for any possible feature films, acquisition of characters, storylines, ideas and treatments with which to build its library, the recruitment and retention of talented personnel, and the licensing and distribution of its related products. Studios attempt to differentiate itself from its competition through its high quality level of CG animation, production processes, training of skilled animators and proprietary software. Competition is expected to continue to intensify in the family-oriented, animated and live action feature film Page 58

59 market. In addition, there has been increasing widespread acceptance for CGI-animated films. In the last few years, there has been a significant increase in the number of CGI-animated films released, a trend that is likely to carry through in the future. Many studios have announced their intention to release multiple animation films per year. Competition in Television: Studios compete for television time slots, viewership ratings and related advertising revenues. Typical competitors include other producers of animated and other children s programming such as Film Roman, Inc., Fox Kids Worldwide, Inc., The Cookie Jar, Nelvana Limited, Warner Bros., Inc. and Disney. In addition, the animated television productions also vie for the children s audience with all other forms of media, including live action television series and video games. Competitive factors in animated television production area include the quality of the production, the reputation of the production company and the ability to deliver finished productions on time and on budget. Programming broadcast in international markets often must comply with foreign broadcast rules and regulations, which may stipulate certain minimum local content requirements. Competition in Feature Films: Several CG animation studios have achieved success in both the television and feature film arenas. Competition could come from studios such as DreamWorks Animation SKG, Warner Bros., Sony Pictures Entertainment, DNA, Bluesky, Disney, Fox Entertainment, Paramount Pictures, Lucasfilm, Universal Studios, MGM/UA, Studio Ghibli as well as numerous other independent motion picture production companies. DNA Studios is the Page 59

60 producer of the Jimmy Neutron television series and theatrical feature film. Pixar is the creator and producer of the Disney hits Toy Story, Toy Story II, Bugs Life, Monsters, Inc., and Finding Nemo. DreamWorks has exclusively distributed the CG films including Shrek, Shrek 2 and Antz. These studios have a successful track record in the theatrical feature film business. However, these studios are looking for more cost effective ways to produce CG animation. Pixar (which produced Toy Story and A Bug s Life) and several other studios have already developed and released animated feature films, and have several others in production. There could be additional competition in the animated feature film market from movie studios and independent producers. Further, continuing enhancements in computer hardware and software technology will lower barriers to entry for studios or special effects companies, which intend to produce computer, animated feature films or other products. Several movie studios have developed their own internal computer animation capability, which may be used for special effects in animated films and live action films in addition to creating CGIanimated feature films. For example, DreamWorks has successfully produced and released Antz in 1998, Shrek in 2001, Shrek 2 and Shark Tale in 2004, Madagascar, Madagascar Escape to Africa in In addition, Fox successfully produced, through its subsidiary Blue Sky, Ice Age, which was released in 2002 and Robots, which was released in 2005, Ice Age: The meltdown, which was released in Warner Bros. released The Polar Express in 2004 and Disney distributed Valiant, in August 2005 and Chicken Little in November. Page 60

61 Continuing enhancements to commercially available computer hardware and software technology have lowered and will continue to lower barriers to entry for studios or special effects companies which intend to produce computer-animated feature films or other products. Competition from animated feature films and family-oriented feature films will likely continue to intensify over the next several years. Due to a potentially large number of family-oriented films scheduled for release over the next few years, it is possible that the market for these films, whether animated or live action, will become further saturated. Merchandising and Licensing: Competition in this area comes from a multitude of owners of creative content who seek to license their characters and properties to a limited number of manufacturers and merchandise distributors. Competition for merchandising and licensing relationships can be intense as new parties enter the market. Success of a studio in this space depends on the favorable ratings and popularity of its productions, the ability of the studios characters and properties to provide attractive merchandising opportunities to its customers and the studio s ability to attract strategic merchandising and licensing partners. Computer Graphics and Visual Effects: Studios face competition from computer graphics visual effects firms, including ILM, Digital Domain, Dreamworks, Rhythm & Hues, Tippett Studios, WETA Digital, Digital Domain, Sony Pictures Imageworks and Boss Film Studios, Inc. These computer graphics visual effects firms are capable of creating their own CG animated television programs or feature films or may produce CG animated television programs or feature films. ILM has already created and produced three-dimensional character animation Page 61

62 which was used for several central characters in the live action film Star Wars Episode III: Revenge of the Sith. RISKS FACED BY ANIMATION STUDIOS The television, video/dvd and feature film industries historically have involved a substantial degree of risk. Audience acceptance of a television program, video/dvd, or a feature film involves many factors such as audience response to their artistic component, media reviews, promotion, general economic conditions, public tastes generally and other intangible factors. The following are some of the key risks faced by animation studios: It is difficult to predict worldwide box office success prior to film release. While the popularity of the film is initially measured by box office success, the film s success within each follow-on product category, such as home video, merchandise or television, depends on factors unique to each type of product, such as pricing, competitive products, and the time of year or state of the economy into which a product is released, among many other factors. Television program, video/dvd, and feature film costs may exceed their budgets, sometimes significantly in the case of feature films. However this is not common in television program and direct video costs. Some studios are critically dependent on the services of certain key personnel and hence their success would to a large extent depend upon the skill and efforts of its management and upon its ability to attract and retain qualified management personnel. Page 62

63 Certain studios finance a part of their production budgets from Canadian governmental agencies and incentive programs, federal and provincial tax credits. The loss of these incentive programs could have an adverse effect on the Company s business. Global distribution of animation content is subject to risks associated with local economic conditions, currency fluctuations, changes in local regulatory requirements, compliance with a variety of foreign laws and regulations, cultural barriers and political stability. Timing of the domestic and international theatrical and home video releases of animated feature films is key Timing of the release of related products into their respective markets, such as home videos, television, and merchandising is key Demand for such related products, which is often a function of the success of the related animated feature film Costs involved to distribute and promote feature films and related products Success at marketing feature films and related products Availability of appropriate talent is a critical factor Critical reviews of animation content critics is important Piracy and the unauthorized recording, transmission and distribution of animation content are increasing challenges. Motion picture piracy is already prevalent outside of the United States, Canada and Western Europe and in countries where studios we may have difficulty enforcing intellectual property rights. Page 63

64 The number, quality and acceptance of other competing films released into the marketplace at or near the same time Distribution strategy, including the time of the year and the number of screens on which it is shown Animation studios are dependent on a complex system of hardware and software to enable content creation. Technical glitches in such hardware or software could result in delays in meeting deadlines. DEMAND DRIVERS OF THE INDUSTRY The key demand drivers of the industry are the following: 1. The number of basic Cable Households in the US is expected to grow at a healthy pace 2. As more cable channels serve a large audience, content is the basic factor in maintaining and increasing viewership 3. Innovations such as HDTV, which is the next technology leap would be a key demand driver 4. In future, movies on demand would be done through the Broadband Internet owing to its reach 5. Worldwide we are witnessing an increasing consumer interest for computer animation and computer generated effects There has been a reduction in the costs and efforts involved in production of computer animation due to the advent of sophisticated computing technology. Page 64

65 Market Opportunity The total value of global animation production was US $ 177 billion in 2009 and is projected to reach US $ 249 billion by 2012 Most of the segments in the animation industry are growing at the rate of 10% YoY and some segments are growing at 15% YoY Film revenues are increasing at the rate of 4% per annum with the US box office revenue expected to reach up to US $ 11 Billion in 2012 The production cost per movie ranges anywhere between US $ 20 Million to 200 Million The spend on special effects as a percent of production cost is about 20%-25% The computer animation industry is posting strong growth in popularity and usage. The first animated cartoon was Disney s Steamboat Willie, a three minute cartoon, which needed about 5,500 still pictures at 30 frames per second. Advancements in IT (information Technology) has made available large dedicated mainframes resulting in computer animation reaching the masses. Ultra powerful work stations and off the shelf animation software solved many of the technological problems related to the end-user. Increasingly powerful computers and animation softwares has made it possible to generate more complex animation work resulting in increased use of animation in various areas, such as feature films, advertisement films and game software. All this has enabled the smaller studios to taking advantage of the emerging opportunities in computer Page 65

66 animation. The industry is growing at an average growth of 10% YoY. Refer Figure 1 for the market forecast of the industry. North America is the largest geographical segment of the industry followed by Europe and Asia. The geographical break-up of the global animation industry is given in Figure 2. Page 66

67 FIGURE 3: SIZE OF GLOBAL ANIMATION INDUSTRY Size of global animation industry (US$ Billions) Page 67

68 FIGURE 4: GEOGRAPHICAL BREAK-UP OF THE GLOBAL ANIMATION INDUSTRY Geographical break-up of Global Animation Industry (US $ Billion) US and Canada Europe Asia Rest of the world Page 68

69 Global Animation Studios Distribution and Capabilities Majority of the animation studios are located in North America (about 2100). Figure 5 gives a geographical distribution of animation studios across the world. Figure 6 gives a break-up of animation studios based on their specialty. Table 3 lists the leading animation studios of the world as well as their key projects. Page 69

70 FIGURE 5: GEOGRAPHIC DISTRIBUTION OF ANIMATION STUDIOS IN THE WORLD Number of Animation studios across the world Europe North America Asia Rest of the world Page 70

71 FIGURE 6: BREAK-UP OF ANIMATION STUDIOS BASED ON CAPABILITIES Break-up of animation studios based on Capabilities D Animation 3D Animation Special Effects Web Animation Others Page 71

72 TABLE 3: LEADING ANIMATION STUDIOS IN THE WORLD Company Product Industrial Light and Magic Jurassic Park, Star Wars series Disney Lion King, Tarzan, Finding Nemo Digital Domain The Time Machine, Lord of the rings, X-men, Armageddon, True Lies and Apollo 13 Dreamworks Shrek, Antz, Road to El Dorado Pixar Toy Story, Finding Nemo Blue Sky Studios Ice Age, Bunny, Star Trek Insurrection, Fight Club, Ice Age: The Meltdown, Robots, Dr. Seuss's Horton Hears a Who! Mainframe Entertainment Action Man, Spider Man, Barbie, Reboot, Casper Rhythm and Hues Daredevil, Cat in the Hat, Scooby Two Pacific Data Images Prince of Egypt Warner Brothers Looney Tunes Wild Brain El Kabong, Coffee Dog, Destination Moon Klasky Csupo Rugrats, Wild Thornberrys, Duckman, Real Monsters, Santo Bugito, and Page 72

73 Stressed Eric Fablevision Studios Blue Shore, Antartic Antics Film Roman The Simpsons, King of the Hill, X-Men, The Mask, Bobby's World, The Twisted Tales of Felix the Cat and Garfield & Friends Digital Production Solutions Dinoman, X-Men Evolution Hanna Barbera Tom and Jerry, Fred Flintstone and Yogi Bear to George Jetson and Jabber Jaws Toei Animation Dragon Ball, Baron Omatsuri and the Secret Island, Karakuri Castle's Mecha Giant Soldier, Episode of Alabasta: The Desert Princess and the Pirates, Air, Clannad Aardman Animation Chicken Run, Wallace & Gromit, A Town Called Panic, Purple and Brown, Flushed Away, Shaun the Sheep, Chop Socky Chooks, A Matter of Loaf and Death Studio Ghibli Laputa: Castle in the Sky, My Neighbor Totoro, Kiki's Delivery Service, Spirited Away Bones Wolf's Rain, Scrapped Princess, Eureka Seven, Ouran High School Host Page 73

74 Club, Darker than Black, Angelic Layer, Fullmetal Alchemist Studio 40 C Spriggan, Princess Arete, Mind Game, Tekkon Kinkreet, Genius Party Folimage The Monk and the Fish, At the Ends of the Earth Atomic Cartoons Atomic Betty, Captain Flamingo, Click and Clack's As the Wrench Turns BRB Internacional Around the World with Willy Fog, Dogtanian and the Three Muskehounds, The World of David the Gnome. Nickelodeon Studios Avatar: The Last Airbender, Catscratch, The X's, Tak and the Power of Juju Page 74

75 TABLE 4: ANIMATED FEATURE FILMS FROM PROMINENT STUDIOS Project Studio Year Location Type Escape From Planet Earth The Weinstein Company 2007 USA CGI Kung Fu Panda Dreamworks 2008 USA CGI Delgo Fathom Studios 2008 USA CGI Happy Feet Animal Logic/Warner 2006 Australia CGI Bros Hood Vs. Evil The Weinstein 2007 USA CGI Company/Kanbar Horton hears a Who BlueSky Studios 2008 USA CGI Ratatouille Pixar 2007 USA CGI Rapunzel Unbraided Disney Feature 2010 USA CGI Hollywood Dog Disney Feature NA USA CGI Meet The Robinson's Disney 2006 USA CGI Happily Never After DPS 2006 Canada CGI Page 75

76 Surfs Up Sony Pictures Animation 2008 USA CGI Shrek 3 DWA 2006 USA CGI Flushed Away DreamWorks 2006 USA CGI Ollie The Otter CritterPix 2006 USA CGI Cat Tale Imagi Entertainment 2007 Hong Kong CGI Astro Boy Sony Pictures 2007 CGI Cloudy with a Chance of Sony Animation 2008 Hong Kong CGI Meatballs Bee Movie DreamWorks 2007 USA CGI Madagascar-Escape to Africa DreamWorks Animation 2008 USA CGI SKG Dragon Hunter Mac guff line 2007 Paris France CGI Foodfight! Lions Gate NA USA CGI Fly Me to the Moon N Wave 2007 Belgium CGI How to Train your Dragon DreamWorks Animation 2009 USA CGI Arthur and the Minimoys Luc Besson 2006 France CGI Page 76

77 The Pirates Who Don't Do Lions Gate Films 2007 USA CGI Anything Green Monkeys Nickelodeon Movies NA USA CGI Hood vs. Evil The Weinstein Company 2007 USA CGI Igor The Weinstein Company 2007 USA CGI Planet One Ilion Animation Studios 2008 Spain CGI The Smurfs Nickelodeon Movies 2008 USA CGI The Hero of Color City Exodus Film Group 2007 USA CGI Igor Exodus Film Group 2007 USA CGI Amarillo Armadillo Exodus Film Group 2007 USA CGI Ribbit Vanguard Animation 2007 UK CGI The Zabajaba Jungle Vanguard Animation TBD UK CGI Kung Fu Gecko Egg Creative Production 2008 Singapore CGI Enchanted Walt Disney Pictures 2007 USA 2D Madagascar - II DreamWorks Animation 2009 USA CGI Teenage Mutant Ninja Warner Bros 2007 USA CGI Page 77

78 Turtles Phreex Vangaurd Animation 2007 UK CGI Lissi und der wilde Kaiser Scanline 2007 Germany CGI Jack and Ben Laika 2008 USA CGI Coraline Laika 2008 USA Stop Motion & CGI Space Chimps Vangaurd Animation 2007 USA CGI Happily N ever After Vangaurd Animation 2006 USA CGI Page 78

79 Animation Segments Market Segmentation Key facts The first completely computergenerated (CG) feature length film, Toy Story, was released in 1995 and represented the successful convergence of cinematography and computer animation. The first Oscar for Best Animated Picture was awarded in 2002 to Dreamworks for the movie Shrek. Some of the key CG animation movies include Toy Story 1 & 2, Monsters Inc, The Incredibles, A Bug s Life, Finding Nemo, Antz, Shrek 1 & 2, Ice Age 1 & 2, Jimmy Neutron, The Cars, Wall-E etc. The leading CG animation studios include Pixar (Disney), Blue Sky, Dreamworks and DNA The main advantage to CG animation is that it is a non-linear process. Parts of the value chain can be separated out and worked on simultaneously thereby increasing the speed of production. Animation production is a very labor-intensive business process that can be segmented in different stages some of which are highly suitable to outsourcing to lower-cost locations. The process can also vary considerably. In American animation, there are up to 12,000 to 16,000 drawings, while the highly stylized form of Japanese animation requires only about 4,000 drawings for every 22-minute episode. In two dimensional (2D) animation, labor accounts for 70 percent to 80 percent of total costs. Even for threedimensional (3D) animation, in which software and hardware play an important role, labor still accounts for 60 percent of the cost. Content for film & TV are the major animation consumption segments and accounts for about half of the total global computer animation production. This comprises of movies for TV, home videos etc. The animation industry can be classified in various ways. Technically, it is divided into two dimensional and three-dimensional animation. 2D animation is the cel animation as is seen in the traditional Disney style. 3D animation allows one to create within a 3D space, and almost no film today is devoid of 3D animation and special effects. Compositing is an element of the entire post-production process that allows one to work in layers. The ability to do this on computers once again ensures non-destructibility and no generation loss. Special compositing Page 79

80 software allows the artist to work on a platform unhindered by other elements, and at the same time is economical. Classical 2D animation is applicable to TV-series,-commercials and fillers, feature films, short films and film sequences for digital media and computer games. Due to the complexity of the full production line, it is a time and resource consuming process, but it is still utilized due to a large and grateful audience. But while the emotional points you score with the consumers when using it in commercials can outweigh the production cost, profits in most other cases depend on the company s ability to brand, market and merchandise their products. In addition there are segments such as Visual effects, Web animation, corporate services, Flash productions, Games as well as animation services targeted at mobile handheld devices. 2D ANIMATION This constitutes the largest segment in the global animation industry. 2D animation production is a labor intensive process, which involves building up animated sequences by hand. Most of the effort goes into drawing, inking and coloring of the individual animated characters for each of the frames. This involves the following stages Story board, Sound Track, Sound Detection, Layout, Background Painting, Key Frame Animation, In- Betweening, Cleaning, Paint, Check, Record by shooting frame-by-frame on film or video. 2D animation constitutes a major part of the industry followed by 3D animation. Two-dimensional animation techniques contribute a great deal to computer animation by providing the tools used for sprite-based animation, Page 80

81 blending or morphing between images, embedding graphical objects in video footage, or creating abstract patterns from mathematical equations. 2D animation or Cel animation derives its name from the clear celluloid sheets that were used for drawing each frame. The series of frames in between the keyframes (first and last frame of action) are drawn in a process called tweening. Tweening involves action calculating the number of frames between keyframes and the path the action takes, and then actually sketching onto a cel with pencil the series of progressively different outlines. Cel animation is the traditional method of eight overlapping stages: Storyboard (scripting), Soundtrack, Exposure sheet (giant spreadsheet to log sound and direction for animation), Background painting, Drawing, Pencil testing, Inking and coloring and Compositing. The most common form of 2D animation is sprite animation. A sprite is a bitmap image or set of images that are composited over a background, producing the illusion of motion. They are usually small with respect to the size of the screen. For example, to animate a rabbit hopping across a meadow, the animator would create a sequence of images showing poses of the rabbit hopping. This sequence of images would then be composited one image per frame onto a background image of the meadow. Sprite-based animation can be done extremely quickly with current graphics hardware, and thus many elements of the scene can be moving simultaneously. The disadvantage of this technique is that subtle changes in lighting and depth cannot be reproduced. Consequently, sprite animation is most often used in interactive media where rendering speed is more important than realism. Page 81

82 Digital 2D animation techniques are mostly used for web-tv, interactive animations for websites, TV-series, and commercials. It is a timesaving process, enabling the animators to produce more footage per animator. There are serious limitations to the extent of expressions, which bids professional consideration to be given to its appliance. 2D is often hand drawn, but nowadays, is mostly computer aided, which has increased the productivity of artists by six-fold or more. 3D animation involves a great deal of advanced computer software and processing power. Over the past decades the technical development has rapidly provided the businesses with new product possibilities. The actual Content Production for Film, for TV or for the New Media still utilizes classical hand drawn Animation, puppet animation, as well as digital 2D and 3D animation. But the lines between the different media and techniques are blurring. Character Animation is applied by way of Motion capture on to Live Action movies. Props and backgrounds are digitally generated and entered into classical hand drawn animation or Live Action. Effects are generated onto puppet animation and so on. Figure 7 gives the break-up of the global animation industry based on the various market segments. Page 82

83 FIGURE 7: BREAK-UP OF GLOBAL ANIMATION INDUSTRY BASED ON MARKET SEGMENTS 300 Break-up of global animation industry based on market segments (US $ Billion) D animation 3D animation Web Animation Others Page 83

84 3D ANIMATION 3D animation allows one to create within a 3D space, and almost no film today is devoid of 3D animation and special effects. Three-dimensional animation involves constructing a virtual world in which characters and objects move and interact. The animator must model, animate, and render the 3D scene. Modeling involves describing the elements of a scene and placing them appropriately. Animating involves realizing how the objects should move in the 3D world. Rendering converts the description of the objects and their motion into images. The 3D animation market comprises of the 3D movies, 3D animated serials and 3D interactive games. The explosive growth of 3D animation is triggered by the digital games industry. The digital games industry is a very large, multi-billion-dollar industry, and therefore, any opportunity that presents itself in this field will be of a fairly large nature, where the emphasis is equally on infrastructure and capability to sustain the effort. Most games are now designed in 3D, and the platforms and developmental tools are quite affordable. As far as the industry growth rate is concerned, 3-D animation is growing at a much faster pace than 2D animation. Traditional animation involves considerable manual labor and all the frames have to be manually drawn. Every minute of action on television is divided into about 24 or 30 frames. Thus, a 2D animation scene of only a few seconds onscreen may take hours, even days to produce. In most cases, the background and some parts of the character remain constant, while only a small part of the Page 84

85 character head, legs, or arms is altered in every succeeding frame. This is made easy by painting the moving part on a series of cells, which are then in turn placed in accurate register against the character s body and background, and the frame exposure is made. All the information attendant to the artwork meant to be prepared are listed on a dope sheet which is given to the production crew. Digital 3D animation techniques are utilized in commercials, feature films, TV series, special effects, and computer games. The commercial breakthrough for digital 3D animation as more than just a technique for commercials, came with Jurassic Park and Toy Story produced by the American companies Universal and Disney/Pixar. The market for digital 3D animation has grown rapidly, and presently the market shares of the digital feature films far exceed those of the classical animation features. In 3D animation, the key frames need to be drawn with computer software, with the rest of the frames automatically supplied by the computer software. Companies from Korea, the Philippines, India, Korea and Taiwan have a strong presence in the market for supplying 2D animation. VISUAL EFFECTS Visual Effects relate to all animation techniques. It is present in all types of media as rain, dust, smoke, water, explosions and so on. Visual effects incorporate into classical, puppet and live action movies, covering everything from animated sequences, animated characters conversing with real characters to graphical finishing of a sequence. In classical animation visual effects have traditionally been done by hand, and still is in many Page 85

86 cases, but the use of digital visuals has made some of the processes obsolete. With Digital animation entering the live action movie realm, and the urge for Live Action movies to contain fictitious characters similar to those created in a purely digital space growing, fine tuning Motion Capture was the next logical step. The technique has been developed since An actor is equipped with sensors that register and map his movements in a magnetic field. Extensive editing of these movement maps is still necessary before they can be imposed on digital characters in a virtual space. The latest blockbuster, where motion capture was used extensively and successfully, has been Lord of the Rings. An actor would be mapped during filming of the actual scene, and then digitally a costume or a new face would be generated onto the virtual movement later to be imposed on to the original Live Action film. WEB ANIMATION Web animation has the potential to grow to a large segment. This is enabled by the increasing availability of broadband Internet. As bandwidth increases, networked games will become more and more popular. This will again cause an upsurge in the production of interactive 3D games, and demand for production will rise. CORPORATE SERVICES Corporate services include integrating various elements of a corporate entity such as images, animation, sound, music and interactive pointers and markers, to be able to create multimedia presentations. Page 86

87 Typically, large and medium sized corporate houses utilize these services on a regular basis. Computer Games The games market can be segmented into three broad categories: 1. Game machines, starting in the 1970's with Pong and Space Invader machines in pubs, leading to today's games arcades full of specialised machines that offer a single game 2. Game consoles such as Sega's Dreamcast, Nintendo's GameCube, Sony's PlayStation and Microsoft's X-Box. These machines are essentially high-performance computers with hardware graphics engines to boost their performance and several have DVD drives. 3. Games that run on (high-end) home computers Games themselves fall into several categories, including: Adventure games (sometimes called role-playing games) such as Zork and Myst Platform games such as Donkey Kong, Super Mario, Sonic the Hedgehog, Lemmings Shooting games such as DOOM, Tomb Raider, and Street Fighter Simulations such as SimCity, Populous, Civilisation and RailRoad Tycoon Strategy games such as chess or backgammon Page 87

88 Sports games such as football (UK and US versions), basketball, snooker and so on Simulators for driving and flying (and for motorcycling and snowboarding in arcades) Some games are hybrids. For example, Microsoft's Age of Empires is an excellent combination of simulation with a military strategy game. Similarly the Lucas Arts Indiana Jones games are combinations of adventure games and shooting games. As the computational power of game platforms rapidly increases, the sophistication of software for interactive entertainment expands in response. The gulf between high-end graphics, as seen in feature films, and state-of-the-art games, such as Halo for the X- Box, is diminishing. Not surprisingly both Lucas, through Lucas Arts, and Spielberg, through Dreamworks Interactive, have interests in the games market. All games have become more and more graphical and realistic. For example, where early adventures like Zork were text-based and hence depended, like radio drama, on the player's imagination, the latest are increasingly film-like. The images on the left, taken from Lucas Arts Monkey Island series, are a good example of how the state of the art in realtime, cartoon-like animation has progressed. CROSS OVER BETWEEN GAMES AND MOVIES Computer games use the techniques of animation production. There are a number of video games based on films including King Kong, Star Wars, The Lord of the Rings, Cars, etc. See Table 5 for a list of Games based on Animation movies. Page 88

89 TABLE 5: GAMES BASED ON ANIMATION MOVIES 1. The Chronicles of Narnia 2. Godzilla 3. Madagascar 4. Mission Impossible 5. James Bond 6. Robocop 7. Pirates of the Caribbean 8. Fantastic Four 9. Batman 10. Superman 11. Austin Powers, 12. Chronicles of Riddick: Escape From Butcher Bay 13. Lord of the Rings Return of the King 14. The Hulk Page 89

90 15. Finding Nemo 16. The Incredibles 17. Enter the Matrix 18. Shrek Lord of the Rings The Fellowship of the Ring 20. The Punisher 21. Van Helsing 22. King Arthur 23. Kung Fu Panda 24. Lethal Weapon 25. Last Action Hero 26. True Lies 27. Top Gun Page 90

91 Similarly, there are a number of movies based on video games such as Super Mario Brothers, Lara Croft series, Final Fantasy The Spirits Within, Mortal Kombat series, Doom etc. Movies based on video games have achieved mixed success in the box office. Tomb Raider, which was released in 2001 was a global success, which has been attributes to the close interpretation of the game as well as the start cast including Angelina Jolie, who played the part of Lara Croft. Final Fantasy The Spirits Within, made in 2001 was a big flop in the box office. Doom, which was another adaptation also ended up being a flop. See Table 6 for a list of Animation movies based on Games. Page 91

92 TABLE 6: ANIMATION MOVIES BASED ON VIDEO GAMES 1. Lara Croft: Tomb Raider 2. Pokemon: The First Movie 3. Mortal Kombat 4. Lara Croft Tomb Raider: The Cradle of Life 5. Resident Evil: Apocalypse 6. Resident Evil: Extinction 7. Silent Hill 8. Pokemon: The Movie Max Payne 10. Resident Evil 11. Hitman 12. Mortal Kombat: Annihilation 13. Street Fighter 14. Final Fantasy: The Spirits Within Page 92

93 15. Doom 16. Super Mario Bros. 17. Pokemon 3: The Movie 18. The Wizard 19. Wing Commander 20. House of the Dead 21. Street Fighter: The Legend of Chun-Li 22. Alone in the Dark 23. In the Name of the King: A Dungeon Siege Tale 24. (Dungeon Siege) 25. BloodRayne 26. Double Dragon 27. Pokemon 4Ever 28. Pokemon Heroes 29. DOA: Dead or Alive Page 93

94 Computer Generated Imagery (CGI) The current state of CGI is the result of developments in two areas in computing - improvements in algorithms for computer graphics and the increasing density of integrated circuits. The software innovations have made it possible to generate and animate complex, photo-realistic scenes, while the improvement in hardware has meant that the calculations required to render each frame of such scenes now take minutes rather than years. One key stimulus for invention in the field is the annual SIGGRAPH conference, one of the largest computer conferences held each year, whose film programme acts as a showcase for the latest innovations. Another equally important stimulus comes from the computer game industry, which has had a profound effect on computer graphics. Tim Burton's The Nightmare before Christmas impressed animators as well as film critics with its dazzling mastery of stop-motion animation. Coupled with the Oscar won that year by The Wrong Trousers, it might have seemed that stop-motion, for years an animation technique largely confined to television advertisements (and art-house shorts from Eastern Europe) was at last becoming a serious rival to cel animation. The first completely computer-generated (CG) feature length film, Toy Story, was released in 1995 and represented the successful convergence of cinematography and computer animation. A strong box office success, Toy Story opened the eyes of the public at large to the potential of computer animated films. However, the separate technologies and art forms that merged in Toy Story had been quietly developing for decades. Computer- Page 94

95 Generated Imagery (CGI) had already been used in live-action films and John Lasseter had been making CGI shorts at Pixar since 1985 (including Tin Toy 1988) which won an Oscar), but Toy Story was the first full-length film to be entirely computer generated. Toy Story premiered in November of 1995 marking a milestone in history of film, animation, and computer graphics as the first fully computer-generated feature film. Toy Story was well received by critics and at the box office. Virtually everyone seemed to form a positive impression of the film and this new medium in filmmaking. Both Disney and Pixar referred to this first film as being analogous to Snow White (1937). Toy Story was followed by Dreamworks Antz, and the mega blockbuster Shrek. Antz was released in September of Several technical innovations developed at Dreamworks had facilitated the completion of the movie. The three most prominent innovations were a fluid system called FLU, a muscle-based facial animation system, and a crowd-control simulator. Another important feature of Antz is that it was produced with good production value in only two and a half years, nearly twice as fast as the production cycle. Blue Sky Studios using a budget and staff smaller than those of its competitors produced Ice Age, and DNA Productions released Jimmy Neutron. While CGI slowly permeated the world of live-action films, it has had a far more dramatic, and rapid, effect on the animation industry. Indeed, it exhibits all the features of a 'disruptive technology'. Thus, when the first ever Oscar for Best Animated Picture was awarded in 2002, it went, not to Disney, the studio that for sixty-five years has been synonymous with the cartoon feature film, but to a newcomer to animation, Dreamworks SKG, for Shrek. Disney themselves submitted Page 95

96 Monsters Inc., a CGI cartoon produced by their partner Pixar, rather than their own traditional cartoon, Atlantis: The Lost Empire. The success of CGI animation raises many interesting questions. Will traditional techniques, particularly stop-motion, be replaced by CGI? Will the increased realism of 3D cartoons make the form more popular, particularly with adults? Or is 3D CGI animation a 'flash in the pan' of which the public will quickly tire? What will be the effect of the close relationship between CGI animation and the technology used in computer games? Are there significant limits to what CGI can achieve and if so how will these limits affect the sort of animated films that get made? To understand the rapid growth of CGI, we need to appreciate the factors that have led to the current state of the art, so it will be necessary to examine the underlying trends involved in the development of computer hardware and graphics software. To see why it has had such a powerful effect on animation, we will need to look the history of animation techniques as well as the economics of animation features. Since the technological and economic forces involved are likely to continue to exert an influence, this understanding will help us to predict the likely future. CGI is a tool, and like all tools, it amplifies human powers in the performance of a task. This has two consequences. First, a tool presents an interface to a person (an HCI or Human Computer Interface). The features of this interface determine what it feels like to use the tool, which in turn affects not just how people use it, but what sort of people want to or like using it. Secondly a tool makes some tasks easy and some hard, which in turn affects the sort of products people make with it. To understand the Page 96

97 impact of CGI on animation style we need to look at its HCI aspects and compare them with those of drawn and model animation. It is easy to be misled by the marketing hype surrounding any new technology. While CGI animation has received a great deal of media attention, success at the box office is what determines how pervasive the technique becomes. For animated features, box office success is not a simple matter of counting cinema admissions, since much of the revenue for such films come from video and DVD sales as well as from merchandise such as toys, books and video games. The processes for creating and executing a CG animated feature film vary with each new production. This is because of the tools, hardware and software that are constantly changing. New versions of commercial software packages are being released at frequent intervals with each new release adding new tools and new functionalities. Moreover the proprietary softwares of studios are under constant development and refinement, usually in response to the needs of current and upcoming productions. Computer animation has also been used with great success with regard to a number of more practical applications. Computer animation has been used in educational, training, medical, and computer-aided design (CAD) animations, as wells as in simulations of various sorts, including flight simulations. At times these computer animations entail the creation of interactive virtual environments. Page 97

98 TABLE 7: CGI FEATURE FILMS Studio CGI feature film 20th Century Fox and Blue Sky Studios Ice Age (2002) Robots (2005) Ice Age: The Meltdown (2006) Horton Hears a Who! (2008) Big Idea Productions, Inc. Jonah: A VeggieTales Movie (2002) DNA Productions Jimmy Neutron: Boy Genius (2001) The Ant Bully (2006) Digital Rim Ark (2004) DreamWorks Antz (1998) Shark Tale (2004) Over the Hedge (2006) Flushed Away (2006) Shrek (2001) Page 98

99 Shrek 2 (2004) Madagascar (2005) Over the Hedge (2006) Flushed Away (2006) Bee Movie Kung Fu Panda (2008) Madagascar: Escape 2 Africa (2008) Nickelodeon Movies Jimmy Neutron: Boy Genius (2001) The Wild Thornberrys Movie (2002) Rugrats Go Wild (2003) Hey Arnold!: The Movie (2002) animated film The SpongeBob SquarePants Movie (2004) Barnyard: The Original Party Animals (2006) Charlotte's Web (2006) Pixar Animation Studios Toy Story (1995) A Bug's Life (1998) Page 99

100 Toy Story 2 (1999) Monsters, Inc. (2001) Finding Nemo (2003) The Incredibles (2004) Cars (2006) Ratatouille (2007) WALL-E (2008) Sony Pictures Animation/Imageworks The Polar Express (2004) Square Pictures Final Fantasy: The Spirits Within (2001) Final Fantasy: Advent Children (2005) Vanguard Animation Valiant (2005) Walt Disney Pictures Lilo & Stitch (2003) The Jungle Book (2002) Piglet s Big Movie (2003) Brother Bear (2003) Home on the Range (2004) Page 100

101 Chicken Little (2005) The Wild (2006) Weinstein Company Hoodwinked (2005) Warner Bros. & Legendary Pictures Looney Tunes: Back In Action (2003) The Ant Bully (2006) Xilam Films Kaena: The Prophecy (2003) Page 101

102 PRODUCING CGI ANIMATION Producing a CGI scene involves three basic steps. First a 'wire-frame' geometric model of every object in the scene must be developed. For animate objects that move, such models include the underlying skeleton and joints as well as the surfaces, since these define the 'avars' (articulation variables) that control the object's gait. As might be expected, special software tools have been developed to simplify this task. The second step involves defining the surface appearance of each object; its colour, texture, reflectivity, transparency and so on. Again there are specialised tools, known as 'shaders', to help. The final step is to 'render' the scene, which is to calculate the colour of all the pixels. As well as the models of all the objects in the scene, rendering also requires definitions of the camera and the light sources. Then the scene is ray-traced by drawing imaginary rays from the viewer's eye, through a window representing the screen, until each ray hits a point on an object within the scene. The colour of that point determines the colour of the pixel in the window through which the ray passes. To determine the point's colour the illumination of the point is then calculated by drawing rays from the point to each light source, taking into account any other objects on the way. The absorption, opacity, transparency and reflectivity of each surface have to be taken into account. Note that this exactly reverses the process by which the viewer perceives the scene. Given the large number of pixels in a high-definition scene (several million) and the complex path a ray may take from light source to viewer's eye, this is an Page 102

103 exceedingly complex task. Pixar's RenderMan is a good example of the sort of rendering software package required to do full computer animation. Approaching photo-realism has required many algorithmic innovations to cope with simulating partial reflection and refraction, shading and texturing. Work on fractals has made generating mountains, trees and other landscape features easier. Similarly there has been advancements on realistic skin, hair and fur and realistic animal movement. It is not accidental that the first computer-animated full-length feature, Toy Story had a cast made largely of plastic, wood and metal, with simple jointed limbs and a limited range of expressions. The dog and human beings in the film are the least convincing characters. Similar reasons lie behind the choice of insects, with rigid limbs and exoskeletons that look as though they are made of shiny plastic, in both A Bug's Life and Antz. The state of the art has advanced rapidly in the last few years, as seen in Shrek, Monsters Inc. and Final Fantasy: The Spirits Within. Hardware power determines how long it takes to achieve rendering of a given level of realism. It is now possible for a home computer to do in real time 15 times or more a second (in games like Tomb Raider or Grand Theft Auto) what would have taken hours or days on a mainframe computer 30 years ago. However the level of realism in a film like Shrek is still a long way from being achievable in anything like real-time. ADVANTAGES OF PRODUCING CGI ANIMATION The malleability of digitally stored information brings about a significant change in workflow. Prior to the use of computers, cel animation work was linear in nature. A traditional animator could change animation Page 103

104 repeatedly during the animation stage of production, but if the character's design was later altered, then all subsequent character animation work had to be remade by hand. By contrast, in current CG production practices, a character s appearance may be modified, to some extent, without losing the motion that has already been applied to it by the animator. Surface attributes may be changed at any time prior to rendering, and the model itself may be altered somewhat without losing compatibility with previously completed animation. As a result, changes to finished work can often be made that would not have been attempted in the past. Directors and producers are still adjusting to these new-found flexibilities, as are the artists and contentcreating professionals who work with them. The computer also greatly increases the speed and efficiency of the animation process. However, using the computer does not make animation an automatic process. After the story has been created, every layer of artistic expression used to convey and amplify the story must still be carefully developed and executed by the storytellers, designers and artists. Computers have been integrated through most of the production value chain from concept to final release. However technology is least utilized in the story development stage, which still seems to be ruled by pencil and paper. Yet even in this stage, while concept art is still rendered in traditional media, and the initial aspects of storyboarding are still executed by hand, computers replace the optical process for cutting together story reels. The computer has impacted all artistic choices made during production. The computer enables artists to make choices more efficiently, and provides many new options in modeling, coloring, lighting, character animation, character control, cinematography and graphic rendition. Page 104

105 Another significant benefit that the computer provides artists is the ability to separate their tasks. Now computer-based lighting is separate from the coloration of the characters, and coloration is separate from the animation of the characters. Furthermore, lighting on the characters can be changed and refined or a mood may be fine-tuned during the animation process. The characters' performances can then be adjusted to further amplify the original mood which lighting has enhanced. In traditional cel animation, making these kinds of changes to finished animation would be prohibitively expensive. The main advantage to CG animation is that it is a non-linear process. Parts of the value chain can be separated out and worked on simultaneously, theoretically increasing the speed of production. For example, the final sets can be constructed while animation is in progress and lighting and effects are being developed for a scene. It is possible to animate the character in steps; that is start with gross body movements and add subtle enhancements later. At the same time different animators can work on a character's facial animation while its body movements are being worked on by other artists. When revisions are required on a scene, it is returned to the appropriate department to be fixed. This doesn t always mean the artist must start from scratch; they can often correct the existing artwork and the scene can continue on the path to final render and composite. DISADVANTAGES OF PRODUCING CGI ANIMATION The non-linear nature of CG production can be a two-edged sword. With the possibility for endless refinement or changes in artistic direction, Page 105

106 productive work may be brought to a halt. Animation loses it vitality if it is reworked too often the animator simply loses his inspiration and the performance loses spontaneity. If the schedule does not allow sufficient research and development time for creative and technical iterations in the pre-production phase, the production itself will become unmanageable and unable to move forward. Directors and producers can run up expenses by abusing the perceived infinite flexibility of this new medium. They may repeatedly change their minds or even add content up to the end of the schedule. Directorial choices that are cost prohibitive in live action filming or cel animation may also be costly in CG productions, and as such these practices may put a strain on the artistic professionals creating the film as well as increasing production costs. INFLUENCE OF CGI ON CEL ANIMATION Computers have long been used in conventional 2D animation as well. Within the production-line approach of cel animation, computer graphic tools were first used to assist 'in-betweeners', with the development of socalled 'tweening stations'. While these at first did little more than simple 2D morphing between one key frame and the next, the process now involves a 2D analogue of the wire-frame model used in 3D animation, complete with underlying (flattened) skeleton and articulation points. While final rendering takes a great deal of computer time, it is perfectly possible to view real-time animations during the design phase, not only as simple wire-frame models, but as simplified versions of the final product. This makes it quite easy to experiment with alternatives. For Page 106

107 example, the computer model incorporates details of the position of lights and cameras as well as the objects, characters and backgrounds in the scene, so the former can be changed without any need to redraw characters or backgrounds. This leads to one of the key differences between CGI and conventional animation - the ability to move the camera in an extremely dynamic fashion. While camera movement is perfectly possible in stopmotion and cel animation, both lead to problems. In the case of stop-motion, the movement has to be pre-planned since there is no going back without having to reposition the models and reshoot every frame from new angles. Camera movement in stop-motion is thus unlikely to be the result of spontaneous experimentation. Cel animation is faced with a different problem. As the camera moves, backgrounds change. Simple linear movement - a tracking shot - can be accomplished relatively easily without redrawing, but panning changes the perspective and can force redrawing of the whole background for each frame, a hopelessly uneconomic task. Though it may take a great deal of computer rendering time, it requires little human effort to 'reshoot' a scene with repositioned cameras, something that is unthinkable for traditional animation. As well as allowing experimentation during production, this has other uses. CGI competes head-on with stop-motion and with 2D cel animation. Largely aimed at the same audience, they are thus competing for the budgets that studios are prepared to spend reaching that audience. There is also a more subtle form of competition that occurs within the animation Page 107

108 community itself, where a relatively fixed number of practitioners have to choose which tools they will use to realise their ideas. There is considerable evidence of a growing drift of animators towards CGI. As well as competing, CGI has also been used with cel animation in a co-operative manner. In the late 1930s, Disney developed the 'multiplane' camera system, an elaborate animation stand that allowed several separated cel layers (foreground characters and background sets), to be moved independently frame by frame, giving a powerful illusion of threedimensional space. An updated version of this technique uses CGI to replace the background layers. Films produced using this approach are sometimes called 2D/3D hybrids. In such films the foreground characters are handled in a conventional 2D manner (though often using computers to assist the animators to do tweening) but background scenery - buildings and trees for example as well as features such as crowds - are modeled using 3D CGI. This is becoming an increasingly popular way of producing 'traditional style' cartoons - Disney used CGI for backgrounds and crowd scenes on Mulan (1998) for example One advantage of this approach (which it shares with 3D CGI) is that it makes it simple to adjust the position of the camera and even move it during a shot. While the 'multiplane' system allowed the camera to perform tracking and zooming shots, it could not cope with a true pan because rotating a constant background image introduces unacceptable perspective Page 108

109 distortion. CGI offers much more freedom because the background is redrawn in the proper perspective for each frame. CHALLENGES Making computer-generated objects and characters behave in realistic ways poses several quite distinct problems: behavior of fluids (liquids and gases) complex, textured, flexing surfaces motion of groups (flocks, herds and schools) and ensembles (snow flakes, rain drops, leaves) Features like waves and ripples in liquids, flames and smoke, clouds and fog, have all become easier to do as computer power has increased. One difficult problem has been reproducing the flexing of complex surfaces such as the skin of the face or clothing. Modeling a plastic toy such as Toy Story's Buzz Lightyear, whose facial expressions are largely limited to movements of gross features such as eyes, mouth and chin, is relatively simple. By contrast, trying to model a humanoid face such as Shrek's requires an extremely complex model of the underlying facial musculature. CRITICAL SUCCESS FACTORS FOR CGI PRODUCTIONS The following are the issues which are critical for the success of CGI productions. Page 109

110 1. Appropriate infrastructure in terms of studio facilities, work spaces, computer hardware, software etc. 2. Technical skills and competence 3. Creative and visual communication skills 4. Ability to convey the right story 5. Ability to objectively and critically conduct self assessment 6. Right level of corporate controls 7. Right incentive and motivation mechanisms 8. Robust production workflows 9. Supportive corporate culture (respectful, collaborative, etc.) 10. Sound economic model 11. Strong intellectual property planning 12. Strengths in licensing 13. Ability to form contracts and leverage networks to get the right work done a the right global location and at the right price 14. Effective marketing and public relations plan 15. Extensive distribution network Stop Motion Three dimensional animations are not limited to computers. Animators have explored the same through stop motion animation. In this form of animation, the animator uses physical models, such as puppets and clay figures, which are positioned or manipulated and then photographed for each frame. The Academy Award-winning Wallace and Gromit series, done using modeling clay, is a good examples of such animations. Clay and Page 110

111 puppets are the most common media for stop motion animation. 3D computer animation holds certain important similarities to stop-action techniques. In both, animators first model 3D figures that they then position and manipulate. An early pioneer of this process, Willis O Brien began using the technique in 1917 with the short film, The Dinosaur and the Missing Link and King Kong (1933). Stop motion animation techniques are still in use today. Examples include Nick Wallace and Gromit series, The Nightmare Before Christmas (1993) and James and the Giant Peach (1996). There are two specific capabilities that differentiate CGI from stopmotion - motion blur and particle. For CGI motion blur is a straightforward rendering task, and it appears in most shots containing fast moving characters or objects. By contrast, while motion blur is not impossible to accomplish in stop-motion, it is very difficult. It is only in rare situations that a model can be moved smoothly and sufficiently fast during the brief exposure of a single frame so that blurring occurs. Even when models can be moved, the price of motion blur is normally a static camera position. Not all objects in a CGI scene are rendered using standard ray tracing techniques. Particle systems are used to model things like fire, smoke, fireworks and the leaves of trees. Such features consist of a very large number of objects, all of which behave in a similar way. Ray tracing collections of many thousand such objects would require enormous computer power (even by today's standards), so special techniques have been developed to deal with them. The motions of the individual 'particles' in such a system are typically quite complex, since they are often acting Page 111

112 under various constraints. For example, the behavior of the leaves of a tree swaying in the wind are determined by the wind (which may be gusting), the elasticity of the branches of the tree and gravity, the detailed, individual way they are attached to branches and the movement of those branches themselves. While the computations involved may be complex, computers now make it possible to produce realistic animated images of such scenes. Conventional stop-motion, unable to cope with the sheer number of individual objects, let alone deal with their complex motions, either avoids such scenes, or handles them using mattes and conventionally filmed liveaction inserts. Although the success of 3D CGI cartoons is likely to affect all conventional forms of animation, it is with stop-motion that it competes most directly, and hence will impact most. After all, it is already possible, using CGI, to reproduce the vast majority of conventional stop-motion sequences. There is quite a lot of anecdotal evidence that stop-motion exerts particularly strong effects, both psychological and physical, on its practitioners. Adherents feel that the limitations and idiosyncrasies of the technique lend a very particular character to the end-result. Supporters of stop-motion argue that CGI technology, where the puppet is a virtual figure, seen on a computer screen and manipulated though a mouse or keyboard, lacks this direct, tactile approach, and hence cannot duplicate the particular qualities of stop-motion. See Table 8 for a list of prominent stop motion animation movies. Page 112

113 TABLE 8: PROMINENT STOP MOTION ANIMATION MOVIES 1. Chicken Run 2. Tim Burton's The Nightmare Before Christmas 3. Coraline 4. Wallace and Gromit: The Curse of the Were-Rabbit 5. Tim Burton's Corpse Bride 6. James and the Giant Peach 7. Monkeybone 8. Wallace and Gromit 9. The Adventures of Mark Twain 10. The Secret Adventures of Tom Thumb 11. Gumby: The Movie Page 113

114 Motion Capture Motion capture (mocap) includes measuring an object's position and orientation in physical space, then recording that information in a computerusable form. Objects of interest include human and non-human bodies, facial expressions, camera or light positions, and other elements in a scene. In most instances, a live subject, most likely human or animal or puppet, is used as the source of data which is transformed into another form. In motion capture, a significant amount of the creative process occurs during post production process, when data is manipulated to become animated imagery. Sometimes imagery is manipulated on the fly, or as the performance of real-time animation is taking place. In terms of animation, motion capture can be used for different aspects of production. For example, captured motions can be used real-time directly in a work, with or without secondary animation of hands and face in post production. The captured data also can be transformed into characters and modified completely during post-production. Using motion capture-based motion generation techniques, the animator accurately replicates motions from the real world. With these techniques, input devices, or sensors, are attached to a human actor in order to record the motion of that particular human. This kinematic information can then be used to generate the motion for a similarly structured model. The sampling points are the collection of points on the human actor where the sensors are placed. To use the data collected from motion capture, the animator must have set up a model, the virtual actor, with an appropriately Page 114

115 similar hierarchy, so that its joints and structures can correspond with the sampling points on the human actor. The more sensors that are used, the more detailed the resulting animated motion can be; however, the more sensors that are used, the greater the computational and monetary costs become. Following is a summary of three types of mocap used in entertainment and the ways in which they work. 1. Mechanical: the performer wears a human-shaped set of straight metal pieces (like a very basic skeleton) that is hooked onto the performer's back; as the performer moves, this exoskeleton is forced to move as well and sensors in each joint feel the rotations 2. Optical: The performer wears reflective dots that are followed by several cameras and the information is triangulated between them. In optical-based motion capture the sensors are reflective markers, and a series of cameras records the data by detecting the light that bounces off the reflectors. 3. Electromagnetic (magnetic): The performer wears an array of magnetic receivers which track location with respect to a static magnetic transmitter. It involves the use of a centrally located transmitter and a set of receivers (the sensors) that detect magnetic fields in order to measure the sensors spatial relationships to the transmitter. These sensors are attached by cable. The capture area, the area in which the human actor can move, must not be near any Page 115

116 sizable area of metal, for such an area might affect the surrounding magnetic fields, distorting the motion capture data. 4. Sonic: it employs ultrasound and is subject to several types of interference 5. Biofeedback sensing: it measures bodily movement from the heart, brain, retina, eyes, skin, and muscles, and is used extensively in biomechanical and sports related work, In terms of freedom of motion for the human actor, optical motion capture systems are better because there are no cables or cords to hinder and restrict movement. There are wireless magnetic receivers; however they are currently much more expensive than the other options. Optical motion capture systems also have a slightly larger capture area than its magnetic counterparts. Magnetic motion capture systems can provide real-time feedback, whereas optical motion capture systems cannot. Magnetic motion capture systems also do not suffer from the problem of occlusion that optical motion capture systems often do; in optical systems, the human actor or props can occlude, or hide, sensors from the view of sensors. Though typically used to record larger human body movements, motion capture techniques have also been used to capture data on facial expression animation. What makes motion capture technology such a challenge is the speed at which everything must occur. In real-time mocap, within 1/30th of a second, the length of one frame of video, motion must be sampled, data must be applied to a digital scene representing various body parts of a Page 116

117 character, and a scene must be rendered into a digital image. Magnetic systems offer the best quality data; however, a lot of research is going into optical systems due to its flexibility. Optical mocap usually is employed in feature film production (examples can be found in Titanic and Star Wars Episode I: The Phantom Menace) because of the higher quality data, while magnetic is used for live, interactive situations. A magnetic motion capture session is run much like a film shoot. Careful rehearsal ensures that the performers are familiar with the constraints of the tethers and the available space for capture. Rehearsal often includes the grips for the cables to ensure that their motion aligns to the motion of the performers. The script is broken down into manageable shot lengths and is often story boarded prior to motion capture. Each shot may be recorded several times, and an audio track is often used as a synchronizing element. Because the magnetic systems provide data in realtime, the director and actors can observe the results of the motion capture both during the actual take and immediately after, with audio playback and unlimited ability to adjust the camera for a better view. The tight feedback loop makes magnetic motion capture ideally suited for situations in which the motion range is limited and direct interaction between the actor, director, and computer character is important. However, mocap has a number of problems. Accurately measuring the motion of the human body is tricky because trackers attached to skin or clothing shift as the performer moves, creating errors in the recorded data. Furthermore, if the object used to generate the recorded motion and the Page 117

118 graphical object have different dimensions, the animation may have noticeable flaws. The technology used for motion capture makes it difficult to capture some motions. One class of sensors are magnetic, and metal in the environment creates noise in the data. Some sensors require that the actor be connected to the computer by an umbilical cord, thereby restricting the actor's motion. Another class of sensors are optical and occlusions caused by props and other body parts create confusion in the data. All sensing technologies have a relatively small field of view, which limits the kinds of actions that can be captured. Page 118

119 Forecasting Animation Content Demand Forecasting of demand for animation is not easy owing to the nature of variables such as the quality of workforce, the working conditions, unplanned exigencies, changes in priority etc. All these would have an impact on the quantity and quality of output. We have built in sufficient buffer to arrive at a best case scenario for the market size forecasting. The global market for digital special effects and animated films for broadcast video is very large. In Europe, about 10% of total airtime is dedicated to the broadcasting of cartoon animation serials and films. In Asia, the total percentage is about 10%. In North America, the percentage is about 10% of the total airtime. In the rest of the word this number is 10%. The amount of content required to cater to this demand is very large. Most of the content creation from the advanced countries is outsourced from Asian countries, and in a few cases, to the Eastern European countries. This is because production in these countries is cheaper, labor regulations are more flexible, and overall price-performance ratios become very attractive. Animation Content demand from TV Channels in Europe The number of general entertainment channels in Europe is about 155 and the number of children s channels was 45 in the year General entertainment channels dedicate about 10% of their airtime to cartoon animation and the children s channels dedicate 60% of the total airtime to cartoon animation. This means that a total of 522 hours of animation Page 119

120 content is being beamed across Europe per day. If we discount for reruns as well as the slot for commercials, the demand for new animation content per day comes to 261 hours (in 2009). Typically, of this 2D, Cel animation content accounts for about 90% of the total content and 3D accounts for about 10% of the total content. Table 9 details the calculations involved in forecasting the demand for animation content by TV channels in Europe. Figure 8 gives the break-up of animation content demand by TV channels in Europe. Page 120

121 TABLE 9: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN EUROPE Entertainment Channels Children s Channels Hours Entertainment Channels Animation airtime (Assuming that 10% airtime is dedicated for animation) Children's Channels Animation airtime (Assuming that 60% airtime is dedicated for animation) Total Animation airtime (hours) Reruns New content hours Total time available in minutes Page 121

122 (Assuming 10% time for Commercials) Total animation time (000 minutes) 3,614 3,997 4,380 4,763 5,147 5,530 5,913 2D Cel animation requirement (in 000 minutes) (Assuming 90% of 3,252 3,597 3,942 4,287 4,632 4,977 5,322 content is 2D Cel animation) 3D animation requirement (in 000 minutes) (Assuming 10% of content is D animation) Page 122

123 Assumptions: 1. All the channels offer programs 12 hours a day. 2. The entertainment channels dedicate 10% of their airtime to animation. 3. The children s channels dedicate 65% of their airtime to animation. 4. Fresh content would be 50% of total content and re-runs would be 50% of total content 5. We have allocated 10 minutes per hour for commercials, thereby taking 50 minutes per hour for animation. Page 123

124 FIGURE 8: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN EUROPE 6,000 Break-up of Animation Content demand by TV Channels in Europe (000' Minutes) 5,000 4,000 3,000 2,000 1, D Animation 3D Animation Page 124

125 Animation Content demand from TV Channels in the Us and Canada In the US Market there are a number of TV choices such as cable, dish and digital channels. The cable TV watching pattern in the US is given in Figure 9. Page 125

126 FIGURE 9: CABLE TV WATCHING PATTERN IN THE US Cable TV watching pattern in the US 6% 11% 14% 5% 3% 22% 39% Entertainment Children's programming News Nature/Education Women Music Others Page 126

127 The number of entertainment TV channels in the US and Canada is about 215 and the number of children s channels is about 37. General entertainment channels dedicate about 7% of their airtime to cartoon animation and the children s channels dedicate 60% of the total airtime to cartoon animation. This means that a total of 447 hours of animation content is being beamed across the US per day in the year 2009 (here we are taking 12 hour viewership considering the audience profile). If we discount for reruns as well as the slot for commercials, the demand for new animation content per day comes to 224 hours (in 2009). Typically, of this 2D, Cel animation content accounts for about 90% of the total content and 3D accounts for about 10 % of the total content. Table 10 details the calculations involved in forecasting the demand for animation content by TV channels in the US and Canada. Figure 10 gives the break-up of animation content demand by TV channels in the US and Canada. Page 127

128 TABLE 10: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN THE US AND CANADA Entertainment Channels Children s Channels Hours Entertainment Channels Animation airtime (Assuming that 7% airtime is dedicated for animation) Children's Channels Animation airtime (Assuming that 60% airtime is dedicated for animation) Total Animation airtime (hours) Reruns New content hours Total time available in minutes Page 128

129 (Assuming 10% time for Commercials) Total animation time (000 minutes) 3,570 3,739 3,909 4,079 4,249 4,418 4,588 2D Cel animation requirement (in 3,213 3,365 3,518 3,671 3,824 3,976 4, minutes) (Assuming 90% of content is 2D Cel animation) 3D animation requirement (in minutes) (Assuming 10% of content is 3D animation) Page 129

130 Assumptions: 1. All the channels offer programs 12 hours a day. 2. The entertainment channels dedicate 7% of their airtime to animation. 3. The children s channels dedicate 60% of their airtime to animation. 4. Fresh content would be 50% of total content and re-runs would be 50% of total content 5. We have allocated 10 minutes per hour for commercials, thereby taking 50 minutes per hour for animation. Page 130

131 FIGURE 10: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN THE US AND CANADA 4,500 Break-up of Animation Content demand by TV Channels in the US and Canada (000' Minutes) 4,000 3,500 3,000 2,500 2,000 1,500 1, D Animation 3D Animation Page 131

132 Animation Content demand from TV Channels in Asia In Asia there are about 150 entertainment channels as well as about 60 children s channels in the year General entertainment channels dedicate about 7% of their airtime to cartoon animation and children s channels dedicate 60% of the total airtime to cartoon animation. This means that a total of 558 hours of animation content is being beamed across Asia per day (here we are taking 12 hour viewership considering the audience profile). If we discount for reruns as well as the slot for commercials, the demand for new animation content per day comes to 279 hours (in 2009). Typically, of this 2D, Cel animation content accounts for about 90% of the total content and 3D accounts for about 10 % of the total content. Table 11 details the calculations involved in forecasting the demand for animation content by TV channels in Asia. Figure 11 gives the break-up of animation content demand by TV channels in Asia. Page 132

133 TABLE 11: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN ASIA Entertainment Channels Children s Channels Hours Entertainment Channels Animation airtime (Assuming that 7% airtime is dedicated for animation) Children's Channels Animation airtime (Assuming that 60% airtime is dedicated for animation) Total Animation airtime (hours) Reruns New content hours Total time available in minutes Page 133

134 (Assuming 10% time for Commercials) Total animation time (000 minutes) 2,891 3,624 4,358 5,092 5,574 5,979 6,461 2D Cel animation requirement (in 2,602 3,262 3,922 4,583 5,016 5,381 5, minutes) (Assuming 90% of content is 2D Cel animation) 3D animation requirement (in minutes) (Assuming 10% of content is 3D animation) Page 134

135 Assumptions: 1. All the channels offer programs 12 hours a day. 2. The entertainment channels dedicate 7% of their airtime to animation. 3. The children s channels dedicate 60% of their airtime to animation. 4. Fresh content would be 50% of total content and re-runs would be 50% of total content 5. We have allocated 10 minutes per hour for commercials, thereby taking 50 minutes per hour for animation. Page 135

136 FIGURE 11: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN ASIA 7,000 Break-up of Animation Content demand by TV Channels in Asia (000' Minutes) 6,000 5,000 4,000 3,000 2,000 1, D Animation 3D Animation Page 136

137 Animation Content demand from TV Channels in Rest of the World We assume that in the rest of the world, there are about 130 entertainment channels as well as about 45 children s channels in the year General entertainment channels dedicate about 7% of their airtime to cartoon animation and children s channels dedicate 50% of the total airtime to cartoon animation. This means that a total of 433 hours of animation content is being beamed across the rest of the world per day (here we are taking 12 hour viewership considering the audience profile). If we discount for reruns as well as the slot for commercials, the demand for new animation content per day comes to 217 hours (in 2009). Typically, of this 2D, Cel animation content accounts for about 90% of the total content and 3D accounts for about 10 % of the total content. Table 12 details the calculations involved in forecasting the demand for animation content by TV channels in the rest of the world. Figure 12 gives the break-up of animation content demand by TV channels in the rest of the world. Page 137

138 TABLE 12: ANIMATION CONTENT DEMAND FORECAST TV CHANNELS IN THE REST OF THE WORLD Entertainment Channels Children s Channels Hours Entertainment Channels Animation airtime (Assuming that 7% airtime is dedicated for animation) Children's Channels Animation airtime (Assuming that 60% airtime is dedicated for animation) Total Animation airtime (hours) Reruns New content hours Total time available in minutes Page 138

139 (Assuming 10% time for Commercials) Total animation time (000 minutes) 2,814 3,219 3,586 3,953 4,320 4,687 5,053 2D Cel animation requirement (in 2,533 2,897 3,228 3,558 3,888 4,218 4, minutes) (Assuming 90% of content is 2D Cel animation) 3D animation requirement (in minutes) (Assuming 10% of content is 3D animation) Page 139

140 Assumptions: 1. All the channels offer programs 12 hours a day. 2. The entertainment channels dedicate 7% of their airtime to animation. 3. The children s channels dedicate 60% of their airtime to animation. 4. Fresh content would be 50% of total content and re-runs would be 50% of total content 5. We have allocated 10 minutes per hour for commercials, thereby taking 50 minutes per hour for animation. Page 140

141 FIGURE 12: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS IN REST OF THE WORLD 5,000 Break-up of Animation Content demand by TV Channels in Rest of the World (000' Minutes) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, D Animation 3D Animation Page 141

142 Total Animation Content demand from TV Channels Worldwide Combining Tables 10, 11 and 12 we would get the total content requirement for channels in the US. The calculations are given on Table 13. Figure 13 gives the break-up of animation content demand by TV channels worldwide. Page 142

143 TABLE 13: WORLDWIDE ANIMATION CONTENT DEMAND FORECAST TV CHANNELS Global 2D Animation demand (000' minutes/year) No. of episodes required to meet the demand (22 minutes per episode) 527, , , , , , ,613 Per episode production cost for 2D animation Total 2D animation content required by TV Channels (US $ Billions) Global 3D Animation demand (minutes/year) No. of episodes required to meet the demand (22 minutes per episode) 58,583 66,272 73,788 81,304 87,675 93, ,068 Per episode production cost for 3D Page 143

144 animation Total 3D animation content required by TV Channels (US $ Billions) Total animation content required by TV Channels (US $ Billions) Page 144

145 Assumptions: 1. Each episode is of 22 minutes duration. 2. Per episode cost of 2D animation is US $ 100,000 in year 2006 and increases at the rate of 5% YoY 3. Per episode cost of 3D animation is US $ 220,000 in year 2006 and increases at the rate of 5% YoY Page 145

146 FIGURE 13: BREAK-UP OF ANIMATION CONTENT DEMAND BY TV CHANNELS WORLDWIDE Break-up of animation content demand by TV channels worldwide (US $ Billion) D animation 3D animation Page 146

147 Size of the Global Animation Industry The above methodology was adopted for forecasting the size of the global animation industry. For forecasting the size of the global animation industry, we calculated the demand for animation content in all the channels except for TV channels (e.g. movies, Web etc.) The variables we used included the size of the global entertainment industry, share of animation and special effects in the global entertainment industry, size of Web animation industry, size of animation content in advertising and the size of animation content demand in industrial applications. Computer animation includes entertainment applications (movies, TV, Flash productions, games etc.) and corporate applications (corporate promotions, industrial use etc.). Most of the animation is of the entertainment variety (about 80%) and the rest (about 20%) comprise of corporate applications. Within the entertainment segment, content for movies and TV account for a large chunk of the market. In this report we are not extensively analyzing the market for 2D and 3D Games and we feel this in itself is a very large market. The demand for content for movies and TV is growing in excess of 20% with demand for 3D content growing at a faster pace. Corporate applications currently account for a market of about US $ 7 billion and is also growing in excess of 20% YoY. The break-up of the global animation industry based on applications is given in Figure 14. Page 147

148 FIGURE 14: GLOBAL ANIMATION INDUSTRY BREAK-UP BASED ON APPLICATIONS Break-up of the global animation industry based on applications (US $ Billion) Advertising TV Movies Corporate applications Page 148

149 Future Developments Key facts One key development of the future could be Directed Characters, models with intelligence. 3D animation is expected to grow faster than 2D The future will witness an increase in convergence of 2D and 3D animations in the form of hybrid 2D/3D cartoons. The future will also witness an increase in convergence of 3D animations with live action animation in the form of hybrid live action/3d films. 2D cel animation skill-set will face a shortage as animation training programs currently are heavily biased in favour of CGI. The 3D animation pipeline is expected to get shorter owing to increased hardware computing power as well as more advanced and user friendly software. The future will witness animations targeted at devices with small forms such as mobile devices. Computers seem guaranteed to get faster, in accordance with Moore's Law, for the next ten years at least. This would just mean that rendering times would decrease, but we can also expect that CGI software will become both more powerful and easier to use. More powerful as it will be able to produce an ever wider range of effects and easier to use as the level of computer knowledge required will decrease. The barrier to entry has gotten so low that it is feasible to create a studio that is under the radar of traditional Hollywood with low overhead, reasonably paid animators, and a passion to deliver high-end product, for low end prices. As more companies begin to specialize, it is not out of the realm of reason to see shops offering Cloth, Hair and Dynamics effects that cannot be completed anywhere else. Key developments of the future could be Directed Characters, models with intelligence - behavioral control of animation. There could be key developments in terms of making this technology truly intuitive, easy to manipulate, and approachable. The learning curve is still very steep. For the industry to grow any larger we need to pay attention to the next generation of animators. Another key development could be people with live-action film skills being able to move into animation. Thus lighting experts will be able to design the lighting on future animated films, whereas it currently takes a computer science expert. In any case, CGI is clearly here to stay and its use, in live-action feature films at least, is likely to increase. It has revolutionized special effects, virtually eliminating the use of traditional matte painting for special effects and drastically reducing the need for stop- Page 149

150 motion model work on films such as The Lord of the Rings or the Star Wars series. As far as animation is concerned however, uncertainties remain. Stopmotion for cartoon feature films has never been healthy and is certainly under threat. Studios are unlikely to invest in it until success seems more guaranteed. Aardman's partnership with Dreamworks is surely the key to this. While Aardman show every sign of being able to continue making successful short films, its problems with The Tortoise and the Hare sound a warning note. A successful second feature for Dreamworks - and one starring Wallace and Gromit has a good chance - could cement the future of stop-motion features. Although 2D cel animation will survive, it will be largely in the form of hybrid 2D/3D cartoons. As well as reducing costs, using CGI for backgrounds allows for a more dynamic camera, matching the increased demand for thrills and excitement. In any case, the training offered to would-be animators these days is heavily biased in favour of CGI, so young artists with traditional 2D cel skills are becoming harder to find. In future, animation devices could become cheaper and more prevalent as computer power increases, just as mice, tablets and scanners already have. Such devices will make the construction and manipulation of CGI models more physical - more like throwing a pot on a wheel than writing a computer program. Page 150

151 As more and more everyday objects become computerized (the average new car now contains at least a dozen tiny computers) it becomes both possible and cheap to make fully computerized, miniature models. We might expect to see a revival of stop-motion as the process of animating such models become simpler and more intuitive. An example could be Stuart Little. Currently animators have to choose between a virtual, CGI-generated Stuart on the one hand, or a stop-motion model Stuart on the other. In the future one can imagine a real, robotic, model - an intelligent puppet - that exhibited the same range of expression and movement and did so in a semiautonomous fashion. Where today, reshooting stop-motion scenes is a labour-intensive, completely manual process, such devices would make it possible to design and record such motions and then repeat them, with variations, at will. Stopmotion would effectively be transformed into live-action. While audiences have eagerly welcomed CGI toys, insects, monsters and aliens, they do not seem ready to embrace believable human CGI characters. If Final Fantasy had had a more compelling story things might have been different, but the losses incurred by Square are likely to discourage another attempt in the near future. Pixar, with four very successful features to its credit, seems unlikely to fail either technically or artistically. Dreamworks SKG's intense rivalry with Disney and Dreamworks demonstrated ability to make very successful animated features will ensure that Pixar does not have a monopoly of success. It is likely, however, that at least some of the many CGI cartoons Page 151

152 currently planned or in production will turn out to be failures, but that has always been true of filmmaking. Page 152

153 Animation Software Market Landscape 2D Animation Software Marketplace Key facts It is estimated that 75 percent of all live-action feature films apply some type of digital effect. Key vendors of 2D animation software include Toon Boom Animation, Retas Studio etc.. There are four types of software applications for 2-D animation applications, which include Scanner which is the tool used to transform recorded images into digitalized images; Nonlinear editing applications which can draw the images in between, compose many layers of images and imitate camera movements; Tools for special effect which have built in template effects and Production tools for 3-D animation which are used to position 2-D characters in 3-D background. Key players in 3D animation software include Autodesk, Electric Image, Maxon and Side Effects. Prominent Japanese animation production software is RETAS for Anime production and Manga Studio for Anime production It is estimated that 75 percent of all live-action feature films apply some type of digital effect. In terms of animation production, the heavy reliance on digital technologies in the process seems quite natural, since the adoption of digital technologies has presumably been able to cut production costs and increase productivity. However, when people hear the term, computer animation, three dimensional (3-D) computer animation tends to come to mind. As a matter of fact, two-dimensional (2-D) animation also represents a very important component of the computer animation industry. Dedicated proprietary systems based on expensive hardware and software were the core part of competition between American animation studios in the 1980s. Because of proprietary software, large American studios maintained their competitive advantages other studios in the other countries. However, the rapid advancement of digital technology has decreased the advantages that were enjoyed exclusively by large studios. The current wave of technological advances in computer-aided animation, chiefly manifesting itself in the collapse of workstations and the ascendancy of increasingly powerful personal computers, has lowered the cost of capital equipment. There are a myriad of software applications that assist animation artists in the production of animation. The software widely applied the production of animation is shown in the following table. Table 14 classifies the 2D and 3D animation softwares based on functionalities. Page 153

154 TABLE 14: CLASSIFICATION OF ANIMATION SOFTWARES Name of software Major functions application Photoshop (Adobe) Used to scan, digitalize and improve any single hand-drawing frame. Once a frame is scanned, it can always be recycled. Premiere (Adobe) A tool of non-linear editing: it can used to draw the in-between frames, composite several layers of characters and backgrounds. After Effect (Adobe) A digital special effects system. It can manipulate a digitalized picture or video sequence to create a special effect. It is also a computer-assisted editing system that provides editors with a fine degree of control over the finished product. Scanner Scanner is used to convert the images produced by analogue image (e.g. film footage) into digitalized data. Based on the function, the post-production functions can be processed. Flash (Adobe) A software application for the production of Internet plug-in software. It was created in order to put animation skills to Page 154

155 practical use when making Internet websites. Motion Catcher It can record many dots on a moving body so as to animate a static character. Maya (Autodesk) Software application for 3-D animation. It can bring in a 2-D character and position it in a 3-D environment. Page 155

156 To sum up, there are four types of software applications for 2-D animation applications, which, when combined, create a new production process for 2- D animation. These four types of software are introduced according to the new production procedure: 1. Scanner the tool used to transform recorded images into digitalized images necessary for post-production; 2. Nonlinear editing applications these tools can draw the images in between, compose many layers of images and imitate camera movements; 3. The tools for special effect these tools have built in some template effects; 4. The production tools for 3-D animation they are often used to position 2-D characters in 3-D background. Due to the advancement of digital technologies (e.g., the improved compressed technology, the increased memory capacities) and falling software price, amateurs and semi-professionals have come to be able to create animation on inexpensive computers. Buying a package of software applications for 3-D animation (e.g., Maya) was frustrating until the price became affordable in the late 1990s. Before then, only major workstations have financial resources to buy the software. He asserted that nowadays most of his fellow students in his animation production program are equipped with sophisticated but inexpensive personal computers. It has been widely accepted that high-end animation production remains in North America. However, given the technological advancement, have offshore Hollywood studios evolved to execute the high value-added Page 156

157 production that hitherto had been the exclusive province of core countries. The essential part of competitive advantages lies now not so much in technological competency, but in the efficiency of networking. In contrast to the traditional working environment wherein the staffed workers were located in many separated divisions, the new environment requires intensive cooperation among these labor forces. Although technological advancement has made it relatively easy to establish small-sized business, the new studios still lag behind their clients in Hollywood in terms of integrated production teams. Nevertheless, CG has excelled in this industry compared to three years ago. It has become one among few players in the world. One of the most prominent technological advancements is Flash, the Internet plug-in software. Paralleling the rise of Internet economy and the increase of Internet users, Macromedia, an American software company, developed Flash software that allows the users with little skill to produce animated cartoons and make them available online. The rapid adoption of Flash has greatly impacted the animation industry. I will discuss this issue in another paper. Animation process using a 2D animation package Here we examine an animation production process using a 2D animation package. The use of 2D animation software starts at an early stage wherein the software log all the processes within the animation chain. The artists first begin by drawing the characters with possible poses and expressions. Much of the expressions are added to the characters during the actor s (who play the animated characters) voice over readings. Throughout this stage, Page 157

158 the storyboards are created. It is important for these to tell the entire story so all animators may work on the project but at different times and to an exact template. At this stage, if not all is correct; the process may become very tedious or unacceptable to work with. The scenes are stored in the Manager module database of 2D animation software where they can be altered and updated automatically throughout the animation period. This forms a diary, which the animators can refer to during any stage of the process. It becomes extremely useful when needing to amalgamate 3D work within the 2D structure. This diary forms the story reel, crucial to the progress of production and is stored via the Scan module in 2D animation softwares, creating a viewable rough draft of the entire storyboard. The scene can hold the entire panels of the storyboard in sequence so that major animation timings can be previously worked out for each movement. Organising scenes, dialogue and camera instructions can also be added here. Setting the foundations of the animation in this way allows perfect precision when coming to produce the film and enables the animation artist to work with detailed exposure sheets rather than hard copy dope sheets. Prominent 2D animation softwares offer many features aiding cross-over technologies. Some 2D animation softwares incorporate a 3D element as part of its interface, with its Scene planning capabilities. 3D Animation Software Marketplace Animation software, particularly 3D animation software came into being during the 1970s. The 1980s witnessed the release of 3D animation Page 158

159 software products targeted at entertainment, scientific visualization and industrial designs and entertainment. Silicon Graphics Inc. was a key player during this period because 3D animation graphics were exclusively targeted at professionals, because PCs were not powerful enough to process 3D Graphics. Software packages were written only for Unix workstations, and were very expensive. SGI produced the standard hardware specialised for 3D Graphic processing. SGI workstation was equipped with RISC microprocessor chip by MIPS, specialised 3D processor, and a special version of Unix OS, IRIX, produced by SGI. These workstations had the highest display technology embedded within, and allowed for quality previews, removing much of the need for time-consuming test rendering. SGI dominated the 3D Graphic industry for the much of its early history. SGIs dominance started diminishing with the advances in computer technology, reduction in hardware price, and advances in Windows based operating systems. Microsoft purchased Softimage in '94 and produced a version of Softimage for an NT workstation, powered by Intel s Pentium. Other leading 3D software, Lightwave, which worked on Amiga machines only, and then new product 3ds Max started targeting the large user base of Windows based machines. SGI acquired Alias and Wavefront, the other leading 3D Graphic software companies (Subsequently in 2004, SGI sold off Alias graphics software business). AliasWavefront also started producing NT compatible versions of its packages StudioTools and Maya. The movement towards NT caused a dramatic drop in cost associated with professional 3D animation production. Increasing power of PC was allowing a different type of 3D animation market to develop. New series of 3D animation software, such as Ray Dream Studio of Fractal Design, came Page 159

160 in affordable price for an amateur artist or a hobbyist. These software lacked the detailed modeling and rendering ability of the high-end, professionally-used packages, but were much easier to learn and to use than the high-end products which requires hundreds of hours of training. This new market was further supported by the prevalence of the Internet, which created a new market for 3D animation. INDUSTRY OVERVIEW While there have been several newer entrants into this competitive market segment, many of the original players are still creating tools that meet the needs of the professional 3D animator. The major vendors with products that are classified in this market segment include Autodesk, Electric Image, Side Effects and Maxon. The market has seen shifting platforms to acquisitions, mergers, to maturing markets and new business models. In all this time the major tool vendors have found ways to move with the industry and define new frontiers for 3D graphics and animation. The current market for professional animation software is made up primarily of the following commercial vendors: 1. Autodesk 2. Electric Image 3. Maxon 4. Side Effects 5. Smith Micro 6. Adobe Page 160

161 Commercial 3D animation software underwent a fundamental change during the late 90s. The transition began with the introduction of two programs: 3ds Max by the Kinetix division of Autodesk and Houdini by Side Effects Software Inc. Previously, Alias/Wavefront joined the revolution and pushed it forward with the introduction of Maya. Programs like Maya, Houdini, 3ds max etc. are aimed at helping animators scale new heights replaces products with colder, more technical names such as Power Animator, advanced Visualizer, Prisms, 3D Studio, Softimage 3D, N-World etc. And yet, part of their importance is the freedom they give technical directors and CG supervisors as well as artists and animators. All these programs offer sophisticated modeling, animation, and rendering capabilities, but what makes the software qualify as part of the next generation is not the feature set, it is the underlying architecture. They are all based on an "open" and extensible architecture, they all have a procedural architecture, and they all offer a scripting language or the equivalent. In this generation of software, animators can customize programs with nearly as much flexibility as a programmer without ever writing code; and programmers have the tools to write plug-ins that extend the basic tool sets The GUIs gave non-technical animators easy access to tools, thus providing a much-needed path to computer animation for people who would otherwise have avoided the machines. Unfortunately, the pretty interfaces made customization difficult for technical directors (TDs). Autodesk took the lead in showing companies targeting the entertainment industry why it made sense to have third-party developers add functionality--a strategy that Yost had implemented in software he developed for the Atari in 1986 and that Autodesk had also successfully Page 161

162 leveraged with its AutoCAD software. Eventually, other software companies including Softimage, Alias, Lightwave, and Electric Image also began offering software development toolkits (SDKs) so that programmers could write "plug-ins" to extend the toolsets packaged within the fancy GUIs, and studios used the SDKs to extend functionality as well. The problem is that to create a plug-in for most programs, someone has to write C++ code. That is fine for third-party software developers. It is not so fine for production studios working on fast-track projects. Yet, like people in most studios they should customize and extend software for particular projects to have a creative edge. At the same time, they need to have software that non-technical animators can use. Two 3D animation software programs, however, followed a separate route. Side Effects! Prisms had a procedural architecture that gave technical directors enormous flexibility, but the lack of a GUI made it hard for many animators to use. Similarly, the pioneering LISP-based Symbolics software, which was being ported to Silicon Graphics hardware as it moved from Symbolics to Triple-I and finally to Nichimen, had a wide open, objectoriented architecture but lacked a pretty interface. The next generation of 3D animation software began when the PC-based 3D Studio evolved into the Windows 95 and NT-based, object-oriented MAX; and SGI-based Prisms evolved into easier-to-use Houdini, which now also runs on Windows NT. 3D Studio's WAS routines had allowed third-party developers to build plug-ins, and hundreds did, but this software could not be incorporated into the user interface and was therefore somewhat cumbersome for users. With MAX, the plug-in developers could add Page 162

163 features that would become a seamless part of the user interface. Now, some of the most interesting features in MAX for deformation, lattices, and character animation have been created by third-party developers. This development is enthusiastically encouraged by Kinetix. Side Effects already had an open, procedural 3D animation program with Prisms. For its second generation, the company integrated its 2D and particle/effects software into Prisms, gave the new program a visual interface, and named it Houdini. The result is perhaps the richest, seamless integration of 2D and 3D animation, effects, audio, and compositing software within a single open environment on the market. MAX R2, which runs under Windows NT and 95 on Intel platforms is aimed at a wide market. Houdini, which runs on SGI machines and under Windows NT serves the high-end. The leading 2D and 3D animation softwares are listed in Table 15. Page 163

164 TABLE 15: LEADING 2D AND 3D ANIMATION SOFTWARES Company Product Toon Boom Animation ToonBoom Studio, Toon Boom Harmony, Toon Boom Animate Adobe System Inc. Dimensions, After Effects, Flash Autodesk Maya, 3ds Max, Motionbuilder, Mudbox, ImageModeler, Stitcher, HumanIK, Kynapse, FBX, Softimage Autodessys Form Z Caligari Corp. TrueSpace, TruePlace Credo Interactive, Inc. Life Forms, Mega MoCap, Animania, DanceForms, GamePak Smith Micro Poser EI Technology Group EIAS, Amorphium Hash Inc. Animation Master Newtek Inc. 3D Arsenal, LightWave 3D, SpeedEDIT, TriCaster, Page 164

165 VT Robert Mcneel & Associates Rhinoceros Side Effects Software Houdini Strata 3D [in] Photoshop Plug-ins, The Strata CX Suite, SWiSH SWiSH Max Electric Rain Swift 3D Page 165

166 3D ANIMATION SOFTWARE MARKET SEGMENTS The 3D animation software market includes softwares across the spectrum ranging from the low end to the highly sophisticated ones. We can broadly classify the market into low end softwares, intermediate softwares and high end softwares. Low end animation softwares include products such as Xara 3D (suitable for creating, logos, titles), Adobe Dimension (plug-in for illustrator), Modo, Silo, Cheetah3d etc. Intermediate animation softwares includes Amorphium (user friendly 3D software program), Poser (3D character renderer and animator), Strata 3D (has good rendering features, including radiosity), Pixels (Mac-only 3D program that offers advanced rendering, animation and modeling), Bryce 3D (landscape rendering software which can create terrains, skies, seas etc.), Blender (One of the best free 3D softwares, which is a full featured production software), AC3D, EIAS etc. At the high end, the market includes softwares such as Lightwave 3D (has separate modeler/texturing and animation/lighting/rendering apps), Softimage (combines modeling with non-linear animation, scripting, and rendering), Maya (has node-based architecture which enables complex animation and rendering), 3ds max (very popular software in the game development industry), Houdini (animation system that has a node-based architecture), Cinema 4D (has advanced radiosity rendering, high end character tools, and GUI based expression system), Renderman etc. Page 166

167 TABLE 16: KEY PLAYERS AND THEIR PRODUCTS IN 3D ANIMATION SOFTWARE MARKET Name of software Company Major functions application Lightwave 3D NewTek Popular and easy to use software that is widely used for video and television production. 3ds Max Autodesk Max is a leader in the game development industry. The software is also used in film and television productions. Maya Autodesk Maya is the leader in the 3D animation software market. The product is used in feature films and games. Mental Ray Mental Images Leading rendering software. Softimage Autodesk 3D animation software. Houdini Side Effects Software Houdini is a sophisticated 3D animation software. Page 167

168 Aladdin 4D DiscreetFX 3D animation modelling, and rendering Amorphium EI Technology 3D animation and rendering software Group Electric Image Animation EI Technology 3D animation and rendering software System Group Cinema 4D, Bodypaint 3D Maxon 3D animation software Renderman Pixar Widely used rendering software. Blender Bledner High end open source software. Foundation AC3D Invis 3D modeling application Form-Z Autodessys CAD software Modo Luxology 3D animation and rendering software Silo NeverCenter 3D modeling software SketchUp Google 3D modelling software SolidThinking SolidThinking Inc. 3D modeling and rendering software. SolidWorks SolidWorks 3D mechanical CAD program Page 168

169 Corporation Truespace Caligari Free 3D Authoring software which allows Corporation users to model, texture, light, animate and render 3D content. ZBrush Pixologic ZBrush is a digital sculpting tool that combines 3D/2.5D modeling, texturing and painting Massive Massive Software 3D animation system for generating crowdrelated visual effects Cheetah3d Cheetah3d 3D animation modelling, and rendering Carrara DAZ 3D 3D modeling, animation and rendering software Bryce DAZ 3D 3D modeling, rendering and animation software targeted at fractal landscapes Xara Xara 3D 3D animation software Page 169

170 FREE ANIMATION SOFTWARES There are many animation programs available that offer free download and usage. Many of these software programs are completely open-source, which allows users to use them for free. The leading free 2D and 3D animation softwares are listed in Table 17. Page 170

171 TABLE 17: FREE ANIMATION SOFTWARES Name of software 2D/3D Major functions application Pencil 2D Combines vector drawing and bitmap drawing attributes. Good software package for starters. Synfig 2D Creates camera and lighting effects. CreaToon 2D Good basic animation software. Blender 3D High end 3D animation software, which works across Windows, Mac and Linux. TrueSpace 3D Free 3D Authoring software which allows users to model, texture, light, animate and render 3D content. 3D Canvas 3D 3D modelling and animation software Page 171

172 PLUG-INS TO PRODUCTS Many of the animation companies custom make much of the plug-ins and rendering software they use as they often need them to perform unique jobs. However, the 3D software companies are producing advanced versions as well as plug-ins towards this effort. There are a number of such plug-ins available. 3D software companies are not only extending the capabilities of the production of 2D visuals from within the environment and use of cartoon, pencil and pen like renders and plug-ins they also are offering more advanced paint effects, often built into the software. Better use of Paint facilities is necessary when extending further into facilitating 2D and traditional effects. One of the most popular additions of 3D paint which can run on multiple platforms, Maya, 3ds Max, Softimage and LightWave, is Deep Paint 3D which can be used as a standalone package or with Deep UV. A good example of the progression of built-in paint facilities is the Maya s award winning paint suite. They have incorporated three major types of applications for its creation, including Artisan, Paint Effects and 3D Paint. Maya Paint Effects is an intuitive software it allows the user to paint in virtual 3D space, onto a 2D canvas. Simple special effects are also possible within the software. Page 172

173 TABLE 18: PRICING STRUCTURES OF ANIMATION SOFTWARE PACKAGES Product, Company Description Platform Approximate price (US $) SpeedTreeMax, Plug-in for creating low to 3dsMax, Windows 495 Digimation medium polygon count trees V-Ray, Digimation Photorealistic rendering for 3dsMax, Windows 899 3ds Max Illustrate, Digimation Illustration rendering for 3ds 3dsMax, Windows 395 Max Quickdirt, Digimation Aging plug-ins for 3ds Max 3dsMax, Windows 245 Testurelab Mapping and texturing suite 3dsMax, Windows 245 The Essential Textures Procedural maps for 3ds Max 3dsMax, Windows 195 Illustrate!, David Gould Cel and illustration renderer 3ds Max, Windows 395 Studios Inkworks Cartoon cel and flat coloured 3ds Max, Maya Windows 300 outlines Maya Vector Render is incorporated Windows, Mac 4,995 Page 173

174 into Maya. Cinema 4D, Maxon Professional 3D Animation Win, Mac 995 Software Bodypaint 3D, Maxon Texturing software 3ds max, LightWave 3D, 995 Maya finaltoon True Line Renderer 3ds Max, Windows 495 ThinkingParticles Rule-based particle systems 3ds Max, Windows 1695 finalrender Stage-2 Advanced Rendering system Maya, 995 finalrender Stage-1 R2.0 Raytracing and Global 3ds Max, Windows 995 Illumination rendering system Swift Vector render 3ds Max Windows 300 Swift 3D 3D software Photoshop, Flash, 3ds max, 295 LightWave, Strata 3D [in] 3D Software Photoshop 399 Page 174

175 Analysis of key players in 3D Animation Software Market 1. Maya (owned by Autodesk) is a high-end 3D animation software which has over the years become the established leader in character animation for feature films. Maya has also become a strong player in video game development, although it is still not as popular as 3D Max for games. Maya has a versatile modeler, powerful character animation and visual effects capabilities. While Maya is a big, complex package to learn, it has an advanced and fully customizable interface, featuring Artisan brush-based tools that allow objects to be shaped and edited by an interactive painting-like process, and Paint Effects that allow grass, trees, and other elements to be painted into 3D space as renderable "brush strokes." Dynamic simulation of rigid objects, soft-bodies, fluids, cloth, and hair, combined with a powerful scripting language, make Maya a great visual effects tool. Maya also comes with a license of Mental Ray, a flexible, powerful, and stable renderer. 2. Softimage is owned by Autodesk and is very strong when working with polygons, as well as multiple types of subdivision surfaces. Softimage s non-linear animation system sequences clips of animation, but also allows animators to blend and transition between different riggings, constraints, expressions, and externally referenced models. Softimage comes with a seamlessly integrated copy of the popular Mental Ray renderer. The Rendering system also has the most complete support for customized render passes Page 175

176 implemented in any package, and also includes an integrated compositing system. 3. 3ds Max (owned by Autodesk) is the world s most widely used professional 3D modeling, animation and rendering solution and it dominates the video game development industry. It is used by companies in film and television production as well. Max provides a workable modeling, animation, and rendering solution out of the box, but most of the system's power comes from the huge market for plug-ins and add-ons that are available for it, for example, plug-ins are available to render self-shadowing volumetric smoke, or to simulate sophisticated fluid dynamics, and Max was the first program to get plug-ins to render 3D scenes directly into Flash animations. 4. Mental Ray is a leading rendering software and generates images of outstanding quality and unsurpassed realism and achieves scalable performance through the exploitation of parallelism on both multiprocessor machines and across networks of machines. The software uses advanced and proprietary acceleration and recursive sampling techniques for faster rendering on even the smallest, single processor machines. It produces images of unsurpassed realism for digital content creation and design in the areas of entertainment, product design and data visualization, including such applications as visual effects for motion pictures, full-length feature animations, content creation for computer games, Computer Aided Design (CAD), product design and styling, architectural design, lighting Page 176

177 design, fluid flow simulation, seismic data studies and medical imaging. Plug-ins supplement the 3D software and are usually developed by independent companies other than the 3D software manufacturers. They have specialized but powerful functions to strengthen the software they are plugged into. Given below is a list of some popular 3D animation software plug-ins. 1. Creature Creator enables users to create humanoids, aliens, monsters, bugs etc. and help create characters for cartoons, fantasy and sci-fi by using any of the plugin's library of over 500 predefined body parts, which can be tweaked or combined in endless ways for genuine originality. The users can also add their own modifications and models to the library. 2. Darwin is a set of special parametric primitives designed to help artists create new and unique life inside of 3ds max. Darwin has complete sets of arms, legs, bodies, heads, flippers, fins, beaks, teeth, hands, feet, hooves, tongues, horns, tails and wings which can be adapted, combined and evolved to produce the full range of vertebrate life. 3. SpeedTree allows users to create low to medium polygon count trees. The average SpeedTree tree has around 5,000 polygons. As such, you can create a lot more speedtree trees in your scene. In addition, SpeedTree 2 also fully supports wind animation within the tree for a highly realistic look in your animations. Page 177

178 4. Absolute Character Tool is a suite of plugins and technology to extend 3ds Max with advanced muscle and skin deformation tools for creating the realistic character animations. It is also a complete, extensible, foundation technology designed to support a vast range of advanced character animation features in the future. 5. DreamScape allows users to create realistic landscapes, seascapes, skies, outdoor lighting and more. This also includes modeling and animation tools for building complete environments including mountainous landscapes, realistic skies and bodies of water. 6. AfterBurn enables users to create volumetric particle effects for 3DS Max. Additional features include photorealistic effects such as clouds, pyroclastic smoke and dust, to superb explosions, liquid metals, water and various procedurally defined solid objects (HyperSolids). 7. Final Render is a rendering engine which offers raytracing and global illumination rendering systems for 3ds max. Features include 3D motion blur, blurry reflections, sub-surface scattering, caustics etc. 8. RealFlow is a fluid simulator and offers features such as simulate wave propagation, objects floating and bobbing at a liquid s surface, waves, body dynamics, waves etc. It has interfaces with Maya, 3dsmax, Cinema4D, Lightwave etc. Page 178

179 MARKET SIZE The commercial 3D animation software market is growing at the rate of 10% and the market size during the year 2009 was US $ 720 million. The market is expected to reach about US $ 1 billion by Page 179

180 FIGURE 15: COMMERCIAL 3D ANIMATION SOFTWARE MARKET SIZE 1200 Commercial 3D animation market size (US $ Million) Page 180

181 MARKET SEGMENTS The market for professional 3D animation consists of movies and TV, games, visualization, web design and learning. Movies and broadcast currently account for a major part of the market accounting for about 44%. Game development accounts for about 32% with visualization accounting for 8%, web design 7% and learning accounting for 9%. Page 181

182 FIGURE 16: 3D ANIMATION SOFTWARE MARKET BREAK-UP BY SEGMENT 3D animation software market segment and size Web design 7% visualization 8% Learning 9% Movies and TV 44% Games 32% Page 182

183 Japanese Anime Production Softwares Most Japanese anime studios have computerized to speed up 2D production. The continuing focus on 2D is partly due to lower production cost and partly aesthetic. Several Japanese studios are trying their hand at blending 2D and 3D, and some animation artists are developing a new visual style. But for now, 2D remains the core of Japan s animation industry. With traditional animation production, the lead animator draws the main characters and keyframes on paper, artists or illustrators draw the images and the in-betweens (a sequence of drawings that suggest movement when shown in rapid succession), assistants transfer the drawings to celluloid, and colorists color the images. Camera operators mount the cels in front of background scenes and photograph them one at a time. A made-for-tv animation typically requires 30 different cels for each second of animation. Most Western animation studios have replaced pencil and paper with computers and digital pen, but Japanese animators believe the handmade drawings convey emotional nuance difficult to duplicate with digital tools. Hardcore anime fans claim to recognize the specific signature of anime artists in the contours of their character drawings. The key problems in the Japanese animation industry are cost pressures and a growing shortage of animators (the better-paying gaming industry competes for talent). Japanese studios are responding by computerizing all or part of the production. While most characters are still drawn by hand, studios now use computer graphics software to draw backgrounds and mechanical objects like robots, cars, and spaceships. Handmade character drawings are scanned into the computer and digitally colored. Artists use animation software to combine the hand-drawn Page 183

184 characters with digitally drawn objects and backgrounds. Computers not only speed up production, they also offer greater control and versatility. Animators can rapidly adjust color schemes, change backgrounds, and add a greater variety of special effects like whirling dust, explosions, and vibrations. PROMINENCE OF 2D Despite computerization of production, Japanese animation has retained its 2D feel. However, a growing number of studios are incorporating 3D CG in their anime productions. Among the pioneers is Tokyo-based Production I.G., maker of Ghost in the Shell and its sequel Ghost in the Shell: Innocence. The movies, based on a 1980s manga series from the influential manga author Masamune Shirow, have greatly increased the international profile of anime. Critics in the US and Europe used superlatives to praise the movie. Shirow s Ghost in the Shell, not unlike William Gibson s Cybermancer, confronts the viewer with questions about what it means to be human in an increasingly technological world. Ghost in the Shell GitS to its fans takes place in 2029, when people have cybernetic implants. Using 3D even while the aim is 2D animation has several benefits. 3D is a flexible data type. Models of robots, vehicles, and other objects can be created once, reused in a different scene, and shown from different vantage points. Three-dimensional CG also speeds keyframing, the task of creating movement in a scene. Instead of fixing an object s position, rotation, or scaling for each frame, 3D software interpolates the in-betweens from keyframes in a given scene. Three-dimensional software tends to offer a greater variety of special effects and techniques. Particle systems included in most high-end 3D software packages let users simulate and Page 184

185 animate rain, fire, wind, and other natural movements. These tools can define the states and behavior for individual particles which can be anything from a single point to an object or groups of particles. Particle movement can be calculated by different parameters. Combining 3D objects with 2D animation is a special challenge in digital animation, but toon shading (or cel shading) technology makes this easier. A tool for non-photorealistic rendering, toon shading gives 3D CG objects an artistic, hand-drawn feeling. Computer game developers widely use this technique. Toon shading is not applied to the actual object, but is part of the rendering phase. The rendering engine only selects a few shades of each color for the object. To enhance its cartoon look, toon shading can accentuate the object s outline. Most 3D software programs include toon shaders, but they are also available as plug-ins. Toon shading helped Ghost in the Shell and Howl s Moving Castle to retain their 2D look despite inclusion of 3D components. RETAS - SOFTWARE FOR ANIME PRODUCTION Japan s leading animation production tool is the Revolutionary Engineering Total Animation System (Retas) from software developer Celsys. The company s Retas!Pro dominates the domestic 2D market with a share of more than 90 percent. All but one of the approximately 80 weekly TV animation programs currently shown in Japan are made with Retas!Pro. Celsys s near market monopoly is partly the result of foreign vendors failing to localize their products for the Japanese market. Equally important, Celsys analyzed the workflow of anime production, and tailored its software to the specific structure of the Japanese animation industry. Page 185

186 Japan s animation industry is highly fragmented. There are approximately 10 studios employing 100 people or more, 30 medium-sized studios, and as many as 2,000 small players with fewer than 10 people. (Large studios with 300 or more workers only employ about 20 percent of workers full time; the others are contracted on a project basis.) Few studios carry a project from conception to final product. They commonly subcontract various production stages to studios that specialize in one aspect of production. Celsys tapped into demand for specific applications by offering separate tools for drawing, pencil testing, tracing, painting, effects, and shooting (camera). Celsys has developed a technology to convert raster data to vector graphics, including Flash data. Moreover, the software can vectorize lines as outlines or as center points, and can modify both the curvature and the line width. The software handles not only 2D drawing but also live video and 3D computer graphics. Among the supported image formats are TGA, PICT, BMP, TIFF, RAW, YUV, MOV, AVI, and SGI. Retas!Pro runs under Macintosh and Windows, and is available in Japanese, Chinese, and English. A growing number of animation courses in the US at such schools as Pixar University, CalArts, Sheridan, and the University of California, Los Angeles use the package. In February 2006, Celsys released an English version of its manga drawing tool, Comic Studio, through its subsidiary E-Frontier. The launch of the English version, renamed Manga Studio for the international market, coincides with the growing popularity of manga-style drawings outside of Japan. Celsys also plays a key role in facilitating the internationalization of Japan s anime industry. Much of the grunt work of anime production Page 186

187 (especially drawing the thousands of in-betweens) takes place in China, Korea, and the Philippines. Production outsourcing made computerization an imperative. MANGA STUDIO - SOFTWARE FOR MANGA PRODUCTION Manga, Japan s popular illustrated novel and the source of anime, is attracting a growing audience around the world. Major publishers in the West are selling translated versions of the illustrated novels, and thousands of professional illustrators and hobbyists are buying up instruction books on how to draw manga. Japanese software developer E-Frontier launched Manga Studio, a graphic software tool based on ComicStudio from Japan s leading anime software developer Celsys. E-Frontier is the first software company to offer a manga creation tool outside of Japan. The launch of Manga Studio underscored the popularity of manga in the West. The Japanese-style cartoons have had a cult following since the 1980s, but the genre has now reached mainstream audiences. Penguin Group USA and Del Rey Books are both publishing more than 10 manga titles a year. The magazine CosmoGIRL! runs a monthly manga strip featuring a spunky college sophomore. In the past few years, girls have replaced boys as the main buyers of manga. According to The New York Times, girls aged 12 to 17 represent the largest audience for the genre. The Sunday comic sections of the Los Angeles Times, the Detroit News, and the Vancouver Sun carry manga cartoons, and a strip from manga artist Ron Kaulfersch appears in 30 North American newspapers. E-Frontier offers two versions Manga Studio Debut for the aspiring artist and hobbyist, and Manga Studio EX for professional illustrators. The professional version also targets illustrators who need high- Page 187

188 end features like filters and tones. Users can select from 80 templates, a large selection of screen tones, single-click special effects, drag-and-drop tools, word balloons, and floating palettes. Users can print from any computer, format for the Web, or export for coloring the completed artwork. Manga Studio EX stores drawings as resolution independent vector images. Users can resize the drawings while retaining maximum image quality. The software s vector based native format can be written to JPEG, BMP, PNG, TGA, and PSD files as well as output to a printer. Users can also import 3D figures, models, and backgrounds. The 3D line tone rendering feature lets users import 3D object data files (LWO, OBJ, DXF, and LWS) for 3D modeling. The software features automatic line smoothing to correct and adjust shaky, hand-drawn lines. Manga has also attracted attention from academia. The University of Minnesota and the University of Massachusetts are among a growing number of universities with a manga society. Even NASA has embraced manga. The space agency commissioned the University of Texas at Dallas to create a manga to explain the coupled ion-neutral dynamics investigation (Cindi) research mission to students in grades six through nine. The manga, titled Cindi in Space, features an android (Cindi) who lives in a spaceship with her two robot dogs. Androids and robots are quintessential creatures in both manga and anime. Proprietary 3D Softwares of Animation studios Large animation studios such as Pixar, Dreamworks, Blue Sky etc. have proprietary softwares to support their CGI productions. These include CGI Page 188

189 Studio which is the rendering system developed and owned by Blue Sky studios. CGI studio is a proprietary raytracing or global illumination renderer. Dreamworks has a sophisticated version of muscle simulator which enables full-body animation and simulating clothing. Softwares created by Pixar include Renderman, Ringmaster and Marionette. Marionette is Pixar's software system for modeling, animation and lighting for computer animation. Marionette has been designed and optimized for character modeling and animation. Marionette is portable across many of the standard Unix workstations, including those from Silicon Graphics and Sun. Pixar has also ported Marionette to IBM and Hewlett-Packard workstations for hardware evaluation purposes. Ringmaster is a production management software system for scheduling, coordinating and tracking a computer animation project. Due to the enormous amount of data required in three-dimensional animation, accurate production information is essential for producing high quality animation. Pixar's production coordination staff uses Ringmaster to plan and track projects ranging from short commercials to feature films. A key component of Ringmaster is a distributed rendering system for managing the huge quantity of images and data that must be rendered to create Pixar's products. Pixar does its rendering on an array of powerful Unix processors which are dedicated to rendering 24 hours a day. These machines, called RenderFarm, are connected via a local area network. To achieve the desired quality level, the average time to render a single frame at film resolution is between one and four hours; for video resolution the average time to render a single frame is between 30 and 90 minutes. Since an animated feature film contains well over 100,000 frames, each of which may be rendered several Page 189

190 times in the production process, Pixar typically has a large number of frames to render at any give time. To manage this process, Ringmaster coordinates and schedules all the processors in the RenderFarm. Ringmaster includes a compositing system and also maintains an array of disk drives as a central data repository for the digital image files generated by the rendering and compositing steps of the production process. Ringmaster also controls the filming phase of production and is responsible for backing up shots for archival purposes. RenderMan is a rendering software system for high quality photo realistic image synthesis that Pixar uses internally and also licenses to third parties. Today, RenderMan is used by many major film studios and special effects firms. Examples of projects which have used RenderMan include Terminator 2, Jurassic Park, True Lies, Aladdin, Casper and Apollo 13. By licensing RenderMan to film studios, visual effects houses, commercial production facilities and other computer animation companies, Pixar believes that RenderMan has been established as a de facto industry standard for high quality rendering. RenderMan was designed to be easily portable. It runs on a wide variety of Unix workstations, including those from Silicon Graphics, Sun, Hewlett-Packard and Digital Equipment. Pixar has also ported RenderMan to the Windows and Macintosh platforms. Collaboration between Animation Studios and Software Firms In addition to these generic software applications, it is usually the case that the purchased programs have an open structure that allows animation Page 190

191 studios to add proprietary software. For example, the Cuckoo s Nest and CG hire a group of computer programmers. They cooperate with a variety of animation artists to create proprietary software that automatically meets the specific needs of these artists. The advantages of this kind of networking are tremendous. The immediate one is that the company will possess numerous proprietary software applications that their competitors will not. These assets are particularly difficult to acquire for new studios that just started, creating high entry barriers for potential new players. In the long run, however, the substantial advantage lies in the formation of quality teamwork among graphic artists, animators, and computer programmers. With years of teamwork, the efficiency and, consequently, productivity, of the company improves. The fundamental part of competition in the global animation industry has diverted to the capability of forming this kind of teamwork. It really takes a while to get a group of people with diverse backgrounds and disparate talents to work together. Page 191

192 Content Creation Content Creation Workflow in 2D Animation Key facts On an average, a studio takes about four years to complete a CGI film A typical 3D animation workflow involves activities such as art design and storyboarding, sound design, 3D modeling, texturing and shading, animation rigging, particles and FX, animation motion, lighting and rendering, compositing and video editing The 2D animation workflow for feature-length films consists steps such as scripting, storyboarding, art, sound, background, dialogues, editing and special effects The strengths of 2D animation are personalized artistic expressions The key strengths of 3D animation production are flexibility, nonlinearity Computing resources have allowed the usage of (CGI or CG), which is a form of animation that allows artists to draw three-dimensional (3D) images. The process of creation of three-dimensional (3D) animation content is similar to that used in the creation of computer games. Computing technology has enabled artists to produce two-dimensional (2D) images much faster, by automating repetitive manual processes such as outline, ink and paint. Technology is playing a key role on animation content production by exponentially increasing the productivity of workers. Traditional animation has advantages such as the scope for expressive, where every action of the animator is communicated in a hand drawing as well as the scope to use a variety of compositional and drawing devices. Also, the background and other artwork can be easily made in a variety of traditional painting media such as colored pencil, water-colour or pen and ink. The key disadvantages of traditional hand-done animation are its linear nature, labor intensiveness, and the limitations of the camera to go into screen depths. Traditional animation process flow for feature films starts with the preparation, editing and revision of the script. This is followed by the storyboarding of the script. Major parts of the story development happens as the storyboards are rearranged, redrawn and redone. Activities such as visual look of the movie, designing the graphic language, color palette, characters and locations via conceptual drawings are carried out in parallel. Page 192

193 Once the storyboard is finalized, the sketches are photographed on an animation stand and played back as a story reel. The story reel times each image from the storyboard to the time that the shot or action will take to complete. Temporary music, effects and dialogue are mixed on the sound system and played back in synchronization with the story reel. The story team then makes the necessary changes in the storyboards. This is an iterative process and is repeated until the creators of the animation are satisfied with the outcome. Once the story reel is created, the Art department works on the creation of background drawings needed for each scene and shot. A shot consists of frame/frames viewed from the same camera and always ends on a cut. The dialogue recording for the film by the voice actors is carried out at this stage. In many cases, videos of the voice actors are taken during recording, and are used as visual reference for the animators. The purpose behind this is to understand facial expressions, mannerisms etc. In the next step, the dialogue is edited to create the complete dialogue track for the entire movie. Sounds or music, which needs the animator to animate are also edited onto the track in parallel. The animators then work on the character drawings and schematics needed to draw and animate their character/s by animating the shots assigned to them. The output from the character animators is given to effects animators to incorporate visual effects such as smoke, explosions, water, fire etc. On completion of all the animation for the sequence, the drawings are sent to Ink and Paint. On completion of painting and painted effects have been executed, the shot is filmed on an animation stand. This process is repeated for every frame of every shot for the entire movie. Page 193

194 During this stage, corrections such as editing, color adjustments as well as music is also generated at this step. Multiple multiple sounds, voice and music tracks are mixed. The audio and film is then mastered, duplicated and distributed for theatrical release. The animation production process for animated TV series involves the following stages: Conceptualization Pre-production Production Postproduction Page 194

195 FIGURE 17: 2D ANIMATION PRODUCTION WORKFLOW Conceptualization Pre-Production Production Post-Production Story Concept Screenplay Voice Recording Storyboard Layout Story reels Visual Effects Cleanup Ink and Paint Background Paint Sound Effects Music Compositing Sound Mixing Editing Special Effects Page 195

196 CONCEPTUALIZATION Conceptualization stage is about bringing an idea to the screen and starts with an early stage script. This idea as well as the script is then worked on in detail. The script, the conceptual framework as well as the characters are used to generate the detailed production plan involving resources, roles, logistics, schedules etc. Schedules, which need to be worked out include shooting, asset development, and integration. At the end of the planning stage the director finalises the scenes of the artwork. In cases, where the work is contracted out to external studio/s the originator needs to share the script, characters, scripts etc. with the contractor studio/s. PRE-PRODUCTION Pre-production involves getting the idea and script fleshed out in models, storyboards and finally, story reels. Thousands of drawings and concept art are done in the pre-production phase, to finalise on the prototype of the feature film. For animated features, pre-production may be more elaborate and iterative. In the case of 3D animation process the content development process starts with laying out the various aspects that ensues in production: modeling, rigging, surfaces (consisting of textures and colors), and various tests of animation and other software systems. PRODUCTION Production processes involves filming and logging equipment, programmable heads, motion tracking systems, etc. The production phase involves developing the specifications, visual effects, background paint, and ink Page 196

197 and paint. In the case of 3D activities include modeling, layout, rigging, animation, shading and lighting, rendering, film recording compositing, effects etc. Low end and repetitive activities such as clean up, visual effects, and digital ink and paint, rendering, composting etc. can be sourced from a low cost contractor. POST-PRODUCTION Post-production processes include sound effects, the final musical score, sound mixing, color correction, editing and retakes. Post-production also include activities such as editing, special effects, animation, compositing. Content Creation Lead Time Calculation in 2D Animation The digital processing segment of the entire content creation cycle includes: digital scanning and clean-up, Ink-and-paint, compositing and dope-sheet preparation, camera setup, test renders, line-renders (flipbooks) final compositing and rendering. A typical cel animation sequence will contain at least 4 separate layers. These can be in the form of separate characters, or their shadow layers. We shall work on the calculations on the basis of an average of 4 layers, to understand the requirements. We will also work at achieving a target of 22 minutes of completed animation in the period of one month (25 working days) working just one shift per day. Page 197

198 SCANNING AND FILTERING Scanning each cel on an automatic flatbed scanner with an ADF attachment, takes approximately 10 seconds. Post-processing and filtering each cel take another 20 seconds. Cleaning up each cel takes another 30 seconds on average. Therefore, it takes approximately one minute to scan and postprocess each cel. Therefore, to scan and post-process 4 layers will take 4 minutes. The PAL video standard has 25 frames of video per second. Traditional cel animation works on the premise of a double-frame, i.e. 12 frames per second. If you include repeats, loops, backwards, holds etc, take an average of 10 frames per second to be processed. Therefore, to complete one second in this work segment will take 40 minutes. Once the operator is comfortable with the process, the time will be down to 20 minutes. At 20 minutes per second, it will take an operator a total of 1200 minutes (20 hours) to process one minute of animation. To complete 22 minutes of work will take 440 hours. Repeats will account for a further 15% reduction on overall time. Therefore, the total time to process 22 minutes of work in this segment is 375 hours. At 8 hours a day, it will take 47 days to complete the job on one workstation. To complete the same job in 25 days will take 2 workstations working one shift per day. For 22 minutes, it takes 375 hours (22500 minutes) therefore it will take one machine 1022 minutes to complete 1 minute of work in this segment. INK AND PAINT At 30 seconds per layer, 4 layers of animation take 2 minutes per frame. Automatic processing of a sequence of cels brings down this figure by 50%, Page 198

199 i.e. 1 minute per frame. Therefore, at 10 frames per second, one workstation takes 10 minutes per second. One minute of work takes 600 minutes, i.e. 10 hours. 22 minutes of work will take 220 hours. At 8 hours per day, it will take 28 days to complete this segment on one workstation. Re-dos and checks will take an additional 20% of time. Therefore, projected time in this segment to process 22 minutes of work is 34 days. Hence it will take one machine 742 minutes to complete 1 minute of work in this segment. COMPOSITING AND DOPESHEET PREPARATION Compositing and flip-books take time, and rendering is an extension of this process. Adding effects and checking all the time also takes time. People will also want to check line-tests. Besides, different sections of the episode will be done on separate machines to achieve parallel tasking. Layer priorities have to be assigned and animated. Layer attributes and PRS values have to be assigned, animated and set. Each block of 5 seconds (50 original frames) of animation that has to be composed per layer, can be estimated to take 60 seconds. A minute of work per layer will therefore take 12 minutes to prepare. 22 minutes of one layer will take 264 minutes to prepare. Four layers will take 1056 minutes to prepare. Camera preparation and PRS animation, and adding of special effects etc, will take an estimated 60 minutes for every 5-minute segment. For the full 22-minute segment, this section will take an additional 240 minutes. Test renders will take another 220 minutes and we estimate a total of 3 test renders for the entire episode. That accounts for 660 minutes. Flipbooks per layer will take a total of 220 minutes for the entire episode. Final renders will take 2750 minutes. The total for this segment, adds up to 4926 minutes (or 82 hours, or 10 days Page 199

200 at one shift) to complete 22 minutes of work. However, the programme directors and assistant directors will be working closely with the operators at this level, and changes and corrections will tend to be frequent at many levels at this stage. Therefore, it is prudent to add 100% more time at this level. It will therefore, take about 10,000 minutes (21 days) to complete 22 minutes of work. Also for many jobs, you must sync audio to the timeline for correct results. This means that it will take one machine 450 minutes to complete 1 minute of work in this segment. Digital processing in 2D Animation WORKFLOW PRECEEDING DIGITAL PROCESSING A complete section of the workflow that precedes the digital processing, is done manually. This consists of: Conceptualizing, defining and refining characters for the story Preparing the comprehensive storyboard Assigning workgroups for main characters and subsidiary characters and plots Preparing the flowcharts for creation of cels Assigning groups to prepare libraries of cels Assigning keyframe artists per workgroup Assigning in-betweening artists per workgroup Assigning coordinators to keep track of workflow and scheduling Assigning Assistant Directors for plots and character groups Managing the dynamic workflow for optimum productivity Page 200

201 Sending the drawn cels to the digital processing department Scouting for and procuring back-up human resources to feed the funnel The digital processing workflow in 2D animation includes the following steps: 1. Conceptualizing, defining and refining characters for the story. 2. Preparing the comprehensive storyboard. 3. Assigning workgroups for main characters and subsidiary characters and plots. 4. Preparing the flowcharts for creation of scenes. 5. Assigning groups to prepare comprehensive libraries for the characters and scenes. 6. Assigning keyframe artists per workgroup. 7. Assigning finishing artists per workgroup. 8. Assigning coordinators to keep track of workflow and scheduling. 9. Assigning Assistant Directors for plots and character groups. 10. Managing the dynamic workflow for optimum productivity. 11. Sending the rendered scenes to the finishing/compositing department. 12. Scouting for and procuring back-up human resources. In a modified form, the above workflow will be applicable to the postprocessing division, too. In this section too, interaction between System Administrator, Project Director and section heads will be important to achieve optimum throughput Page 201

202 Content Creation Workflow in 3D Animation Three-dimensional computer animation production consists of the following stages: modeling, animation, and rendering. During the modeling process, an animator defines the shape, or form, and placement of 3D objects in environments. During the motion generation stage the animator specifies how these objects are to move within their environments, as well as specifying any changes of the lights, cameras, and surfaces/textures. During the rendering process, all the data that define the 3D objects and environments are translated into 2D images. This data include information about the models, cameras, lighting, and surface characteristics, or textures. During this stage most of the visual characteristics of the objects and environments are determined. The 3D production workflow draws a number of key inputs from traditional animation as well as live-action cinema. The animation production process, for 3D animation includes stages such as: Conceptualization Pre-production Production Postproduction Page 202

203 FIGURE 18: 3D ANIMATION PRODUCTION WORKFLOW Conceptualization Pre-Production Production Post-Production Story Concept Screenplay Voice Recording Storyboard Layout Story reels Modeling Animation Rendering Layout Shading Film Recording Sound Effects Music Sound Mixing Print Page 203

204 CONCEPTUALIZATION Conceptualization is the stage where the story and its characters are created and developed. Conceptualization stage is about bringing an idea to the screen and starts with an early stage script. This idea as well as the script is then worked on in detail. The script, the conceptual framework as well as the characters are used to generate the detailed production plan involving resources, roles, logistics, schedules etc. Once the screenplay is written, it is turned into story boards, which are panels filled with thousands of sketches that represent the story to be animated. The story boards are then transferred to film or video so that they can be electronically edited into a photo play of the film called story reels, a process which enables editing of the film before the production phase begins. Voices are then selected, recorded and added to the story reels. The process starts when the script is worked on by the story department and the art department. The Story department works on the structure, plot, timing, character development etc. The Art department focuses on developing the look and feel of the movie, its visual style, and its character design, designing and developing sets, locations, and props. At the end of the process, the Story department releases a final set of storyboard drawings, which are given to the editorial department to be made into an animatic. At this stage the Art department passes the work to the layout department. The Editorial department then works on the storyboard drawings and weaves them with dialogue, sound effects, and music, to generate an Page 204

205 animatic. An animatic is a sketch of the movie's timing where each storyboard image represents a single shot. PRE-PRODUCTION Now the animatic is handed off one sequence at a time to the Layout department. Input from the Art department consists of designs and blueprints for the sets, while the Modeling department supplies refined models as needed. Layout receives a heterogeneous flow of data from the Art department, Story department, and Modeling department, but outputs content that is homogenous; files describing shots in the film. Each team in Layout will work on a single sequence until it is completed. PRODUCTION Production consists of six phases: modeling, layout, animation, shading and lighting, rendering and film recording. In the modeling phase, digitized models of each set and character are created by defining their shapes in three dimensions (height, width and depth) and by adding animation control points that allow the model to be moved or animated. In the layout stage, artists place the digital models into a scene and position the digital cameras at the angles from which the three-dimensional shot is to be seen. The assembled shot is then given to the animator together with the prerecorded voice. In the animation stage, the digitized models are animated in three dimensions to create a motion sequence. Animation is performed by defining key frames, which are the frames containing the extremes of motion that will occur in a scene. The computer then interpolates frames in Page 205

206 between the two most extreme positions in a particular segment of movement to create smooth motion. The next step in completing a scene requires attaching to each object and model a description of its surface characteristics. Next, lighting is added by placing digital lights into the scene. The lead lighter s job is to translate the vision of the director and the art department into digital lighting for one or two key shots per sequence. After the lead lighters establish the look of the lighting for their sequence, the rest of the team will apply that look to every shot. Lighting can be thought of as almost the end of the production line. In the rendering phase, the renderer takes the modeling, layout, animation, shading and lighting data and, for each frame in the sequence, computes a three-dimensional image of what the scene looks like at that point in time from the point of view of the camera. The final rendering of a single frame can take between one and twenty hours. The final rendered data is then sent to film recorders for imaging onto film. Once a shot leaves Lighting, it can be rendered. Rendering is the process of simulating, however stylistically or realistically, the effect of light interacting with the objects in the scene, recorded by virtual camera. POST-PRODUCTION Post-production stage consists of two parallel processes: the picture process and the sound process. In the picture process, images are put on film, the film is sent to a laboratory for color correction and final prints are made. In the sound process, the sound effects and musical score are added and the final sound is mixed. In addition, the effects department offers visual effects or technical solutions to artistic problems such as producing dust, fire, fog, Page 206

207 magical effects, physics simulations and crowd effects. Their work might include programming background elements to automatically animate. Rendering is a key post-production activity. Rendering is the process of simulating, however stylistically or realistically, the effect of light interacting with the objects in the scene, recorded by virtual camera. PARALLEL ACTIVITIES There are also some parallel activities such as modeling, surfacing, rigging, R&D etc. MODELING The creation of a computer model involves defining an object or character through the use of approaches such as: surface, solid, or particle system modeling. An animator using solid modeling defines the object as a solid mass, which is then assigned additional properties of a solid, including density and weight. However, most often, the animator uses surface modeling, in which the object s shape is defined by the surfaces that enclose it, because this approach is less computationally intensive while still providing a sufficient model. Another modeling approach is the use of a particle system, or collection of points, which animators often use for phenomena not easily modeled using the surfaces, such as fire, clouds, water flow and spray, mist, and smoke. Once the appearance of a character is finalized the sculptors create a model in a neutral pose. This sculpture is digitized into the computer system. Digitization can be done by laser scanning or more commonly using a digitizing arm. A digitizing arm looks like a vehicle assembly robot and Page 207

208 tracks the 3D location of its tip by constantly recording the rotation at each joint of its arm. Graphite lines are traced over the contours of the sculpture to build a grid of rectangles. Once data from sculpture is in the computer the modeling department will refine and correct this data into a model of the CG character. Kinematic, or geometric, techniques for motion generation are based on changing the positions and orientations of models in the 3D environments. These techniques typically rely heavily upon the animator, who provides the geometric information, which may include coordinates, angles, velocities and accelerations, and shape defining points. SURFACING At every studio a group is tasked with taking the computer models of the characters, props, and sets, and defining the way in which light will interact with their surfaces. They achieve this by creating and using algorithmic material descriptions called shaders which define how a surface should react to light and the camera. Surfacing artists also maintain libraries of the materials they have created as well as maps that have been applied to previous objects. In this way, whenever a new object comes to them with material needs similar to those they have already made, they can reapply that material to the new object, simply adjusting it's properties as needed. RIGGING The rigging artists take a model and builds a skeleton within it, then binds the skeleton to the skin of the character. Once the character has an internal Page 208

209 structure to drive its motion and deformation, each rigger then sets to work attaching controls to different parts of the model s internal and external structure. Some of the controls are not tied to the joints or surfaces of the character, but instead act as remote controls over lower-level control devices. The rigger will then likely lock non-control components. Only the controls are given to the animator, allowing him the freedom to do his work, unencumbered by unintended interaction with the character data. Once the rigging department is finished, models leave the department fully articulated and ready for the animators to use. R&D Research and Development team is responsible to investigate new ways of solving problems, to create new tools, effects, programs or processes and to develop them into software for future studio use. The R&D team is tasked with solving problems anticipated in an upcoming production. Individuals in R&D are the inventor's-inventor, finding generalized solutions to problems that the rest of the studio may not even yet know exist. Time Line of a Sample 3D production workflow On an average, a studio takes about four years to complete a CGI film. In this example, we take a scenario with about 30 sequences, 1300 shots, 60 unique characters and 35 unique locations. For every department, sequences are the basic unit of work that is handed off from one team to another, with some exceptions such as Modeling and R&D which produce non-shot content. However non-shot content must also be tracked. The art and story Page 209

210 development work in CG preproduction is done the same way as in traditional animation. However the rest of the pre-production pipeline is unique. Output from the Art department is sent to the Surfacing group, the Modeling department, and Layout department. The Story department gives its outputs to Editorial, in the form of storyboards. However the Story and Art departments act in close collaboration with one another, under the direction of the producer and director. As a result, it may be helpful to think of these two departments as actually doing two aspects of a single task; both developing the visual experience of the movie. The Story department is concerned with the film's temporal aspect. The Art department is primarily concerned with the film's physical aspect, its sense of place and style of design. The concerns and responsibilities of these two departments overlap, because both focus on the visual presentation of the film's characters and plot. The Art department hands a set of character drawings and maquettes to the modeling department. Maquettes are small-scale physical sculptures of characters to be modeled in the computer. Some maquettes are generated in a specific pose for reference purposes but for each main character there is at least one maquette set in a neutral pose. Art also sends plans and drawings to Modeling for construction of the props (all non-character items) and sets. Occasionally, objects with highly complex surfaces, like a mountain or an important tree will be built as a maquette and given to Modeling. The Art department also sends conceptual drawings of characters and props to the Surfacing group. The Surfacing group develops surface shaders and texture maps and applies them to the corresponding objects made in Modeling, using the drawings supplied by Art. Lastly, the Art Page 210

211 department sends conceptual drawings and blueprints of sets to the Layout department. The Story department outputs storyboards to the Editorial department, where Editorial scans them into the system to create a story reel or animatic. As in traditional animation, the animatic is generated to time the different storyboard elements and synchronize them with temporary dialogue, sound effects and music. This is done to give an estimate of the duration of the film's shots and to judge its pacing. The initial pass of the animatic is made of the entire film, and continual refinements are made both to the film's overall structure and to individual shots and sequences. During this stage of development, the producer and his associates in the Production department work with the department heads to determine which shots and sequences should be worked on first in production. To make this determination the producer considers how difficult the shot will be to complete, how important the sequence is for setting the tone of the film and which shots will be needed for promotional purposes, such as movie trailers. For a given sequence there are 20 to 80 shots, which will make from one to four minutes of finished film. In Production, a sequence will start in Layout where a team will take about two weeks to execute it. After Layout finishes, the sequence is then handed off to Animation. Each team works on one sequence at a time, spending approximately eight weeks to complete it. Within every animation team each animator will be given about eight shots to work on, and each animator has a quota to finish of about one shot a week. All animators are assigned quotas, even the supervising animators carry a nearly full quota per sequence. Page 211

212 When animation on the sequence is complete, Lighting takes over and assigns a team of lighters to each sequence. Lighting also takes about eight weeks to finish work on the sequence, but this department follows a different procedure. Two lead lighters are assigned to the sequence before the rest of the team. The lead lighters are each assigned a key shot by their Lighting Sequence Supervisor. The lead lighters complete these shots using color production paintings received from the Art department as a guide. The key shots establish the look of the sequence for the rest of the lighters. The shots are then divided among the whole team and executed. Unlike Animation, Sequence Supervisors in Lighting do not have quotas of their own, but they do occasionally pick up a shot when needed. When Lighting is finished, the shots which need effects are given to the Effects department (FX). From layout to rendering, a single sequence takes about one year to produce. This time does not include the pre and post-production time needed. A single 90 minute motion picture takes about four years to complete, from pre-production to release. Typically, large studios such as Pixar, Blue Sky, DNA, Dreamworks etc. have multiple films in progress at any point of time. Role of Animation Software in the 3D Production Workflow 3D Animation software is closely linked with the workflow of 3D Animation production. The first step is the creation of a model, which represents a 3D shape. Then additional data is attached to the shape and its Page 212

213 environment to determine how the shape would look under various environmental variables, such as where the viewpoint was, or where the light was. The two steps create a virtual static world. The process of animation is essentially taking still images of different static worlds, so they can be played rapidly in sequence to produce the illusion of movements. The process of Animation is to produce variants of the original static worlds and create movements. Then there is rendering, which is the process of taking still images from a given viewpoint, then post-production editing, which is considered as a branch of 2D Graphics, as it only deals with still two-dimensional images. An additional aspect of 3D Graphics Animations packages is the Graphical User Interface. As in any other graphic applications, how graphical control is done is just as important as what features are offered. Modelling is the process of building 3D geometry data, and thus creating the surfaces of a virtual object. There are two main types of modelling technology, and they differ from one another by the way in which a curved surface is represented in the computer. The first, polygon mesh technology simulates a smooth curved surface by a large number of small polygons, just as a circle is simulated using a large number of straight-line segments in two- dimensional geometry. This inevitably results in rough edges being produced, but this is overcome by use of smooth shading, in which colour value of each pixel in polygons is calculated separately, creating an illusion of a smooth surface. Polygonal modeling is important in games. Though this is the only method understood by the most rendering engines (and thus other forms of geometry must eventually be converted to polygon mesh form when rendering by a process called Page 213

214 tesselation), modeling itself could be done using splines, which are true curves represented mathematically inside the computer. There are several different types of splines and the favorite is NURBS, which is a type of B- spline, the highest class of splines. NURBS technology is implemented by various high end products, allowing more precise and detailed control over curved lines for organic modeling, but they are more difficult to learn to control than polygon. Maya is a popular modeling tool. Modeling tools such as Nendo from Nichimen Graphics is very popular for creating models for the web, most as they are easier and simpler, and is generally quicker to use for creating low-resolution contents. The following is an elaboration of a typical workflow involving 3D animation software usage: 1. Art Design and Storyboarding: This is a pencil and paper activity and does not involve animation softwares. 2. Sound Design: The soundtrack is a must for believable animation. Animating to a soundtrack is one of the best ways to begin creating a rough draft. The soundtrack is usually created and edited outside of the animation software. The audio track is perfected after animation edits are locked down. 3. 3D Modeling: 3D animation softwares are used extensively to create models for animation. While traditional 3D modeling is done using one of these surface types, users can also use fluid voxels to create volumes, particles, or paint effects, which will be textured, animated, and rendered later. Page 214

215 4. Texturing and Shading: After the model is created, color is added. This can be done using images, painted within packages such as Maya, PhotoShop etc. 5. Animation Rigging: Rigging a 3D model is similar to putting strings and controls on a puppet. The animator creates a series of controls that enables to animate 3D surfaces, shaders, cameras, and lights. 6. Particles and FX: Software packages, offers many ways to add effects (FX). The term FX usually refers to elements such as fire, water, hair, clothing, trees, and things that have scientific properties in the real world, which would be complicated to animate without some automation and insight. Softwares provide several ways to create effects, using scientific properties that simulate the effects of forces on surfaces, particles, fluids, or paint effects. Often, effects are created manually, using photography, or animating in a creative way. A good FX artist must be well versed in science, math, and software packages. 7. Animation Motion: There are different ways to add motion. Keyframes are the most direct method to use, but you can also use motion capture, motion control camera information, expressions, and dynamics. A working knowledge of traditional animation helps here. 8. Lighting and Rendering: At this stage, the computer figures out the appearance of 3D scenes, after calculating lights and shaders. A lighting artist must be knowledgeable in photography and painting. 9. Compositing and Video Editing: This is the point at which it all comes together. After producing the 3D imagery the team moves forward to other types of software and hardware to refine and combine the images. Compositing in its simplest form is layering images. The compositor s Page 215

216 job involves color correction, 2D morphing, lighting effects, blurring, filtering, rotoscoping, painting etc. Editing is sequencing together film, video, audio, and animation, in its final form. It is also a video editor s job to color correct, and create final special effects. A wide variety of software and hardware is used for editing, from computer based nonlinear systems for video and film to traditional linear tape editing to tape editing. When a film is edited in a nonlinear fashion, an edit description list (EDL) is produced in order to apply the edits back to physical film. Then it is the job of an online editor to maintain continuity among cuts and achieve a final look. Output is the final stage of any production Page 216

217 FIGURE 19: 3D ANIMATION WORKFLOW USING 3D SOFTWARE Page 217

218 Production Management GOVERNANCE ISSUES In large productions there is a considerable production hierarchy, and keeping track of what the armies of story boarders, 3d constructors, animators, clean-up artists, inbetweeners, scene checkers and planners, layout artists and background painters, colour stylists and instructors, scanning, colouring and composite departments are doing, and if they are doing it on time, demands incredibly strong and competent production management. This unfortunately tends to be an area where companies fail miserably, having in their company strategy underestimated the importance of training and grooming of production management. In small companies where the director, animator, and producer are one and the same person, or where a few people cover the many competencies, it is clearly easier to manage the production. Never the less somebody is required to take on the responsibility of time and resource management. There seems to be a strong belief that production management (and management at large) has as its primary goal to kill all creative processes by imposing square and unyielding demands on the artistic talent. So not only is it necessary to develop the education of competent production management, but an alteration in how management is perceived inside the industry is vital. It is of great importance that production management is not only skilled with numbers, but has intricate understanding of the importance and extent of all the different stages of production, and that the artistic talent in return recognises the benefits of being placed in context of a balanced and financially sane production. The final product is not only a Page 218

219 question of how talented the artists involved are, but also how skillfully this talent is applied to a production. TASK DIVISION AND PEOPLE ALLOCATION ISSUES The production management has to take care of people allocation issues such as identifying sub groups which perform work that is sufficiently distinct from the main group's tasks. Similarly identifying overlapping task domains, which fall across multiple departments. There are also issues related to handing off of ownership and control from one task group to another along the workflow. There is need for division and assignment of tasks. This may be needed because the current or upcoming film calls for work to be done that does not fit any of the responsibilities of the existent teams. A new task domain may be assigned to the existing department whose strengths best match the new task. An example of this would be giving a new kind of physical simulation to either the R&D department, or to the Effects department. The second option is to define a new special-purpose team to tackle the problem. This team can be constituted from a collection of people throughout the studio whose skill sets collectively form the best match for attempting to solve the problem. In some cases new manpower may be needed. Once the personnel are allocated for tasks, the next step would be to decide the workflow across departments. For example, the Art and Story departments engage in very complementary work and in close collaboration with each other. Technology can be used to automate all workflow procedures which are inherent to content creation. For example, an animator should not have Page 219

220 to concern herself with what happens to her animation, or where it goes, once the work is finished for the day and saved. The digital workflow should take care of this for the animator. The finished work should simply appear in the next morning's dailies reel for review by the director. Likewise whenever a modeler needs to update a model he should only concern himself with correcting the model, not with propagating the new geometry into all the files that will need it. Not only does technology automate the tracking and transmission of assets for the film, the digital systems of production workflows can also be used to enforce the access and security policies set for the studio. Without sufficient policy implementation, tracking where the problem originated would be difficult. Nor would the studio know how the problem occurred since any user could potentially have been the culprit, and the file system would not necessarily be able to monitor this. Policy can be enforced in the user access privileges of the operating system. The automation of asset transmission and management can be implemented by scripts that pass information from one program to another, or by asset management applications. TECHNOLOGY ISSUES Studios also need to make decisions on buy versus build decisions concerning new software to accomplish a task. Alternately existing program code may be optimized to better perform a given operation. The same logic can be applied to hardware: new equipment may be needed, or a more optimal arrangement of existent resources may be all that is required. For example, a method for simulating foam is needed. It is now necessary either Page 220

221 to find an application or plug-in which can generate the needed CG foam, or to devise a means of generating foam with the current programs. Alternatively it may be best to research and develop a new program, application or plug-in to make foam. Issues such as budget, expertise and manpower will influence this decision. Existing software could be optimized, such as optimizing the algorithm used to render images. While this optimization would not directly affect the workflow arranged for lighting, an improved rendering algorithm would result in a meaningful increase in efficiency. Rendered images could be reviewed more immediately and more often. To implement this change using in-house software, it is only necessary to re-code the relevant portions of the program. For commercial products, software may either be selected, or re-configured for better efficiency. Sometimes requesting code modifications from the program vendor is also possible. Such increases in speed from optimization, would contribute to producing a film on time and within budget. Increases in efficiency can transform workflow in another way. If a lighter is able to see the effects of his lighting in real time, he will light his shot in a fundamentally different way. Such real-time feedback in modeling already allows models to be created that would be interactive. Limitations in hardware or software may force workflow adjustments, rather than a desired workflow dictating hardware and software. While a pipeline is the result of many influences, the next iteration of the pipeline may reverse this relationship, and influence its external situation to change. While available software may have dictated a certain workflow, those designing the pipeline may choose a new workflow Page 221

222 for the next iteration and thus find new software that better serves their goals.. Page 222

223 Audience Dynamics Marketing Strategies for Animation Studios Key facts The most significant medium to reach customers would be by participating in international road shows and trade fairs conducted for the animation industry. While television these cartoon series are aimed at young children, there are some exceptions such as The Simpsons and South Park. Not all TV cartoon series use 2D cel animation. Max Steel, Dan Dare, Pilot of the Future etc. As of now none of the TV series produced in CGI have been successful. The success of CGI animation in movies can be attributed to the fact that they are fantasies designed to appeal not just to children, but to families. In future we will witness more movies that are appealing for adults, and entertaining for teenagers MARKETING PROGRAM The most significant medium to reach customers would be by participating in international road shows and trade fairs conducted for the animation industry. These shows are a huge congregation of production houses and studios and such conclaves have been considered as the most important platform to showcase the productions and build a one to one relationship with the prospects. The participation in such conclaves shall not only create excellent visibility, but shall also enable to exploit this channel to convert prospects to paying customers. Because of the collective gathering of dominant and serious players of the industry under a single roof, phenomenal marketing costs would be saved. This platform shall enable the highlighting of the strength of the company by exhibiting a demo reel, which would be a short feature of about 6 minutes of 2D animation to showcase the quality of production and the creative talent. It would require the prospects to be convinced of the firm s standards of work, which would first be reciprocated by creating a test animation for the prospects, the approval of which shall result into the receiving of final jobs. These international shows and conclaves are conducted right round the year at various destinations. It has been observed that such conclaves have become mandatory platforms to garner visibility and customers. Page 223

224 PROFILING AND TARGETING THE RIGHT AUDIENCE Understanding the audience for animation is not easy and there is very little in the way of 'film theory' to help us. There are three distinct forms of popular animation - the five-minute cartoon, the thirty-minute TV series and the full-length cinema feature - although only the last two are still being made. The TV series have much in common with TV situation comedies, indeed it is not unreasonable to see such cartoons as 'sitcoms for kids'. We see a strong emphasis on broad 'physical' comedy, on verbal wit and word play and, perhaps most obvious of all, the signs of very limited budgets. In the UK, Sky transmits seven channels almost entirely devoted to the genre and cable TV in the USA does much the same, so there is clearly a sizeable young audience. While most of these cartoon series are clearly aimed at young children, there are some notable exceptions such as The Simpsons and South Park. It is worth examining both in more detail. The Simpsons has very clever scripts, and they had no intention of animating them. The Simpsons has a clearly identifiable visual style, much of the humour is verbal - highly complex and referential with considerable sexual innuendo. The visual humour too is full of allusions - to famous films, paintings and books. While it does appeal to children, much of the humour is aimed well over the heads of six to eleven year olds. The humour of South Park - anarchic, indeed scatological - is even more clearly aimed at a teenage audience. The animation appears to be much cruder than The Simpsons, though this is the result of a conscious stylistic decision rather than mere cost cutting. Page 224

225 Not all TV cartoon series use 2D cel animation. Max Steel (which only ran for three seasons) was produced entirely using CGI, as was the British TV series, Dan Dare, Pilot of the Future. Both feature the same sort of synthetic human characters (or 'synthespians') as Final Fantasy, albeit of a more comic-strip character. As yet none of these 3D CGI-produced series has been really successful. It seems probable that the TV audience for thirty-minute cartoon series is more impressed by humour and wit and an idiosyncratic visual style than it is by 3D 'realism'. In Treehouse of Horror VI (1995), a Simpsons' Halloween special, a PDI-generated Homer gets trapped in a 3D CGI world. There has been little or no demand from the audience for a repeat of the experiment. That experiment does however shed an interesting light on the psychology of perception. Homer in 3D should look more realistic than his flat 2D counterpart and in a simple sense he does. But he doesn't seem any more credible; indeed if anything he seems less believable, more artificial. Homer's 'reality' is a complex matter. Even in 3D he is clearly a fantasy figure - no living being could actually look like that. His existence, like that of Mickey Mouse, Dumbo or South Park's Cartman is entirely unrelated to the everyday world we inhabit. Such figures exist only in the fantasy universes of our imagination. Strategies of Successful Animation Films In animation, many people have considered photo-realism as the goal. This has its pitfalls as if something is created, that looks almost real then we like to take a step back and produce something the audience knows does not Page 225

226 exist, that it's a cartoon, it's caricatured, its fantasy. For example, in Shrek the original animated model of Princess Fiona was very realistic - she looked human. But next to an ogre and a talking donkey, a realistic-looking princess seemed out of place. When they placed Fiona in the movie, which is a fairy-tale world, it looked completely wrong. Fiona had to be a little bit stylised so she fit into this somewhat surreal, illustrative world. If the CGI cartoons we have seen so far have been fantasies, their success has surely come from the fact that they are fantasies designed to appeal not just to children, but to families. Clearly the way forward is to produce films that are fantastic for adults, are truly entertaining for teenagers, adults without kids as well as families. LESSONS FROM PAST MISTAKES As well as making mistakes in production - poor casting, plot failures, careless editing and so on - studios can make mistakes in marketing. Thus in August 1999, The Iron Giant opened in the US to excellent reviews. The film was hailed as a 'solid and ironclad winner', 'intelligent', 'well-crafted', and 'visually appealing'. With a production budget of $48 million, the film took only $23 million in the US. The trade press blamed Warner's poor marketing campaign for the box-office failure of the film. To understand such failures we need to look at the audiences at which such marketing campaigns are aimed. Feature-length cartoons, that is, animated fantasies, have been with us for almost sixty years. For most of that time they were directed at the same primary target audience - families with young children. This is Page 226

227 reflected in the stories, which were often based on traditional fairy tales (Cinderella, Snow White) or children's books (The Jungle Book, Winnie the Pooh) and in the visual style, which matches children's book illustration. Earlier attempts to reach other audiences have rarely been successful. For example, Bluth and Goldman made Titan A.E. (2000) for Fox. The film, which had a budget of $85 million, made only $30 million at the US box office. Traditional animation, seems to have a split audience, 6 to 11 and 19 onwards. The 12 to 18 year-old audience abandons animation in favour of PG13 and any other adult product they can get into. They regard animation as too young, a product that they go to see with their parents and now they want to break free and be an adult, at least with regard to films. Titan was definitely a departure from the main stream animated product. It really needed promotion and advertising to fit the product target. It was a big mistake to advertise on Nickelodeon for a 14 year-old male-targeted film. In the wake of the failure of Titan, Fox closed the Bluth/Goldman studio. Other studios have tried and failed to get to grips with niche audiences. Disney targeted Atlantis at 14 year old boys and Dreamworks saw Spirit as a vehicle to capitalise on the interest young girls have for horses. Neither film was particularly successful, but if studios have had difficulty attracting the teenage audience into cinemas to view traditional animated features, TV has had some success, as both The Simpsons and South Park testify. In fact, the South Park cinema feature, South Park: Bigger, Longer & Uncut did reasonably well; with a budget of $21 million it grossed over $52 million at the US box office. It was rated R in the USA, and 15, 16 or 18 in most European countries. Page 227

228 Profile of a 3D Animation Studio: Pixar Pixar Animation Studios is the industry leader in the area of 3D computer animation. In May 2006, Pixar merged with The Walt Disney Company and became a wholly-owned subsidiary of Disney. Pixar has developed some of the most successful animated films of all time including Academy Award winning Toy Story (1995), A Bug s Life (1998), Golden- Globe-winner Toy Story 2 (1999), Monsters, Inc. (2001), Finding Nemo (2003). Pixar Animation Studios was founded in 1986 after Steve Jobs purchased the computer graphics division of Lucasfilm, Ltd. from George Lucas for $10 million. Pixar premiered its first animated short film, Luxo Jr., at the annual SIGGRAPH computer graphics conference. For the next decade, Pixar focused on developing the technologies necessary to produce the first completely computer animated feature film. Pixar released several award winning short films including Red s Dream, Tin Toy, and Knick Knack. Pixar continues to use short films to perfect new technologies. Also during this period of time Pixar produced several computer animated television commercials. In 1989 Pixar launched its RenderMan product, which has become the industry standard renderer to produce stunningly realistic imagery. In 1993 the Academy of Motion Picture Arts and Sciences bestowed a Scientific & Technical Award to the developers of RenderMan. In 1995 Pixar went public with an initial public offering of 6.9 million shares at $22 per share. The IPO raised $140 million for Pixar and was the largest IPO of the year. Toy Story was released marking a milestone in the movie industry as the first fully computer animated feature film. Toy Story became the highest grossing film of Page 228

229 With the release of Toy Story, the feature film industry was forever changed, demonstrating the near limitless possibilities of computer animation. The 77 minute movie had 1561 individual shots, all of which progressed down the production pipeline from storyboards to modeling to layout to animation to shading and finally to lighting. Toy Story generated one terabyte of data and required 800,000 machine hours to render. To deal with the sheer complexity of managing the entire production pipeline, three core proprietary software systems were developed: Marionette, an animation software system for modeling, animating and lighting; Ringmaster, a production management software system for scheduling, coordinating and tracking a computer animation project; and an enhanced version of RenderMan for high-quality, photo-realistic image synthesis (rendering). Walt Disney Studios distributed Toy Story as according to their 1991 three feature film distribution agreement with Pixar. In 1997 Pixar released another short film, Geri s Game, demonstrating Pixar s ability to produce realistic skin and cloth effects. Also, Pixar and Walt Disney Studios superseded their previous feature film agreement, agreeing to produce five original computer-animated featurelength theatrical motion pictures for distribution by Disney. In addition, Disney and Pixar agreed to co-finance, co-own, co-brand, and share equally in the profits from these films. The following two years saw Pixar release two new feature films, A Bug s Life (1998) and Toy Story 2 (1999). A Bug s Life had a worldwide box office collection of $362 million, while Toy Story 2 grossed $483 million worldwide. Toy Story 2 was the first film in history to be entirely created, mastered, and exhibited digitally. Page 229

230 Some of the technological breakthroughs seen in A Bug s Life included: a subdivision surface modeling technology; new illumination models for translucent effects a critical component in achieving the proper lighting effects seen in the small world inhabited by bugs as compared to the world we inhabit; a proprietary crowd system for animating hundreds of ants seen in the ant colony; new fire and rain simulators based upon particle systems; and a state-of-the-art digital editing system. Toy Story 2 leveraged many of the technologies developed for A Bug s Life. These technologies allowed the models of the original Toy Story characters to take on a softer look and were shaded better as compared to the plastic look of the original Toy Story. Also, more controls were added to the characters to assist the animators. In addition more human characters, are prominently featured in Toy Story 2. Pixar released Monsters, Inc. in The movie became the highest grossing animated film worldwide and the second highest grossing animated film ever earning over $100 million at the domestic box office is just nine days. Monsters, Inc. featured many new technologies, including a highly advanced hair animation system on the monster Sullivan. Sullivan, who is one of the main characters in the movie, is also an extremely furry blue and purple monster. The only parts of Sullivan not covered in fur were the soles of his feet and the palms of his hands. Overall, more than 2 million hairs needed to be simulated on Sullivan s body. The fur on Sullivan also was long, thick fur, in order to provide a more realistic look to Sullivan while he walked. After extensive R&D, a specialized keyhair control system was implemented which allow the animators a degree of control over Sullivan s hair while at the same time reducing the overall Page 230

231 number of hairs to be animated to a reasonable number. Also, a completely new cloth simulation system was created to animate the T-shirt of Boo, a small girl who befriends the monsters of Monster s Inc. The next movies, were Finding Nemo, (2003), The Incredibles (2004) and Cars (2006). Pixar Animation Studios and its employees have received more than 100 awards and nominations for its animated films, commercials and technical contributions. Pixar s relentless pursuit of creative technical solutions to the needs of the underlying story have made Pixar s films a unique mixture of cutting-edge visual special effects and good old fashion storytelling and have placed them in a special place in film history. Page 231

232 FIGURE 20: PIXAR S PRODUCTIONS Page 232

233 PIXAR s TECHNOLOGICAL ADVANTAGE Being computer based, 3D animation involves heavy amounts of programming to create the software animation tools. From the early days, companies like Pixar have built their own tools to develop higher end animation. Pixar also licenses its animation tools to others, although it only derives about four percent of its revenue from this. Pixar s technological edge effectively began in 1973 with the development of the early version of RenderMan a 3D graphics rendering program (to create an image with all its desired lighting and shading effects), which is now one of Pixar s technological mainstays. Released in 1989, Pixar's first tool was RenderMan, a rendering software system for photorealistic image synthesis that enabled computer graphics artists to apply textures and colors to surfaces of 3-D images onscreen. Pixar licensed the tool to third parties and eventually sold upwards of 100,000 copies. RanderMan quickly became an industry standard and was used extensively to augment live action films. For several years, while other projects were being developed, RenderMan provided the company with its primary source of revenues. A secondary revenue stream was CAPS (Computer Animation Production System), a software system developed exclusively for Disney that helped to automate the time consuming painting/colorization process on hand drawn sketches. Two additional software tools were also developed by Pixar but not licensed for external use. Marionette, an animation software system provided modeling, animating and lighting simulation capabilities. RingMaster was a production management software system for scheduling, Page 233

234 coordinating and tracking computer animation projects. These two products helped to provide a considerable competitive advantage to Pixar, as they were critical to the production of high quality 3D graphics and comparable tools were simply not available on the market. Pixar software developers will tweak RenderMan and Marionette for each new movie to provide new technical features that will enable new effects in the movies. Pixar artists also use third party software in their work. Increasingly, other high end animation studios are developing their own tools, and off the shelf commercial packages are becoming as good if not better than internally developed software, such as Autodesk s Maya, Adobe s Photoshop for digital painting, etc. These have also helped to make the starting up process easier for new firms. Each of Pixar s movies has a defining characteristic based on some technological advancement. In Toy Story, it was the refinement of a 3D world projected onto 2D, with sufficient details (e.g. hair, leaves and realistic clothing movement) as well as textures to make it realistic, while in Monsters Inc., the focus was on realistic looking fur. In Finding Nemo, a great deal of attention was paid to the look of the ocean and to fish movement, to make sure it was realistic, but also not so realistic as to make an audience feel the environment was completely real. Over 100 staff work on programming and software R&D for each new generation of technology, while in 1995, 117 Sun workstations were used to render Toy Story. Just four years later, Toy Story 2 required 22 times more computing power. The typical Pixar film is ever increasing in complexity. Toy Story had 5 to 6 million polygons per frame, and Toy Story 2 had double that (the number of polygons being the discrete shapes that Page 234

235 make up an object within the frame of animation). In contrast, because of their need to run in real-time on most home users PCs, most current videogames only consist of thousands of polygons per frame, and sometimes, several hundred per character. It is in the sense of technology enabling art that Pixar and game development are very similar in their business model. The high risk in this model is well recognized by the industry. The well publicized failure of the game developer Square to turn their hot Final Fantasy game property into a movie (Final Fantasy: The Spirits Within) also highlights the importance of having more than technology, and even big name actors. The creative process that created the scripts, styles and characters behind Shrek, Toy Story and other successful animated features are clearly woven from the talent of directors, actors, and artists, working individually and collaboratively. Final Fantasy devoted so much of its budget to realistic human expressions, textures, movement and the like, much more than Toy Story 2 and many other animation films. But Final Fantasy fell flat with a plot and dialogue that did not move these animated humans into a more compelling and immersive setting. Page 235

236 Economics of Animation Economics of Animation Copyrights Key facts Animation production companies have tried to minimize risks in animation movie production by relying on quality of production, variants such as sequel or prequel, and by spreading risk across different projects and genres Animation movie production companies try to maximize their audience both through the number of outlets (theatres, pay TV, pay per view, home video, broadcast television, etc.) and by entering new geographical markets Effective distribution channels are critical to the revenues and profits of the industry Animation production companies targeting TV audiences have attempted to reduce risk by repeating proven themes and genres, distributing in the syndication market such as independent broadcast stations, cable networks, foreign broadcasters etc. Animation movie production is a very risky process. In the film market, there is an extremely high level of unpredictability in movie demand. Moreover, there has been an increase in the concentration of revenues in a small number of releases over the last years. The inability to judge in advance if a movie will be a hit or a miss is a key risk. Producers have tried to reduce this risk by relying on quality of production, variants such as sequel or prequel, and by spreading risk across different projects and genres. Because the marginal cost of adding one more viewer is almost zero, animation movie production companies will try to maximize their audience both through the number of outlets (theatres, pay TV, pay per view, home video, broadcast television, etc.) and through the expansion of geographical markets. The subsequent distribution channels are thus critical to the revenues and profits of the industry. Similar problems exist in TV production as well. Uncertainty of demand is a key risk in TV productions as it is difficult to predict the audience appeal. Programs with similar budgets frequently attract different numbers of viewers. Moreover, the audience for a program is not just affected by the quality of the program itself, but can be influenced by the popularity of adjacent shows. There have been efforts to reduce this risk by repeating proven themes and genres. The success of a TV series for a certain number of years allows the program to be distributed in the Page 236

237 syndication market (independent broadcast stations, cable networks, foreign broadcasters) and earn huge profits given the low marginal costs. Animators face a long and daunting obstacle race to bring their works to market. First they must find a producer prepared to speculatively develop and package the work to an offerable stage. This typically involves the creation of a 'pilot' episode or sequence, plus extensive artwork, scripts and the gathering of commitments from key production facilities and personnel. Next the producer must secure an international consortium of broadcasters, distributors and sales agents prepared to commit to the production - international because no single, local market outside the US offers prices sufficient to underwrite a major animated work. The buying consortium in turn must be supported by a panel of investors or lenders prepared to cash flow production against the consortium's 'presale' and distribution commitments, which are normally contingent on delivery of the finished work. Even at this stage, there is typically a shortfall or 'gap' between the production cost and the presale commitments, which must be met by a third-party investor or else absorbed by the production team in the form of wage deferrals or the foregoing of profits. Only then, often after many years of effort, can the work attempt the final hurdle, of consumer acceptance. From an economic perspective, the creation of copyright works is a tenuous enterprise, characterised by high levels of risk and low average rates of return. This is not merely a local perspective: it is the same for copyright creators the world over. Even the Hollywood studios earn only a break-even return on their copyright investments, and rely on the 'upstream' profits of distribution for their corporate viability. Page 237

238 DYNAMICS OF COPYRIGHTS How can such low average profitability be reconciled with the tremendous popularity of movies, animations and other copyright-based entertainments? To answer this question requires an assessment of the dynamics of copyright markets, noting in particular: The long chain of intermediaries linking creation with consumption, each deducting their costs and profits before the remainder is passed on. (Structurally, the copyright market resembles that party trick where champagne glasses are stacked in a pyramid and champagne is poured into the topmost glass, corresponding to the retailer, which must be filled before any champagne bubbles over to the next level, corresponding to the distributor, which in turn must fill, and so on down the pyramid, until the remainder -- if any -- trickles down to the bottom tier, corresponding to the creator.) The zero-pricing of entertainment products in the main, free-to-air television markets, which are fully funded by third-party advertisers, so that consumers 'pay' only by their attention to the advertising messages buried inside the content stream. The equation here is a trade-off, whereby consumers accept their second, third or n-th preferences in return for free entertainment. This system has no other basis than the historical incapacity of broadcast media to collect payments directly from consumers. (Web-based subscriptions systems may overcome this deficiency in time, but old-fashioned network television is still the primary system of content distribution, and will remain so for at least years.) Page 238

239 The market power of the ruling intermediaries, the handful of brand name broadcasters and distributors who dominate the world market for content by their control of the broadcast spectrum and retail shelf space. Globally, there are perhaps five or six corporations which between them command per cent of the main media markets; locally, their power is further concentrated by the regulated scarcity of 'bandwidth', so that a matrix of international media power would show a cross-linked and vertically-integrated network of interests, like a giant octopus in a lurid medieval map. The evidence of this power is in the fixed low prices and adverse terms of trade routinely offered to copyright owners, terms which transfer most of the risk to the owners and grant a prospect of profits so vanishing that, from an accounting perspective, they must be set at zero. Page 239

240 Guidelines for Setting up an Animation Studio Key facts Windows NT has become the platform of choice for many users because of the robust nature of the Windows NT operating system Purchase is not the only determining factor in buying hardware and software. The Cost of ownership includes the purchase price, the cost of downtime and the time it takes to actually deliver a job A networked studio based on distributed is more efficient because it allows multiple tasks to be accomplished at the same time Efficient administration of the studio is the key to achieving economies of scale The reduction in cost of animation hardware and software and the availability of highly trained craftspeople has given producers tremendous creative power. The well known and continually improving capabilities of new media tools have given rise to clients with increased expectations who demand and get more value for their dollar. Producers or more correctly, content creators, must deliver more production value, or face losing business. The demand for increased production value is complicated by shorter production schedules and shrinking production budgets. An independent producer needs to choose the right tools to build his business. The foundation for his digital production studio is a fast, reliable, feature-rich nonlinear editing system. The most basic service that a producer can offer is to assemble a finished video program. Let us use an independent producer who is starting out on his own an example of how to build a business around the right digital production tools. Our producer will most likely look very seriously at a Windows NT-based system, even if he is more familiar with a different platform. Intel-powered desktop computers are price and performance leaders in the industry. Processor and bus speeds continue to increase allowing for greater data transfer rates, while hardware prices continually edge downward. Windows NT has become the platform of choice for many users because of the robust nature of the Windows NT operating system. Windows NT offers multi-threading, multi-tasking, protected memory and multi -processor support - all of which mean power, speed and stability. The Page 240

241 producer must consider all aspects of the editing application upon which he intends to build his future. Purchase price alone is not the determining factor. The Cost of ownership includes the purchase price, the cost of downtime and the time it takes to actually deliver a job. The producer must also consider how much money he spent in post-production houses during the previous year. Corporate information technology departments are becoming distributed. This means that computers will cease to be defined as standalone boxes sitting on desktops and become known as components in a network where two or more computers are linked together to share data and storage. A network consists of a server that is at the center of the network and at least one client that connects to the server. As his studio grows, our producer will need to add editors or graphic designers. Putting each specialist to work on a machine that is tuned for a specific talent makes each specialist more productive, and the time to complete the project that much shorter. It also gives the artists more time to experiment and refine their part of the project. A networked studio is more efficient because it allows multiple tasks to be accomplished at the same time. The editor may be working on an audio mix while the paint artist is cleaning up frames, and the compositor is timing out a fly-through of graphic elements. With each artist in the studio applying focused effort to different aspects of the same job, the studio will be able to produce projects with exceptionally high production value. An additional benefit to the studio is that each artist will be generating billable hours. All aspects of the production are moving forward in an extremely efficient and creative environment. The producer has the time to add more value to projects, charge more money and turn more business. If the networked production facility uses 3ds Max, it can take advantage of the Distributed Network Rendering that MAX offers and use all of the studio s PC- Page 241

242 based computers to accelerate the rendering of models produced by 3ds Max. This type of network environment will put all the facility s assets into play and maximize our producer s bottom line as well as creative freedom. Page 242

243 Investments Needed for Setting up an Animation Studio Animation is a very expensive process. The costs involved can be broadly broken into the following: 1. Computer hardware 2. Software 3. Human Resources a. Talented animators b. Management staff 4. Cost of running the facilities Efficient administration of the studio is the key to achieving economies of scale. In such ventures, the creative talent must be kept productive with challenging and stimulating work. Therefore, it will be up to administrative officers to ensure that they device ways and means of retaining the talent required, and extracting the level of consistent performance that is required to complete large projects. The economics of animation has become risky with the lack of talented animators as well as the high costs of 2D and 3D animation. This is the key reason why outsourced animation service providers are not focusing on in-house animation content. The capital expenditure incurred in setting up a 200 member animation studio is given in Table 19. The key personnel required to manage the studio are given in Table 20. Page 243

244 TABLE 19: CAPITAL EXPENDITURE FOR SETTING UP AN ANIMATION STUDIO 1 Item Description No. of Per unit cost Total cost Units (US $) (US $) 2D Animation Software (Toon Boom 10 3,000 30,000 Studio) 2D Animation Software for education 5 2,174 10,870 (in-house usage) Real 2d-3d fusion 1 13,043 13,043 Targa based Uncompressed-Editing 1 28,261 28,261 Scanner A3 size Sheetfeeder Fujitsu 1 9,783 9,783 PC with PIV,1.5 GHz processor, ,196 23,913 MB RAM Graphic Cards-Asus 7700/ ,174 1 These are base figures and includes the number of units of hardware, software, and equipment required for a typical one episode (22 minutes) a month setup Page 244

245 SGI Server Origin - Unix ,087 26, mhz,1GHz RAM Render Farms NT - 1GHz RAM CPU's 3 5,435 16,304 CD Writer Wacom Graphic Tablet 12x ,630 DISK Array - Raid GB 2 5,978 11,957 Camera with Animation Stand Networking Cost & Others 1 4,348 4,348 Space Deposit ,304 Interiors Admin Computers ,804 Laptop 1 1,739 1,739 Printer Copier 1 1,848 1,848 Fax EPABX Page 245

246 DSL Internet connection UPS & Generator 1 13,043 13,043 Page 246

247 TABLE 20: PROFILE OF EMPLOYEES REQUIRED TO MANAGE THE STUDIO 2 Description No. of Employees CEO 1 COO 1 CMO 1 CCO 1 CFO 1 Production Manager 1 Character Designer 3 Background Designer 3 Prop Designer 3 Layout Artist 15 Background Painter 15 Lip Assignment Artist 2 Character Animator 10 Special Effects Animator 10 2 These are base figures for the number of employees required for a typical one episode (22 minutes) a month setup Page 247

248 Assistant Animators 40 Clean-up Artist 20 Camera Services 1 Ink and Paint Artist 10 Sound Editor 2 In-between Artist 60 Office boys 1 Receptionist 1 Security 1 Accountant 1 Total no. of employees 204 Page 248

249 Specialised Hardware and Software Investments The following are the basic hardware and software installations while starting an animation studio: Operating systems such as Windows, Linux etc. 2D and 3D animation softwares such as Toon Boom, Maya, 3ds Max etc. High powered desktops for creating and modifying animations. They help the animators in activities such as content creation and content modification. Data Warehouse for storage of the massive quantities of data generated. The data also needs to be easily made available for the end users. Effective storage mechanisms should offer production efficiencies and shorter lead times. This could be investments in areas such as Storage Area Network (SAN) and Network Attached Storage (NAS) etc. A grid/cluster based approach is appropriate when there are a large number of nodes available. A cluster based approach allows for effective work break-ups and faster turnaround times. Network of computers which can carry out massive parallel processing for activities such as rendering. Animation workflow activities such as rendering, modeling etc. are computing intensive. Hence the best way to approach the problem is to have nodes of computing resources which carry out specific tasks in parallel. The computing powers may vary from a few thousand Page 249

250 nodes in large animation studios such as Pixar, Dreamworks etc. to a few workstations in smaller studios. LAN/WAN with adequate bandwidth to connect a number of users. A robust, scalable and high bandwidth network is necessary because of the quantum of data exchanged in the form of images, video, sound etc. Workflow softwares to manage the linear and non-linear workflows in 2D and 3D animation production processes respectively Page 250

251 Managing an Animation Studio Key facts The workplace, environment, and ancillary services provided by the studio and administration will play a part in the success of retaining talent An in-house training facility is a critical requirement for and animation studio Animation studios need to keep in mind the concept of Convergence technologies such as mobile, Internet, etc. to provide the appropriate animation output catering to the different channels of content distribution Animation studios should constantly attempt to mentor the junior staff in creative positions by offering basic as well as on the job training Efficient and effective management of the animation studio is the key to success. This is important because of the nature of the human resources creative talent must be kept productive with challenging and stimulating work. Therefore, it will be up to administrative officers to ensure that they device ways and means of retaining the talent required, and extracting the level of consistent performance that is required to complete large projects. Team work within and between groups will become very important. The workplace, environment, and ancillary services provided by the studio and administration will play a part in the success of retaining talent. It is important to remember that the success of the project will eventually depend on the human resources and creative outputs of the facility. To nurture and sustain this becomes critical. Eventually, teams of creative persons are responsible for giving life to animated characters and to keep this team together, productive and motivated for the entire duration of the job is very important. Therefore, management of Human Resources will be a very important aspect. Key Issues of Concern The prime issues of concern are the following: 1. The capability to produce content of high creative standards 2. The capacity to handle the volumes that will be necessary to make the project profitable. Page 251

252 3. The ability to create a workforce to produce the content, as well as to be able to hold them together as a cohesive team for the long durations required to complete such projects successfully. 4. The ability to create fresh talent to replace the talent that will leave as a natural event in any creative-based organization. 5. The necessity of having a system of accountability and functionality; and the necessity of making the system work. 6. The necessity of having a management policy in place before the production begins. TRAINING FACILITY The necessity of such a training centre is very obvious. The objectives will be: 1. To train and create persons who can be absorbed into the workforce of the commercial studio. 2. To ensure that participants are trained in several or all aspects of the workflow, so that they will be able to fit in to any segment, depending on their natural aptitude and skills 3. To provide a dynamic learning environment by involving the participants with real-life simulated working situations. It must be appreciated that creative staff will definitely tend to migrate elsewhere, after a period of time. The case for preparing understudies for all the special and important creative positions becomes strong. The training institute would be capable of not just imparting computer-based training, but also the necessary training on fundamentals of animation. This will give the student an all-round and comprehensive base Page 252

253 and will help him to hone his skills. To ensure that the training centre is adequately set up in terms of facilities, it would require between 6 and 12 systems that can train the students on packages for 2D cel animation, 3d animation, production scheduling, compositing, special effects, and nonlinear editing. The facilities will also include non-computer equipment so that students can train on creating cels, understanding the creative guidelines for classical, traditional animation techniques, modeling, camera handling, importance of lighting, compositing etc. The centre will also be equipped with full-time as well as part time faculty and teaching aids like TV and VCR, projection system etc. LEVERAGING TRAINING AS A STRATEGIC TOOL It is easy to understand why proven technology should be used as a training platform. As the talent that is being formed will use this technology in the real world of production, they need to train on relevant platforms, so that they are at home and productive when they take up their positions in the film and video industry. Redundant techniques and methodology will only increase the period of training, and in many instances, the talent has to relearn methodology to be able to use current technology. But why would a training centre want to anticipate and install the technology of tomorrow? As a matter of fact, this issue is more important than the above. Every talent who enters a phase of learning remains in that phase for at least 2 years. At the end of his term, he moves into the production world with certain capabilities and proficiencies that he has developed in his training period. The likelihood is that by then, what he worked on initially is already redundant. The fundamentals may not change, the principles may not Page 253

254 change. But their application and the nature of content and treatment can differ wildly. It is for this reason that the closer the talent remains to current trends, the more meaningful, and effective his entire training period will become. Expand this concept from a single talent to many batches of talents who go out every year to be assimilated by the industry, and you have a situation, where a training centre that is well-equipped, far-sighted and conscious of trends and implementation, will have more correctly fulfilled its moral responsibility to the industry it services. Such an institution will attract more talent, and will by extension, directly affect the quality and content of the entire industry in a very positive manner. Formulating the Long Term Strategy Sometimes, expanding the scope of operations makes an entire project more profitable and viable. The reason is that the product that is processed can be re-processed or modified to address other requirements, too. Although the primary thrust of most studios are in the areas of providing services in 2D and 3D animation production, it makes sense to also provide a range of services that mesh with this so that the facility assumes the profile of a "one-stop shop" for special effects. These services include: Games development Interactive Games development VRML content creation CD, or video-based multimedia presentations Audio recording, dubbing and editing Motion capture services Page 254

255 Putting systems in place that will ensure this quality and consistency will be of high importance. To ensure real-life movement and animation or characters for large volumes is an extremely time-consuming process. This can be hastened, and its quality can also be assured, by the use of motioncapture equipment. Such equipment is in use in all the large animation production studios over the world, and the price-performance advantages ensure payback within the first project itself. One of the new mantras in entertainment and communication is "convergence." A facility that can build this concept into its foundations will be able to flourish and expand more seamlessly, as a result of foresight and planning. As you can see, this form of application of convergence technologies, makes for better utilization of the creative workflow, and provides returns from diverse segments of entertainment and communications. Page 255

256 Animation Content Outsourcing Key facts The cost competitive advantage along with the delivery of good international standards of 2D animation by studios in Philippines, Korea, India etc. have encouraged international production houses to look towards these destinations as locations to outsource animation content production The global computer animation production industry is very fragmented and the total number of players in this industry runs in excess of 4500 Most of the small and medium players are located outside of North America and execute outsourced animation projects The costs of getting work done in countries such as Korea is about half of that incurred in production houses in developed countries and in countries such as the Philippines and India, the costs are about % of the cost of production in developed countries Animation work involving substantial amount of creativity is not outsourced to low cost destinations Offshore Computer Animation Production The production houses and studios developing 2D animation content and features for the digital media are widely distributed in Europe, America, and Asian countries such as Philippines, China, Korea and Japan. The cost competitive advantage along with the delivery of good international standards of 2D animation by studios in Philippines, Korea, India etc. has encouraged these production houses to look towards these destinations as the future locations to outsource their assignments. The focus is primarily on outsourcing jobs from international production houses and studios, however, due to the growing domestic market, any local assignment would only be undertaken if the revenue receipts would be at par with the international rates. There are a number of studios that have peaked out on jobs and have been seriously evaluating the outsourcing of their assignments to their counterparts, because of the significant cost differential in terms of wages and reasonable creative talent. The global computer animation production industry is very fragmented and the total number of players in this industry runs in excess of Most of the small and medium players are located outside of North America and execute outsourced animation projects. More and more of these outsourced jobs are shifted to companies in Asia with the opportunity increasingly being tapped by North American and European film and television program producers. This has been facilitated by the fact that they can have easy access to high-end Windows NT/2000 based computer Page 256

257 animation systems at reasonable local costs, and staff them with local labor whose salary rates are dramatically lower than comparable North American or Western European computer animation industry salary rates. The rising demand for animation produced in Asia is mainly due to lower manpower costs prevailing in Asia. The costs of getting work done in countries such as Korea is about half of that incurred in production houses in developed countries. In countries such as the Philippines and India, the costs are even lower (25-30 % of the cost of production in developed countries). For example, a 20-minute special effects animation sequence costs about $75,000 in India whereas it would cost $150,000 in the US. However, animation work involves a substantial amount of creativity which is not sourced from Asia. This is due to the lack of creative talent available in Asia and the reluctance of major production houses to outsource critical jobs from Asia. The major factor behind this shift of computer animation production to the Asia/Pacific region continues to be the availability of low cost, powerful Intel based computer animation platforms, running either Windows 95/98 or Windows NT/2000, and much lower labor rates in the Asian and Pacific Rim countries compared to North America and Europe. Many of these countries produce these computers, and their components as well, so they are readily available, and at local prices. This has resulted in the lowering of market entry costs. The outsourced animation service providers are offering 3D computer animation production capability, as well as the 2D production capability that was traditionally their strong areas. The low local labor costs in these countries means that they can offer computer Page 257

258 animation production services to American and European producers at very attractive rates. BUSINESS AND REVENUE MODELS In an effort to move beyond the role of just an outsourced content developer, firms could utilize their resources and capabilities to develop inhouse content. This business model not only helps the firms in moving up the value-chain in terms of perceived value, but it also provides for closer relationships with the customers through the characters developed. This business model would also generate a combination of fixed as well as recurring revenues in terms of the screening rights from television channels as well as repeated use by games enthusiasts. The in-house productions would primarily cater to the emerging and fast growing demand for local content and characters among the local viewers. Firms also need to make investments in creating Intellectual Property Rights for their in-house content. Drivers On the demand side, popular response to Finding Nemo, Lord of the Rings and other movies relying on computer graphics is driving studios to expand output while keeping costs down. Audiences around the world are demanding high quality digital special effects for advertising, television programming, and web content. Computer game users are similarly migrating to games with high production values and navigable, three dimensional settings. As Asia emerges as the world s epicenter of economic Page 258

259 growth, immense new markets for digital content are opening. Traditionally, the post-production of movies from the US have been outsourced to locations such as Japan, Taiwan and Korea. Indeed, for much of the 80 s and early 90 s Korea was the country of choice for the U.S. animation industry s outsourced production work. Now, Asian countries, too, are passing their work on to India, given the perceived cost savings. According to estimates, the cost of outsourcing one hour of animation work to India is estimated to be close to US$60,000, versus the $160,000- $200,000 that other leading animation centers in Korea, Taiwan and the Philippines in Asia charge, and not surprisingly has allowed them to gain market share. The growth of digital content companies is also being driven by the engagement of affordable new pools of creative talent on an unprecedented scale. North American, European, and Japanese entertainment and software multinationals have turned increasingly to offshore sites as a way to reduce productions costs and to better prepare digital content for targeted global audiences. As a result, countries that offer affordable and well prepared labor are attracting direct investments, joint ventures, and outsourcing business. Technology advances in the production of computer animation and gaming are also driving the rapid growth and globalization of digital content firms. Notable developments in these areas include the following: Lower costs in software and hardware, reduce key cost barriers for expanded output of quality animation and graphics. The priceperformance of advanced authoring systems for digital content already have fallen by factors of 20 or more over the past 10 years, and further progress will creating an increasingly level field in which small Page 259

260 creative teams operating on limited budgets will be able to produce animated content comparable in quality to large studios and production houses. Reducing costs in international telecommunications, enables individuals and firms specializing in digital content creation to find clients and partners and interact with them more efficiently. Plunging costs of international and community-level telecommunications can bring pervasive telecommunications links to both urban and rural areas. High quality Voice Over Internet Protocol (VOIP) links are enabling to drive international telecommunications costs to a few U.S. cents per minute. These prices enable countries with liberalized telecommunications to generate large scale employment in ICT-enabled market segments, including rich media market segments. Exceptionally affordable Internet links are also becoming available via VSAT satellite dishes comparable in size and cost to their TV broadcast receiving brethren. An always-on VSAT link that averages 2-10 times faster than dialup connections in some developing countries can be installed at a one-time expense of less than US$1000, with monthly costs in the US$ range. The emergence of Wifi (802.x) systems, with one-time equipment costs of around US$100, means that this international bandwidth can be affordably shared at neighborhood levels. Throughout Asia, advances in VSATs and next-generation local wireless networks means that bandwidth can be made available on an unprecedented scale. Another driver of new offshore opportunities consists of innovations in management of projects and coordination of onshore/offshore teams. As small and new entrepreneurs play a growing role in delivery of Page 260

261 knowledge-based services, a critical success factor becomes the quality of project management. New workflow systems from companies such as Digital Production Solutions (DPS) have emerged to manage animation project teams across time zones and national boundaries. A spectrum of web-enabled tools for online meetings, project scheduling, task assignment and tracking are making it possible for small groups of individuals and specialists to cooperate effectively. Larger companies have turned to workflow solutions built upon Lotus Notes, Groove.net, and other powerful workgroup coordination and communications tools. In most instances, these enable round-the clock work on sophisticated projects, with responsibilities shifting to affiliated production centers in step with their respective workdays. This enhances a key competitive advantage of offshore sourcing speed to market to those who create teams and coordinate operations with online systems. A further area of breakthroughs is occurring in diffusion of skills. New e-learning systems have emerged to rapidly create and share online learning resources. Wherever bandwidth permits, short courses, workshops, seminars, and degree programs can be readily delivered - enabling students and practitioners to stay current as market conditions, skills, and technologies change. These online just-in-time training resources help level the global playing field for countries seeking to rapidly develop skills to compete in global digital content creation and other ICT markets, by enabling technical, management, and language skills to permeate throughout developing countries at unprecedented speeds and at far lower cost than before. Online materials for 500 MIT courses, including some on multimedia and computer graphics, are now Page 261

262 available without charge from one of the world s top technical universities, and inexpensive courses and certifications are offered by hundreds of others. To help stimulate demand for technical and business skills certifications in a broad-based way, micro scholarships and vouchers are beginning to be offered in some countries to open new digital content creation skills and certification opportunities for people in rural and urban areas alike who seek new language, marketing, business productivity, and other ICT-related skills. Electronic marketplaces that offer immediate job opportunities to firms of all sizes, ranging from micro entrepreneurs to mid-range Digital Content animation and gaming enterprises. Auction markets such as emoonlighter.com, Elance.com, and Rentacoder.com patterned after E-Bay s reputation-based marketplace today allow small and new enterprises as well as larger firms to rapidly build global reputations. Bidders from developing countries enjoy a strong advantage over their onshore competitors in these new service marketplaces, given that the marketplaces favor companies that offer highly-competitive bids. The new markets have also adopted reputation-building systems in which all parties to a transaction post feedback on their respective experiences. By satisfying their initial clients, offshore producers gain powerful reputation points and visible client references that can give them a sustained competitive advantage. An opportunity exists for Digital Content entrepreneurs in emerging markets to build visibility in global outsourcing markets and to gain valuable credentialing projects in the reverse auction systems. Page 262

263 Animation Industry in Europe Key facts The mature animation production countries in Europe are Germany, UK, France, Spain and Italy. The emerging animation countries in Europe are Poland and Hungary. The first European 3D animation film was The Living Forest, made in Spain. Some of the modestly successful European animation films include Chicken Run (UK), Lucky and Zorba (Italy), Belleville Rendezvous, Raining Cats and Frogs and Opopomoz (France) etc. The European animation industry is growing at the rate of between 7-12% YoY. There are about 1600 animation studios in Europe, majority of them are in Germany, UK, France, Spain and Italy. The key animation studios in Europe are TV Loonland, Hahn Film, Trixter Film, Hit Entertainment, Collingwood O Hare, Aardman Animations, Colourland, France Animation, Neptuno Films, Cromosoma, Filmtecknarna, Happy Life etc. While Europe lags behind in its share of the global animation industry, countries like France and Spain are now Europe s market leaders. The UK used to be the largest European producer of animation in the 1980s. However, France, Spain and Germany have now overtaken the UK. In part this is because their Government s have recognized the importance of being a part of the globally expanding industry, and have thus been willing to support animation production through a range of tax breaks and subvention schemes. It is also for cultural reasons, with a desire to expand domestic production that appeals directly to local audiences and limit the dependence on Hollywood imports. The development of and interest in animation across Europe is part of a worldwide boom. To date, the strong European growth has been in television (although there have been some attempts at feature films). For feature films, the main success stories are American, with many studios desperate to imitate the continuing achievements of Disney. The dramatic returns obtained by the high profile animated features have not been experienced by European producers, except in isolated examples. Werner, a uniquely German animated feature, was a major box office hit in its own country, but failed in the rest of the world. A superficial conclusion therefore might be-as in live action that Europeans can hold their own with animated production aimed at television, whereas the real money and dominance is retained by the major American studios in features. Page 263

264 Winds of Change Several European filmmakers, when asked about the reasons for the rapid burgeoning of European animated features cite a more fundamental phenomenon that goes back to the early nineties, with the emergence of DreamWorks and the end of Disney s domination. It is related to changes that the non-disney animation world has undergone since the turn of the century, which has led to it becoming more confident and ambitious. DEMAND FOR TV CONTENT The industry has traditionally been fragmented with a number of small studios. In the 90s a section of the nascent European animation industry started forming associations with one another to produce TV series. European TV, which hitherto had acquired most of its animation from the U.S. and Asia, gradually began to take on board the existence of local production whose quality was improving at the same time as studios were professionalizing and uniting to offer the volume and rate of production required. The boom in TV demand boosted this developing industry and a number of countries emerged in particular: France, Germany and Spain. This movement was encouraged by European institutions such as the Media program which, without getting directly involved in production, encouraged synergies between studios, as well as training animators, producers, etc. The result was that for the first time a genuine animation industry emerged in Europe, initially centered on television and fairly low cost animation. Page 264

265 FEATURE FILM INDUSTRY Although it is more expensive, financially riskier, and more complicated to get right, the feature film has always exerted a fascination for animation professionals, particularly in terms of the considerable number of individuals it can involve in the long-term and, above all, in terms of morale. Thus once certain financial and psychological barriers had been overcome, many have taken the plunge. The ways in which the move into features happens are as many and varied as the projects themselves, although it is significant that most of the teams involved in feature films in Europe have emerged from a background in TV projects. If one compares the disparate corpus of European animated feature films with what is produced in the U.S. and Japan, one notices that. apart from a common origin, there are some recurrent characteristics. First, the under-financing of projects. The budgets for European features, even the most well-off, are still far lower than those of American blockbusters. The majority of European features are basically independent films, which do not enjoy contributions from the majors or large European groups. This means that, just as in live-action, the instigators spend an enormous amount of time raising money, gradually stacking up contributions from many different sources, mainly comprised of public funding and partnerships with national television channels. Critics will snipe that with this system, financial break-even is guaranteed for some films even if nobody goes to see them in cinemas. This is a rather glib and partial view of the enormous problems generally encountered. To pull off this kind of project, it is often still the case that a studio has to be put Page 265

266 together from scratch, and then dismantled once the film is completed, since there is no, or hardly any, continuity of production. Partly as a response to this problem, and partly to keep costs down, many films rely on sub-contracting out, usually to the east. And here the word east is meant in the widest sense, since it stretches from Estonia to the two Koreas. Sub-contracting out is not without its problems: take the example of the problems encountered by the French-Belgian-Luxembourg production, Corto Maltese en Sibérie, adapted from the Hugo Pratt comic book, where the poor quality of animation delivered led to the producers switching sub-contractors in mid-production, having to start one whole section of the film again, with the obvious attendant delays. MARKETING AND MERCHANDISING Once a film is completed, the coffers are usually empty. The marketing budgets for European features are often low and it is not so long ago that thinking seriously about marketing only began once the film was finished. Over time things change, but it is revealing that the European institution s program for audio-visual development, Media and its animation organization Cartoon, are now stressing the measures urgently required to remedy the continuing weakness of European features in terms of distribution, in Europe as elsewhere. European animation, remarkably diverse in terms of its creative inspiration, suffers from the very qualities that are its strengths. Some critics like to reiterate that the more firmly a film is rooted in its own culture, the greater the chances of achieving something universal, and hence appealing to a wide international audience. Whilst this is undeniably true for really Page 266

267 outstanding works, we should acknowledge that many European features are successful in their home market, but do not manage to repeat this success in other countries, even and including countries relatively close to them, whatever the merits of the film. Today, things might be about to change. The Living Forest, the first film to be made entirely in 3D in Europe (Spain) is on the way to a (partially) European-wide success, modest but effective, as was the case with Enzo d Alo s earlier film Lucky and Zorba (Italy). French films like Belleville Rendezvous, Raining Cats and Frogs and Opopomoz have been sold to a substantial number of territories, some of them outside Europe. Simultaneous and large-scale release in all European countries remains, however, a distant dream for many producers. Collaboration Among European Studios A number of factors might just change the picture. First, there has been a growing recognition within Europe that animation and the art of animation is very much a part of the European heritage. A key body that has helped this fact to be realized is the European Association of Animated Film, better known as CARTOON. This body was created under the original MEDIA program, a pan-european initiative set up in 1989 to try and add financial and marketing weight to the highly divided audiovisual media industries scattered around Europe. Within MEDIA there were many separate initiatives to cover the spectrum of the film and television worlds (from script development to video distributors to documentaries, etc.), but it has Page 267

268 generally been accepted that CARTOON, administered from Brussels by a small team, has proved one of the most successful. CARTOON isolated the key points in trying to develop a substantial European animation industry: development, transnational cooperation and training, but it also highlighted the talent working within Europe with such headline grabbers as the Cartoon D'Or, the "Oscar" of European animation. The success of its policies is visibly demonstrated in such initiatives as The Cartoon Forum, an exclusive meeting of animation buyers (from television and video) and financiers with European animation producers. Drivers for Success There is one fact connected with animation, it is that returns do not come fast. As Disney and other studios such as Warner Bros. and MGM discovered, once they do flow, they can, if properly managed, prove consistent and highly lucrative. Within Europe therefore, animation is now seen as financially respectable, which is a dramatic change of perspective still not fully realized by all producers. This, alone, would not change the picture, especially given the extreme caution with which financiers regard the European film industry. But another factor in the increasing confidence of European animation is the brilliance of some of its originators. That this is recognized in America is evidenced by the increasingly large colony of European talent working there. Marketing power is only one of the key requirements in developing a successful feature film industry. No European based film player can hope, at least in the foreseeable future, to develop or afford the long term strategy Page 268

269 and dominating marketing power of the major American studios, and in particular Disney. The simple fact is that Disney took many decades to build up this position of strength and though it nearly let it go in the seventies, it is understandably determined not to let this dominance slip. Such is the way of capitalism. Trends in Europe Many children's animated television series broadcast in Europe are either produced or co-produced with French studios such as Praxinos, La Fabrique, France Animation, Ellipse Animation, etc. The rise in French animation production has been particularly rapid. The French agency Centre de Nationale de la Cinématographie (CNC) is the only agency that monitors production on a regular basis. They report that French production has risen from 70 hours of production in 1986 to 294 hours in CNC provides the most comprehensive range of subsidies for animation projects to support both production and distribution. CNC will automatically give a subsidy of around 10% of the production budget if a proportion of the work is carried out in France and 25% of the French spend has been raised in presales of the production to a French television channel. CNC also provides funds to support the production of pilot programmes, which gives French producers a competitive advantage in obtaining international sales. A producer is much more likely to achieve a sale if they can show a threeminute pilot as opposed to having an idea just on paper. Overall the French system means that studios can raise around 40% of their production budgets Page 269

270 domestically, which compares favourably to the position in other territories, particularly the UK. The Spanish animation industry has low labor costs relative to other Western European countries. It is therefore supported by work subcontracted from other European studios, including some from the UK. Spain s top two producers are based in the Catalan region where the public service broadcaster, TV3 has been a key supporter of animation. Such support can make a significant difference to animators. Production of animation in Germany is also booming, with major studios centered in Berlin, Hamburg and elsewhere, often working in association with studios and support services in the former East Germany and other Eastern European states. With large investments from such major players as Bertlesmann, the Kirch Group and Ravensburger, German producers are well positioned to play an increasingly dominant role. Eastern Europe, which has a tradition of producing high quality animation, is also a beneficiary of the global expansion in animation. Again, one of the distinct advantages of Eastern Europe is low labor costs, and like Spain and the Far East, it benefits from work subcontracted from other territories. Germany While France is still the leading center for the production of animation in Europe, Germany has now developed in a matter of only a few years into the second largest European market, with production said to be worth US$ 130 million annually and new animation studios popping up in some corner Page 270

271 of the country every month. Germany has also seen fairly rapid growth in animation, with two of its biggest studios floating on the Stock Exchange and making aggressive acquisitions of other animation properties, including rights, studios and distributors from around the world. The Länder (regional Governments) each have their own rules for supporting indigenous production. Private funds such as the Berlin Animation Fund and the Victory Media Management Fund, which are supported by tax breaks, have attracted investors and enabled the growth of German animators. CHANGING STRATEGIES Animation targeted mainly at children is naturally at a disadvantage because such films normally can only secure afternoon and, possibly, early evening screening slots in the cinemas and will have lower takings since the bulk of the box-office comes from the lower priced tickets for children. Films aimed at a wider, adult audience, however, will also have access to evening slots and thus have the potential for higher box-office returns. It is no surprise then that European animation producers are increasingly adopting the moniker of family entertainment to describe their output so as to escape the children's film ghetto. KEY PLAYERS IN THE INDUSTRY One of the highest profile converts to the animation world was veteran producer Eberhard Junkersdorf who set up his own animation studio Munich Animation Film from scratch with Michael Coldewey in 1995 to produce an animated version of an updated story of the Bremen Town Musicians in The Fearless Four (Die furchtlosen Vier, 1997), distributed by Page 271

272 Warner Bros. Since then, the studio has worked with Thilo Graf Rothkirch on Tobias Totz und sein Loewe (1999) and Help! I'm a Fish (2000) with Danish and Irish production partners. Meanwhile, at the Bavaria Film- Studios, Odeon Film was preparing to diversify into animation programming through subsidiary Lunaris Film's animation film rights to the classic children's books by Erich Kaestner. What's more, the Leipzig outpost of Berlin producer Alexander Ris' Mediopolis Film has joined forces with Tony Loeser's Motion Works to develop a 26-part series, Count Mocca, centered on the figure of the colorful inventor and adventurer for the six to eleven age group. Berlin was the base for an animation subsidiary launched by Hofmann & Voges Entertainment - Punchhole Film - to produce for cinema and TV. The first fruits of this collaboration was the animated linking sequences in the Erkan & Stefan headnut TV show. Table 21 gives the list of key animation studios in Germany. Page 272

273 TABLE 21: ANIMATION STUDIOS IN GERMANY 1. Animations-fabrik Hamburg 2. Animationsstudio Ludewig 3. Cartoon Film Rothkirch 4. Greenlight Media 5. Hahn Film 6. Juergen Egenolf Productions 7. Mediopolis Film 8. Motion Works 9. Munich Animation Film 10. Odeon Film 11. Punchhole Film 12. RTV Family Entertainment 13. Scopas Medien 14. Senator Filmproduktion Page 273

274 15. Studio Film Bilder 16. TFC Trickompany 17. Toons 'n' Tales 18. Trixter Film 19. TV-Loonland Page 274

275 UK The UK has traditionally produced good quality and appealing animation and has been leveraging children s books that are published in the UK as source material. However the industry is going through tough times. There are a few companies making good profits from producing animated commercials for the advertising industry, but those in feature film and television production face fierce competition from abroad. In particular, the UK industry finds it hard to compete effectively with the many territories that now enjoy generous Government support in the form of subvention and tax breaks. France and Canada in particular, have successful schemes, which have allowed them to become major players in the animation sector. The British animation industry is characterised by a large number of small independent studios. There are around 400 studios, including those involved in the games sector, employing about 3,500 people. The majority of companies employ less than 10 people and the average annual turnover was approximately 750,000. About 250 of these companies worked on mainstream production for film and television. Of these about 30 regularly work on feature film and television programmes, as opposed to just producing commercials and promotional films. In addition to independent studios, the BBC also has a small in-house unit producing animation. Cosgrove Hall, now one of the UK s largest and best-known animation studios is a subsidiary of Granada Media, but operates in much the same way as an independent studio. Some UK studios, like Telemagination are foreign-owned but still act largely independently of their parent group. Page 275

276 There are also a few companies that specialise as rights holders, such as Gullane Entertainment, Hit Entertainment and Entertainment Rights. These companies concentrate largely on acquiring the rights to animated characters and animation productions for distribution. They have built their businesses on the successful management of a few extremely valuable properties. Gullane, for example has evolved through its involvement in Thomas the Tank Engine. Production companies can only emulate the success of these distribution-led companies if they can successfully develop, make and manage projects for which they can retain the intellectual property rights. INDUSTRY SUCCESS UK s animation sector has many animation producers with an established international reputation. It is responsible for worldwide television hits like Thomas the Tank Engine, Wallace and Gromit, Bob the Builder, The Animals of Farthing Wood, Dangermouse, The World of Peter Rabbit, The Snowman, The Adventures of Captain Pugwash, Spot the Dog, Percy the Park Keeper, and 64 Zoo Lane, and feature films such as Watership Down, The Wind in the Willows, Chicken Run and Christmas Carol - The Movie to name but a few. US studios such as Walt Disney have previously based productions like Who Framed Roger Rabbit? in the UK. British animators have bagged international awards, including prestigious Oscars and International Emmy s. The creative success of UK animation studios has enabled them to win contracts for commercial work such as advertisements and pop videos both for domestic and overseas markets. Aardman for example, which is Page 276

277 famed for its model animation, has made a series of advertisements for transmission in the USA on behalf of the oil giant Chevron. Such commercial work helps to sustain studios by providing them with a regular throughput of work and valuable income. However, it does not and should not, serve to cross-subsidise work on film and television projects. Successful UK film and television series serve to illustrate the two particular animation specialisms at which UK producers excel: pre-school television programming and stop-frame (model) animation. To some extent the success in pre-school television results from the UK s tradition of producing strong and appealing children s literature, which has often provided source material for successful animated series such as Paddington Bear, Watership Down and Thomas the Tank Engine. Many such stories are popular beyond the English speaking world, so our animators ought to have a ready international market. Producing programmes in English should also provide an advantage given its dominance as an international language. The country s pre-eminence in stop frame animation results largely from the success of projects like The Wind in The Willows and Creature Comforts made by Cosgrove Hall and Aardman Animations respectively. Both studios now have a long tradition of producing model animation and their expertise and reputations is unmatched anywhere in the world. Both studios have continued with model animation with Cosgrove Hall currently producing Fetch the Vet for ITV and Bill and Ben for the BBC. Aardman, whose early work included the quirky television character Morph, has continued to develop a distinct style of its own, with such successes as Wallace and Gromit and Chicken Run. Such is the distinctiveness of Page 277

278 Aardman s techniques and style that have won a five-feature film deal from the Dreamworks studio in Hollywood, of which Chicken Run was the first. KEY PLAYERS IN THE INDUSTRY Table 22 gives the list of key animation studios in the UK. Page 278

279 TABLE 22: ANIMATION STUDIOS IN THE UK 1. Cosgrove Hall 2. Telemagination 3. Hit Entertainment 4. Aardman Animations 5. Eva Entertainment 6. Collingwood O Hare 7. Telemagination 8. Tandem Films 9. Captive 10. Saffron Rage 11. Axis Animation 12. Blue Zoo 13. RJDM Animations Page 279

280 14. Gizmo Animations 15. Golem Productions 16. Brian Stevens Animated Films 17. Elm Road Productions 18. Flicks Films 19. Happy Hours Productions 20. Hibbert Ralph Animation 21. Motion Blur 22. Motus 23. Optic Verve 24. Pascavision Ltd 25. PS Creative 26. Qurios Entertainment Limited 27. Red Star Studio 28. Shutterbag productions Page 280

281 29. The Charactershop 30. Treehouse Productions Page 281

282 Italy Over the past few years Italy has fought to grow its indigenous animation industry and it serves as an interesting case illustrating how the rest of the Europe is recognising the importance of having a strong animation industry, and just as importantly, an infrastructure that supports it. While Italy has not implemented a system like that of France s CNC, it is supporting animation through an investment programme with the state broadcaster Rai. After years of neglect, in 1995 the state broadcaster Rai started a drive for animation that included investment and also an annual animation festival, Cartoons on the Bay, which is held on the Italian coast. There has been significant funding of animation. A significant investment by Rai between helped produce 270 hours of animation, among them shows like Marco & Gina (which is funded by the European Broadcasting Union) and the Italian German co-production Coco Bill. The increase in local production is impressive: in 1996 only 24% of Rai s animation was European. In 2001 it was 51% and currently it is almost 70%. Rai normally contributes up to 30% of budget in a tripartite co-production, although the quota may rise in Italian-initiated projects. The commercial broadcaster Mediaset has made some limited investment in animation but does not have a defined strategy for animated programming. Mostly, this is because advertising is not allowed during children s programmes. The Italian government is introducing laws to help animation. Rai will have to invest 8% of the investment quota (20% of licence fee revenue) in European production. Page 282

283 KEY PLAYERS IN THE INDUSTRY There are a number of upcoming studios in Italy. Table 23 gives the list of key animation studios in Italy. Page 283

284 TABLE 23: ANIMATION STUDIOS IN ITALY 1. Cartoonia 2. Chinatown 3. Colourland 4. De Mas and Partners 5. Fulmini leopardi 6. Gertie 7. Graphimated Cartoon 8. Graphilm 9. Graphisme 10. Green Movie Animation 11. Gruppo Alcuni 12. Lanterna Magica 13. Lastrego and Testa 14. MNOGO Film 15. Matitanimata 16. Melazeta 17. Mondo TV Page 284

285 18. Motus 19. Musicartoon 20. Officine Pixel 21. Quipos 22. Rainbow 23. Shortcut 24. Stranemani 25. Studio Arcadia 26. Studio Yusaki 27. Studio Vertigo Imaging 29. Video and Cartoons Page 285

286 France Today, France is at the top of the European animated film market (cartoons, films with puppets or clay models), and in third position on the world market. With the success of Kirikou et la sorcière, French animated films have acquired real international recognition and now rank first in Europe and third in the world. The French animated film industry comprises of more than 400 companies, employing more than 10,000 people. Walt Disney has set up a subsidiary in Montreuil, near Paris (Walt Disney Animation France). France s animation funding system is considered to be very effective. The main source of funding is through CNC. CNC will give a subsidy of around 10% to aid production work if a proportion of the work is carried out in France and 25% of the French spend has been raised in presales to a French channel. French producers accessing these funds can often cover 50% of their budget. French broadcasters also have to meet high quota systems 40% French product and 60% European. As a result of these subsidies, France has moved from a position where 20 years ago it barely had an animation industry, to being the one of the market leaders in Europe. There are also local and regional governments in France that offer support to animation studios in the form of grants and tax incentives. A high percentage of the funding of French animation comes from Canada. However, French studios co-produce with a number of territories, notably Germany and the UK. Page 286

287 KEY PLAYERS IN THE INDUSTRY There are a number of good quality animation studios in France. Table 24 gives the list of key animation studios in France. Page 287

288 TABLE 24: ANIMATION STUDIOS IN FRANCE 1. Alphanim 2. Animage 3. Arles Animation 4. Carrére 5. Cymax 6. Ellipseanime 7. Folimage 8. France Animation 9. La Fabrique 10. Les Films du Triangle 11. Marathon 12. Millimages 13. Neuroplanet 14. PMMP France Page 288

289 15. Praxinos 16. Rooster Studio 17. Saban International 18. Téle Images Page 289

290 Spain Spain's animation industry is also known as Spanimation. The industry went through a severe cash crunch during the years 2001 and 2002 with a number of company closures. Spain s animation industry consists of small and large firms. The large players include BRB Internacional, D'Ocon, Neptuno Films, Cromosoma. Spain s animation sector is the fourth largest in Europe and consists of about 200 companies. Spain s animation industry is increasingly dynamic, fueled by the growth in 3-D work and new markets, abroad and at home, such as digital TV, cable and multimedia. The cost of Spanish animation remains relatively cheaper than other major European competitors at approximately $6,060 a minute. In France, Europe's largest animation producer, the same work runs around $10,000 a minute. This competitive edge coupled with skill has Spain's animation companies increasingly working on an international level. Spanish producers such as BRB, D'Ocon, Neptuno and Cromosoma have been linking up with foreign co-producers. Broadcasters are vital to the sector's future. Spain's animation sector has some important structural defects. It does not receive specific subsidy support, as in France. It is also doubtful that it will benefit greatly from a new law, passed this spring, which obliges broadcasters to invest 5% of their total annual revenue in European films and TV movies. A mere 5% of the total animation shown on Spanish television is made in Spain. Spain s animation studios are also well versed in merchandising. BRB Internacional started its life as a licensor of US merchandising. Page 290

291 KEY PLAYERS IN THE INDUSTRY There are a number of good quality animation studios in Spain. Table 25 gives the list of key animation studios in Spain. Page 291

292 TABLE 25: ANIMATION STUDIOS IN SPAIN 1. BRB Internacional 2. D'Ocon 3. Neptuno Films 4. Cromosoma 5. Cartoon Productions 6. Black Maria 7. Digital Egg 8. Filmax Animation 9. Icon Animation 10. Loco Motion Pictures 11. Luxmotion 12. Manga Films 13. Ars Animacion 14. Bus Animation 15. Serena Digital 16. Tridente Animation 17. Vanhop Animation Page 292

293 18. Keytoon Animation 19. Toon Factory 20. Saponia Page 293

294 Denmark With the feature film Valhalla, released in 1986, Denmark made its first attempt at a production of an international scale and standard. The director, Disney-animator Jeffrey Varab, attempted to create a work of international quality, but faced the challenge of a country where the necessary workforce competence had to be either developed during production or imported. The production was a financial disaster, despite the solid foundation in the illustrated works of the most respected illustrator/ comic book artist in Denmark, Peter Madsen. Never the less this piece of work kicked of the development from which Denmark benefits today. KEY PLAYERS IN THE INDUSTRY There are a number of good quality animation studios in Denmark. Table 26 gives the list of key animation studios in Denmark. Page 294

295 TABLE 26: ANIMATION STUDIOS IN DENMARK 1. A-Film 2. International Television Entertainment 3. Lego 4. IO Interactive Page 295

296 Animation Industry in USA Key facts Animated feature films have a major portion of their animation done in the United States, whereas animation targeted at TV has preproduction performed in the United States and the animation itself done overseas in lower cost destinations such as Korea, Taiwan etc. Box office revenues from animated features account for over 10% of total box office revenues. In the US, animated programming as a % of television programming accounts for about 30%. The leading animation studios of the Us include Walt Disney, Hanna Barbera, Warner Brothers, HBO Animation, Nicktoons, Klasky- Csupo, Pixar, Blue Sky, DNA, Dreamworks, Wild Brain, Film Roman etc. Successful animated feature films have become some of Hollywood s top money-makers. A single animated feature film has the ability to generate billions of dollars worth of consumer spending. Such revenues are derived from marketing campaigns surrounding the theatrical release of the animated film, which, in turn, drive demand for home videos, television, toys, and other film-related merchandise. Animation is an attractive investment because of its longevity, its portability, and the potential to create the aforementioned ancillary revenue streams. Historically, animated features have the bulk of their animation done in the United States, versus television animation that has pre-production performed in the United States (to storyboarding and timing) and the animation itself done overseas. The animation market space can be subdivided into the following categories: feature films, direct-to-video films, TV series (kids and primetime), video/dvd rentals and sales, television commercials, interstitials, visual effects for live action films, and Internet entertainment. Though dominated by major studios, the space is shared with independent companies, as well as high technology companies such as Sony Pictures Dreamworks, Pixar and Blue Sky. As in live action, creative talent agencies are principal players in this environment. Television advertising is a lucrative business in the United States. TV advertising spending by category puts automotive at the top of the list followed closely by retail, department and discount. The other major categories worth mentioning, in descending order of spending, are movies, media & advertising; food, beverages & confectionary; medicines & proprietary remedies; financial; Page 296

297 telecommunications; toiletries, cosmetics & personal care; airline travel, hotels & resorts; restaurants. The animation styles and techniques applied in the market are a combination of the following traditional and new technologies: Traditional 2-dimensional (2D) hand-drawn cells with a four year production cycle for a typical feature (e.g., Disney s Atlantis); Computer Generated 3- dimensional (CG or CGI 3D) with a two year production cycle (e.g., DreamWorks /PDI s Shrek); Non-Traditional (claymation or stop-motion, e.g., DreamWorks /Aardman s Chicken Run), and tra-digital (Jeffrey Katzenberg coined term for combination of traditional animation and CGI33, e.g., DreamWorks Spirit.) Industry shorthand is evolving where 2D denotes traditional, 3D denotes CG, and hybrid (tra-digital) defines the many combinations between the two. Claymation and stop-motion retain their descriptive monikers. Market Size United States gross box office revenues in the year 2009 was about US $ 10.5 billion. Of this the major studios in the US accounted for about 90% of the market. In 2008, about 520 movies were released in the United States and about 3% were animated features. However the animation box office revenues account for about 11% of total domestic box office revenues. In the US, animated programming as a % of television programming accounts for about 30%. This is distributed by television broadcast networks such as ABC, CBS, Fox, WB, UPN and PBS, which account for 55% of all television viewing. Animation heavy cable stations such as Nickelodeon, Page 297

298 Cartoon Network, Disney Channel, ABC Family, MTV and Comedy Central augment the major networks. Among the list, Cartoon Network as well as Disney are positioned as pure animation channels. The market size of animation content is augmented by the growing DVD sales and rentals. Challenges One of the biggest threats to American animation is the use of overseas talent. TV animators are the ones most likely to suffer from American studios sending work overseas and United States networks purchasing foreign animated programs. Studios such as Warner Brothers and Fox Kids have had pretty good success picking up Japanese animation, which cost them practically nothing. There is a strong likelihood that this trend will continue. It is cheaper to produce animation overseas, with the major sacrifice coming in the form of loss of creative control. The downturn in the advertising market has cast a shadow of uncertainty on commercial production, and animation has been effected accordingly. Commercial production is seen as an anaemic industry at present as dollars spent on advertising are tied closely to the economy. Animation cycles in and out of favour in commercial work, and the popularity of a property will determine its licensing fee. In the current advertising environment, cost looms as an ever more important factor in commercial animation production. On the technical front, CGI animated films are becoming more common. In 1999, traditional animation accounted for $358 million or 61% with CGI at $225 million or 39%. The trend reversed in 2001 with Page 298

299 traditional animation and CGI at $182 million or 39% and $268 million or 61%, respectively. Currently, this ratio is 70% and 30% for CGI and traditional animation respectively. Shrek, 3D animation at its best, produced by DreamWorks' PDI grossed more than $362 million worldwide. Released the same year, Disney s traditionally drawn Atlantis has managed roughly $100 million. CGI films tend to cost less to make too; say, $50 million versus twice that for top-shelf traditional cartoons. Key Trends Overall trends in computer graphics will continue: decreasing production costs, continued industry growth, continuing expansion of applications and uses, and a growing desire for computer imagery on the part of artists/studios and consumers. In the US, the type of films produced fall into two categories: highbudget, family-oriented films (such as those traditionally produced by Disney), and lower-budget films appealing to a specific audience niche. The success of Paramount's animated films and those of Japanese studios has shown that a successful TV or video game property can spin off a film franchise. While the 1990 s signalled an animator s market (through the rise of animation as a viable commercial property) the millennium seems to favour the financial interests of the studios. Hollywood has grown increasingly interested in Web-based minimovies and Web designers are using the technology to create commercials, music videos and TV shows. Macromedia s Flash for broadcast is the next step in a rapid evolution for the easy-to-use animation tool. Part of the Page 299

300 allure of creating works in this tool is the cost and time savings. Flash is faster and it streams on both the Web and TV. There is economy since content created once can be distributed on both mediums. What makes Flash attractive to online and offline animators is that it uses vector graphics instead of bit maps or photo images, which create large files and are slow to design with. The result in Flash is typically a high-speed animation show or website due to its relatively small file sizes. Narrowcasting, unlike television, is viewed out of home, usually at a relevant point of contact with the consumer. With narrowcasting's evergrowing popularity; animation may have found a new market niche. This is because, narrowcasting, as opposed to broadcasting, is, as the prefix suggests, a narrowly focused mix of media created for a specific viewer (or set of viewers). It is also a good example of how many advertisers who traditionally depend on static-paper media can now take their message to consumers digitally. And it is a logical choice for animation and motion graphics. Such digital display monitors sense when a viewer approaches and begins to play a spot in DVD-quality audio and video. Many of the interested advertisers to date have been alcohol and tobacco companies because of imposed advertising limitations. In the early days of the television commercial with its eye-catching appeal, relatively low cost and deep talent pool, animation was a preferred way to advertise. The same holds true today for the narrowcast medium. With software and hardware becoming more advanced and less expensive and a steadily increasing work force of talent entering the industry, animation for the narrowcast medium is a logical choice. Page 300

301 To keep the medium fresh and up to date, content needs to be rejuvenated. Animation and motion graphics will be used extensively as a cost effective means for producing the content needed. Animation and the tools that assist in creating animation have matured to a point where it is cost effective to supply these media with new content and allow the creative talent a new place in which to display their artistry. Advertisers are increasingly looking towards the Internet as a viable channel for branding campaigns. Many website publishers have been taking 30- and 60-second television commercials, digitising them, and running them on their online web pages. The technology for broadcasting web video commercials and running high-resolution Flash-based animated ads has improved such that online ads are approaching the quality of TV commercials, or even theatrical trailers. As marketers cut media budgets due to the state of the global economy, online commercials have become more appealing as a viable advertising alternative to the traditional television commercial. Production and Post-Production Market The production market includes a number of firms. There are many small, medium and large firms in the highly competitive design market. In addition to design studios, many companies maintain proprietary design studios in-house. Post-production encompasses all the activities that happen to a film after shooting. The primary disciplines of post-production include telecine, film editing, sound editing and mixing, music composition and recording, music editing, graphics and titles, visual effects, and final dubbing or duplication. Among the post-production disciplines, some Page 301

302 processes appear to be inherently more artistic in nature, such as visual effects, while others appear to be more mechanical, such as final dubbing. For the purposes of this study, post-production is considered to include all the activities listed above, both the mechanical and the artistic. Among these services are activities that represent the least amount of creative content among post-production disciplines: film, videotape, and DVD reproduction services, film laboratory and developing services, and film library services. Beyond functional disciplines, the post-production market can also be categorised into four primary markets: feature films, television programming, television commercials, and music videos. Feature Films: Of the film and television productions, full-length feature films (also called theatrical films in the industry) produced by both major studios and independent companies operate on the largest scale and generally require the greatest resources. Television Programming: Television production includes programming of one-hour long and half-hour long episodes, movies-of-theweek (MOWs), and miniseries (a MOW of two or more parts). All the major film studios and many independents are involved in producing television programming. Television Commercials: Although television commercials (TVCs) are commissioned by firms to advertise their product or service, advertising agencies are the real drivers behind the TVC industry. Ad agencies are the creative decision-makers, and in a way act as the executive producers in TVC production. They select the director for their spots, and thereby are able to select the studios that will produce their commercials. Production budgets for TVCs vary greatly with the complexity of the commercial, but Page 302

303 one industry source has stated that an average budget for a 30-second spot can easily approach $500,000, with an expensive commercial costing as much as $1 million. Typical production schedules last around six to eight weeks. Roughly 69% of all TVC s are 30-second spots. Music Videos: Music videos represent the smallest segment of the entertainment production market. The production cycle for a video is typically three to six weeks, with a budget of approximately $100,000. Due to the short turnaround, small budgets, and the intensely creative nature of music videos, producers tend to be intimately involved with the postproduction process. MARKET SIZE United States post-production sales revenue in 2009 was about $15 billion. This revenue number includes film, videotape, and DVD reproduction services, film laboratory and developing services, and film library services. Other activities such as editing, titling, sound effects, and visual effects account for $8 billion in annual revenue, approximately half the total for post-production overall. KEY TRENDS The US post production industry has become extremely competitive due to: a boom in the use and affordability of technological tools. Technological Changes: Exponential advances in technology have created dramatic changes in the way entertainment content is produced, and as a result, post produced. Many of the changes have been brought about by the acceleration of computer technology into the process. Few will deny that Page 303

304 although there is no standard today, digital content is the wave of the future. It is clear that in the very near future most content distributors will be capable of receiving and delivering product digitally. The obvious conclusion is that the costly process of producing and distributing old style product will be sharply reduced, if not eliminated. New technologies have allowed the film production process to become unbundled, removing the necessity of having all of the people in the extensive chain of production together in a single location. For example, once a film is shot, it is then transferred to videotape format and digitised. At this point it can be transmitted over the Internet to editors sitting at any location in the world, where it is quickly and easily transformed with the aid of powerful computers and sophisticated software programs. The editor can then get feedback almost immediately from directors and producers no matter where they happen to be, and re-edit the film to produce the final product. As such, a common industry belief is that long distances and geographical borders simply are not as important as they once were. The digital trend will grow more pronounced as new generations of film directors enter. While many of the current generation A-list directors have trained and developed their skills in the analogue world, the rate of adoption of digital filmmaking is being accelerated by techno-savvy cashstrapped independent film directors and high profile evangelists like George Lucas and James Cameron; two top-echelon film directors and producers who have wholeheartedly embraced digital production. With the passage of time it appears safe to conclude that the digital paradigm will become the rule and not the exception as directors employ the most cost effective and creatively dynamic production tools at their disposal. Post-production firms, Page 304

305 therefore, are wise to adopt digital systems which save time, allow for more experimentation, and provide the ability to create and view new optical effects. Firm consolidation: The late 1990 s through early 2001 saw a trend toward consolidation, which continues today, though currently for more economic reasons than for strategic reasons. Related to the availability of progressively upscale and expensive technology (primarily HD), in the late 1990 s many firms began to realise they would not survive on their own without investing in their future. Unfortunately, those investments often required a $1 million per year revenue shop to consider making a $1 million or more investment in one piece of very high tech equipment. Furthermore, the cost of maintenance and upgrades to that equipment meant the ambitious postproduction firm could expect sizeable investments in the years to come. With the ever-apparent trend of their clients to vertically integrate, the consolidation of post-production firms allowed small companies to merge with larger companies, and in the process to spread the costs of major investments in equipment (e.g., an HD infrastructure) across a broad coalition of business partners, thereby guarding against a crippling slowdown in any one industry. The pooling of creative resources amongst the key artistic talent was also thought to allow large companies to adopt a small company face that the small company will deliver a better product due to a dedication to the artistic integrity of projects. This appears to be an attempt to maintain the small firm culture during the rapid expansion. As the economic environment improves, however, the larger firms will continue their pursuit Page 305

306 of market share with the large production firms, but we predict a return to a greater number of small boutique post-production houses providing specialty services to the rest of the industry. Alliances: A developing trend, which will need to be watched, is the increasing production, and postproduction, alliances of the major studios. While they have traditionally contracted out their post-production needs, they are increasingly positioning in the post-production market to provide a range of services and contracting jobs for other major studios. Faced with the threat of direct competition with the studios and their growing use of cost effective technologies, the post-production industry is consolidating even further. Independent Film: There is a trend in independent film production towards cost-effective creativity. This allows independent shops (with low budgets) to produce high-end effects for considerably less than the major studios. Traditionally, the terms visual effects and independent films would not have appeared together due to sophisticated effects being cost-prohibitive for most independent filmmakers. Now, with digital video cameras and effects created on PCs (in addition to advancements and price breaks on offthe-shelf software) the old prohibitions are disappearing and allowing independent producers to achieve big-studio appearance on the independent industry s schedules and budgets. An example of such a successful film is The Blair Witch Project, which was filmed entirely using digital video cameras. Television Series: More and more episodic television is being done in High Definition (HD) because of its ease of use and cost effectiveness. A fortyminute HD tape is equivalent to approximately 5,000 feet of film. Some Page 306

307 producers using the technology have reported saving close to $700,000 per episode by shooting in HD. And fortunately for the post-production industry the price of high definition editing systems themselves are at reasonable levels. With the introduction of non-linear high definition editing systems like the Sony XPRI, Avid DS, CineWave, and Final Cut Pro HD many post houses can put a HD editing system in place for around $1,000. While the investment in HD editing systems is affordable, there is little consensus amongst producers about when the market for HD product will take off. So, although home entertainment stores are pushing affordable HDTV products, the lack of broadcast standards means that post-production houses should not anticipate a watershed change in the demand for HD editing in the near future. Television Commercials: The over $74 billion television commercial market has become a series of erratic peaks and valleys, with production houses currently in bidding wars to secure work and just stay afloat. While the number of commercials has steadily grown, the recent lean economic environment has meant commercial budgets have declined an average of 8% over the last two years. It is easy to conclude that the companies who survive will be those best adept to the dynamics of the technology-based industry. Post-production companies will need to find ways to dramatically improve creative productivity while holding down costs. From our research and interviews it is clear that these firms must have the courage to creatively reinvent themselves to exploit this new media dynamic. Music Videos: The business is experiencing a less revolutionary change in terms of technology. The medium tends to favour the use of images of the Page 307

308 artists rather than employing much special effects. The nature of this business favours local creatives and use of local post-production. Production cycles (from initial concept to end of shooting) average three weeks with post-production lasting slightly less. Our research clearly indicates that United States producers and directors will rarely, if ever, employ other than personally known and established post-producers. In addition, the budgets and margins of the music video marketplace do not make this industry attractive. Animation Value Chain Vertical integration is common in the United States animation production market. Strong associations exist between parent companies (studios) and their production and distribution arms. Antitrust law prohibits networks from purchasing content exclusively from their production arms. However, informal knowledge is such that sister divisions get preferential treatment and better access to decision makers (e.g., right of first refusal - a substantial competitive advantage). In the television arena, the distribution channels contract with the production studios to produce content. There are several methods for procurement of content: studios can purchase existing animated programs (such as Warner Bros. licensing of Pokemon), original story ideas, or completed scripts from freelance writers. Studios will often purchase this intellectual property (IP) outright, striking a producing deal with the owner of the IP to produce/oversee the program. Direct-to-video (DTV) Page 308

309 productions closely mirror TV productions with the exception that revenue is based almost entirely on video and DVD sales. The distribution channels are identical to ancillary feature film distribution channels. Feature films revenue stream begins with box office revenue. Popularity can be leveraged especially effectively for animated feature films because of the toy/merchandise market space. Ancillary market revenue can far eclipse the receipts for the box office. Animated characters lend themselves to stuffed toys particularly well, which can be seen from the sales figures of toys based on movies such as is The Lion King, Pokemon etc. Major players will cross-pollinate. Successful movies end up as television series, either through syndication on network, or cable channels, and vice versa. Disney s Hercules and Tarzan, for instance, are current TV programs after successful features were produced and released. Page 309

310 TABLE 27: LEADING ANIMATION STUDIOS IN THE US 1. Walt Disney 2. Hanna Barbera 3. Warner Brothers 4. HBO Animation 5. Nicktoons 6. Klasky-Csupo 7. Pixar 8. Saban 9. Marvel 10. DreamWorks 11. Blue Sky Studios 12. Vanguard Animation 13. Wild Brain 14. Film Roman Page 310

311 15. Fred Films 16. Vinton Studios 17. Curious Pictures 18. Atomshockwave Page 311

312 TABLE 28: LEADING ANIMATION TV CHANNELS IN THE US 1. Fox Kids 2. New Kids Channel 3. Disney Channel 4. New Educational Channel 5. Cartoon Network 6. Cartoon Net 7. HBO 8. TBS 9. TNT 10. Nickelodeon 11. Nicktoons 12. Showtime Page 312

313 Asian Animation Industry Key facts The mature animation production countries in Asia are Japan, South Korea, the Philippines and Taiwan. The emerging animation countries in Asia are China, India, Vietnam, Malaysia and Singapore. The Asian animation industry is growing at the rate of between 10-20% YoY. Growth is driven by animation outsourcing from North America and Europe. China and India have one of the lowest labor rates, which makes these countries an attractive destination for animation outsourcing. There are about 1700 animation studios in Asia, majority of them are in Japan and Korea Asia has emerged as a major player in the animation industry in part for cultural reasons, but mainly because of its relatively low labour costs. China and Korea in particular, have a number of animation service studios. These tend to concentrate on volume production for projects subcontracted by studios in Europe and America. Animation studios can make substantial savings by subcontracting work to Asia, with Korea offering productions costs per half hour of between US$85, ,000, compared to the USA where costs usually exceed US$400,000. Among the services they offer are preparing layouts, drawn animation, inking, painting and compositing. Korea, with over 450 animation studios is also moving into originating animation projects with the active support of the Government, which now operates a grant system to support such production. Japan also has a substantial presence in the animation industry as the world s second largest television market. Japan has always prioritised domestic programming so it has a large film and television production sector. The Pokémon phenomenon has made Japanese style animation the darling of the international marketplace. The mature animation production countries in Asia include Japan, South Korea, the Philippines and Taiwan. As animation production is a very lucrative and labor-intensive (70 percent to 80 percent of costs go to labor) business, other Asian countries such as India, China, Vietnam, Malaysia and Singapore have started their own industries. The early animation in Asia was predominantly influenced by Walt Disney. Thus, in China, The Page 313

314 Smiling Monkey was termed a copy of Mickey Mouse, and India's The Pea brothers (1934), considered by some as that country's first released animated film was said to be similar to Disney animations. In some cases, pioneer animators such as James Wang of Taiwan, Payut Ngaokrachang of Thailand, Tezuka of Japan, and Shin Dong Hun of Korea proudly accepted the title "the Disney" of their respective countries. The outside influence resulted from exposure to foreign cartoons early on, and then from training abroad or onsite. In China, foreign works were always imitated, even during the times of Mao. The first generation of animators was inspired by Disney in the 1930s and 1940s, the second generation by Soviet and East European masters, and the succeeding generations from the 1980s on again by American animators. However, the Chinese, perhaps more than any other Asian animators save those of Japan, were insistent on adapting only those elements of foreign animation that fit their culture, never favouring full adoption. The early Chinese feature-length animation, Princess with the iron fan, had relatively less western influence. In the 1950s, considered China's golden age of animation, indigenous styles and techniques such as paper-cut, ink and wash (shuimo dong huapian), and folded paper were applied to what became classic works. Indian animation was started and nurtured over the years by outside factors and individuals. The first animated shorts were produced during World War I by the "father of Indian cinema," D.G. Phalke, when he could not obtain adequate film supplies to do live action features. The medium had steady growth during the succeeding decades, incorporating many aspects of Western animation. Indian animation always betrays the ethnic Page 314

315 heritage of local animators and almost always borrows from Western productions. Outside influences were especially prominent in the training of animators. In , the governmental Films Division, with financial support of UNESCO and an American government foreign aid program, brought former Disney animator Clair Weeks to the Cartoon Film Unit where he trained a group of Indians, including Ram Mohan, Bhimsain, Satam, Ezra Mir, A.R. Sen, and Pramod Pati. Pati also studied with Czech animator Jiri Trnka and worked in both U.S. and Yugoslav studios before almost single-handedly developing Indian animation art films after In the early 1970s, Weeks and British academic Roger Noake were responsible for training graphic designers and artists at the National Institute of Design, who themselves would train the next generation of animators. The Zee Institute of Creative Arts (ZICA) in Hyderabad initially operated an animation school for its first three years, using Russian animators as teachers. Early animators of Taiwan had many connections to the U.S. industry. Chao Tse-Hsiu, who directed Taiwan's first animated film, The race between the tortoise and the hare (1967), studied in Japan and the U.S. and learned some animation at Disney studios. When he returned to Taiwan in 1964, Chao established the Tse-Hsiu Institute of Art Production. James Wang of Taiwan along with Bill Hanna of Hanna-Barbera started offshore animation facility called Cuckoo's Nest (Wang Film Productions). Thailand's first animator, Payut Ngaokrachang, had done an animated short in the mid-1950s that caught the attention of the U.S. Embassy in Bangkok, which was looking for cartoonists to draw anti- Page 315

316 communism themes. Payut drew for the embassy a Thai child sitting in the palm of a hairy hand carrying a sickle and was quickly signed to a contract. In 1955, he started nearly thirty-four years of work with the United States Information Service, where he produced Hanuman pachoenpai krangmai (The new adventures of Hanuman, 1958) and Dek kub mee (A child and a bear, 1960). Like the Wans in China, Payut was influenced both by the Fleischers and by local shadow theatre (nan talung). Establishment Of Local Animation Industry In the mid-1990s South Korea, with government support, established a local animation industry. In 1994, government officials recognised animation as a "value-added" product and granted the industry a number of incentives, such as a lower tax base, low-interest loans, and a viable infrastructure. Studios producing primarily foreign work increasingly turned domestic, bringing out about a half-dozen features and numerous shorts and episodes depicting Korean folklore, humour, and culture. But, the boom subsided by the late 1990s, as overseas markets were not found and as the costs of producing local animation far outweighed its popularity among Koreans. South Korea is still the third largest producer of animation worldwide, but 95% of its output is manufactured by foreign order. Not one of the nearly 400 animation studios in Korea is devoted entirely to making domestic shows. Page 316

317 Early Trends In Animation Outsourcing To Asia Much of Asia's animation production since the 1960s has been tied to foreign interests attracted by stable and inexpensive labour supplies. For nearly forty years, western studios have established and maintained production facilities, first in Japan, then in South Korea and Taiwan, and now also in the Philippines, Malaysia, Singapore, Vietnam, Thailand, India, Indonesia, and China. The economics of the industry made it feasible for Asia to feed the cartoon world, to the extent that today, about 90% of all "American" television animation is produced in Asia. The usual procedure is for pre-production (preparing the script, storyboard, and exposure sheets) to be done in the United States or other headquarter countries, after which, the package is sent to Asia for production (drawing cels, colouring by hand, inking, painting, and camera work). The work is sent back to the U.S. or other headquarter country for post-production (film editing, colour timing, and sound). Asian animation companies bid fiercely for part of the global business, insisting that it provides employment and skills for young people, brings in needed foreign capital, and adds to the creation or enhancement of domestic animation. Most animation workstations in Asia are staffed by young people, many of whom are women. They are enticed by wages low by western scales but competitive locally, splashy perks, ceremonies, and celebrations, or opportunities to be trained. Even in situations where wages have been low and working conditions poor, Asian animation officials rationalise away labour exploitation. Nevertheless, animators in offshore companies face a precarious existence because of the seasonal nature of animation Page 317

318 work and knowing they can be easily replaced by freelancers, computers, or cheaper labour elsewhere. Offshore animation has led to the creating and nurturing of a local industry, as an infrastructure is built up, equipment is put into place, and skills are transferred. By the latter decades of the century, certainly Asia was in need of a larger supply of domestic animation as television and cable channels proliferated, demanding much larger supplies of programming. However, not much domestic animation resulted from the presence of foreign-based studios. In most countries, animators can point to only one or two features or television series that have local angles. ANIMATION OUTSOURCING IN CHINA Shanghai Animation Film Studio, which for decades produced only Chinese animation, started to pick up foreign work by the early 1990s, especially after it became Shanghai Yilimei Animation Co., a joint venture with Yick Lee Development Co. of Hong Kong. In the mid-1990s, 70 percent of the merged company's funding still came from government, allocated on the basis that the company completed a annual minutes of domestic animation quota set by the authorities. Any money needed for development and creativity came from the annual minutes of animation done for foreign firms. By the end of the decade, the state lowered its allocation to 30%. Yet, China still produced about 6,000 minutes of domestic animation in 1998, doubling the previous year's total. ANIMATION OUTSOURCING IN INDIA There is a considerable increase in the 2D and 3D animation outsourcing to India. Due to the extremely competitive climate as well as the global slow-down, some of the large studios in the US have implemented large Page 318

319 amounts of layoffs of animators and artists. India is slowly emerging as an alternative to Korea, Philippine and Taipei for animation outsourcing. India is also emerging as a post-production hub for animation. Post production involves a lot of ink, paint and compositing and scanning work, which is the labor intensive part of the entire process of animation and requires less skill. Thus we can see that the animation industry in India is following a similar evolutionary part as the software industry. In the early part of the evolution of the India software industry, it was the low value jobs which were shifted to India. Over time it is projected that more and more high value jobs would be outsourced to India. For low value post-production works, it is easier for a studio in the US to outsource its post production work as probably nothing is going to go wrong. India has one of the lowest labor rates, which makes it an attractive destination for animation outsourcing. ANIMATION OUTSOURCING IN SOUTH KOREA South Korea is one of the largest suppliers of television animation in the world. The 1970s was the decade of subcontracting. Korean animators, because of their low wages and high skills, were in high demand by American and Japanese producers. While subcontracting greatly expanded the Korean animation industry, it also gave it a bad name, as it seemed to demonstrate a lack of creativity and planning. However we are seeing an increasing trend towards co-production of animation content along with foreign animation studios. There is also an increasing trend towards the creation of local content. ANIMATION OUTSOURCING IN PHILIPPINES The Philippine animation industry's output is mostly outsourced or exported to some of the biggest international production outfits worldwide. Page 319

320 Local animators have been involved in outsourcing projects with studios such as Walt Disney, Dreamworks, Hanna Barbera, Marvel and Warner Bros. The Philippine animation industry has begun recovering and animation studios have started to experience a rise in the number of outsourcing animation projects this year. ANIMATION OUTSOURCING IN TAIWAN In the past Taiwan's animation industry was only known for its outsourcing works for Hollywood Studios such as Disney and Warner Brothers. The leading Taiwanese animation company Wang Films was behind production work on Mulan, The Lion King, Lilo & Stitch and The Little Mermaid. ANIMATION OUTSOURCING IN VIETNAM Hanoi Cartoon Studio was changed significantly as Vietnam adapted to the world economy in the 1990s, brought on by the collapse of its donor nation the Soviet Union, the re-establishment of diplomatic and trade relationships with the U.S., and the linkup with the Internet, lowering communication costs. The amount of domestic animation produced by Hanoi Cartoon Studio had been formidable, five to ten titles annually since 1961, for a total of 260 by The quality of the artwork was superb, for Vietnam is a country with a long tradition of drawing and painting, reinforced by the French colonisers who encouraged the formation of art schools. Beginning in 1991, Vietnam became a haven for overseas animation studios, first the Japanese, followed by the French company Pixibox in 1994, and American, Korean, Filipino, German, and Australian companies since the mid-1990s. In , Australia's Énergee Entertainment struck a deal whereby Hanoi Cartoon Studio would become Page 320

321 its overseas facility and grant Énergee distribution rights to its full catalogue of animation. Creative aspects of animation, such as compositing, modelling, and rendering of images, that used to be done with high levels of skill in Vietnam, are retained in Paris, San Francisco, or Sydney. Vietnamese artists are now sent to Australia for training or are imbibed with European philosophy. Local Content Productions Asian animation studios have also realized the need to develop locally produced animated series for the local and regional market alike. Since 1996, Malaysia has successfully produced and marketed the Kampung Boy series done with the help of Philippines based animation studio, PASI. Saladin is a 3D animation for television series which came out of Malaysia. ToonzAnimation India has produced a series based on an Indian folk tale called The Adventures of Tenali Raman, while Silicon Illusions of Singapore is producing Sing to the Dawn. Nickelodeon Asia has acquired rights for The Adventures of Tenali Raman and the Indian rights for the series is with Cartoon Network. Nickelodeon airs The Adventures of Tenali Raman on Nickelodeon Philippines and Nickelodeon Asia feed covering Singapore, Malaysia, Korea, New Zealand, Hong Kong and Indonesia. The first of locally produced animated series in the Philippines, Ang Panday and Captain Barbel, were released in 1987 and aired on Philippine TV. Then, in 1997, Ibong Adarna, based on Filipino folklore, became the first wide- screen full-length commercial animated film. Top Peg animation Page 321

322 studio has also successfully produced an animated series based on a Philippine children s book called Tutubi Patrol. Trend Towards Co-Productions CO-PRODUCTIONS IN JAPAN In the late 1990s, Asian animation studios entered into coproduction agreements with American, Canadian, Australian, and European partners. Benefits accruing to the Asian studios include moving from strictly work-for-hire to a more creative role in animation, enlarging capital investment pools, being involved in larger, more prestigious projects, and gaining a wider distribution abroad. Also, because sales of animation in Asia were almost impossible because of widespread piracy, Asian studios sought co-production deals in which they would share in profits from North America and Europe. The most formidable partnership was that of Walt Disney International and Japan's Tokuma Shoten Publishing Co. to distribute the latter's films worldwide through Buena Vista Home Entertainment. The pact gave Disney global video rights to market eight animated features. More importantly, it provided Disney entry into anime. Disney already controlled 65% of the Japanese market for children's videos. CO-PRODUCTIONS IN CHINA Co-production arrangements grew steadily at the close of the 1990s. In China, Morning Sun Studio joined with Fred Wolf Studios to make Dino babies, and with Warner Brothers and Fred Wolf to produce Sinbad the sailor. Shanghai Yilimei partnered with CINAR of Canada on a TV series Rumble & growl, and other studios with Yoram Gross Village Roadshow of Australia, Network of Animation (Canada), the Storm Group of England, Page 322

323 Tokuma Group of Japan, and Moro Animation Film Studio of Spain. In January 2000, a state-owned group called Shanghai Telefilm Group was set up to produce, distribute, license, and merchandise Chinese animation. Though not strictly a co-production arrangement, the group did combine Shanghai Yilimei Animation, Shanghai Cartoon Culture Development Co., Shanghai Animation Fine Drawing Studio, and Cartoon king magazine in a partnership to produce a 52-episode TV series, Music up and a second animated feature after Lotus lantern, as well as to establish the Shanghai Animation Institute. CO-PRODUCTIONS IN KOREA Realising they were pricing themselves out of work-for-hire animation, Korean studios also tried to develop creative partnerships after Besides the Disney-Tokuma Shoten cooperative effort, others in Japan were formed between Madhouse Studios and Korea's Samsung Entertainment to produce Alexander, Nippon Animation and Mitsui and U.S.'s LA Animation to work on The monkey king. CO-PRODUCTIONS IN INDIA Nippon Ramayana Films and Ram Mohan of India produced the epic Ramayana and Swan Princess III. Because of fears by the Indian government that the story might be trivialised and lead to religious turmoil among Indians, Ramayana took ten years to reach the screen. Ram Mohan and his team provided visual reference and key drawings, from which the Japanese worked to create an interesting fusion of manga (comic book) style and Indian design. Page 323

324 CO-PRODUCTIONS IN TAIWAN Taiwan's animation industry has engaged in co-productions with Hollywood Studios such as Disney and Warner Brothers. The leading Taiwanese animation company Wang Films was behind production work on Mulan, The Lion King, Lilo & Stitch and The Little Mermaid. Studios such as Cuckoo s Nest Studio have played a prominent role in this area. Taiwan animation companies, boosted by renewed government push are positioning themselves to garner a big chunk of the lucrative global animation business. CO-PRODUCTIONS IN PHILIPPINES Philippine studios have played a key role in bringing to life worldclass animation such as Scooby Doo, Tom & Jerry, Addams Family, Buzz Lightyear, Timon & Pumba, Tarzan, Biker Mice from Mars, Ned s News, Popeye, X-Men, Sailor Moon, Slam Dunk, The Mask, The Jetsons, Dragonball Z, Digimon, Captain Planet, The Prince of Egypt and The Road to El Dorado, Johnny Bravo, Finding Nemo etc. Local animators have been involved in lucrative projects in the past, with studios such as Walt Disney, Dreamworks, Hanna Barbera, Marvel and Warner Bros. Popularity of Foreign Animation Animation dominated by foreign programs tops all children's television in Asia. Much of the foreign animation arrived with the multinational television broadcasters Star TV, TNT, BBC, Disney, Cartoon Network, etc. For example, 66% of television animation in the Beijing market is foreign, of which one-half is Disney. CINAR of Canada signed with CCTV to broadcast Arthur and Germany's EM TV supplied fifty-two episodes of Blinky Bill. Page 324

325 The foreign media conglomerates compete furiously for the cartoon market of Asia, launching customised cablecasts as Disney Channel did in the Philippines in 1998, dubbing into local languages as TNT & Cartoon Network did in India the following year, and using all types of strategies to make themselves welcomed. All outsiders used gimmicks to woo audiences and placate parents in the mid - to late s, but perhaps Cartoon Network was the most persistent and innovative. In 1997, Cartoon Network Japan was set up as a joint venture, combining Japanese and Western animation in 24-hour broadcasts; shortly after, the service was expanded to Australia. Also in 1997, Cartoon Network on Tour came into being as a musical production of animated characters who took to the road to perform in various Asian shopping malls. That same year, the network split its Asia Pacific feed to cater to specific regional preferences of Southeast Asia, Australia/New Zealand, and India, and in January 1998, TNT and Cartoon Network found a spot on Hong Kong's pay cable system Wharf TV. In India, Cartoon Network fine tuned programming and transmission timings, organised children's events, co-sponsored the release of Space Jam in four cities, and organised a campaign to donate toys to orphanages, including that of Mother Teresa. Controversies Surrounding Foreign Animation Despite such efforts, foreign animation continues to spark controversy and condemnation in Asia. For years, Chinese authorities have on and off banned western favourites to make room for local cartoon characters, have released feature productions to eclipse western cartoons not in tune with Page 325

326 China policy (e.g. Red River Valley was released to offset Disney's Kundun, which sang the praise of the Dalai Lama), and have cancelled or postponed the showing of American animation as a reaction to the U.S - China trade wars. Of course the main objections to the importation of American and Japanese animation have to do with the presenting of values which are anathema to Asian cultures or the depicting of violent or sexually explicit content. Authorities in at least Korea, Taiwan, the Philippines, Thailand, Singapore, and Malaysia have made such complaints, in some cases, such as that of Malaysia, leading to the development of more culturally appropriate local animation. PHILIPPINES Filipino parents, newspaper columnists, and religious and educational figures complained about Japanese robot anime as early as 1979 when the genre was introduced to the Philippines. Reacting to the parents' objections, President Ferdinand Marcos ordered the Board of Censors that the showing of all robot programs be proscribed immediately. At the time, the Japanese show, Voltes V, was rated number one of all television programming with a 40% viewership rating. SINGAPORE Although Singapore authorities have been very strict in keeping out cartoons considered in bad taste or containing explicitly sexual or violent content, some liberalisation of censorship policies occurred in the 1990s. Before then and to a degree yet, cartoons were expected to use humanistic themes, moral messages, and educational values. In 1994, Singapore Broadcasting Corporation permitted Japanese anime with some sex and Page 326

327 violence to be shown after midnight, which made little sense as the broadcasters see animation as being children's fare, and the censoring board extended the hours per week that could be filled with anime from two to four in the early 1990s, and from twelve to fifteen in But none is shown in primetime. The television station chooses the anime by its popularity and clean content, often looking at past records of particular cartoons in other nations. KOREA Anime was banned in Korea and Taiwan for decades because of the fear of Japanese cultural imperialism, understandable as both countries had been occupied by Japan. However, in neither country was the inflow of anime abated as piracy ran rampant. Commissions were set up in Korea and Taiwan to censor and ban anime, staying in existence until the 1990s. In Korea, the maintaining of a censoring body for Japanese cultural products had no logical base whatsoever, since such products were not allowed to be there in the first place. MALAYSIA Calls for the banning of Disney's Aladdin as a racist film in 1993 did not advance very far in Southeast Asia, partly because of lack of attention by the mass media. In Malaysia, very little publicity was given to the charges, according to one study, because Malays are Muslims, but not Arabs; the public perceives animation as just cartoons not to be taken seriously, and the distributor of Aladdin had taken steps to offset negative publicity. Page 327

328 INDONESIA The reaction was low key in Indonesia, because the country must protect a highly-developed film industry, which has had past troubles with Hollywood. Since 1989, Indonesia has been on a U.S. watch list for copyright infringements relative to films and videos; at another time, Hollywood had threatened to completely take over film distribution and exhibition in the country. Animation in Asian Societies Over the years, animation was fitted to Asian societies and their mass media. Politically, filmed cartoons have served governmental and bureaucratic goals, particularly in China, Vietnam, and the Philippines. Most Chinese animation stressed morals, such as wholehearted service to the people such as The panda's shop. They promoted campaigns; or exposed enemies of the state, such as the Gang of Four in One night in an art gallery (1978). In the 1960s and early 1970s, Vietnamese cartoons carried wartime themes, such as those of The kitty (1966), which depicted a kitten who successfully organises against an army of invading rats, or The talking blackbird (1972), the story of a Vietnamese boy and his blackbird companion who together defeat the Americans. Culturally, animation was moulded to Asia through the use of indigenous artistic styles and techniques, such as paperfold, paper-cut, and ink and wash in China, or shadow theatre in China, Indonesia, and Japan, and localised plots based on literary, religious, or folkloric stories. A symbiotic relationship has existed between animation and other mass media in Asia. In Japan, manga and anime feed off each other, and in Hong Kong Page 328

329 and Taiwan, many Japanese anime evolve into live action films and television drama serials. Hong Kong musicians write and sing Cantonese versions of anime theme songs, and other Asian artists, such as Lat of Malaysia, Nonoy Marcelo of the Philippines, Dwi Koendoro of Indonesia, or Pran of India adapt their print cartoon characters to the screen. Successful Business Models It is worth mentioning one extremely successful business model. Hong Kong s Centro Digital Pictures and Golden Harvest produced the action film titled A Man Called Hero which blends futuristic and high-tech digital effects with traditional kung fu--has created such a stir in Hong Kong, breaking the country's opening-day box-office record. The film was dubbed in English and released globally. In Hong Kong, it is difficult to make futuristic types of movies because this is not the focus of the local culture. In China, martial arts comic books are very popular. The reason why A Man Called Hero became popular is because it uses digital technology within the context of Chinese culture. This development in Hong Kong can serve as a model for other Asian countries. Animation Studios In Asia The key animation studios in Asia are given in Table 29. Page 329

330 TABLE 29: KEY ANIMATION STUDIOS IN ASIA Country India Studios Acropetal Animedia, Colour Chips, Compudyne Winfosystems, Crest Communications, DQ Entertainment, Digikore Studios, Escotoonz, Heart Animation, Jadoo Works, Maya Entertainment, Mediaworks, Paprikas Animation Studios, Pentamedia, Toonzanimation, UTV Toons, Wondertoons, Zee Interactive China Shanghai Info Creation, Beijing Hong Ye Animation, Shanghai Hong Qing Ting Animation, Animation Production Department Of CCTV, Animation Institute, Beijing Broadcasting Institute, Shanghai Animation Film And Television Co., Wang Films, (Taiwan), Hong Ying (Taiwan), Shanghai Morning Sun (Taiwan), Hong Kong Animation Services (Hong Kong), Jade Animation, Colorland Animation, Shanghai Afanti, Beijing Xiele Arts & Crafts Product Co., Shenzhen Hbb Animation Art Co., Shanghai Hosem Industries Co, Lawton & Chaoyi Shanghai Co., Shanghai Fantasia Animation, Shanghai King- Polo Computer & Cartoon Deign Co., Shanghai Oriental Television Cartoon Co., Shanghai New Age Art Production Co., Page 330

331 Shanghai Animation Film Studio, Shanghai Luya Industry Co., Shanghai Yilimei Animation Co., Shanghai Hosen Animation Studio Co., Smec Animation & Graphic Technology Co., Shanghai San Ding Cartoon Making Co., Shanghai Lighthouse Animation Co., Shanghai Hongqingting Cartoon Co., Shanghai Afanti Cartoon Production Inc., Dalian Afanti International Animation Co., Shanghai Xuming Animation, Shanghai Starts Info-Creation Co., Shanghai Tsuburaya Productions Co., Hong Guang Animation Co., Suzhou Hongyang Cartoon Production Co., Nanjing Blue Docphin Animation Co., Nanjing Niuniu Animation Co., Wuxi Gold Link Cartoon Production Co., Zhejiang Ming Xing Animation Co., Hangzhou Animation Co., Hangzhou Duoduo Animation Production Co., Shanghai Tongren Animation Co., Shanghai Yuanbo Animation Co., Hangzhou Longqi Cartoon Co., Chengdu Jinze Culture Advertisine Co., Dalian Field Cartoon Production Co., Wuhan Jiang Shong Information Industry Co., Hunan Oriental Cartoon Propagation Co., Jinan Zhongdi Multimedia Co., Tianjin Institute Of Arts & Crafts, Chongqing Slam Digital Studio, Dalian Tianyi Cartoon Co., Wuhan Jiangtong Animation Co., Jinan Field Cartoon Co., Dalian Times Animation Co., Jilin Page 331

332 Changchun Impress Cartoon Co., Guangdong Da Ben Niao Cartoon Arts Co., Shenzhen Animation Art Co., Shenzhen Shengxiao Industrial Co., Shenzhen Guang Hia Zhao Ri Picture Products Co., Shenzhen Tian Fu Yuan Cartoon Production, Guangzhou Film & Video Work Studio, Shenzhen All-Vision Technology Co., Shanghai Blue Butterfly Inc, Beijing Cartoon Co., Beijing Gold Panda Animation Company, Beijing White Parrot Creative Idea Co., Guangdong Co., Beijing Huitian Animation Co., Beijing Xin Cang Production Co., Beijing Hongye Advertising Co., Canton Computer Co., Beijing Kaiming Film & Video Development Co., Beijing Zhongnan News Development Co., Beijing White Lemon Development Co., Beijing Greenwood Cartoon Co., Beijing Mili-Boss Cartoon Development Co. South Korea A-1 Production, Ani Village Co., Akom Production, Akom Production, Co.Ltd, Anik, Anima Sam Won, Animagic Studio Inc, Animax Enterprise, Anivision, Aniway Co.,Ltd, Bigstar Enterprise.Inc, Blueline Co., Ltd, Chang Kang Mania Co.,Ltd, Characterplan Co.,Ltd, Click Entertainment Co., Ltd, Dai Won, Daiwon Character And Animation Co., Ltd, Digital E Mation, Digital Odyssey, Dna, Dong Yang, Dongwoo Page 332

333 Animation.Co.,Ltd, Dooly Nara Inc, Dr Movie Co.,Ltd., Dr- Movie, Echo Animation, Hahn Shin Corporation, Han Ho Film, Hang Yang, Hangil Production Co.,Ltd, Hanh Shin, Hanho Heung-Up.Co.,Ltd, Hanil Animation, Heewom Entertainment, Inc., Iconix Entertainment, Imageplus Co.,Ltd, Jem Co.,Ltd, Joongang Movie Entertainment Co., Ltd, Koko Enterprise Co., Ltd, K-Production, Kye-Sung Production, Kyung Kang, Lascaux Entertainment Co. Ltd, Mg World Co.,Ltd, Nara Animation Studio, Next One Seoul, Orange Animation Studio, Plus One, Plus One Animation, Production Grimi Co.,Ltd, Rainbow Animation Group, Rough Draft, Rough Draft Korea, Saehahn Productions Inc, Saerom, Saerom Animation, Inc, Sei Young, Seong Bo Yang Haeng, Seoul Movie, Seoul Movie Co., Ltd, Shin Won, Some Entermedia Co.,Ltd, Spec Korea, Studio Sek, Sun Min, Sun Woo, Sung San Animation Production, Sunmin Image Pictures Co.,Ltd, Sunwoo Entertainment Co.,Ltd, Team's Art Production, Yearim Productions, Yeson Animation Studios Philippines Animasia, Animates Art Shop, Artfarm Asia Animation & Digital Exchange, Avalon Interactive Corp., Fil Cartoons, Form Toonworks, Greatoons Creative Studio, Holy Cow! Animation, Imagineasia, Inc., Living Room Animation Studios Inc., Page 333

334 Mowelfund Film Institute, NGC Animation, Level Up! Inc., Onlinks Media Co., Philippine Animation Studio, Inc. (PASI), Peg Bar Animation, Quanxi Communications Inc., Q. Motion Animation Corporation, Spinweb Inc., Studio Zoo, Inc., TOEI Animation, Tooncity Animation Inc., Toontime Animation Studio, Top Draw Animation, Top Peg Animation & Creative Studio, Trade Winds Animation Inc. Taiwan CGCG INC., DIGIMAX,INC., Diginoise Media Lab LTD, Digital Frontier Technology Corporation, Green Paddy Animation Studio, Hong Ying Universe Co.,LTD, Interserv International Inc., Jamar Idea Production Co., LTD., Lead Entertainment Co., Ltd, Lichi International Co. Ltd., New Information Tech, Enterprise Co., Ltd, Oceansky CG Corp., SMEC Media & Entertainment Corporation, Spring House Entertainment Inc., Tvbean Co.,Ltd., Wang Film Productions Co., Ltd. Japan Spectrum Animation Studio, Pacific Animation Corp., Studio Mook, Miyuki Production, Tama Production, Sunrise, Tatsunoko Production, Toei Doga, Kk C&D Asia, Ashi Production, Madhouse, Topcraft, Mushi Production, Tms- Telecom, Artmic, Studio Junio, Teleimage, Telescreen, Visual Page 334

335 80, Studio 4 C, Eiken, Animal House, Studio Cockpit, Doga Kobo Singapore 25 Frames, 7 Cans Productions, Adwerkz Media Pte Ltd, AfterGlow Animations, Ampleton Consulting Pte Ltd, Animasia, Animata Productions, Animation Arts Pte Ltd, Animation Design Effects Centre Pte. Ltd., Animatrix, AnyMotion Pte Ltd, Big Communications Pte Ltd, Character Republic, Chithrommedia, Chua Interactive, ColorMagic Pte Ltd, Concept Box (S) Pte Ltd, Cowboy Water Design, Crest Communication (Singapore) Pte Ltd, Digital Flying Pig.com, Dune Communications, E Pictures Pte Ltd, E T Graphics Pte Ltd, Editude Post Production Pte Ltd, Envistar Animation Studio Pte Ltd, Flip! Creatives Pte Ltd, Frames Production Singapore Pte Ltd, Garman Animation Studios, ID Imaging, IMMG Pte Ltd, Infinite Frameworks Pte Ltd, Intense Animation Studio, Intergraph Systems South East Asia Pte. Ltd., Journey Promotions Pte. Ltd., Lasalle-SIA, Lights & Shadows Pte Ltd, Liquidfire Studio, Looking Glass Entertainment, Media Mechanics Pte Ltd, Multimedia People Pte Ltd, Quattro Communication (S) Pte Ltd, Riard Media Pte Ltd, Sapfx (Asia Pacific) Pte Ltd, Scrawl Studios Pte. Ltd., Talentx Pte Ltd, Page 335

336 Tigon Media Pte Ltd, Touchtoons Animation Studio, Vasunas Pte Ltd, VHQ, Voiceovers Unlimited Pte Ltd, Wishing Well The Imaging Station Pte Ltd, Yolk Page 336

337 Animation Industry in Japan Key facts There are more than 440 animation production companies in Japan, 65% of which are based out of Tokyo. About 23% percent of the entire printed materials in Japan are comics and about 2200 animated television programs are produced every year. In Japan, more than 250 animation programs per week are aired on television. About 60% of TV animations viewed by children around the world are made in Japan. The Japanese animation industry is growing at about 10% per year. Leading Japanese animation production companies include Studio Ghibli, Gonzo Digimation Holding, Toei Animation, Nippon Animation, Production I.G etc. Japan has won global acclaim for the originality and quality of its animation, sometimes referred to as Japanimation. The Japanese term anime has even entered the English vocabulary. Animation (called anime) and comic books (manga) are two of the mainstream forms of popular culture in Japan. To take only a few examples: about 23% percent of the entire printed materials in Japan are reportedly comics; more than 250 animation programs per week are aired on television; average 1700 (short or feature length) animation films are produced per year and about 2200 animated television programs produced per year in other words, average 6 new works produced everyday which makes Japan a number one producer of animated video and television programs that comprise about 65% of the world production. Approximately 60% of TV animations viewed by children around the world are said to be made in Japan. Japan has approximately 440 animation production companies, 350 or 80% of which are operating in Tokyo. The animation-related market is estimated to be worth 1 trillion yen, including the production of animated TV shows / movies, sales of video titles, and sales of merchandize featuring animation characters. The popularity of Japanese animation (anime, hereafter) has been accordingly phenomenal in Japan since the inception of the medium as a practically postwar popular cultural trend and has ever increased with the sophistication of its technical and literary languages. It is thus no wonder that tickets sold for anime films are estimated to reach about half the entire annual box office sales in Japan and that Hayao Miyazaki s 1997 record- Page 337

338 breaking hit anime Princess Mononoke remains as the highest-grossing Japanese film to date. Anime, transcends age and cultural barriers. The genre appeals to audiences around the world. Millions of children watch Japanese cartoons on TV, while sci-fi anime feature films like Ghost in the Shell appeal not only to general audiences, but also to the cyberpunk generation and art movie fans. When the New York Museum of Modern Art sneak-previewed the feature-length Japanese anime Howl s Moving Castle in 2005, fans lined up 10 hours before show time to claim a seat. The Internet is a hotbed of anime devotees. The genre deals with romance, mystery, science fiction, and nonfiction. The stories are usually character-driven, making it easy to identify with the characters. Even titles targeting children do not shy away from death, spirituality, and existential issues. Anime has cuddly characters, but rarely talking animals common in Western cartoons. Rather than stories that lead to happy endings, anime lets the audience ponder the distinction between good and evil, human and machine, and male and female (anime characters tend to have an androgynous quality). The stories are played out in fantastic settings and depicted in a visually compelling style, which explains why the genre also appeals to adults. What is more interesting about anime is its border-crossing appeal that has attracted numerous fans in many different regions of the world. While it is an intriguing question worth a separate critical investigation how such a local cultural development could translate to broad international audiences, it can still be said that anime texts travel abroad across the national-cultural boundaries as important media commodities. Anime has induced lively fan cultures all over the world, most noticeably in South Page 338

339 Korea and Taiwan, the former colonies of the Japanese Empire, yet also as widely as in other Asian regions like Hong Kong, Thailand, other South Asian countries, in both Eastern and Western European countries and equally in North and South Americas including the United States. To take just one example, in Italy, the popularity of Yumiko Igarashi s comic and animated series Candy Candy was so enormous in the 1980s that, after the end of the original Japanese series, Italian producers had to hire local artists to continue the series. However, the global quality of anime does not simply lie in the scope of international fan cultures. More significantly, the process of anime production reveals its status as a global media product, through its close connection to the transnational capital and the Third World labor. Firstly, we need to think about the magnitude of the capital and industry involved in the production of anime. As a lucrative commodity produced in a highly developed media industry, anime can be more fully understood within the web of influences organized according to the successful media mix strategy. That is, there has formed a full circle of related industries around anime in Japan: in many cases, it starts, although not necessarily in a chronological sense, from the original manga (comic book) series; then the manga is adapted to animation series in television or film or both formats; also video production of the animated series follows, while video series (called OAV, original animated video or OVA, original video animation), are often directly created from the original manga, too; then almost simultaneously, various goods related to the manga and anime, including original soundtrack CDs, paperback books, fanzines, and numerous character merchandises like action figures, toys, stationery goods, Page 339

340 confectionary products, etc., are distributed in the market; also, the release of computer games based on the manga and anime follows, which in turn increases the sales of the original manga series, magazines, books and videos and encourages the creation of extended editions of the original manga and anime. These close relations among several different cultural and commercial industries have been apparently very functional on a business level, contributing to inaugurating such Japanese multinationals such as Sony and Nintendo as notable players in global economy. Yet, at the same time, the media mix policy has been very significant in terms of the dialogic influences on all the forms and contents of the media products under the synergistic effect of the circle. The full-fledged export of anime titles began in the 1970s. Astro Boy gained popularity in Asia and the United States, while Mazinger Z was a hit in Europe. Non-Japanese have always been a part of the hard core of anime fans. However, it was Pikachu and his fellow monsters that really pushed Japanese animation into the mainstream of global entertainment. Pocket Monsters (Pokemon) was anime's first major commercial success outside Japan. Pokemon: The First Movie, which was released at the end of 1999, was a number-one box office smash in the United States, and the Pokemon TV series was eventually broadcast in more than 60 countries. Anime has been a major component of entertainment in Japan since World War II. Members of the "first anime generation," born in the late 1950s and 1960s, absorbed television anime as children and, now in their thirties and forties, are passing on their enthusiasm to their own children. Roughly 60 anime programs are broadcast on Japanese TV every week, not Page 340

341 all of them aimed at children; many of them are made for adult audiences. The value of the domestic market for anime products, including films, videos, and character merchandise, has been estimated at US$ 25 billion, with foreign sales boosting the figure closer to US$ 83.3 billion by some estimates. Key Trends In 2003, Spirited Away produced by Hayao Miyazaki won an Oscar for best animated film at the seventy-fifth annual Academy Awards; the previous year, it had won the Golden Bear for Best Film at the Berlin International Film Festival. Such achievements have affirmed the high standing that Japanese anime enjoys internationally and suggest that it has the potential to be an even bigger business than video games. The animated feature film Howl s Moving Castle, directed by Hayao Miyazaki, grossed nearly US $ 4.7 million. Other prominent movies include Detective Conan: Strategy Above the Depths, Pocket Monsters Mew and the Wave Guiding Hero: Lucario, and Crayon Shin-chan: Buri Buri 3 Minutes Charge. The 2008 release by Hayao Miyazaki, Ponyo on a Cliff by the Sea grossed more than US $ 160 million. Other prominent releases include Paprika, One Piece Movie: The Desert Princess and the Pirates Adventures in Alabasta, Tekkon Kinkreet, Genghis Kahn: To the Ends of the Earth and Sea, Vexille, Naruto Shippūden 2: Bonds, Bleach the Movie: The DiamondDust Rebellion, Another Hyōrinmaru, Evangelion: 1.0 You Are (Not) Alone. The industry operates in a collaborative manner. In the planning stage a number of firms from different fields, such as TV broadcasters, advertising agencies, toy companies and anime production companies, form Page 341

342 production committees for joint planning. In the case of cartoons, toy companies are involved from the planning stage as sponsors, because the development of branded characters is an essential component of the business. Production is carried out by anime production companies. In addition to the original contractor, numerous production companies are involved as subcontractors. Companies that turn out full-length feature films, such as Studio Ghibli (Spirited Away), are the exception, as most companies produce cartoons for TV. Although Japanese anime is gaining international fame, the industry is still restrained by relatively small production budgets and a shortage of animators. The production budget for a 30-minute cartoon is generally less than 10 million. TV anime is unprofitable on its own in most cases, so production companies must seek profits from corollary business, including videos/dvds and brandedcharacter goods. The most popular Japanese animation movies of all time are listed in Table 30. Page 342

343 TABLE 30: MOST POPULAR JAPANESE ANIMATION MOVIES 1. Pokemon: The First Movie 2. Pokemon: The Movie Yu-Gi-Oh! The Movie 4. Pokemon 3: The Movie 5. Spirited Away 6. Digimon: The Movie 7. Howl's Moving Castle 8. Princess Mononoke 9. Pokemon 4Ever 10. Ghost in the Shell 2: Innocence 11. Cowboy Bebop 12. Paprika 13. Pokemon Heroes Page 343

344 14. Metropolis (2002) 15. Akira 16. Ghost in the Shell 17. Steamboy 18. Vampire Hunter D: Blood Lust 19. Tokyo Godfathers 20. Appleseed 21. Perfect Blue 22. Jin-Roh: The Wolf Brigade 23. Escaflowne: The Movie 24. Sky Blue 25. Wings of Honneamise 26. Millennium Actress 27. Spriggan Page 344

345 28. Robot Carnival 29. One Piece Movie: The Desert Princess and the Pirates Adventures in Alabasta 30. Tekkon Kinkreet 31. Genghis Kahn: To the Ends of the Earth and Sea 32. Vexille Page 345

346 MARKET OVERVIEW The Japanese anime market comprises three main sectors: animated films for theaters, cartoons for television, and videocassettes and DVDs of the works from the first two sectors. According to the Media Development Research Institute, the size of the Japanese animation market was billion yen (about US$2.026 billion) in This is driven by the movies such as Tales from Earthsea, Pokemon and Doraemon as well as the increase in television anime titles for the growth. Earlier successes of the industry include the globally acclaimed Spirited Away, which brought in about US$345 million at domestic box offices. But these figures do not account for the entire market, because the business of branded-character merchandising, including the licensing of rights to use anime characters and sales of toy figures and other goods using characters images, is huge. If these categories are included, the total anime market is believed to be well in excess of US$20 billion in annual sales. The domestic anime industry has well-established arrangements for production, but it is visibly lacking in know-how when it comes to domestic and international distribution, licensing and other rights, as well as international business practices. COLLABORATION BETWEEN JAPANESE AND OVERSEAS STUDIOS Toei Animation has entered into an agreement with a U.S. agency to sell several of its cartoon series, including Saint Seiya, One Piece and Ojamajo Doremi, to American broadcasters, and these shows are now being aired in North America. Producers of cartoons will be working to tap the popularity of Japanese anime in foreign markets by creating series designed from the start to be broadcast initially overseas by, for example, adjusting the Page 346

347 contents to appeal to American viewers. Sony Pictures Entertainment s cartoon series Astro Boy/Tetsuwan Atom, was launched on Japanese TV in 2003 by the Fuji Television Network and on U.S. TV in the same year on Kids WB (part of the WB Television Network operated by Warner Bros. Entertainment). The series has been produced with global distribution in mind, so extreme scenes, religious content and other elements that might interfere with broadcasting in some countries have been eliminated from the start. GDH has teamed up with a French animation company to produce 26 cartoon episodes for the European market. The French are writing the scenarios and five of their production crew members have come to Japan to produce the cartoons jointly in GDH s studio. The plan is to approach Japanese broadcasters, in addition to showing the cartoons in Europe. Nippon Animation s Hunter X Hunter is already being shown in three Asian markets outside Japan and the company has licensed broadcast rights in countries including France, Italy, Mexico and Spain. Plans include possible broadcasts in Germany, Portugal and the United States, along with arrangements for video sales/rentals and licensing of branded-character goods. Nippon Animation and the government-operated China Central Television, that country s largest broadcaster, have entered into a partnership for the joint production of TV programs, with the work shared between the Japanese and Chinese sides. Nippon Animation hopes to use this as a springboard for developing its business in the Chinese market, where the broadcasting infrastructure has been improving. The first joint project, based on Les Misérables, will be broadcast in China and major Japanese broadcasters will also be approached. The two organizations will work on additional anime works based on classics and will in principle Page 347

348 share copyrights equally. Apart from Chinese and Japanese broadcasts, they intend to take their works to Cannes and elsewhere to seek deals with broadcasters in other markets. Internet distribution picks up speed Toei Animation has launched an online service called Toei Tokusatsu Anime Archives, which allows users to download works like Fist of the North Star (Hokuto no Ken) on a per episode basis. This is an interesting example of secondary use of anime content. Meanwhile, in the field of branded-character merchandising, Bandai is marketing characters from at least four cartoons, including Teen Titans and Saint Saiya. Hal Film Maker is developing the Chinese market for anime-related products. Working through a planning company set up in Dalian by its Chinese subsidiary, it will supply know-how and manage copyrights to earn licensing fees based on a percentage of local sales for cartoon videos, music software and branded-character products. It also plans to undertake activities such as character design, story proposals and marketing. OUTSOURCING TO OTHER COUNTRIES A growing trend has been the outsourcing of anime production to other countries. For example, original drawings are sent in digital format to production offices in countries like China and South Korea, where the drawings are completed, colored and then sent back to Japan. Toei Animation has about 130 people working in a studio in the Philippines, and even some of the work on Studio Ghibli s Spirited Away was contracted out to a South Korean firm. The common pattern nowadays is to handle key work such as planning and direction in Japan, but outsource more routine operations such as animating and coloring. Traditionally, however, Japanese animators developed their basic skills performing these routine jobs, so Page 348

349 some people are expressing concern that outsourcing will eventually sap Japan s ability to produce anime domestically. The labor intensiveness in the production of animated materials is hardly unique to the Japanese case: whether it is actually hand-painted or mechanically-generated, (cell) animation in general entails the painstaking procedure of production in which thousands of animation cells are processed through some kinds of human labor practice. What is rather specific to Japanese animation is, though, that it is produced within a highly developed studio system with a rigorously rationalized division of labor. Hence, it is not surprising that because of the high labor costs in Japan, since the 1980s only preproduction (script, storyboard, character design, etc.) and post-production (film editing, color timing, sound, etc.) of anime have been done in Japan and other jobs of the production such as coloring, inking, painting, background, and inbetween animation have been done in countries such as Korea, Taiwan and Hong Kong. Understandably, the rationalization of production and recruitment of the inexpensive Asian labor in animation production was first started by Hollywood studios since the 1960s, which have established their production facilities as many regions as Japan, South Korea, Taiwan, the Philippines, Malaysia, Singapore, Vietnam, Thailand, India, Indonesia, China, and maintained them to the extent that about 90% of the American television animation is still produced in Asia The South Korean case appears to be particularly interesting to think about in examining anime s relation to the Third World labor. South Korea is the third largest producer of animation worldwide, following Japan and the United States: yet, 95% of its output is manufactured by foreign order Page 349

350 and none of the 400 animation studios in Korea is fully committed to making domestic shows. Around 1995, the Korean government, recognizing the commercial potential of animation, began to support the animation industry in order to increase the domestic production, by granting a number of incentives, such as a lower tax base, low interest loans, and a viable infrastructure. As a result, many studios, formerly produced foreign works, turned domestic, bringing out about six features and numerous shorts that deal with Korean folklore and traditional cultures. However, by the late 1990s, the boom quietened down as the international markets for Korean domestic productions were hard to find and as the interests of local audiences turned out to be too limited to continue the domestic production. SUCCESSFUL BUSINESS MODELS Considerable attention is now focused on the field of branded-character merchandising, which enables the production companies, etc. that invest in anime projects to earn fees from the licensing of anime characters. Licensees include a wide range of companies in industries including finance, toys, automobiles, aviation and food. Typical uses include the adoption of characters as corporate/product mascots and the creation of toy figures of the characters themselves. To the extent that the anime (films or cartoons) helps to promote these secondary products, the value of the anime rises. It has become increasingly common for advertising agencies to work as intermediaries to arrange for toymakers, game software companies and other sponsors to participate from the planning stage. During the 1980s and 1990s, Japanese anime established a leading position in the global market. Early examples of exported anime were Astro Page 350

351 Boy, which went on the air in the United States in 1963, and A Dog of Flanders, which was an early export to the European market. In both cases, local viewers accepted the works without thinking of them as Japanese. The Doraemon cartoon series, meanwhile, has become a popular children s program in a number of Asian countries. Popular domestic cartoon series like Sailor Moon and Dragon Ball were broadcast in Europe and won many fans, while Akira, Gundam and works from Studio Ghibli drew favorable attention in the United States. In 1998, the video release of the film Ghost in the Shell topped the U.S. video sales charts. It is estimated that about 60% of the cartoons broadcast around the world are made in Japan. CHALLENGES Japan s extreme shortage of people familiar with international laws concerning intellectual property rights is keeping the Japanese anime industry from earning larger profits from exports. Ordinarily, when rights to sell visual content are traded in countries like the United States, a minimum guarantee is set for the payment by the company acquiring the rights and an agreement is made on payments to be made if sales exceed the minimum. In order for the Japanese side to deal on equal terms with U.S. and other foreign counterparts, people with the requisite know-how are needed to help ensure that overseas sales are monitored accurately and to avoid entering into contracts with unfavorable terms. The industry also needs to develop marketing skills to maximize the profit potential of its creative content. Bandai Visual, which handles international distribution rights for anime and other visual content, estimates that it is losing tens of millions of yen each year in uncollected royalties from the overseas market, and it plans to drastically increase its Page 351

352 international market revenues by protecting copyrights more vigorously. It now employs European-based Japanese who are familiar with the local situation to keep close track of sales and actively exercise the company s right to audit partners with regard to products that have topped their minimum guarantees. In the area of joint production as well, up to now few Japanese companies have been able to deal with U.S. counterparts on an even footing. Instead, they have tended to play the role of subcontractors. Correcting this situation requires a combination of planning prowess and negotiating ability. A company called Production I.G, which has produced a number of works that have become popular overseas, such as Ghost in the Shell, has hired lawyers and accountants familiar with U.S. business practices and law to work at its U.S. subsidiary and handle distribution sales contracts, joint production and other legal matters. In some Asian countries, meanwhile, widespread pirating of videos and other entertainment content is presenting a major hurdle for business development in these markets. The other challenges faced by the industry include: Animation businesses in South Korea, China, etc. are making remarkable progress with government support. The industry lacks the structure for developing creators, IT technicians and other human resources. Japan falls behind the United States in adopting digital technologies in animations. Japan falls behind Europe and the U.S. in the development of financial systems for financing the production of animated TV shows and movies. Page 352

353 Copyright situations have created complicated business practices that hinder business development. The industry suffers the absence of funds and producers capable of producing major works on the international level, and the underdevelopment of systems for supporting joint international projects. Anime Exports About 25 Japanese cartoons were being aired in the United States. Exports of anime from Japan are believed to be going to countries all over the globe. On the import side, Europe and the United States are the main sources of foreign anime seen in Japan. The first example of a Japanese anime creation that achieved a major success overseas was Pokémon (short for Pocket Monsters ), which started out as a Nintendo game and was subsequently turned into a series of cartoons and movies. Box office revenues from the three Pokémon films released globally clocked revenues of over US $ 364 million. If sales of related products are included, it is estimated that Pokémon has earned some US$25 billion around the world. What is particularly notable about the Pokémon phenomenon is the huge size of its branded-character business, which has brought home the importance of anime as a medium for promoting characters to consumers. In the past, the usual pattern was to offer animated works to the foreign market after they had achieved a certain degree of success in Japan. An increasing number of works are getting produced with an eye on potential overseas audiences. Also, while exported works used to be predominantly cartoons for children or serious anime fans, the success of Spirited Away has encouraged the industry to export feature films with a high level of artistic content. Japan Broadcasting Corporation (NHK) is airing Hinotori Page 353

354 (Phoenix) a cartoon based on a manga (comic book) series created by Osamu Tezuka which it plans to market internationally. Foreign companies are showing a high level of interest in Japanese anime. The Disney Group, which has a subsidiary in Japan to distribute Disney works, has established a department within the subsidiary to purchase Japanese content for airing on its own network, which broadcasts in 54 countries. It is also considering collaborations with Japanese partners to produce films and anime. Another sign of foreign interest is investments in Japanese anime projects by overseas TV broadcasters and distributors, with the foreign investors participating from the planning stage. There are also cases where works produced through Japanese international collaboration are broadcast in both countries. Foreign production companies and others have also made equity investments in the Japanese anime production industry. Even Hollywood is showing its growing appreciation of Japanese anime. U.S. moviemakers have acquired the rights to make live movie versions of Dragon Ball, Akira and Lupin III, and the Wachowski brothers have asked a number of Japanese directors to create an animated version of their hit film The Matrix. The presentation of an Oscar to Spirited Away has provided an extra boost to Japanese anime s international image. OVERSEAS INFLUENCE OF ANIME American companies are cashing in on the anime boom. The Houston-based Anime Network is the first channel in North America solely dedicated to anime. Cartoon Network has been showing anime since the 1990s, and is producing Japanese-style animations in a specially constructed Burbank studio. Disney, DreamWorks, and Pixar have alliances with Japan s anime industry ranging from distribution to co-production deals. On average, six Page 354

355 anime conventions are held in North America every month, with the larger meetings attracting more than 20,000 people. Anime has become an international generic term for Japanese animation. The word is also used in Korea, Taiwan, and other countries producing animation in the Japanese style. Japan has become a global trendsetter for animation. But the Japanese industry is not without its challengers. Korean players look set to catch up with their Japanese counterparts. Korean universities offer more than 30 animation courses, and the Korean government actively supports the animation industry with subsidies. China and India are emerging animation superpowers. The region is also attracting US players. In 2005, Lucasfilm opened Lucasfilm Animation in Singapore. The studio employs over 300 people from more than 40 countries and is equipped with the latest technological equipment. Globally Successful Japanese Animes Ghost in the Shell directed by Manabu Oshii ranked at the top of video sales in the United States in A sequel called Innocence will be released in theaters in the United States and Europe this year. DreamWorks SKG, a U.S.-based film production and distribution company, will distribute the film before it is released in Japan. The anime feature film Yu-Gi-Oh! based on a Japanese cartoon series is also slated for release in the United States and Warner Bros. Pictures plans to show it in over 3,000 American theaters. This is quite a change from the days when Pokémon was released in Japan in 1998, at which point there were no definite plans for overseas screening. Gonzo Digimation Holding is working on an animated film entitled Spirit for release this year. As the firm s first feature film, it was conceived with overseas distribution in mind. GDH has shared its production processes Page 355

356 with its two U.S. distributors from the initial stage and has been receiving advice about how to adapt the work for U.S. audiences. THE POKEMON PHENOMENON Pokemon, an abbreviation for poket monsters, originally started in Japan in 1996 as a computer game for Nintendo s Game Boy and has been quickly morphed into a global multimedia phenomenon of comic books, animated television shows, movies and videos, trading card games, collectibles and toys. The whole series revolves around the adventures of a twelve year old boy who aspires to be a great Pokemon master, who trains various kinds of Pokemon (biological creatures with supernatural powers of an unknown origin) to defeat other Pokemon trainers and become a higher master. Logically, the overarching theme of the series and games is to collect all the Pokemon, as is revealed in the consistently repeated catch phrase of the series, Gotta Catch em All. This phrase can be meaningful in a viewer s real life too, since a viewer/player can also participate in the imaginary competition by consuming Pokemon products and become a trainer as in the diegesis, who captures each different Pokemon and uses it to advance to higher levels of mastery. Significantly enough, the most accessible, if not the only, way for a viewer to collect them all and become a great master is to spend more money. In this sense, it is no wonder and quite fitting that the detailed information on the several hundred kinds of Pokemon concerning their names, fighting abilities, special features, various evolutionary stages, etc. requires such a remarkable amount of expertise from the collectors. For, to collect more and gain more knowledge, one needs to consume more of various products including books, cards, videos, and computer softwares. Page 356

357 Therefore, the Pokemon series clearly exemplifies the way in which the whole circle of media products function in close relations with each other, utilizing smartly designed themes and narratives that motivate and reward more consumption. Further, we can find the influence of related commercial media on the Pokemon anime, not merely in its narrative or thematic concerns, but in its formal techniques as well. As is seen in the example of Pokemon the First Movie, which was commercially successful in both domestic and international markets, yet heavily criticized (mainly by adult viewers) for its lack of narrative, the Pokemon anime often has a highly fragmented narrative line, with each fragment only loosely connected to each other without any strong causality. This rhetoric, although it may bore uninitiated viewers, can directly appeal to regular audiences, as home shopping TV shows do, presenting each product more powerfully with the sensory stimulation of excessively repeated visuals and utilizing narrative devises only secondarily. At the same time, we can find a remarkable parallel between the formal strategies of the Pokemon anime and those of its original computer games. To name just a few, the battle sequences in the anime seems to derive directly from the computer game format, with divided frames, stylized action choreography, and conventional musical accompaniments. Similarly, the often implosive, schizophrenic sensory appeals of the Pokemon series, which constantly distract viewers from the experience of any coherent narrativity, could be explained in terms of the influences of its original computer games. Also, the fluid identities of characters in Pokemon can be said to originate from the computer game genre, in which we can pick any pair of fighters for battles: therefore, there cannot exist an absolute enemy Page 357

358 or villain, as is exemplified by the ambiguously evil characters, Team Rockets in Pokemon. As is discussed so far with the example of Pokemon, the circulation of anime is closely interconnected with varied kinds of media and other consumer industries that function uniformly according to the logic of the transnational capital. Thus, an anime text could be best understood only when we take into consideration its status as a media product of global economy which determines not just production and distribution of anime, but affects its communicative dimensions as well. Japanese Anime Production Models Most Japanese anime studios have computerized to speed up 2D production. The continuing focus on 2D is partly due to lower production cost and partly aesthetic. Several Japanese studios are trying their hand at blending 2D and 3D, and some animation artists are developing a new visual style. But for now, 2D remains the core of Japan s animation industry. With traditional animation production, the lead animator draws the main characters and keyframes on paper, artists or illustrators draw the images and the in-betweens (a sequence of drawings that suggest movement when shown in rapid succession), assistants transfer the drawings to celluloid, and colorists color the images. Camera operators mount the cels in front of background scenes and photograph them one at a time. A made-for-tv animation typically requires 30 different cels for each second of animation. Most Western animation studios have replaced pencil and paper with computers and digital pen, but Japanese animators believe the handmade drawings convey emotional nuance difficult to duplicate with digital tools. Page 358

359 Hardcore anime fans claim to recognize the specific signature of anime artists in the contours of their character drawings. The key problems in the Japanese animation industry are cost pressures and a growing shortage of animators (the better-paying gaming industry competes for talent). Japanese studios are responding by computerizing all or part of the production. While most characters are still drawn by hand, studios now use computer graphics software to draw backgrounds and mechanical objects like robots, cars, and spaceships. Handmade character drawings are scanned into the computer and digitally colored. Artists use animation software to combine the hand-drawn characters with digitally drawn objects and backgrounds. Computers not only speed up production, they also offer greater control and versatility. Animators can rapidly adjust color schemes, change backgrounds, and add a greater variety of special effects like whirling dust, explosions, and vibrations. PROMINENCE OF 2D Despite computerization of production, Japanese animation has retained its 2D feel. However, a growing number of studios are incorporating 3D CG in their anime productions. Among the pioneers is Tokyo-based Production I.G., maker of Ghost in the Shell and its sequel Ghost in the Shell: Innocence. The movies, based on a 1980s manga series from the influential manga author Masamune Shirow, have greatly increased the international profile of anime. Critics in the US and Europe used superlatives to praise the movie. Shirow s Ghost in the Shell, not unlike William Gibson s Cybermancer, confronts the viewer with questions about what it means to Page 359

360 be human in an increasingly technological world. Ghost in the Shell GitS to its fans takes place in 2029, when people have cybernetic implants. Using 3D even while the aim is 2D animation has several benefits. 3D is a flexible data type. Models of robots, vehicles, and other objects can be created once, reused in a different scene, and shown from different vantage points. Three-dimensional CG also speeds keyframing, the task of creating movement in a scene. Instead of fixing an object s position, rotation, or scaling for each frame, 3D software interpolates the in-betweens from keyframes in a given scene. Three-dimensional software tends to offer a greater variety of special effects and techniques. Particle systems included in most high-end 3D software packages let users simulate and animate rain, fire, wind, and other natural movements. These tools can define the states and behavior for individual particles which can be anything from a single point to an object or groups of particles. Particle movement can be calculated by different parameters. Combining 3D objects with 2D animation is a special challenge in digital animation, but toon shading (or cel shading) technology makes this easier. A tool for non-photorealistic rendering, toon shading gives 3D CG objects an artistic, hand-drawn feeling. Computer game developers widely use this technique. Toon shading is not applied to the actual object, but is part of the rendering phase. The rendering engine only selects a few shades of each color for the object. To enhance its cartoon look, toon shading can accentuate the object s outline. Most 3D software programs include toon shaders, but they are also available as plug-ins. Toon shading helped Ghost in the Shell and Howl s Moving Castle to retain their 2D look despite inclusion of 3D components. Page 360

361 Future Trends New technologies are being introduced to further digitize the anime production process, such as computer-graphics software developed by Sega Enterprises and the University of Tokyo that runs on ordinary personal computers. And banks are finding new ways to provide funds to an industry they have traditionally been reluctant to lend to because of its lack of land or other tangible collateral assets. Securitization schemes where royalty income is considered an underlying asset and project finance designed to fund individual anime titles are among the other ideas being developed to help the industry to capitalize on its achievements so far. The anime industry can now also look to the government for help. Rapid progress in digital communications technology, such as broadband Internet connections and digital broadcasting, has alerted the government to anime's potential as high-quality multimedia content. In 1997 the then Ministry of International Trade and Industry launched a Digital Animation Study Group to conduct research on promoting the anime industry. These moves at the national level are being followed by local governments, such as the city of Tokyo, where 70% of all anime production takes place. The Tokyo International Anime Fair 21, held in February 2002, was the first international trade show for the Japanese animation business. Some 104 companies from Japan, France, South Korea, and the United States participated in the three-day event, which attracted over 50,000 visitors. Anime production companies, toy manufacturers, video-game makers, and comic-book publishers discussed business with foreign buyers, while entrepreneurs sought financial and management advice. Page 361

362 All in all, the spread of Japanese anime worldwide, the accolades it has received, and the measures that have been taken to ensure its continued success suggest that anime has a bright future both as an art and as an industry. Animation Studios in Japan In Japan there are a number of well established studios. The key among them are listed in Table 31. Page 362

363 TABLE 31: LEADING ANIMATION STUDIOS IN JAPAN Studio 1. A-1 Pictures 2. ACTAS Inc. 3. AIC (Anime International Company) 4. Ajia-Do (Asia-Do) 5. Animal House 6. Answer Studio 7. ARMS Studio 8. Artland Animation Studio 9. Artmic 10. Ashi Production 11. Bee Train 12. Bones 13. Digital Frontier 14. Doga Kobo 15. Eiken 16. Gainax Page 363

364 17. Gonzo Studios 18. Group TAC 19. Hal Film Maker 20. IMAGIN 21. J.C. Staff 22. Kk C&D Asia 23. Kyoto Animation 24. Madhouse 25. Magic Bus 26. Manglobe 27. Milky Cartoon 28. Miyuki Production 29. Mushi Production 30. Nippon Animation 31. Nomad Animation Studio 32. OB Planning 33. OLM (Oriental Light and Magic) 34. P.A. Works (Progressive Animation) 35. Pacific Animation Corp. Page 364

365 36. Picture Magic 37. Production I.G 38. RADIX 39. Satelight 40. Shin-ei Animation 41. Spectrum Animation Studio 42. Studio 4 C 43. Studio Cockpit 44. Studio Comet 45. Studio Deen 46. Studio Gallop 47. Studio Ghibli 48. Studio Hibari 49. Studio Junio 50. Studio Mook 51. Studio Pierrot 52. Sunrise 53. Tama Production 54. Tatsunoko Production Page 365

366 55. Teleimage 56. Telescreen 57. Tms-Telecom 58. TNK 59. Toei Animation 60. Tokyo Movie Shinsha 61. Topcraft 62. Trans Arts 63. Trinet Entertainment 64. Ufotable 65. Vega Entertainment 66. Viewworks 67. Visual Xebec 69. Yumeta Page 366

367 Animation Industry in Korea Key facts South Korea is the third largest producer of animation globally. There are about 450 plus animation studios in Korea. Korea is one of the largest suppliers of television animation in the world. Korean studios have the capability to produce over 1200 episodes (22 minutes per episode). About 95% of South Korea s animation content is outsourced from foreign animation studios. The country is the key outsourcing destination for North American, European, and Japanese studios. The industry is undergoing a change with increasing focus on producing local content. The Korean animation industry is growing at the rate of between 8-12% YoY. Majority of the Korean animation industry is located around Seoul. The leading studios in Korea are Sunwoo, Seoul Animation, Hahn Shin Corporation, Dongwoo Animation, Tooniverse, Saerom, Daiwon, AKOM etc. South Korea is the third largest producer of animation globally. About 95% of its animation content is outsourced from foreign animation studios. There are about 450 plus animation studios in Korea producing animation content. Korea is one of the largest suppliers of television animation in the world. Korean studios have the capability to produce over 1200 episodes (each episode running into 22 minutes). In Korea, every year, about 30 animated TV series of 26 one-half hour episodes and four or five feature-length films are made, increasingly as cooperative ventures and with overseas sales in mind. Korea has been an important animation country for more than 30 years, mainly as an overseas producer for North American, European, and Japanese studios. Shortly before and during this time original works were made, including the first Korean animated feature Hong Gil Dong in 1967, but at a sporadic pace. The South Korean animation industry has traditionally been functioning under the shadow of animations from foreign countries such as Japan. The propellant for the industry was a 1994 government report showing animation (mostly for hire) to be Korea's top cultural product export. Immediately, the government primed animation studios with many incentives changing the industry's status from service to manufacturing (triggering a 20% tax break), launching the Seoul International Cartoon and Animation Festival (SICAF), and inaugurating the annual Korean animation awards, all in Results were equally swift with the release of five feature-length films and the creation of a 24-hour cartoon cable network, some animation schools, additional festivals, and a slick animation Page 367

368 periodical, Animatoon. Another factor which has influenced the industry s growth has been the emergence of popular live-action Korean films. The few animation features produced in Korea during the 1990s have had trouble securing wide theatrical releases, despite the wide popularity of animated Hollywood films. A second metamorphosis occurred in 1997, when the three major US TV networks quit hiring out production work to Korea and after the economic debacle that hit Korea and most of Asia that year. The government again came to the rescue of animation, supporting and promoting it as a national strategic industry. Animation was listed as part of culture contents technology, one of six designated high-tech fields for the future. To coordinate cultural contents, the Korean Culture and Contents Agency (KOCCA) was set up in 1997 under the Ministry of Culture & Tourism to handle animation, comics, film, television, music, and games. The national government's financial support spurred local governments and the private sector to get involved with animation. Seoul authorities fully support the multi-purpose Seoul Animation Center with its training academy, museum, libraries, theatres, exhibition halls, festivals, and incentive award programs for animators. Bucheon and Chunchon City officials have offered help for office rent and production costs to animation studios in their provinces; Bucheon also sponsors the Bucheon Cartoon Information Center, Korean Comics Museum, and annual Bucheon International Comics Festival. Development and professionalization of animation proceeded at breakneck speed after 1997, with the establishment of the alreadymentioned animation and cartoon centers, museums, and libraries in Seoul Page 368

369 and Bucheon; about 150 university, college, and high school animation and cartoon schools and departments; various animation-oriented agencies in the ministries of Cultural & Tourism, Telecommunications, and Energy & Resources, and professional associations. Emergence of educational animation programs has been extraordinary; in 1994, only one existed at Kongju National Junior College. With the dwindling of overseas production work, the industry is obviously still too small to absorb all graduates, many entering digital graphics fields instead. Yet, the rush to start training programs has not subsided, even reaching to the high school level. Six high schools have fully developed animation curricula, some with state-of-the-art facilities. Among the associations are three dealing with character business under two government ministries and the Korean Animation Producers Association, Korean Animation Artists Association, Korean Cartoonists Association, Korean Alliance of Cartoonists, and Korean Society of Cartoon and Animation Studies. One of the results of the government's heavy subsidization of animation, and a government quota system enacted in 1998 requiring that 50 percent of TV animation be Korean, has been the phenomenal growth of television series. In 1999, only three different series were aired; the number doubled in 2000 and again a year later. Emergence of the Industry Korean animation began with a commercial for Lucky Toothpaste in In 1960 Dong Heon Shin and Chung produced a 6-minute animated short for AFKN (Armed Forces Korean Network) titled I am Water. This small educational film might be called the Genesis of Korean Animation. In the Page 369

370 following years some animation content production work was outsourced from Japan, which was mostly ink and paint work. In 1968, International Art Production, began re-doing a series of single reel shows featuring classic animation characters such as Betty Boop, Krazy Kat, Felix and even Porky Pig. These were being copied frame by frame and being reproduced in color. In the early years, the Korean animation studios did not always understand their Western clients. Key people who acted as pioneers in the industry include Steve Hahn, Tayk Kim, James Wang, Nelson Shin etc. The Korean market for animated series started in the mid to late Eighties when several animation studios were formed such as Daiwon, Sei Young, AKOM, Saerom etc. Korea's first animated feature, Hong Kil-dong was based on a popular folk tale about a man who steals from the rich to give to the poor, was a huge box-office hit when it was released during The film's director Shin Dong-hun based the movie on a four-year old comic strip drawn by his younger brother, assembling a team of 400 people to assist in the making of the film. Hong Kil-dong attracted over a million viewers in Korea, but huge expenses incurred in making the film resulted in low profits for the producers. In the early 1970s, the market for Korean animation rapidly shrank as the country was flooded with foreign animated films and TV shows. However by the mid-1970s, local animation in Korea received a new life with the introduction of theatrical screenings for children during the school holidays. What differentiated these animations from the elaborate Page 370

371 productions of the late 1960s was the fact that they were produced in a very inexpensive manner with a crew of only 5-6 people. The films' plots revolved around science fiction, anti-communist propaganda, and sports films, with many thematic elements lifted directly from Japanese films. Interestingly, Japanese films were banned at that time by the government in retaliation for Japan's 35-year colonization of Korea. Despite the degree of plagiarism involved, the films were praised for their technical skill and the creativity with which they were adapted to suit Korean culture. However by the mid-1980s the industry began to be criticized for a lack of creativity, and audiences turned to other forms of entertainment. Authorities have not been able to trace prints of Hong Kil-dong still unknown resulting in the fact that the oldest extant animated feature is now Hopi and Chadol (1967). In the earlier years, Korean animation has remained unpopular with local viewers, despite the efforts of business and government to revive the industry. However, during the 1990s a number of changes occurred, which set the stage for the regeneration of Korean animation. The most important change has been the establishment of South Korea as a center of outsourcing work for foreign animation studios. This was spearheaded by Nelson Shin, a Korean animator who moved to Hollywood in the 1970s and became a key figure at Warner Bros. and Marvel Comics. In 1985, Shin returned to Korea and established AKOM Production, which eventually acquired contracts for The Simpsons, Batman and other high-profile animated series from around the world. With AKOM eventually employing over 1000 animators and other companies forming to follow its lead, a new generation of manpower became highly trained in animation. Page 371

372 The year 1995 was the first year of planned animation and it proved to be extremely successful. The most important result was the formation of Dong Yang Group's Tooniverse. The laws governing Korean cable television demanded that 30% of programming be locally made, a mandate that was fulfilled by animation. As a result, along with co-ventures in such related industries as cartoons and games, the animation market started to take off. Another important change was the increase in the production of inhouse productions and the continuing challenge of making feature-length films. The number of animated features increased steadily (one each in 1993 and 1994, and three in both 1995 and 1996), as did the number of TV shows (five to six new series a year between 1994 and 1996). However, with the exception of 1996, most indigenous animated productions have not been successful. This shows that, despite Korea's demonstrated technical proficiency in animation, its productions lack the creativity characteristic of Korean cultural products. Developments in animation parallel the country's industrial policy, which is noted for government working hand-in-hand with the private sector. The most impressive example of this collaboration is SICAF, which has continuously attracted record attendance levels. The Korean government also sees animation as the most competitive industry for the 21st century. To demonstrate their confidence, it has provided tax breaks by changing animation's industrial classification and providing services to producers--two changes which clearly demonstrates the government's commitment to the field. Page 372

373 In 1994, the South Korean government officials recognised animation as a value-added product and granted the industry a number of incentives, such as a lower tax base, low-interest loans, and a viable infrastructure. Studios producing primarily foreign work increasingly turned domestic, bringing out about a number of features and numerous shorts and episodes depicting Korean folklore, humour, and culture. Functioning of Korean Animation Studios The animation studios in Seoul have developed a system that relies upon a strong cottage industry for many phases of production. From ink and paint to camera, there are players who would sub-contract jobs. Almost everyone freelances. A studio may be producing three separate series at the same time and not even have a layout department in house; it will all be outsourced to different entities. This system might be undesirable for an overseas studio, however it helps the studios in that it provides decentralized micromanagement within each phase of production supplied by each contractor. The larger studios producing the large shows maintain full in-studio departments but even they will avail themselves to freelance help when they need it. The end result is that Korea has developed a large and capable work force and a system in which their production efforts can be maximized when needed and downsized when slow. There has also been a trend to form network of studios with one large studio taking smaller studios under its wing and presenting the group as one large holding. This system is simply an extension of subcontracting but doing it openly and telling the client that the studio has control of the smaller studios doing their work. The only problem is that often times, the group is made up of totally separate business entities, with completely Page 373

374 different agendas, and the studio doing your work is not being paid a fee that will allow them to produce a solid show. The group is only held together by the main studio's ability to supply everyone shows at a reasonable fee. After a while, inevitably, the small studios grow unhappy with the large studio from which they receive work. The large studio naturally skims a percentage of the client's fees and the studio doing the work feels unappreciated and underpaid. During the 1990s, a number of world class studios emerged such as Sun Woo, Rough Draft Korea (RDK), Plus One, Koko, Saerom, Daiwon, AKOM etc. Together, these studios captured up to 30% of the world market in animation production. Changing Business Models The downsizing of the overseas animation industry directed most of the country's studios to switch to production of Korean television series as well as to diversify services. Other studios have also spread their services. Independence Digital Visual Effect Studio, with animation, commercial (commercials, music videos, etc.), film production and visual effects, research and development, and contents development divisions, has coproduced Wonderful Days, is finishing another feature Egg Cola, and does overseas animation, short films, TV series, commercials, and visual effects. Sunwoo, owners of four of Korea's largest digital and traditional animation studios, produces many works for Disney, Paramount, Klasky Csupo, and Nickelodeon, but has also brought out the Korean feature Mari Iyagi (My Beautiful Girl, Mari), which won the best animation award at 2003 Annecy International Film Festival, and other original shows, such as Space Hip Hop Duck, The Boogie Brothers, Dooley's Journey to the World, and others. Page 374

375 Additionally, Sunwoo makes online and mobile content, commercials, and live-action films. In line with this redirecting, Korean animators increasingly are seeking an overseas presence for their original works, through screenings at international festivals and competitions and at home-grown events such as SICAF, Puchon International Student Animation Festival (established 1999), seminars, and conferences. The Korean contingent at the MIP-TV conferences has been steadily growing over the years. Similarly, KOCCA has ensured active participation by Korean animation companies in Cannes. KOCCA has sponsored Korean comics exposition at the Angoulême International Comics Festival. Gradually, Korean animation is finding a niche in the international market, selling its product abroad and partnering with foreign producers and distributors. The 26-episode series Ki-Fighter Taerang, was exported to US distributor Crash Media Group at the highest price among all Korean animated films to be sold abroad. Wonderful Days, a groundbreaking feature because of its high US$ 12 million budget, about seven years of production, and mixture of traditional 2D, 3D computerized methods, miniatures, and live-action was sold to Spain's Manga Films to be released in France, Italy, England, and Germany. GOING BEYOND SUBCONTRACTING Korea's animation industry acquired the unique distinction of being dominated by feature films. Most American and Japanese TV series were being animated in Korea, but local broadcast outlets could not afford to make such shows themselves. The 1970s was the decade of subcontracting. Korean animators, because of their low wages and high skills, were in high Page 375

376 demand by American and Japanese producers. While subcontracting greatly expanded the Korean animation industry, it also gave it a bad name, as it seemed to demonstrate a lack of creativity and planning. Before the 1988 Seoul Olympics, as a result of cultural reform, there arose a demand for domestically made animated TV series. The demand was finally met when Korea's two major broadcasting stations, KBS and MBC, showed the first locally-made animated series: Wandering Gga Chi and Go On Running Hodori. The following year, Wonder Kiddy 2020 sparked interest on the international scene. While both subcontracting and domestic production continued to coexist after 1988, some studios began to enter into co-production deals with Japanese and American companies, enabling Korea to begin entering the international animation market. Disney's success in 1992, spurred a revival the following year of local animated features for the first time in seven years. INVESTMENTS BY INDUSTRIAL GROUPS The first factor in changing Korea's animation industry was that the country's major industrial companies started investing in Animation. For example, Jeiljedang invested in DreamWorks SKG and began to produce animation through JCOM. The Dong Yang Group established the Tooniverse cable channel, while such conglomerates such as Samsung and Hyundai also entering the fray. CHANGES IN INDUSTRY STRUCTURE During the 1970s and 1980s, Korea was looked upon as a source of cheap labor. When its work force became more expensive and Korean firms started to reduce focus on subcontracting work, these jobs started to shift to Southeast Asia and China. The industry adapted by evolving from sole Page 376

377 dependence on subcontracting to indigenous production. This resulted in development and planning departments being set up in the larger studios. SUCCESS IN OTHER COUNTRIES New expectations were set by the success of Disney animated features and the global spread of Japanese animation. Disney's success, in particular, allowed Korea to dream of animation as being a viable industry in the same league as automobiles and semiconductors. And it was the success of nearby Japan's animation industry that supported that dream. Current State of the Industry Of late a number of local animation companies have turned to producing their own works. Since the late 1990s, a large number of television series and feature films from these companies have entered production. At the same time, a large number of academic programs in animation began to appear throughout the 1990s, spurred on in part by the Korean government. Students and graduates from these programs have made large strides in establishing a wave of independent short animated features which are showcased at local film festivals such as the Indieforum and the Busan Asian Short Film Festival and other international festivals. In this manner, independent animation has established itself as a separate line of development from the films produced by large companies. One example of a high-profile feature film to emerge from this is My Beautiful Girl, Mari, released in January The film was supported by extensive advertising and opened in a larger number of screens. However the film s performance was below expectations, which ended the filmmakers' hopes of opening a new commercial path for Korean animation. This however did not stop the film from being chosen as the first Korean film ever to compete at the Page 377

378 Annecy International Animated Film Festival in France, the world's most prestigious festival for animation. At Annecy the film received critical acclaim from the critics and audience members and bagged the festival's Grand Prix. In Korea a standard animation series for television (30 minutes x 13 episodes) requires an investment of around US$2 million, and an animated feature film destined for theaters requires the same. However, most of the time, it has been difficult to earn back the original investment. GOVERNMENT SUPPORT In order to promote local animation productions, the Korean government has put in place regulations which ensure that the Broadcast Stations a show certain percentage of local animation titles. This resulted in the soloproduction as well as co-production of animation series with foreign companies. In all, over 150 series including TV series, feature animation film and Original Video Animation (OVA titles) were produced. Local studios are also producing animated series such as for 3D, clay animation, flash animation etc. using government grants and funds made available by investors. The Korea Film Commission has set up the "Animation Academy" for training producers. The Animation Academy focuses on animation preproduction. The Korea Film Commission has various financial support programs such as Low Rated Fund Support, Loan On Security, Translation & Print Production Support, Financing On Industry, Financial Supporting on Research. Korean Broadcasting Institute is financing fund for production of local creative animations. In addition, the Small & Medium Business Administration offers regulated loan program to finance local animation Page 378

379 product, for example Management Fund, Special Management fund, fund for promoting co-production with North Korea. The infrastructure support provided by the City of Seoul includes the fund for Cultivating Small & Medium Business and Trust Guarantee for production houses and operation of Seoul Venture Town and Seoul Animation Center. City of Chuncheon has established High-tech Venture Town for assisting small animation studios and organizing Chuncheon International Anitown Festival every year. City of Bucheon backs Bucheon International University Animation Festival. The Korean International Broadcasting Foundation (Arirang TV) also promotes export of Korean TV programs including animations. The Korean Ministry of Culture and Tourism is planning to promote and penetrate foreign markets with entertainment contents through the Korean Cultural Industry Promoting Center which was set up in The centre also offers training for animation specialists. Further, discovering that 98% of all exportable visual products from Korea was animation, the government granted the industry manufacturing status, affording a 20% tax break. COLLABORATION WITH OVERSEAS PARTNERS All types of partnerships have been put together involving Korean and /or foreign broadcasting systems, governmental and educational institutions, animation studios, toy and game developers, and digital graphics companies. The Island of Inis Cool series is a co-production of Korean, Page 379

380 Irish, and Luxembourg companies, while the clay animation series Dragon is a joint venture with Canadian studios. There are others, such as Odd Family with a French firm, Netibee and Dr. Cookcook's Big Math Cooking with Chinese TV and animation companies, and the Antenna Tales series with Sante Fe Communications of the US. More specifically, the globally popular Beyblade (also known as Topblade) television series, released in the US and Canada through Nelvana, is a collaboration between Seoul Broadcasting System, Seoul Animation, and toy company Sonokong, all in Korea, and Tokyo TV and Madhouse Studio in Japan; and Dongwoo Animation has several projects with US, Canadian, and Japanese support. Dongwoo's Tank Knight Fortress is affiliated with seven other Korean studios, game developer CCR, and Japan's Bandai Co., and its new Teenage Mutant Ninja Turtles series is tied to 4 Kids Entertainment of the US. KEY TRENDS In the 1990s, there were many projects which Korean companies produced from their own creative ideas. None of these have been very successful. However, a number of Korean companies are launching new projects with local animation content. The Korean animation industry is increasingly witnessing joint productions of animation content. This includes coproductions with Japanese studios. In some cases the Japanese partner cofinances the animation content. The Korean industry has eyed the Chinese market for expansion as well as for exploiting creative talent. The industry is starting to leverage the expertise built in Korea's expertise in Flash-based Web animation. Flash-based animation is very popular in Korea, with the availability of a number of amateur and professional flash content makers. Page 380

381 This trend is boosted by the fact that the Internet environment in Korea is one of the best in the world, and Web-related animation is competitive on the global market Given below are some of the other key trends in the industry: The downsizing trend in overseas animation industry has resulted in Korea s animation studios to switch to production of Korean television series and features Korean animators are increasingly are seeking an overseas presence for their original works, through screenings at international festivals and competitions and at home-grown events such as SICAF, Puchon International Student Animation Festival etc. Korean animation is finding a niche in the international market, selling its product abroad and partnering with foreign producers and distributors. More and more partnerships are being formed between Korean and /or foreign broadcasting systems, governmental and educational institutions, animation studios, toy and game developers, and digital graphics companies. For example, The Island of Inis Cool series is a co-production of Korean, Irish, and Luxembourg companies. The clay animation series Dragon is a joint venture with Canadian studios. Others include Odd Family along with a French and Dr. Cookcook's Big Math Cooking with Chinese TV and animation companies. Others include Antenna Tales series with US based companies. Page 381

382 LOCAL CONTENT Increasingly the Korean market is witnessing a proliferation of locally developed content, which is giving tough competition for content from leaders such as Disney. These include series such as Turtle Hero, Bungabu, Milo's Great Adventure etc. Table 32 gives some examples of local animation content developed by Korean studios. Page 382

383 TABLE 32: IN-HOUSE CONTENT DEVELOPED BY KOREAN ANIMATION STUDIOS Content Turtle Hero Bungabu Milo's Great Adventure, Mari Iyagi Empress Chung Studio Hahn Shin Corporation. Tooniverse Sunwoo Entertainment. AKOM Page 383

384 Challenges The key challenges faced by the industry include: The animation industry in Korea has flourished due to the competitive pricing that drives the animation production field. In the traditional cel animation market however it is getting harder and harder for Korean companies to compete with China and other South Asian countries. The presence of a number of state-run and private organizations offering overlapping support programs, thereby not focusing their investments Feature-length animation films have been unsuccessful at the box office, generally not attracting adult audiences Korean animation lacks good storytelling The industry is inexperienced in marketing techniques Capital intensive business requiring a lot of training There are very few local children s channels in Korea Lack of quality animation schools Low quality film's plot in the case of locally developed content Korean animation, though superior in technology, lacks good storytelling, is inexperienced in marketing techniques. The locally developed Korean films fall short on creativity and story plots. For example, the Korean animated film Wonderful Days took more than five years with an all time high budget of US$ 12 million. But despite Page 384

385 a huge marketing and merchandising campaign, the film failed at the box office grossing just US $1.9 million. This problem can be traced to the past when the Korean animation studios were working almost exclusively on foreign contracting. The contractor took care of the creativity with the Korean studio only executing the contract. Market Opportunity In Korea, every year, about 30 animated TV series of 26 one-half hour episodes and four or five feature-length films are made, increasingly as cooperative ventures and with overseas sales in mind. Korea has been an important animation country for more than 30 years, mainly as an overseas producer for North American, European, and Japanese studios. SIZE OF THE KOREAN ANIMATION INDUSTRY South Korea is one of the largest suppliers of television animation in the world. Korean studios have the capability to produce over 1200 episodes (each episode running into 22 minutes). The Korean animation sector was worth about US $ 3.1 billion in Furthermore, animation related character merchandising and licensing sales arising was about US $ 4.9 billion in the year Korea's animation industry is facing a turning point. The country used to serve as a cheap production base for foreign animation houses. There has been a change in roles with the industry increasingly producing local content. However the quality of the animation content is well below international quality. The number of companies in this industry stands at about 450 employing close to 50,000 animation professionals. Page 385

386 FIGURE 21: SIZE OF KOREAN ANIMATION INDUSTRY Size of Korean Animation Industry (US $ millions) Page 386

387 Future Outlook Despite all the changes and progress made by Korea's animation industry, it continues to remain on the periphery of the international subcontracting system. This trend is undergoing slow change. The industry has not attained great success with respect to long range planning. This has been partly due to investors who demand immediate results, and the overwhelming power of Disney and Japanese companies. However, with substantial investment from the country's industrial giants, the increased interest by the public, and a new cadre of highly trained animation artists, the Korean animation industry now has the potential to change. The following are some of the key trends which may emerge in future: 1. Increase in the strategic alliances between Korean studios and their outsourcing counterparts 2. Growth in in-house content development efforts triggered by the demand for local content 3. Growth in the number of animation training schools aimed to meet the shortfall in talented animators 4. Increase in the quantum of 3D animation as well as games jobs outsourced to Korea The industry is projected to grow at the rate of 15-20% YoY Page 387

388 Animation Schools in Korea The first animation training department was established in Kong-Ju Culture College in 1990 and currently there are over 70 colleges having animation department. A market analysis reveals the presence of the following schools in Korea, which offer quality training in animation (Table 33): Page 388

389 TABLE 33: ANIMATION SCHOOLS IN KOREA 1. Andong Information Technology University 2. Byuksung College, Department of Visual Multimedia Design 3. Choongnam Animation High School 4. Chosun University, Division of Animation Arts 5. Chungang University, Graduate School of Advanced Imaging Science 6. Chungkang College of Cultural Industries, Department of Comic Creation 7. Daebul University, Division of Industrial Design 8. Dongju College, Division of Visual Design 9. Hanseo University, Department of Visual Media and Arts 10. Hansol High School 11. Hansung University, Division of Media Design 12. Hong-ik University College of Design and Arts 13. Kaywon School of Art and Design 14. Sejong University 15. Hyechon College, Division of Media and Arts 16. Induk Institute of Technology, Division of Communiart 17. Kaywon School of Art and Design 18. Kongju Communication Arts College, Division of Animation Design Page 389

390 19. Kongju National University, Division of Animation & Arts 20. Korea Animation High School 21. Korea National University of Arts, School of Film and Multimedia 22. Kyunggi University, Division of Interactive and Multimedia Arts 23. Kyungnam Animation High School 24. Mokwon University. College of Fine Arts, Department of Animation 25. Pucheon University 26. Sangmyung University, Department of Animation 27. Sunchon National University, Department of Cartoon Arts 28. Ulsan Anione High School 29. Woosong University, Department of Computer Design 30. Yewon University, Department of Animation and Game Page 390

391 Animation Studios in Korea In Korea there are a number of well established as well as a number of upcoming studios. The key Korean companies involved in animation are given in Table 34. Page 391

392 TABLE 34: KOREA S LEADING ANIMATION STUDIOS Studio 1. A-1 Production 2. Ani Village Co. Ltd 3. Akom Production 4. Akom Production, Co. Ltd 5. Anik 6. Anima Sam Won 7. Animagic Studio Inc 8. Animax Enterprise 9. Anivision 10. Aniway Co.,Ltd 11. Bigstar Enterprise.Inc 12. Blueline Co., Ltd 13. Chang Kang Mania Co.,Ltd 14. Characterplan Co.,Ltd Page 392

393 15. Click Entertainment Co., Ltd 16. Dai Won 17. Daiwon Character And Animation Co., Ltd 18. Digital E Mation 19. Digital Odyssey 20. Dna 21. Dong Yang 22. Dongwoo Animation.Co.,Ltd 23. Dooly Nara Inc. 24. Dr Movie Co., Ltd. 25. Dr-Movie 26. Echo Animation 27. Hahn Shin Corporation 28. Han Ho Film 29. Hang Yang 30. Hangil Production Co.,Ltd Page 393

394 31. Hanh Shin 32. Hanho Heung-Up.Co.,Ltd 33. Hanil Animation 34. Heewom Entertainment, Inc. 35. Iconix Entertainment 36. Imageplus Co.,Ltd 37. Jem Co.,Ltd 38. Joongang Movie Entertainment Co., Ltd 39. Koko Enterprise 40. Koko Enterprise Co., Ltd 41. K-Production 42. Kye-Sung Production 43. Kyung Kang 44. Lascaux Entertainment Co. Ltd 45. Mg World Co.,Ltd 46. Nara Animation Studio Page 394

395 47. Next One Seoul 48. Orange Animation Studio 49. Plus One 50. Plus One Animation 51. Production Grimi Co.,Ltd 52. Rainbow Animation Group 53. Rough Draft 54. Rough Draft Korea 55. Saehahn Productions Inc 56. Saerom 57. Saerom Animation, Inc 58. Sei Young 59. Seong Bo Yang Haeng 60. Seoul Movie 61. Seoul Movie Co., Ltd 62. Shin Won Page 395

396 63. Some Entermedia Co.,Ltd 64. Spec Korea 65. Studio Sek 66. Sun Min 67. Sun Woo 68. Sung San Animation Production 69. Sunmin Image Pictures Co.,Ltd 70. Sunwoo Entertainment Co.,Ltd 71. Team's Art Production 72. Yearim Productions 73. Yeson Animation Studios Page 396

397 Animation Industry in Canada Key facts The National Film Board of Canada (NFB) played a critical role in developing the industry. Canada s broadcasting requirements require Canadian broadcasters to ensure at least 50% of indigenous programming. Canada has generous tax incentives and subsidies which has fueled the industry growth. Canada has a strong animation talent base supported by the presence of leading educational institutions (such as Sheridan Institute). Canadian animation software firms such as Toon Boom Animation, Alias, Side Effects Software etc. develop much of the software packages used in the global animation industry. The industry players have entered into co-production agreements with European and Asian studios. Leading Canadian animation production companies include Nelvana, Cookie Jar Entertainment, Mainframe Entertainment, Studio B, Natterjack, Delaney & Friends, C.O.R.E. Digital Pictures and Bardel Animation. The Canadian animation industry is mainly centered around British Columbia. The country's two largest animation firms are based in central Canada - Nelvana in Toronto and Cookie Jar Entertainment in Montreal. The other prominent studios include studios being Mainframe Entertainment, Studio B, Natterjack, Delaney & Friends, C.O.R.E. Digital Pictures and Bardel Animation. The National Film Board of Canada (NFB) played a critical role in developing the industry. The NFB collaborated with the National Research Council in the process. In 1974, Hunger/La Faim, produced by the NFB became the first computer-animated film ever to receive an Oscar nomination. Since then NFB has bagged about 60 plus Oscar nominations. Local firms have absorbed many of the former animators from Disney's operation in Vancouver, which shut down its 200-person studio at the end of A glut of entry level animators, fresh out of the half-dozen animation schools operating in the city, has developed, while demand remains strong for experienced artists and directors. Publicly traded Mainframe, with a staff of about 275, has the largest 3-D computeranimation facility in Canada. It is also getting involved in interactive media and is looking at opportunities to expand in South Korea, Singapore, Malaysia and India, with pre-production to stay in Vancouver. Mainframe, Rainmaker Digital Pictures and Electronic Arts (Canada) are the expanding local giants of the computer animation and effects firms, currently employing about 1,000 people, about one half of the estimated total in the local industry. Page 397

398 Canada operates a system of public service broadcasting requirements including quotas, which require Canadian broadcasters to include a range of children s programming in their schedules and ensure at least 50% of indigenous programming. Canada therefore has generous tax incentives and subvention schemes, which has led it to become a major force in funding animation projects. Schemes are linked directly to the amount of people employed in Canada and so a great deal of worldwide animation production now takes place in Canada. Co-production treaties have encouraged Canadian investment in a range of European originated animation projects. Industry Drivers Strong talent base is a key strength of Canada's animation industry. This is due to the presence of leading educational institutions (such as Sheridan Institute) and the support of NFB in promoting young filmmakers. This is in addition to the presence of leading animation software production companies. Canadian animation software firms such as Toon Boom Animation, Alias, Side Effects Software etc. have developed much of the technology used in the global animation industry. Canada has entered into co-production agreements with countries such as UK, China, France and Germany etc. These treaties are negotiated by Telefilm Canada, the federal agency that promotes Canada's film, television and music industries. They also allow films that are co-produced with another country to qualify as local content in Canada, which makes these films eligible for Canadian tax credits. These agreements are very Page 398

399 important to Canadian production companies because they reduce risk and provide access to a great diversity of talent. The government supports the animation schools by subsidizing education costs. Education subsidies could be in the range of 50 to 60 per cent of costs. This is in addition to capital support for the buildings and the equipment. ANIMATION FUNDING Canada s funding of animation is the envy of the animation world. Canadian producers can access up to 50% of a programmes budget through public money, which is administered through the Federal funding body Telefilm Canada. The main source of money is the Canadian Television Fund (CTF), which is made up of tax credits and levies on broadcasters. In 1999, Telefilm invested in 742 children s programs, both live action and animation. To qualify for support, productions must generally have Canadian subject matter or literary properties and a proportion of the work must be carried out in Canada. There are two funding schemes through the CTF: the Equity Investment Programme (EIP) and the License Fee Programme (LFP) The EIP takes an equity stake in projects it invests in and has strict rules about recoupment, sometimes insisting on recouping in first position. The license fee programme, which is for only certain genres, including children s programmes, is a top up once a broadcaster has agreed to and contributed to the budget of a programme. Additionally there are subsidies such as the tax shelter, which operates at both a federal and provincial level. This means that a production company is entitled to a rebate of 15% for every $ spent on a Canadian citizen doing the work, and in Quebec this can go up to 25%. Page 399

400 Challenges The factors, which have impeded the development of the Canadian animation industry include the following: The pressure globalisation is resulting in Canadian animation studios to send the bulk of their work overseas (reducing the chances of developing new Canadian) Rising production costs are making it very difficult for Canadian animation studios to fully exploit growing demand by keeping, and enhancing, the local training and employment infrastructure needed to fertilise the desired range of animation skills and talents. Strengthening Canadian dollar is a cause of concern for Canada's competitiveness in the animation sector as a strong Canadian dollar will reduce export earnings. The tax credit system is complex which discourages foreign producers who do not have knowledge of the intricacies. Brain drain t the United States is another problem of concern for Canadian animation studios. The industry s dependence on the tax credit system is a cause for concern as this is not a sustainable model. The industry itself is cyclical in nature. Hence if there are several big projects, there's lots of work. But if there aren't, then unemployment rates shoot up. Canada is facing competition from low cost animation production destinations such as India and China. India, for example, could become a major competitor for Canada's overseas animation markets Page 400

401 as its creative and technology base expands and improves. Its schools train vast numbers of very capable software developers, and it also has a special advantage over other potential competitors such as China - the Indian labour pool speaks English. In addition, the time difference between India and China (about 12 hours) makes it a perfect option for animation production jobs which could be carried out continuously with seamless transfer of output which is facilitated by technology. There is also a threat from countries with populations much larger than that of Canada as they are much more profitable markets. Strategies for Animation Studios in Canada The following are some targeted strategies for the Canadian animation industry: Canadian companies could help develop other countries' animation sectors, thus creating new markets for Canada s advanced technology. On the production side, expanding local demand for content will further stimulate the demand for Canadian tools and expertise. The threat from outsourcing could be tackled to a certain extent by producing animation of a quality that can't be matched by lower-cost, foreign companies. Canadian companies stand to gain by collaborating closely with studios from low cost destinations such as India to create output targeted at local audience. This would help the Canadian companies to tap the vast market potential of these countries. Page 401

402 Build on overseas marketing and merchandising capabilities The animation companies should focus their efforts on high quality productions leveraging new technologies. The industry needs to invest in continuous training aimed to develop the skill sets of animators. The industry needs to tip-up with Universities and colleges offering courses in such fields as business, arts, and sciences could incorporate in their curriculum subjects or even introduce courses on Animation. Although there is a rapid growth in 2D animation movies, the real value and skill lies in development of 3D animation. It was therefore recommended that for sustained competitive advantage, Canadian animation firms must complement traditional animation (2D) with computer-generated animation (3D). Research and development is one potent tool of updating the industry on what are the latest trends in the local as well as global scenarios. This would give prime focus on the latest technology in need of adoption to upgrade the industry and its various functions and undertakings. The industry should promote strategic alliances among the players from within the industry as well as with players from other industries such as film, software, and publishing industries. Data on Animation Studios in Canada There are a number of good quality animation studios in Canada. Table 35 gives the list of key animation studios in Canada. Figures give various information about animation studios in Canada. Page 402

403 TABLE 35: ANIMATION STUDIOS IN CANADA Studio Medias 2. A.K.A. Cartoon 3. Atomic Cartoons 4. Bardel Animation 5. Barking Bull Frog 6. Black Box Games 7. Brain Child Studios 8. Calibre Digital 9. Cambium Film & Video Productions Ltd. 10. Canuck Creations 11. Caveman Studio 12. Cinar Corporation 13. Cine Groupe 14. Core Page 403

404 15. Cuppa Coffee Animation 16. Delaney & Friends Cartoon Productions 17. Dimensions Edge 18. Dnomight Studio 19. Electronics Art, 20. Helix Animation Inc. 21. Immersion Studio 22. Lost-Boy 23. Mainframe 24. Mercury 25. Michael Mills Productions 26. Mindmill Studios 27. Modern Groove 28. Moshpit Entertainment 29. Natterjack 30. Nelvana Limited Page 404

405 31. Northwest Imaging And Effects 32. Pascal Blais Animation Studio 33. Pascal Blais Productions 34. Piranha Games 35. Pixel Weaver 36. Pork N Bean 37. Radical 38. Rainmaker Entertainment Group 39. Real World Media 40. Redrover Animation Studio 41. Reel Wonders Productions 42. Relic Entertainment 43. Rival Studios Corp. 44. Sextant Entertainment 45. Spashback 46. Studio B Page 405

406 47. Toybox West 48. Trapeze Ontario 49. Tremblay-Mounier Studio, Inc. Page 406

407 FIGURE 22: NUMBER OF ANIMATION STUDIOS IN CANADA Number of Animation Studios in Canada Page 407

408 FIGURE 23: BREAK-UP OF ANIMATION STUDIOS IN CANADA BASED ON SIZE Break-up of animation studos in Canada based on size Large Medium Small Page 408

409 FIGURE 24: CLASSIFICATION OF ANIMATION STUDIOS IN CANADA BASED ON CAPABILITIES Break-up of animation studios in Canada based on capabilities D 3D Flash Games SFX Page 409

410 FIGURE 25: BREAK-UP OF ANIMATION STUDIOS IN CANADA BASED ON APPLICATIONS Break-up of animation studios in Canada based on applications TV Movies Advertising Corporate Applications Page 410

411 Animation Industry in Australia Key facts Australia supports its indigenous industry through a series of funding schemes and incentives. Sources of finance include the central government backed Film Finance Corporation, local government backed funding bodies such as New South Wales Film and Television, Film Victoria etc. Australia s animation industry is facing increasing price pressure from low cost destinations in Asia such as Philippines, India, Vietnam, China etc. The prominent animation companies in Australia are Yoram Gross, The Australian Childrens Television Foundation (ACTF), Burbank Animation, Media World and Southern Star. While still relatively small in global terms the Australian animation industry has developed a creative skills base which could provide a significant base for growth. Between 1989 and 1997 Australia produced 4 animated feature films (5.8 hours, total value $39M), 29 animated television series (212 hours, total value $126.8M) Around $118M of this was spent in Australia. 18 titles worth $93M were shot in the last three years of the survey. The industry consists of a pool of talented, professional animators working in Australia and some entrepreneurial producers who are poised to take advantage of the changes occurring in the industry worldwide. Some of these are to be found in large Australian animation studios; others work in boutique operations, preferring to maintain a higher level of creative control over their work. While their commercial and creative interests can often be different, they are unified by a passion for their craft and a determination to find new and greater numbers of outlets for their product. The prominent animation companies in Australia are Yoram Gross, The Australian Childrens Television Foundation (ACTF), Burbank Animation, Media World and Southern Star. Competition from Asian Studios There is a cost differential between sending some of the more repetitive aspects of the animation process (like in betweening and painting) overseas and keeping them here. Wages for this labour-intensive work are up to 100 Page 411

412 per cent cheaper in countries including China, Vietnam, Spain and India. This can lower overall production costs by per cent. Challenges The factors, which have impeded the development of the Australian animation industry include the following: -way drain of talented animators to work in other countries The pressure globalisation is putting on Australian animation studios to send the bulk of their work overseas (reducing the chances of developing new Australian talent) Lack of development and production money for animated shorts and series pilots Current legislative guidelines blocking animation companies from financing their programs through the same government subsidy mechanisms available to other forms of Australian film and television Lack of effective international distribution infrastructure for Australian animated product Lack of incentives for Australian commercial and public broadcasters to screen Australian animation in their schedules Whereas Disney was the unchallenged major brand in animation, it now competes with DreamWorks, Warner Bros, Fox and other major studios for this title. Such competition creates demand, Page 412

413 worldwide, for new talented animators and has attracted a number of Australia s creative talent base out of the country. Rising production costs are making it very difficult for Australia to fully exploit growing demand by keeping, and enhancing, the local training and employment infrastructure needed to fertilise the desired range of animation skills and talents. Cost of maintaining staff in a studio set-up is very high. Government Support Australia supports its indigenous industry through a series of funding schemes and incentives. The Australian partner can access up to 60% of the production budget as long as the series has been sold to an Australia network and that network has paid the premium license fee. Sources of finance include the government backed Film Finance Corporation, which receives approximately Aus$60m (US$35m) per annum with a mandate to invest in and promote Australian feature films and qualifying Australian local content television series and specials. Official co-productions automatically qualify for Australian local content quota. In addition to the AFC, each state in Australia also has its own funding body. In New South Wales there is NSW Film and Television Office and Victoria, there is Film Victoria. The Queensland body has a production initiative and the South West body also has development funds. Page 413

414 Strategies for Animation Studios In Australia The following are some targeted strategies for the Australian animation industry: diverse slate of Australian animation Introduce incentives to retain a greater percentage of Australian animation production onshore Introduce incentives for Australian commercial and public broadcasters to screen animation in their schedules Data on Animation Studios in Australia There are a number of good quality animation studios in Australia. Table 36 gives the list of key animation studios in Australia. Figures give various information about animation studios in Australia. Page 414

415 TABLE 36: ANIMATION STUDIOS IN AUSTRALIA 1. Yoram Gross 2. The Australian Childrens Television Foundation (ACTF) 3. Burbank Animation 4. Media World 5. Southern Star Page 415

416 FIGURE 26: NUMBER OF ANIMATION STUDIOS IN AUSTRALIA 135 Number of Animation Studios in Australia Page 416

417 FIGURE 27: BREAK-UP OF ANIMATION STUDIOS IN AUSTRALIA BASED ON SIZE Break-up of animation studos in Australia based on size Large Medium Small Page 417

418 FIGURE 28: CLASSIFICATION OF ANIMATION STUDIOS IN AUSTRALIA BASED ON CAPABILITIES Break-up of animation studios in Australia based on capabilities D 3D Flash Games SFX Page 418

419 FIGURE 29: BREAK-UP OF ANIMATION STUDIOS IN AUSTRALIA BASED ON APPLICATIONS Break-up of animation studios in Australia based on applications TV Movies Advertising Corporate Applications Page 419

420 Animation Studios in Australia In Australia, animation is dominated by Disney Entertainment (with 200 employees) and Yoram Gross which is 50 % owned by EM-TV of Germany. The major special effects companies such as Animal Logic are all experiencing financial difficulties due to a critical downturn in foreign production in Australia. The prominent animation companies in Australia are Yoram Gross, The Australian Childrens Television Foundation (ACTF), Burbank Animation, Energee Entertainment, Media World and Southern Star. Yoram Gross Yoram Gross is the most commercially successful and internationally recognised animation studio in Australia. Created by Yoram and Sandra Gross, it has produced such children s hits as Blinky Bill and Dot And The Kangaroo. Following the announcement of a 50 per cent equity partnership with Germany s EM.TV (a distributor and supplier of children s programming), the studio is now called Yoram Gross-EM.TV. The equity partnership is indicative of the trend in the film and TV business to establish deeper links with overseas companies so as to survive in a global marketplace increasingly dominated by a small number of major American players. The studio has been under pressure to collaborate with internationally competitive animations studios and co-produce animation content. The company has made investments in the licensing business and has launched a licensing division. Page 420

421 Media World Media World is one of Australia s four largest animation production companies. The company has an extensive product range including live action adult and children s drama as well as animation. The success of its live action feature film The Silver Brumby encouraged the company to set up an animation production studio in 1994, to produce an animated series of The Silver Brumby. This was followed by another successful animated series, The New Adventures Of Ocean Girl. Animation Works, Media World s production studio, is a one stop shops for animated program production from scripting through to full post-production. The company is facing increasing pressure in maintaining a full production in Australia as many of its competitors are outsourcing work to countries where labour is cheaper. Page 421

422 Burbank Animation Burbank Animation Studios Pty Ltd was founded in The company s animation projects include Frank Enstein, The Pied Piper Of Hamlin, The New Adventures Of Robin Hood, The New Adventures Of William Tell, Sinbad, The Count Of Monte Cristo, Thumbelina, Ali Baba, Puss In Boots, White Fang, The Emperor s New Clothes, Goldilocks & The Three Bears, Pocahontas, Hercules, The Hunchback Of Notre Dame, Hansel And Gretel, Cinderella, Beauty and the Beast etc. Page 422

423 Southern Star Southern Star is involved in film, television and video production, sales and distribution, and licensing and merchandising. Southern Star Entertainment is the television production division of the company. It is the leading independent creator and producer of television programming in Australia and its work includes adult prime-time drama, game shows, children's and family television, light entertainment and documentaries. The company s programmes are sold into over 60 countries throughout the world. The division has partnerships with international partners such as BskyB and Channel 4 in the UK, Hallmark, Showtime and New Line Television in the US, Europe's ENDEMOL Entertainment, ndf Television Germany and Egmont, National Geographic and China's Shanghai Animation Studios and CCTV. Page 423