Animation Industry _ An Analysis

Contents

 Overview of the industry

 Growth in domestic market
 Porters Five Forces – Analysis of the animation industry
 Value Chain Analysis
 Alliances and Collaborations for Animation projects
 India for gaming analyzing the opportunities, threats an challenges
 Policies and Regulatory norms for the industry

Animation Industry In India

 The Indian animation market had been fairly “static “until a few years ago
and activity on this front only began in earnest in the late half of the 90s
when animation studios made an appearance in the country and the
industry developed a more serious ,export oriented outlook. India is now
getting exposure to global opportunities that promise business for the
animation industry

A snapshot of the India animation market scenario in the 90’s:

 The merger of two existing and leading design studios –Ram Mohan
Biographic and United studios – made available for the first time
,infrastructure and resource required for animation .Design studios began
teaming up with overseas animation firms taking the co-producing or
subcontracting route ,and in this way upgraded their technical skill set
 By 1993 ,there were around 15 animation studios in the country ,with three
to four using IT tools and techniques . These studios were coming up in cities
such as Mumbai, Hyderabad ,Chennai and New Delhi.
 Leading animation studios included the Silverton Studio and Crest
Communication ,both of which took on subcontracted work from US, French
and British studios
 Training in animation became more rampant, with organization such as the
Film and Television Institute in Pune offering three year diploma program in
animation
 India attempted to enter the global animation market in 1997 with the
setting up Heart Animation Academy ,a specialized animation school
established in Hyderabad
 Yet another animation training institute the Zee INSTITUTE OF Creative Arts
(ZICA) in Hyderabad began offering production services using over 100
alumni
Animation Market in India
The Indian animation industry has witnessed steady growth in past and has
tremendous potential to grow manifold by tapping opportunities in global and
domestic animation market .Animation industry is emerging as key revenue
generating segment for Indian Entertainment and Media Industry

MARKET SIZE AND GROWTH

1200

1000

800

600

400

200

0
US $ Mn 2008 461 2009 585 2010 743 2011 943 2012 1198

Domestice services outsource services

1
2
Animation revenue spilt

1. Animation sector is booming with outsourced animation production service

as well as developing a robust domestic market.
2. Emergence of new segments in Animation industry.

Porters Five Forces

Before a new company enters the market, it is important to understand the
market forces that may affect the business and also what the effects of the force
might be. Analyzing each of these forces will provide a picture of the level of
competitive activity .The diagram opposite shows the combination of forces that
create the competitive environment.
Environment

SCupp
ubs
ust
competi
Newand
Ent
tute
me
er
competi
Market
d
a
o
c
n
E
w
N
m
s
tC
The market forces, combined with the environment they operate in collectively
give a picture of the overall market dynamics present in the animation market
place
rb
The issues that will be discussed for each market force box are detailed below

Suppliers; who are the key suppliers? How powerful they are and what effect do
they have in shaping the industry? Are they price takers or price givers?
e
p
u
S
Customers; who are key customer and what is there bargaining power? Can they
dictate price?

New entrants; what is threat from new entrants to the industry? Looking at it
another way, what are the barriers to enter? How easy will it be for another player
to come into the industry and take market share?

Substitutes; what is the effect on the marketplace from substitute products and
technologies? Are there other solution that could substitute for current gaming
and if so, how will they compete?

Competition within the industry; after analyzing the four forces above and within
each market segment? Therefore how intense is the level of competition?

Analyzing the Animation industry as per

Porters Five Forces
Suppliers :

 The key suppliers in the animation industry are the animation training and
education institutes whose market is expected to grow at the annual rate of
40 % from 2008-12
  About 300,000 student are undergoing animation training in animation
areas like film design ,game design ,visual effects ,wed animation ,2D ,
3D.illustration and special effects .
 For the industry to grow and move up the value chain ,a critical role will be
played by the training and education institutes which will help professionals
acquire technical skills.
 Hence the suppliers have a key role to play in shaping the animation
industry in the country

ANIMATION SCHOOLS

School Animation Geographical presence Animation Areas

Arena Animation 80 centers across in Animation ,Visual
India Effects, Gaming
Maya Academy of 23 centers across in 2D,3D,vishual Effects
Advanced Cinematics India
(MAAC)
International College of Present in Mumbai, 2D,3D
Animation Arts and Kolkata, Hyderabad,
Technology Delhi
(ICAAT)
Toonskool Present in Mumbai 2D,3D
,Mangalore and
Bangalore
Industrial Design Centre Present in Mumbai Animation and Game
IIT Bombay Design
National Institute of Present in Ahmadabad Animation Film Design
Design
Takshaa Present in Bangalore 2D,3D, Illustration
Anitoons Present in Delhi 3D, and Special Effects

Customers:

India ‘s animation studio are catering to the requirements of various end user
segments such as:

 Feature films
 TV programs
 Advertisement/commercials
 Computer games
 Education
 Multimedia /web design
 Custom Content Development

Animation solutions are also finding a place in niches such as

 Film titling
 Special effects
 Wed entertainment program
 TV broadcast graphics
 3D modeling
 Background development

 The sector is booming with overseas entertainment giants like Walt

Disney ,Imax and Sony outsourcing cartoons characters and special
effects to India

With the increased scope of using animation in India and increase in

Animated strips are being used to convey a medical related issue to
demand of animated
the layman content, customers are moving from a high
or to disseminate.
 power
bargaining Ants (Animation Training School
to a medium )is in talks
bargaining with the traffic
power
department and automobile vendors to prepare animation strips
,informing a new driver of the various rules to be followed and
offering driving tips
 Increasing use of animate content will be witnessed in advertisement
on internet and mobile in future
 Identification of Fast growing segments

The market share of segment using animation reveals that the highest
growth for animation currently comes from custom content development,
followers by animation entertainment, multimedia and education segments

               

   

               

       

2012   33 27 33   17  
       

       

2008   41 26 22 11    

       

               

  0 20 40 60 80 100 120

   

   

  Customer Content Devopment  

  Animation Entertainment  

  Multi Media  

  Education  

               

New Entrants:

 Entry barriers are limited by the expertise ,skills, technology and

investment required for the animation industry
 Hence the threat of new entrants is directly related to the number of
training academies and institutes that open up and provide the
relevant skill sets for the industry to exist and thrive and on the
technology to enable animation development

Substitutes

 All forms of media and entertainment form a part of substitutes for

animation industry
 Threat form substitutes are high .A high % of animation work is being used
in Animation entertainment which has direct competition from
entertainment industry as a whole .There is a media companies who are
vying for the same share of customer attention and viewership
 Competition within industry

Main Players in the industry are

 Big Animation
 Crest Communication
 Heart Entertainment
 Jadoo Works
 Maya Entertainment
 Nipuna Services Ltd
 Padmalaya Tele film
 Paprikaas
 Pentamedia Graphics
 Silvertoon Studio
 Toonz Animation India
 UTV Toonz
 Intensity of competition will be determined by the technology
,manpower, skills ,creativity ,studio and medium of reach out to the
customer

Value Chain Analysis

Development > Pre production > Production> Post Production> Distribution

 Identifying  Preparatio  Developme  Final  Promotion
existing IP or new n of script nt of sound ,distributi
idea generation  Character specificatio recording on
 Asset design ns regarding  Color  Video/DV
Procurement  Store the editing D release
 Funding boarding character  Testing  Cinema
 Integration  Layout  Background  Special and TV
Developme paint sound screening
nt  Lnking and Effects
 Props painting  Music
design  Visual Scoring
 effects  Editing
 Flash
animation

 Majority of animation studios in India are involved in doing pre-production

and post _production work for foreign animation studios
 Many domestic studios have established in- house production
 Big Entertainment does complete production work for both domestic and
international players
 Domestic animation studio are now focusing on creating their own
Intellectual property Rights (Hanuman ,Ganesha) which would enable them
to increase their revenues through character licensing and merchandising

GAP

There is an untapped potential in the development and distribution Stage

.However, some Indian animation companies are moving up the value chain by
developing original content

Players
Name of the Location Capacity Funding
company (amount in
terms of
millions
,INR)
Big Animation Pune Parent Company –Reliance Big
ADA Group Entertainment
The Reliance ADA group has
sealed its $825- million deal with
Steven Spielberg’s
Dream work Studio with
 investment banker JP Morgan
syndicating $325 million debt
Crest Mumbai Total
Animation Revenues
Studio 57.88
India Ltd. Operational
3D animation Profit
company (loss)4.85
Net Profit
(loss)-
13.33(2009)
Heart Hyderabad
Entertainment
2D studio
Jadoo Works Bangalore
Animation

Players

Name of the Location Funding

Company Capacity (amount
in terms of
millions INR)
Maya Mumbai Total
Entertainment Revenues63.43
Animation Studio Operational Profit
(loss) 7.01
Net Profit(loss)
2.19 (2008)
Nipuna Services Parent company
Ltd Satyam
Padmalaya Bangalore Total Revenues
Telefilms 1.81
Animation Operational Profit
(loss)-0.36
Net Profit (loss)
 -2.58
Pentamedia Chennai Total Revenues Parent Company
Graphics 39.8 Pentafour
Subsidiary of Operational Profit
computer (loss)15.24
software Net Profit (loss)
company 6.14 (2008)
Pentafour
Silvertoon Studio Mumbai
Animation Firm
Paprokaas Bangalore
Animation Firm

Players

Name of the Location Funding

Company Capacity
(amount in terms
of millions INR)
Toonz Animation Thiruvananthapura
india m
Marketing office in
London ,California,
Singapore and
Australia
 UTV TOONZ Mumbai Parent Company
Animation UTV
division of UTV
Software
Communications
Classic Animation
Studio

Alliances and Collaborations for

Animation Projects
Name of the company
Compact Disc India Ltd
(CDIL)
Alliance /Collaboration
 Compact Disc India Ltd has teamed up with Pe
legendary soccer player, to develop a 3D anim
feature film on the game of soccer. The partne
with Pele is based on revenue sharing at differ
level .The film is budgeted at UD$63 million, a
project includes an animation feature, multi-p
games .licensing and merchandising (L&M). am
other components .Investment of US$20 millio
be made in the animation feature,US$23 millio
gaming (console .PC, online and mobile games
US$10 million each on L&M and marketing
 Chandigarh- based compact Disc India (CDI) ha
 to set up an animation studio in Vietnam ,for w
would be raising $10 million debt from Los An
based I Media Ventures for this Purpose

Toonz animaton india  Toonz Animation india moved into the 3D CGI
film production with the Life Adventures of Sa
Claus .Its parent company Toonz Entertainmen
entered into an agreement with Gang of & An
and Hyde ParkEntertainment (Ashok Amritraj’
company )to produce the 60-80 minute featur
targeted at families worldwide.the entire prod
of the film will be carried out at Toonz Animati
 Toonz Animation and Chandamama , age old c
of legendary storybooks, have joined hands to
produce a 3D animated feature film has on the
of Chandamama .Toonz will finance the projec
,currently pegged at around Rs 20 crore , and w
undertake the entire production at its facility i
Techno Park ,Trivandrum
DQ Entertainment (DQE) DQ Entertainment (DQE) has partnered with Tuner
Entertainment Networks Asia (TENA) for two exclusiv
animated features .As per the deal ,Turner ‘s kids cha
Cartoon Network will air DQE produced animated se
Balkand and Ravan in 2009 ,TENA has already acquir
animation series from the Indian region

Sanraa Media Limited Chennai – based software firm sanraa Media Limited
known as Sanra Software ) has signed a co-productio

With leading global production company Endemol fo

production of 3D animated series (26x22) Titled the 9
series is based o illustrated comic by the same by th
name ,owned and published by the Teshkeel Media
Group ,Kuwait .
 India For Animation- analyzing the opportunities ,threats and challenges
Positive
Strengths
Internal 1. Low cost of animation services
Factors 2. Attractive destination for
outsourced animation
production for international
players
3. Increase in institutions
providing animation education
4. Well equipped animation
studios
5. English speaking talent
6. Growing awareness of
Indian Animation talent
Amongst international studios
SWOT
Opportunities
1 Increasing awareness of Indian
Externa Animation talent amongst
l international studios
Factors 2 Increasing animation budgets
3 Increasing acceptance of
animation content in domestic
Negative
Weaknesses
1. Manpower shortage
2. Protection of intellectual
property
3. Attrition and poaching loss of
experienced professionals
4. Very little awareness of career
in animation
5. Minimal government support
or incentives
6. Funding problem ,Salary issues
& constant retaining of
professionals
Threats
1 Competition from other
countries like
Taiwan,Philippines.Korea and
China
2 Ever changing technology
3 Lack of awareness in foreign
 entertainment
4 Increasing capex on building
woeld class animation studio
5 Tremendous opportunity of
tapping international
animation market
countries
4 Inadequate funding for capex
and investment in manpower
5 Lack of support from
government

Factor aiding growth of domestic animated film production

 Increase in domestic demand for animation

 India is the second largest entertainment industry in the world , after
Hollywood
 Animation studios in India are creating content for domestic market
also and not dependent merely on the outsourced work
 A long standing tradition and availability of mythological content is a
huge source for idea and story themes for animated film

 Success of animation films like “Hanuman” “My Friend Ganesha”

and extensive use of animation in recent Bollywood movies such as
Krrish and Dhoom 2 is a part of the changing landscape
 A number of animation studios have set up hi-tech studios equipped
with state of the art hardware and software to execute domestic
projects

Number of domestic animated movies in 2008

 90

80

70

60

50

40

30

20

10

0
movies Announced under production

Indian emerging as animation outsourcing hub...

 Significant lower production cost compared to other countries is

driving outsourced /offshore work to India

 India has a large number of qualified and employable professionals

who are proficient in English language
 About 300 animation studio in India are constantly improving on the
skill set required for doing outsourced animation work
 Cost advantage is also a major factor for global entertainment firms
coming to India. Animation can cost about USD125 an hour in US
against USD25 an hour in India
  Initially outsourcing work involved low – end bulk work , but Indian
animation companies have worked their way up the ladder and are
now working on high – end animation

India 15 25

US 100 175

0 50 100 150 200 250 300

upper range Lower range

Increasing Character Licensing Business in India

 Supplemental revenue from animation and character licensing is

also growing and becoming more common
 Merchandise licensing business in India has been growing at
more than 50% in the last three year and total character
licensing sales are estimated at USD 100mm in 2009
 The generation next kids who have given choice with
countless number of TV channels , access to internet and
mobiles are being targeted by cartoon developers through
brand and collaborations

Domestic Player Details

Big Animation 1. Sold Indian satellite TV rights for Little Krishna ,a 13-episode
animation film series to leading children’
2. Bought the right to develop an animated television series on
content from the Indian publication Chandamama ,which is
owned by Geodesic
  25 episodes featuring popular characters and stories of
Chandamama will be developed and ready in 2-3years

Diamond comics Recently made a deal with Licensing solution provider to market
their famous characters to be used in animation films marketing
campaigns and merchandising in children’s properties – clothes
,toys, stationary , etc.
Domestic Player Details
Disney Consumer Product 1. It occupies the foremost position in India ,with Mickey and
Minnie alone generating 43%of its revenue
King Features Syndicate
1. A merchandise licensing firm of Hearst Corporation , that
owns the characters like Flash Gordon ,Popeye and Betty
Poop has entered India
2. It is in talks with Indian corporate for licensing deals in food
and beverages , kids apparel and footwear, stationery and
toys ,home décor and furnishings and the warless / mobile
sectors

High initial investment, shortage of talent, and concerns about IP protection are
key challenges

 High set up and production cost

 Animation movies require large investment for producing , which is
the main reason why many producers in India are not coming
forward to make animation movies
 It cost between USD 3-5 mn to set up a mid –sized studio in India
 The budgets for animation movies in India would be ranging from 15
– 25 mn USD which is very high when compared to normal
Bollywood movies
 Manpower shortage
  The growth in India animation industry is hindered by lack of
skilled manpower, mainly due to lack of facilities and
preference for traditional career options
 Only about 10,000 professionals are working in this techno
creative animation field
 As the demand for animated content increase , lack of
professionals with desired skills sets will hinder the expansion
plans of animation studios
 Protection of intellectual property
 Protection of their intellectual property has always been a
concern for outsourcers to India
 India needs to strengthen its IP policy and ensure that
companies operating in the outsourcing sphere take stringent
steps to take care of clients IP rights

In less than a year, the town of pune has emerged as a serious animation and
gaming industry hub

 A number of animation and gaming have mushroomed in the city

 Nvidia Graphics has set up its operations and rapidly expanding
 Jump games has set shop to develop mobile gaming
 Verisoft is into testing gaming software and Has 50 people
dedicated to testing the latest gaming software
 Auryn Aniamtion Studios, involved with films such as Titanic,
Shark Tales, Stuart Little and Spiderman, has set shop in
pune .Two more are set to launch operations in the city.
 Anirights Info media Of Reliance Group and Anibrain Digital
Technologies have also chosen to house their expansion
projects in pune
  Toolbox Animation Studios has been set and run by Chetan
Deshmukh in pune
 Many of the gaming and animation studios have decided to
either move from other cities to Pune or to set up their
expansion projects at pune
 Also, animation studios in pune as compared to others in
nearby cities are better in terms of space .layout and comfort
for the artist.

 The city has some of the most well equipped animation studios.
 Pune’s Big Animaion studio is massive with a built up area of
60.000 sqft ,which will focus on original Indian content in
animation
 The studios is into the process of setting up multi –feature film
pipelines for both domestic and international market in 2D
and high –end 3D.Big Animation is channelizing its energy and
funds towards acquisition and development of proprietary
products and tools to create a one of its kind IP value chain
 The studio is equipped with a Dolby digital sound auditorium ,
a 35 mm Barco projection unit, the ones used at INOX cinema
halls .The auditorium also has an acting floor for animations,
separate sound recording studios and sculptor’s room
 On the technical side ,Big Animation function on 64Bit architecture, it has a
foundry big Iron RX network switch, one of the fastest in the world and a Blue
Arch storage rate. Each workstation is equipped with specialized PCs worth Rs50
to 60 million.

Over the years pune has witnessed an increase in the gaming education,
preparing skilled manpower

 There has been an increase in institutions providing animation and

gaming education, preparing skilled manpower
 The best animation and gaming schools from across the
globe are setting up schools in pune to train manpower for
the industry
 Also there are several computer institution and art colleges in pune for
companies to get an easy access to talent
 DSK Supinfomcom has set up a Rs 250 core hi-tech 20-acre
campus at Phursungi , near pune
 FTII India offers a one and a half year Certificate Course in
animation and computer graphics
 The Anil Ambani group has forayed into animation
education by launching the Big Animation Infoainment and
Media school or Big Aims, a training institute in pune
 The latest announcement by the information&
Broadcasting Secretary of setting up a government training
institute in the city could set the pitch for the industry to
grow

 There has been an improvement in the animation course content

provided
 Seamless Education Academy or SeamEdu have been offering
courses in different way. They have a commercial tie –up with
animation studios like Toolbox and Rhythm and Hues and the
students are given opportunity to work on some commercial
project to gain hands on experience .With the visiting faculty
including the likes of Shelley page of Dreamworks,the
students are directly seeing world class experts
 Also ,seam Edu is one of the institution to have introduced a
cource on acting for animation. Students are given training on
voice culture to help them learn jow a character emotes
 Another private institution ,DSK Supinfocom International
campus at Loni, some 30 kms from the city ,is offering a
certificate course of supinfocom , a recognized French
institute in animation and gaming.
 MCCIA proposes to introducing courses of short duration
,bringing together trainers, local studios and buyers on a
common platform and forging commercial links with overseas
markets such as china ,Japan. Korea, the US and the UK among
other initiatives.
 IT policy anticipated to support development of animation and
gaming industry in the city
 IT Policy
 With state government coming out an IT policy that lays
special emphasis on the animation and gaming industry,
private educational institutes have introducing courses for
animators. Pune is gearing up tp witness $5 billion worth of
business from animation and gaming in the next five years.
 The new proposed IT policy makes special mention of
animation ,visual effects, gaming and comics with an
assurance from the state government that it will set up a
development center to provide the infrastructure backup. This
will include studio, art gallery and animation film production
facilities .The policy also talks of setting up animation and
gaming parks on the lines of software parks
 The latest addition to boost this boom is the Mahratta
Chamber of Commerce, Industries and agriculture which has
started talking to some of the industrialists to encourage them
to reservr some special economic zones (SEZ) for animation
and gaming industry
 Developed IT
 Existing developed IT in the city would be an aiding factor in
the growth and development of the animation and gaming
industry in the city
 Close Proximity to Mumbai
 Close proximity to Mumbai will help utilize the talent pool
( comprising of script writers, musicians and voice artistes)
Available in Mumbai who are required on contract basis for
projects in pune