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An overview of the global animation industry

Tim Westcott

To cite this article: Tim Westcott (2011) An overview of the global animation industry, Creative
Industries Journal, 3:3, 253-259, DOI: 10.1386/cij.3.3.253_1
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 CIJ 3 (3) pp. 253–259 Intellect Limited 2010

Creative Industries Journal

Volume 3 Number 3
© 2010 Intellect Ltd Practitioner’s Papers. English language. doi: 10.1386/cij.3.3.253_1

PRACTITIONER’S PAPERS

TIM WESTCOTT
IHS Screen Digest

An overview of the global

animation industry

ABSTRACT KEYWORDS
Animation is unlike other media industries in that it is, to use a sometimes vaguely animation industry
applied adjective, global. The highly labor-intensive process behind animation tv animation
production means that work is very often shared across countries and even conti- animation studios
nents. Animation, which is easier to dub and has much less local context than live tv program funding
action drama, also travels easily. The key target audience of under-nines happily tv program
watch cartoons wherever they originate. These underlying strengths of the genre distribution
remain, but it has become an increasingly tough industry for producers as more media companies
intense competition in the broadcasting marketplace has transformed their funding animation production
model. The corporate structure of companies active in the business ranges from the
largest media conglomerates in the world (Walt Disney, Time Warner and Viacom
Inc.) to small companies amounting to little more than a designer with a PC and the
latest software package.

Animation is unlike other media industries in that it is, to use a sometimes

vaguely applied adjective, global. The highly labor-intensive process behind
animation production means that work is very often shared across countries and
even continents. A US prime time show like The Simpsons is designed, scripted,

253

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 Tim Westcott

Source: IHS Screen Digest

Graph 1.

1. http://www.imdb. voiced and edited on the east coast of the United States, but most of the produc-
com/title/tt0096697/
companycredits
tion work between the pre- and post-phases is done in Korean studios.1
Animation, which is easier to dub and has much less local context than
2. http://www.parkworld-
online.com/news/
live action drama, also travels easily. The key target audience of under-nines
fullstory.php/aid/1428/ happily watch cartoons wherever they originate. Japanese anime like One
Thomas_Town_ Piece and Dragonball have followings in the United States and Europe, while
Shinmisato_.html
Thomas the Tank Engine is big enough in Japan to have its own theme park.2
3. IHS Screen Digest These underlying strengths of the genre remain, but it has become an
(2010a).
increasingly tough industry for producers as more intense competition in the
4. http://disney.go.com/ broadcasting marketplace has transformed their funding model. The corporate
vault/archives/movies/
steamboat/steamboat. structure of companies active in the business ranges from the largest media
html conglomerates in the world (Walt Disney, Time Warner and Viacom Inc.) to
small companies amounting to little more than a designer with a PC and the
latest software package.
It is misleading to generalize about an industry that is so diverse and where
the nature of an animation company can vary so widely, from companies that
own and exploit intellectual property through to studios involved in the manu-
facture of animation. For the purpose of this brief overview, I will look at the
world in three parts: (1) the United States, (2) Europe and Canada and (3) Asia.

THE UNITED STATES

Two developments – the growth of cable and satellite, and the vertical integra-
tion of the major studio groups since the 1990s – have transformed the market
for children’s television and animation in the United States. The success of The
Simpsons – now the longest-running TV comedy – on the Fox Network has pushed
animation from its traditional home on Saturday mornings into prime time.
The children’s genre is dominated by three groups: Disney, Cartoon
Network (owned by Time Warner) and Nickelodeon (Viacom). They are
present in almost every part of the production and exploitation chain of
animation, and have an increasingly global footprint. We estimate that their
expenditure on children’s programs accounted for 47 per cent of the world-
wide total in 2010.3
The Walt Disney Company owes its origins to a cartoon character, Mickey
Mouse, who made his first appearance on film in 1928.4 Disney has its own
film and TV animation studios as well as Pixar. Disney bought Pixar, the

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 An overview of the global animation industry

5. http://news.
bbc.co.uk/1/hi/
business/4642116.stm

6. http://tvbythenumbers.
zap2it.com/2010/06/29/
nickelodeon-scores-its-
most-watched-second-
quarter-ever/55673

7. http://www.
mediaweek.com/
mw/content_display/
news/upfronts/
e3ic7094b13
c12aa2ac66ed
2c195b6a6479

8. IHS Screen Digest

(2009).

Source: IHS Screen Digest

Chart 1.

pioneer of computer generated animation, for $7.4bn of its stock in 2006.5

Both Nickelodeon and Cartoon Network have animation studios in Burbank,
California. Warner Bros TV Animation now produces mainly for its sister
company Cartoon Network.
Disney Co. programs the Saturday morning timeslot of the ABC network,
as well as its branded US cable channels. Cable channel Nickelodeon is a
long-term first choice in the viewing habits of 2–11-year-olds in the United
States,6 and captures most of the $1bn in advertising spending aimed at this
age group.7 Cartoon Network, launched by Ted Turner as a home for the
Hanna Barbera and Warner Bros and MGM cartoon archive in 1992, is also
challenging for the children’s audience. All three companies have launched
networks in key international territories.
All three companies operate international versions of the networks,
distribute their content to third-party broadcasters, sell DVDs and consumer
products licences, and have made major online investments. Viacom acquired
an important position in casual gaming with the acquisition of Atomfilms and
NeoPets, while Disney owns the Club Penguin virtual community.
According to IHS Screen Digest’s research,8 the United States is the largest
producer of TV animation by value, worth $376m in 2008. We estimated the
value of animated movie production at another $776m. The United States is
in its own league where movie production is concerned – the value of French
animated movie production was $141m in 2008.
Very few independent animation studios exist outside the empire of the
three major children’s players and the Fox Network. Film Roman, producer of
The Simpsons on Fox and the now-cancelled King of the Hill, is still predomi-
nantly dependent on service work. New York-based 4Kids Entertainment
programs a five-hour weekly block on the CBS Corp/Time Warner-owned
The CW. The counterpart children’s block on CBS has been subcontracted to
Canada’s Cookie Jar Entertainment. Fox, which until the late 1990s was the

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 Tim Westcott

9. http://www.variety. market leading children’s block, has pulled out of children’s TV altogether,
com/article/
VR1117996360
and currently shows infomercials on Saturday mornings.9
10. http://menmedia.co.uk/
southmanchester EUROPE AND CANADA
reporter/news/s/
1094938_the_final_ No European broadcasters have any significant in-house animation produc-
farewell_of_ tion capacity (ITV plc owns Cosgrove Hall Films but shut down the company’s
chorltons_toon_army Manchester studio in 200910). Animation is therefore entirely the preserve of
11. Skillset.org independent studios which, apart from occasional film or commercials work,
12. SFPA (2006). are highly dependent on commissions from broadcasters.
The UK training organization Skillset has reported that two-thirds of the
13. Le marché de
l’animation en 2009, 300-odd animation producers in the United Kingdom are ‘micro-companies’
May 2010, http://www. with fewer than ten staff.11 Companies of this scale virtually disappear from
cnc.fr/Site/Template/T1 the scene when they are not actively involved in production. Furthermore,
.aspx?SELECTID=3913&I
D=2837&Type=4&Annee the vast majority of animation work is done by non-permanent staff. France’s
=2010&t=1 animation producer’s union, SPFA, reported in 2005 that freelancers accounted
for 72 per cent of hours worked that year.12
France is the only country to produce detailed statistical data on its animation
production industry, because of the high level of support offered by the national
film body, the Centre nationale de la Cinématographie (CNC). According to the
CNC,13 351 hours of animation were produced in 2009, with an overall value of
211m. This was more than the year before (259 hours worth 151.6m), but less
than 2006’s high water mark of 395 hours. The CNC data reveal that anima-
tion production does not follow a pattern of growth, but one which is cyclical.
Troughs and peaks are determined by the demand of the market.
The CNC report also reveals that, even in a country that offers relatively
generous financial support, animation must sell abroad for producers to
make a return on their investment. Broadcasters, which are mostly subject
to quotas requiring them to invest in originating local content, are the largest
single source of funding, though in 2009 they provided only 27% of the cost of
animation produced. Cosip – a CNC-administered loan scheme that provides

Source: CNC

Chart 2.

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CIJ_3.3_Westcott_253-259.indd 256 6/14/11 7:09:19 PM

 An overview of the global animation industry

vital support for animation studios – covered another 19% and another 7% 14. http://www.
dhxmedia.com/
came from other domestic sources (tax breaks and presales of rights) while reports/060809133306_
producers themselves invested 19%. Foreign co-producers and broadcasters PREPprospectus.pdf
contributed the remaining 25%. 15. IHS Screen Digest
Producers in other countries sometimes accuse the French animation (2009).
sector of being ‘subsidized’ – though this is something of a caricature. French 16. IHS Screen Digest
producers clearly benefit from a protective system, but still face the commer- (1999).
cial imperatives of providing commercial partners with product that gener- 17. IHS Screen Digest,
ates audiences and DVD sales. The investment that producers need to make December 2010,
themselves also means that they are not entirely insulated from the challenges unpublished research.
of the market. The CNC’s report also reveals a lackluster overseas record for 18. IHS Screen Digest
French animation. In 2009, the value of animation sales outside France was (2010b).
31.9m, slightly higher than the 30.7m in 2008 but otherwise the lowest
annual total since 38.2m in 2003.
Canada, like France, has made a policy decision to support its domestic
animation industry, with a broadly similar structure of federal and provin-
cial loan schemes, tax credits and broadcast quotas. The two countries also
have a ‘mini-treaty’ in place covering animation that enables productions
from each country to qualify for support from the other. The prospectus of
Canadian producer DHX Media, published in 2006, included an investment
model demonstrating that the company would usually expect to cover all but
15 per cent of the budget of its animation and live action productions.14
In our most recent study,15 Canada was estimated to have produced the
highest annual volume of animation produced in 2008, with 382 hours. This
was more than the United States (330), France (251), the United Kingdom
(191) and Italy (112). Without funding support or broadcaster quotas, produc-
ers in other countries undoubtedly face a tougher battle to make a living
from animation. However, this does not make it impossible. In the United
Kingdom, very successful series like Pepper Pig and Horrid Henry have flour-
ished without any public funding support and often low fees from broadcast-
ers. The ITV network’s payment for the first series of Thomas the Tank Engine
in 1983 covered only 10 per cent of the budget.16
One of the most successful UK producers, HIT Entertainment, fuelled its
expansion with a stock market flotation in 1996 and the global success of an
original property, Bob the Builder. HIT went on to build further by acquiring
Thomas the Tank Engine, Barney and other properties, and for a time delivered
the kind of figures that persuaded investors – typically suspicious of media
stocks – that animation was a potential money-spinner.
A series of stock market flotations of animation/children’s content
followed – including Chorion in London (owner of the rights to the Enid
Blyton estate); EMTV, RTV, TV Loonland and Igel Film in Germany; Mondo
TV in Italy; and Millimages, Carerre and Xilam Animation in France. However,
a combination of factors – poor management and even fraud on the part of
some companies, but more generally the unpredictability of the market and
the already noted decline in broadcaster spending and the DVD market – have
added up to a troubled relationship between animation and stock markets.
Of the seventeen animation companies to list since the late 1980s, ten either
went bust or returned to private ownership, and every one of the other seven
were trading as of 13 December 2010 below their issue price.17
One of the major disincentives for investors is the long lead time between
the development of an animated property and the returns from exploitation.18 It
can take two years or more before a producer sees a return on the capital cost of

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 Tim Westcott

19. Author’s unpublished developing and producing a series. Partners offering money up front to enable
interview of Tapaas
Chakravarti, June 2009.
a production to get underway, distributors selling the international rights, all
typically expect to recoup their investment before the producer sees a cent or
20. http://www.ft.com/
cms/s/0/806ef80e-
centime of revenue. The cost of producing a second series will more than likely
32ab-11df-a767- have to be borne before the cost of the first series has been covered.
00144feabdc0.
html#axzz18Mb44EG8
ASIA
21. DQ Entertainment plc
(2010). Animation studios in Asia have traditionally focused on service work. While
22. http://www.accu.or.jp/ links between the United States and subs-contracting studios in Korea, India,
cc/en/animation/img/ China and other territories remain strong, changes in technology and a drive
KoreaHL_no1.pdf to save costs have led many European studios to repatriate animation work.
Traditional hand-drawn animation has almost died out, with computer
programs digitizing color and paint speeding up the animation process.
However, Asian studios retain a significant advantage because they are not
only able to capitalize on low labor costs, but they can also provide the large
numbers of trained artists that are needed to deliver an animation production
in a reasonably short timescale. In an interview with IHS Screen Digest, the
chief executive officer of India’s DQ Entertainment said the company could
produce a 26-part animation series in 60–70 weeks that would take a western
studio 80–90 weeks. Another advantage of his studio is its ability to mobilize
hundreds of trained artists in a short period of time.19
DQ Entertainment has, however, moved away from the conventional
service model of animation production, providing equity for productions
and retaining a share of revenues. The company is acting as the majority
co-producer on a production of the Jungle Book budgeted at 9m, with French
company Moonscoop as a minority co-producer and European broadcast-
ers TF1 and ZDF acquiring the rights. DQE floated on AIM in London in
2007, and had not at the time of writing regained its issue price of 136p. The
Financial Times noted20 just before DQE’s secondary listing in Mumbai in May
2010 that shares on London ‘have gone for long periods with zero volume’,
but that the Mumbai IPO India was already 86 times oversubscribed.
It remains to be seen whether companies like DQE are merely revisiting
the euphoria that surrounded European animation stocks in the 1990s, or
whether they prove a longer-term proposition. It may prove difficult for DQE
to repeat its 2010 financial year performance in Europe, when the old conti-
nent accounted for 84 per cent of its revenues.21 Europe is the most competi-
tive and the most challenging marketplace in the world.
India is also not alone in aiming to make the classic animation business
transition from service work to rights. China’s domestic industry has increased
in scale, nurtured by broadcast quotas and investment in new studios. South
Korean producers have also thrived in a support system similar to that of
France,22 and other territories like Singapore, the Philippines and Vietnam
have also build a service infrastructure. Japan – the biggest animation market
in the world after the United States – has also seen a revival in the global
market as its output increased since Pokémon swept through the world in the
early part of the 2000s.

CONCLUSION
Over the last decade, the animation industry has neither grown significantly
nor contracted. While developments in the TV market have changed the busi-
ness model for animation producers, a funding ‘crisis’ was already in evidence

258

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 An overview of the global animation industry

the first time IHS Screen Digest investigated the animation industry.23 There is 23. IHS Screen Digest
(2001).
no doubt that the investment in the genre has all but dried up in some places,
and that the animation players in the strongest position are either the US 24. http://blog.nielsen.
com/nielsenwire/
vertically integrated studios, producers benefiting from domestic support media_entertainment/
schemes or studios in low cost countries that are able to make a sustainable tv-viewing-among-kids-
living from service work. at-an-eight-year-high/
It is also apparent that the Internet has so far not delivered significant
new revenue streams to animation producers – at least, nothing comparable
to the TV industry. While there is undoubtedly an audience for animation on
the web – whether user-generated or professionally produced – but a strong
reluctance of consumers to pay for it. In addition, TV viewing by the key target
audience of children remains overwhelmingly linear,24 even in countries like
the United States where an average home is equipped with an array of devices
like games consoles, digital video recorders and Internet-connected PCs.

REFERENCES
DQ Entertainment plc (2010), Annual Report, DQ Entertainment plc:
Hyderabad.
IHS Screen Digest (1999), The Business of Children’s Television, 1st ed., IHS
Screen Digest: London.
IHS Screen Digest (2001), Animation: The Challenge for Investors, IHS Screen
Digest: London.
IHS Screen Digest (2009), The Global Animation Business, IHS Screen Digest:
London.
IHS Screen Digest (2010a), The Business of Children’s Television, 4th ed., IHS
Screen Digest: London.
IHS Screen Digest (2010b), For Non-Majors, Animation Has Become A Hard Sell,
January, IHS Screen Digest: London.
Le marché de l’animation en 2009, Centre nationale de la Cinématographie,
May 2010, Supplemented Prep Prospectus, DHX Media, May 2006.
SFPA (2006), Les Grands indicateurs du marché français de l’animation, December,
SFPA, http://www.animation-france.fr/animation.html.
Skillset (2008), Animation Sector Profile, Skillset: London. http://www.skillset.
org/uploads/pdf/asset_13238.pdf?3.

SUGGESTED CITATION
Westcott, T. (2010), ‘An overview of the global animation industry’, Creative
Industries Journal 3: 3, pp. 253–259, doi: 10.1386/cij.3.3.253_1

CONTRIBUTOR DETAILS
Tim Westcott is a Senior Analyst, Television, at IHS Screen Digest and Editor
of the Screen Digest research bulletin. He joined the company in September
2004 and has written reports on film and sports rights, animated movies
and television on the Internet. Tim previously worked for two years at the
European Audiovisual Observatory in Strasbourg as an analyst specializing in
public film and audio-visual funding.
Contact: IHS Screen Digest, Lymehouse Studios, 30–31 Lyme Street, NW1 OEE.
E-mail: [email protected]

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