Overview:

Animation Industry is once again on its historical growth trend. It is undergoing

significant changes which are reshaping the industry demands and supply. It is growing
and expanding in new ways and directions Industry growth continues to be driven by the
new, smaller, computer animation production companies that are still starting up - taking
advantage of the very low industry entry level financial threshold as hardware and
software prices ease downward. It is expanding rapidly with many new production
facilities based in Asia and Pacific Rim countries. India has the world's largest
entertainment industry, a robust software industry and also skilled manpower, all
essential ingredients for the growth of Animation industry.

Major Player in the industry and competition level in the industry:

Till date the lords of the animation field are said to be Disnep, Sony, and IMAX only.
The prominent players in INDIA include UTV Toons, Jadoo works, Crest
Communications, Pentamedia Graphics, Padmalaya Telefilms, Moving Pictures and
Toonz Animation. The animation studios are catering to the requirements of segments
such as feature films, television programmes, advertisements and computer games.
Currently, Indian animation players are predominantly catering to the needs of overseas
television programme production companies. The astonishing news is that 90% of the
total consumption for animation is in the North American and Canadian markets, of
which 90% of the production work is done in Asia.

Cost of animation production in India is the lowest compared to other destinations like
Canada, Korea, Taiwan and Philippines as seen in the table.

Rates of production of a half hour animated program

Countries Cost (in US dollars)

US and Canada $250,000-400,000

Korea and Taiwan $250,000-400,000

Philippines $100,000 – 120,000

India $80,000 – 100,000

Till date Indian animation industry has around 20000 professionals available in the
market, at this consistent rate of growth we might require around 2 lakhs animated
professionals by the year 2008. Apart from the desired technical skills, animation
professionals must have innovative, artistic thinking along with colour sense and picture
motion ideas. This has been a major task for hiring the right professionals. So, we have to
have the training unit along with the development unit, which trains and grooms the
candidates on the required skill sets to build a body of manpower talent to fuel the growth
of animation market.. Unlike the IT industry it doesn’t require only technical
professionals; it provides employment opportunity to even a 10th class drop out too. This
is a great opportunity for talented individuals from rural areas to make progress. Starting
salaries in animation are close to Rs 6,000 to Rs 6,500 and once you gain experience and
are good it could go upto Rs 35,000.

The main sources of income for Indian Animation industry are VFX work for TV shows
( there are at present 126 channels in India, hence VFX work also is on high demand),
movies, Advertising ( VFX and character animation), computer and mobile gaming,
comics, Simulations (Medical, Engineering, Architectural, Educational), web publishing
etc. Overseas entertainment giants like Walt Disney, IMAX and Sony are increasingly
outsourcing cartoon characters and special effects to India. Direct job contracts from
these Hollywood Moghuls or indirect contracts from other Indian companies like UTV
Toons, Jadoo works, Crest Communications, Pentamedia Graphics, Padmalaya Telefilms,
Moving Pictures and Toonz Animation will be the constant source of work and money till
the new start up attain a quality name in the market.

Not just the requirement of manpower is a challenge, capturing the big domestic market
is a more daunting one. Though made a notable entry into 2D, 3D and flash work field,
yet it has to prove itself as a major player in feature film animation. One of the main
reasons why there is a lack of active interest in special effects is that of economic
feasibility and courage. Indian broadcasters pay very small amounts for producing
multimedia and graphic clips, though producing animation is very expensive. Setting up
infrastructure for 3D animation is also quite an expensive affair, and Indian film-makers
are still not daring to experiment with animation in a big way.

The biggest challenges that the Indian animation industry is facing are awareness, skills
and manpower development, infrastructure and financial support, which would require
industry and government to partner.

In the last few years, India has emerged as a global powerhouse in technology
development. But experts say that unlike animators in countries like China, South Korea
or the Philippines, Indian animators have not been exposed to animation films. It is a
relatively new industry. Not much animated stuff is locally available in India. The only
experiences most animators have are from commercials and special effects fields. There
is lack of awareness about the industry and absence of substantial venture capital inflow.
There is also need for proper animation training in the country.

The animation industry has been lobbying for having international co-production
agreements and, to enhance the industry's global profile, a group of Indian animation
houses have banded together to form the Animation Production Association of India.

Animation / Multimedia companies are still waiting for attaining industry status to enable
it to gain access to funding from banks and financial institutions. There is also a need to
set up more training institutes that focus on animation.
 Need to increase the demand for animation as a career option for our students with
lucrative salary packages.

In India Animation arrived with companies picking up contracts internationally to

execute the labour intensive traditional 2D animation production processes in India. Most
hoped to benefit from the exchange rate arbitrage and labour cost advantages. However
this is not a USP in any form because countries like China, Bangladesh, Chile etc. have
been able to offer exactly the same advantages even more competitively. Moreover the
growth in the number of traditional animation artists in India has at best been flat leading
to companies fighting for the same pool of talent with higher offerings.

Suggested Location for setting-up:

Addressing the large gathering of delegates from the animation industry at Nasscom
organised and AP government sponsored Animation India 2005 summit, Andhra Pradesh
Chief Minister Dr. Y S Rajasekhara Reddy expressed the AP Government's desire to
create a conducive environment for flourishment of the animation industry,” For India to
be prominent on the map, it is essential from the Government’s side to provide the right
infrastructure like low cost housing, low cost studios, low cost quality power and
congenial environment. AP Government is ready to provide all these facilities to the
animation industry so that the world recognises us as the next hub for animation.” Other
sources within the animation industry who are close to the AP government say that the
Govt. has mulled the creation of an Animation City in Hyderabad. Since lot of action is
going to happen, our ideal location for setting up will be definitely ‘Hyderabad’.

SWOT Analysis:

STRENGHTS
• High imagination and creativity support due to rich historical and cultural
heritages, mythological sagas etc.

• Availability of latest technologies.

• Lower production rates, in comparison to US / UK markets.

WEAKNESS
• Shortage of Skilled Manpower.

• Warm response from Indian market.

• Field is still in the initial stages, yet to flourish in a major way.

 • Only 36% of over one million animation software packages available in market
are being used daily to produce commercial computer animation and visual
effects due to lack of skilled labour.

OPPORTUNITY
• NASSCOM predicts a market of 15 $ billion in near future.

• Increasing demand due to its applications in media, entertainment, architectural,

medical and educational fields.

THREATS

• Serious competition from other Asian countries.

• Due to limited labor availability, high attrition rates.

• lower production costs and tighter margins