a.

In 1990s and 2000s Indian animation industry witnessed the entry of many new
players and many of the companies were moving up the value chain. In this regard,
discuss the factors that helped the Industry to grow in India. Do you think the
Indian animation industry would gain in moving up the value chain? Justify.

Indian animation industry started in 100 years back with Dadasaheb Phalkes stop-motion
camera. It is an Industry that is in India to stay. In late 1950s Clair Weeks from Disney
Studios came to train folks in government organization -Films Division. A group of those
trainees including Bhimsain and Ram Mohan started their own studios in 1970s.

Major sectors of Animation Industry are Animation, VFX (Visual effects) and CCD
(Custom contents development). Gaming industry is altogether a different segment.
All Figures: Curtsey Delloitte.com



Animation industry growth in India

As shown in figure above, animation industry has been recently growing would grow further
worldwide and even in India. The significant changes which shaped the industry in the last
few years were
The shift from a pure offshoring services industry to the growth of domestic consumer
market.
The services market, on the back of successful project deliveries moved up the value
chain especially in animation with end to end animation movies being produced in India.
Growth of sub sectors like custom content development where animation is used for
education, training and simulation purposes.

The growth drivers in the animation industry in India are:
Increase in the size of the domestic animation market as well as the outsourcing market.
Cost arbitrage is the key driver for development of foreign movies in India.
Proven credentials, English speaking workforce, international quality and on time
delivery capabilities are helping Indian companies get offshored work from foreign
studios.
The industry has moved from a pure offshored model to co-production model in some
cases. The Indian studio brings in the manpower and infrastructure to develop the movie
and the international producer will finance marketing, distribution, etc.
The increased interest of Bollywood and regional cinema industry for animation has
also helped the industry.
With Internet advertising growing along with bandwidth, more complicated multimedia
content is being developed for the web.
The growth of new media and interactive platforms.

Moving up in value chain

Initially India was only getting low yielding outsourced work that too pre or core
productions. To build competitive advantage and capture a better market share, many firms
started moving up in value chain. By early 2000s India was fully fledged in 3D, 2D
animation films with various National and International awards. It was then, the animation
work started getting completely outsourced to India to leverage its reasonable cost and good
talent.

The benefits of moving up into value chain were also in huge earning besides world
recognition. Now India has market and the talent both to cater the demands, it has no
dependency on other developed countries to earn profits unlike IT industry and BPO.

b. According to the experts, although the growth of the animation industry had been
phenomenal in India, it has to overcome certain barriers. In this context, discuss the
challenges to be faced by Indian animation industry. Also suggest the measures to
overcome the challenges in the future.


Future challenges

Despite the significant progress made by the industry in past, the growth in future could be
shackled by challenges like

Limited training institutions and non-standardization of curriculum resulting in
talent crunch
Limited promotional budgets reducing animation demand
Lack of funding for the long-term project financing for animated movies.
High infrastructure costs for studio layout, pipeline setup, render farms etc.
restricting scale of animation companies.
Lack of incentive to develop local IP (Intellectual Property) with the economics
favoring offshore development versus investments in indigenous IP creation.
Majority of the animated content in television is adapted foreign animation leading
to low uptake of domestic TV animated serials
Lack of wider distribution and retail points for animated home video /DVD content
Relatively smaller VFX (Visual effects) budgets and restricted use of VFX in
Bollywood and regional cinema

Measures to overcome challenges

The industry constituents need to come together and drive focused initiatives to grow the
sector by -
Improving quality, efficiency and timeliness of project delivery
Building steady business pipeline

Given the high growth and employment potential in the animation and gaming industry the
government should take proactive steps to promote the industry, like -
Pursuing the skill set agenda for improving quality of animation and gaming
education, setting up standardized curriculum and nurturing talent so that quality of
development in India can improve leading to growth in offshoring development.
Provision of grants, rebates and tax holidays to preserve the cost advantage of India
viz. cheaper South East Asian markets which are emerging as alternative destinations
Mandating local animated content in commercial broadcasts during primetime
giving a boost to domestic animated content development
Removal of service tax and sales tax- The studios, which develop intellectual
property in India.

To grow the industry, NASSCOM - National Association of Software Services Companies
needs to create the industry information for animation, gaming and VFX and deliver world-
class research and strategic inputs for the industry. Other areas could be

To encourage and facilitate members to uphold world class quality standards and
enhance operational excellence.
To create special focus around creation and upholding of intellectual property rights.
To develop and highlight success stories that showcase IP developed by Indian
companies, and also those of captive/MNC companies operating out of India
NASSCOM and the industry need to enhance the quality of talent available in India,
and increase employability of the students passing out of training institutes.
To facilitate the introduction of long term degree programs that will help establish
animation and gaming as serious long term career choices
NASSCOM and the industry need to partner with Central and State Governments to
formulate policies and legislation.
Further activities include working with the MIB - Ministry of Information and
Broadcasting to support and promote the cause of various states who are considering
the setting up Entertainment Parks / Animation Academy / Related infrastructure on
PPP-Public Private Partnership model.

To summarize, animation industry in India has huge potential but equally huge scope
to grow due to the challenges its facing today.