Experts across the 3D industry reveal the tricks of the trade that can make all the difference when pitching a project to an agency, potential backer, broadcaster or movie studio - by Mark Ramshaw
The April 2009 issue of 3D World magazine features an article on project pitching that profiles the developing Chinese animated feature film, “Road to Home”, with observations on the process from Animation Options CEO Kevin Geiger. Full story here.
Your primer on the wonderful world of animation is just a mouse scroll away. 
THE GLOBAL ANIMATION INDUSTRY
The business of animation can be divided into two major enterprises: production and distribution. Production involves the development, financing and creation of animated content. Distribution involves the domestic and international marketing, licensing, promotion, physical reproduction, delivery and exhibition of that content. An animation distributor will typically license the rights to theatrical and broadcast exhibition, non-theatrical markets (such as educational markets, where applicable), home video (including DVD), cable and pay-per view channels and video-on-demand. Additional rights are licensed for soundtracks, games, toys, publications and other ancillary merchandise.
As a keystone of the global entertainment industry, animation is experiencing rapid development worldwide, with a compelling slate of multi-cultural intellectual property. Properties originating outside the United States are gaining distribution and finding financial success in the North American market and elsewhere, something that was rare a decade ago. The global nature of the animation business is particularly notable in the television industry, where co-productions are the norm. Licensing and financing considerations have made international co-productions and sales essential for producers seeking to maximize revenue streams. Interestingly, while the United States remains dominant in the realm of animated features, the U.S. market is considered secondary for certain television properties with strong international sales.
The global animation industry lies mainly in the U.S., Europe, Japan and South Korea, with China and India rising to prominence. Nevertheless, one may point to almost any country in the world for notable developments in animation within the last decade. The United States is the undisputed leader on the world animation stage. In the U.S. and Europe, the animation industry is worth billions of USD annually in intellectual property and related ancillary products. Canada is a main provider of global television production, with many co-production deals, a precedent of government support, and a track record of influential talent in animation studios around the world. In contrast, South America imports most of its animation content from the U.S., Europe and Japan.
As a major animation exporter, Japan has a precise industry chain and a mature operating mechanism. Japan’s animation industry ranks highly in the national economy, and the output value of Japanese animation products exceeds that of steel. Anime has a market value of nearly $2.5 billion USD in the United States alone, with global merchandising worth almost $5 billion USD. South Korea is second only to the U.S. and Japan in the output value of its animation industry, which has become one of the six “pillar industries” in South Korea’s national economy. By the same token, mainland China is aggressively building an animation industry with widespread state support. While lacking China’s level of government intervention, the animation industry in India benefits from production costs that are lower than almost any other country in the world.
Similarly, Spain offers the lowest production costs of any European country, while still maintaining a good quality level, most recently exemplified by Kandor Moon’s animated feature “The Missing Lynx”. The United Kingdom has a strong industry and audience for children’s animated television and DVD, while Germany is Europe’s third largest animation producer and largest TV market. France is the most prolific animation producer in Europe, with a strong system of government subsidies and tax breaks. Like China, France features strict quotas and regulations on foreign participation, which have alternately helped and hurt their animation industry. Eastern Europe, with a distinguished record of artistic achievement, is gradually catching up to the rest of the world in commercial animation production. So is the Middle East, with Israel taking a leading role. Finally, it is worth noting that Africa’s first animated feature film production, “The Legend of the Sky Kingdom” was released in 2002.
Around the world, independent animation has blossomed with the advent of digital technology and in response to the conventions of major studio filmmaking. With the increase in theaters, television channels and the use of digital satellites, the rapid growth of the Internet and a wide variety of other new technologies (including the latest advances in stereoscopic and large-format projection), distributors and programmers in nearly every country require more content than ever to fill consumer demand. China is a prime example of this phenomenon.
THE GLOBAL ANIMATION MARKET
Worldwide box office returns in 2007 amounted to almost $27 billion USD, a 5% increase over the previous year. Across all media, the global animation market was worth over $60 billion USD in 2006, and is projected to become a nearly $80-billion USD industry by 2010. 2008 saw approximately 100 animated feature films released worldwide, of which about 30 were produced or distributed in the U.S. This includes theatrical releases, and direct-to-DVD.
While the international landscape has historically been dominated by the major U.S. studios, animation is becoming a truly global industry that promotes communication and exchange among different cultures, with broad development space and co-production opportunities between various nations. The international animation market has come a long way since the first public screenings of hand-painted sequences on celluloid strips. In the middle and late 20th century, developed countries began to evolve from production-oriented societies to entertainment-oriented societies. Locally produced animation properties began to succeed not only in their home territories but abroad as well, particularly in the areas of broadcast television and DVD sales. Compared to live-action, animation travels well: consumers around the world love animation, and it is relatively easy to tailor animated content to regional markets. This is not an option, but a necessity: animation companies in any country require international revenue in order to break even on their proprietary content, whether in film, television, the Internet or gaming. Many major studios owe more than half of their revenues to overseas theatrical distribution and ancillary sales. In television, international partnerships are essential to fund production, and many series can succeed in international markets without ever finding a domestic audience.
Foreign language films are often grouped with “art house films” and other independent films in U.S. DVD stores and movie listings. Unless dubbed into the native language (as most animation commonly is), foreign language films distributed in English-speaking regions usually have English subtitles. Films of this kind typically receive a limited U.S. release in coastal markets such as Los Angeles and New York. Accordingly, the marketing, popularity and gross revenues for these films are usually much less than for major Hollywood blockbusters. In addition, cultural differences between foreign and domestic films affect theatrical attendance and DVD sales. Many foreign language films never receive a DVD release outside of their home market, but foreign films that are particularly successful may be acquired by the major distribution companies for international DVD release on specialist labels. Foreign films can successfully cross cultural boundaries, particularly when the primal story, visual style and cinematic spectacle are compelling. Live-action films such as “Crouching Tiger, Hidden Dragon”, “Amélie” and “Brotherhood of the Wolf” have enjoyed great success in Western cinemas and DVD sales. The first foreign film to top the North American box office was “Hero” in the fall of 2004, while Hiyao Miyazaki’s animated feature film “Spirited Away” won the Academy Award for Best Animated Feature in 2003.
The general pace of international roll-outs is quicker than in the past, especially from the United States. “Day and date” releases, in which films launch simultaneously around the world (pioneered by DreamWorks’ animated feature “The Prince of Egypt” in 1998), are increasingly common. Distributors and exhibitors continue to find new ways to expand the box office revenue pool. The growth of multiplexes in Europe and an increase in the number of screens in Asia and Latin America have all contributed to this expansion. Other factors include the privatization of overseas television stations, the introduction of direct broadcast satellite services and increased cable penetration. It is important to note that in the major European territories, typical television license fees surpass video license fees. In some instances, a license fee for animated feature films may be up to three times the amount paid by a video distributor for the same picture. Territorial value around the world is defined by media sophistication, ticket and rental costs, economic strength, expendable income, currency exchange rates, and of course – audience size. Following is a selection of the major international entertainment markets by estimated population as of 2008:
(Interestingly, Australian audiences view more films than almost any country except the U.S.)
The 1980s and 1990s saw the emergence of a significant market in the form of home video. Films that performed poorly in their initial theatrical runs were now able to receive new life in the video market. The rise of the DVD format has become even more profitable to film studios, causing an explosion of “special editions” featuring extended versions, deleted scenes, “making of” segments, commentary tracks, and even original short films. Two key factors that affect home video success are the number of VCR and DVD players within a given territory, and the amount of content piracy in the region.
The Internet is by its very nature a global market that can be accessed from almost anywhere in the world. However, individual sites are not marketed equally in all countries, and computer usage, online access and download speeds vary from region to region. The Asia/Pacific region is the world’s largest Internet market, with most of the usage found in Japan, South Korea, China and India. While Internet users are quick to migrate to other sites when fees are charged for content, free access to online entertainment is commonly used as a “hook” for the advertising and sales of related products and services. Mobile wireless technology is also emerging as a potential distribution channel, though more in the gaming market than for animated entertainment. As opposed to web content, which consumers generally expect to access for free as they do television, there is evidence that a viable profit model exists for mobile game distribution and animated “mobisode” sales – with the potential of this market demonstrated by Apple’s highly successful $0.99 price point for music downloads.
Last, but certainly not least, the expansive global market for interactive gaming software encourages animation property owners to pursue this lucrative ancillary revenue stream by granting developers, publishers and distributors licenses for multiple computer & gaming console platforms on a global basis.
With respect to my January 2nd blog post “On The Chinese Animation Market”, here is some equal time for the good ol’ U.S. of A. 
THE AMERICAN ANIMATION INDUSTRY
The U.S. film industry is primarily based in Hollywood, California but has spread to other North American regions in recent years. In 1894, the world’s first commercial motion picture exhibition was given in New York City, using Thomas Edison’s Kinetoscope. The next year saw the first commercial screening of a projected film, also in New York. In 1938, Walt Disney’s “Snow White and the Seven Dwarfs” was released during a lackluster period of filmmaking from the major studios, and quickly became the highest-grossing film to that time. Interestingly, “Snow White” was an independently-produced animation production that did not feature any major studio talent. The United States has been at the forefront of film and animation development ever since, with a well-documented history familiar to most, and too lengthy to fully recount here.
The Walt Disney Studios grew from “pioneering upstart” to become the defining and dominant force in animation, with an unparalleled record of animated features and short films. This success in animation ultimately grew to encompass live-action films, theme parks, broadcast television, publishing, and a wide spectrum of other revenue streams under the auspices of the publicly traded Walt Disney Company. The renaissance of animated features at the Walt Disney Company in the late-80’s and early-90’s, starting with “The Little Mermaid” and culminating with “The Lion King”, prompted a wave of aspiring studios to get into the game, usually with poor box office results. However, within the last decade the success of Disney’s animated feature films suffered from the inevitable ebb and flow of this cyclical industry, as Pixar and direct competitor DreamWorks made incursions upon audience territory formerly ruled by the Walt Disney Company. Disney’s purchase of Pixar in 2006 is widely regarded as a bold corrective measure, but at a cost of more than $7 billion USD, it is one which has yet to play out profitably. Meanwhile, the many other animation studios in the United States, large and small, make their marks where they can in film, broadcast, internet and wireless media.
The drive to produce a spectacle on the movie screen has shaped the American film and animation industry for better and for worse. Major studios such as Disney, DreamWorks and Sony depend on a handful of enormously expensive releases each year in order to remain profitable, relying upon high production values, star power and massive marketing campaigns to attract the huge audiences required. The average cost per film among the major U.S. studios was more than $106 million USD in 2007, with 1/3 of that amount dedicated to marketing costs. It is reported that at least 60% of the total budget for DreamWorks’ animated hit “Kung Fu Panda” was dedicated to advertising and distribution costs.
While a successful blockbuster can reap substantial profits, there is a considerable risk of failure. Most studios release films that both over-perform and under-perform in a given year. The major U.S. studios supplement their large-scale productions with independent films, created with relatively small budgets outside of the studio corporation. Independent films and animation projects typically emphasize a high level of creativity and innovation, leveraging on niche marketing and critical acclaim to garner an audience. A successful independent film can have a high profit-to-cost ratio, while a failure will incur relatively minimal losses, encouraging major studios to engage in co-production or distribution relationships with these productions in addition to their high-stakes releases. Some independent companies such as Miramax have in fact become well-financed divisions of major studios. The big studios can thus capitalize on the success of the “independent” distribution division, while the “independent” distributors maintain a certain level of autonomy within the larger corporate structure. The independent companies are able to produce animated films of comparatively smaller budgets for distribution in targeted viewer markets.
THE AMERICAN ANIMATION MARKET
In 2007, the North American domestic box office grossed over $9.6 billion USD on almost 39,000 screens, a revenue increase of more than 5% over 2006. Additionally, North American motion picture distributors generated more than $7.6 billion USD in worldwide revenues in 2007, an increase of almost 6% from the year before. Despite the growing popularity of foreign films, American productions still dominate the international film markets. While more than 60% of U.S. box office earnings come from overseas, non-U.S. films currently occupy less than 5% of the American market. In 2007, the domestic box office revenues for U.S. animated feature films totaled more than $2.9 billion USD, with “Shrek the Third” and “Ratatouille” accounting for more than $500 million USD combined. Internationally, U.S. animated feature films generated more than $1.8 billion USD. “Finding Nemo” has earned nearly $900,000,000 USD, over 60% of which is from overseas.
Movies continue to draw more people in the U.S. than theme parks and sporting events combined, with admission prices significantly lower than alternative entertainment options. The core consumer base for animated feature films is the family audience. Although family films in the U.S. (G & PG-rated) have historically outperformed more restricted content, the family market continues to be underserved. While the average profitability of G-rated U.S. films between 1989 to 2003 was $79 million USD, G-rated films accounted for only 5% of the market share during that same period. On a related note, an independent study of the U.S. film market between 1995 to 2006 showed that computer-generated animated films outperformed all other feature film genres by a 10:1 ratio ($153 million USD average domestic B.O. return vs. $15 million USD average domestic B.O. return). Also noteworthy is that while the overall number of movies released in U.S. theaters remained stable from 2006-2007, 18 more independent films were released in 2007 than in 2006.
The United States is home to dedicated children’s and animation networks that account for the majority of animation hours viewed. Formerly, the three broadcast networks of ABC, CBS and NBC dominated the television animation market with programming concentrated on weekday afternoons and Saturday mornings, but this paradigm has dissolved in favor of cable channels such as Nickelodeon and Cartoon Network which run animation at all hours.
The Internet is an important source of movie information. A study conducted by the MPAA and Yahoo! found that 73% of U.S. moviegoers use the Internet to conduct research before going to the theater. Moviegoers who research films online are more likely to see a movie on opening weekend, go to the theater more often, and see some films more than once in the theater. Internet advertising expenditures continue to grow each year, but television advertising remains the largest expense at more than 1/3 of total marketing costs. About 25% of marketing costs for U.S. films is dedicated to cable TV, radio, magazines and billboards, while another 20% is spent on other non-media promotional outlets and on market research.
On the home technology front, one in seven U.S. moviegoers has invested to a great degree in content delivery and/or hardware for their households. Contrary to conventional wisdom, this segment of moviegoers goes to the movie theater more often than their lower tech counterparts.
Two related items of interest came to my attention recently.
The first was Don Bluth’s post to the Animation Nation message board, fretting over the increased isolationism that he sees as a consequence of digital technology (if I’m reading him correctly):
Over the years, I have heard from many animation students who are interested in creating their own picture or their own studio. I believe the computer has been a great boon to our industry but at the same time has pushed each of us into a type of isolation. The feature film can never be made by one or two people; it will always be a team effort of people who talk to each other, inspire each other and explore the romance of an animated story. Someone once calculated the sheer man-hours that were involved in creating Pinocchio and came up with 400 years. That is, if Walt had done it all by himself! What I have loved in my career as an animator is the joy that comes from teaming with other people to build an animated movie.
Those of you that have had this experience will know what I’m talking about. The short will always be economically feasible, and can done by an individual; the computers have made that possible. But, how do we overcome the tendency towards isolationism which is the safe ground, and find a more gregarious way of working together to progress our art while we’re waiting for that “special feature” to be funded?
The second was an Ars Technica article forwarded by my friend, Cal Arts professor Michael Scroggins, questioning the need for university computer labs when the percentage of incoming freshmen with tricked-out laptops is approaching 100%:
What’s the point of running a university computer lab when all the students bring laptops anyway? That’s a question that schools have been asking themselves as computer ownership rates among incoming freshmen routinely top 90 percent. Schools like the University of Virginia have concluded that the time has come to dismantle the community computer labs and put that money to more productive uses.
According to the school’s Information Technology & Communication department, 3,117 freshmen enrolled in 2007, and 3,113 of them owned their own computer. Nearly all of the machines were laptops, with 72 percent running Windows and 26 percent running Mac OS X (six hardy souls ran Linux).
Compared to a decade ago, the increase in student computing hardware is little short of amazing. In 1997, 74 percent of incoming freshmen owned computers, but only 16 percent of these machines were laptops. The Windows chokehold on operating systems looked complete, appearing on 93.4 percent of all machines and leaving only 6.6 percent for the Mac.
Given these numbers, the school began to suspect that its labs might not be necessary, even though usage remained high. When it surveyed the programs actually launched on lab computers in 2008, it found that 95 of the time students spent in the lab was spent running “free” software like Firefox, Internet Explorer, Adobe Acrobat Reader, or Microsoft Office (the school has a campus license for Office and students can install free $10 copies on their machines). Expensive but niche programs like SPSS—the bane of social science students everywhere—were used only 5 percent of the time.
With labs closing down, the university hopes to save some cash. School vice president James Hilton told The Chronicle of Higher Education that it cost about $300,000 to run the campus computer labs each year, but the amount that the school actually saves will depend on how much it costs to provide alternative access to things like community printers and niche software.
To make specialized software available to students, the school says it will “convene a community to jointly review potential software delivery solutions.” Its ideas so far all appear to revolve around accessing specialized tools over the network, possibly through “software streaming” or some form of remote connection to dedicated machines.
The change also doesn’t mean that the university gets to reclaim all that physical space from the labs. As the university’s explanatory document notes, “ITC understands that students need collaborative space where they can bring their laptops and mobile devices to conduct group work, especially as the curriculum becomes increasingly team- and project-based.”
As for supporting this hugely diverse range of hardware that students will schlep to campus, the mind boggles at the tech support nightmares that will soon plague the dreams of IT workers.
These two pieces point to the paradigm shift that we are seeing as mobile computing becomes increasingly pervasive in our society while encompassing tasks of growing complexity. Though the majority of folks still surf the web at Starbucks or polish their Excel spreadsheets at 30,000 feet, a growing number of professional artists, writers, musicians, animators and filmmakers can be found “out-and-about” creating work. And this is a very good thing. Far from imposing solitary confinement, professional-grade computers have approached a threshold of portability (and even “wear-ability”) that enable digital artists to bring the studio into the field.
I recall my days as a painting major at the Cleveland Institute of Art, working in what is now referred to as “traditional media” (oils). At one point, I developed a case of artist’s block. I had figuratively painted myself into a corner with my current line of aesthetic inquiry, and didn’t know how to get out of it or what to do next. My mentor, Julian Stanczak, suggested that I take the day off and wander around town on foot without anything in particular in mind. “Don’t think, just look,” was his advice. Of course, I’m sure you can guess the result: I returned to the studio with fresh ideas and renewed vigor, based upon my experience of getting out into the world. Here was a case of an artist suffering from “solitary confinement” with brush and canvas - no digital “Big Brother” required. And frankly, we see can see this problem in animation studios around the world, be they traditional or digital. It is all too common to find professional animation artists who are not only isolated from the world (save for the occasional field trip to the zoo or studio visit from Tai the elephant), but isolated from each other. In fact, by the very nature of their craft, digital artists are among the most collaborative around - moreso than many of their “traditional” brethren who often work behind closed doors.
Which brings me back to Don Bluth’s post. In the first place, Mr. Bluth seems to be suffering from the very isolationism that he bemoans: animated feature films already have been created by one or two people. The fact that computing power enables increasingly smaller teams of artists and animators (including solo artists) to create feature-length films is a good thing. Bloated crews of 300+ (and the bloated budgets required to suckle them) are on their way out. Teamwork remains, but within a more feasible scope for the independent creator. And mobile computing makes this collaboration possible anywhere.
The Ars Technica article suggests a re-definition of what a “lab” will mean from now on: a convergence of ideas rather than an offering of hardware. Will students still meet in school labs? Of course they will. But they’ll also meet in coffee houses and friend’s apartments. They’ll take their laptops out into the field to record sounds, shoot video, write, draw and animate. They’ll engage the world instead of hiding from it. And this will only increase the quality of their discourse and of their art, as the silicon miracles which continue to transform our lives sublimate themselves further and further to the creative process.
There has never been a better time to be an artist, there has never been a better time to form a creative team, and there has never been a better time for independent animated features.
