Animated growth

By Venkatachari Jagannathan | 12 Jun 2002

Chennai: Meet Robi Roncarelli. He has been tracking the global animation industry for the last 17 years. And he is no small fry. The Roncarelli report on the computer animation industry finds a prominent place on the shelves of almost all animation companies across the globe.

Roncarelli, a Canadian, is the president, editor and publisher of Pixel magazine. He has been directly involved with computer animation since 1978 as a designer and producer producing work for a wide range of clients, including major television networks, international advertising agencies and film producers and since 1984 as an industry analyst, writer and consultant.

"In 1984, when we reported on the nascent computer animation industry, the total output of the approximately 40 developmental computer animation production facilities operating at that time totalled just domain-B's currency converter - check it outover $8 lakh. Seventeen years later, at the end of the year 2000, the total computer animation industry production volume of $25.5 billion represents a percentage increase that is beyond the capabilities of my handheld calculator," gushes Roncarelli.

Roncarelli says there are over 8,000 facilities worldwide, churning out computer animation with very sophisticated equipment and systems. While the equipment and systems power have increased manifold, their cost has dropped to less than the price of an average automobile. Curiously, the billing of animation companies has not gone southwards in line with the cost of equipment.

"Computer animation companies located in the Asia Pacific region will gain more market share at the cost of the companies located in North America. And Indian companies are favourably placed because of their proficiency in operating the systems," he says. "But what Indians lack is creative talent and it takes a long time to develop."

Roncarelli recently spoke to domain-b. Excerpts from the interview:

Last time you had ranked the Chennai-based Pentamedia Graphics as the No 1 animation company in the world. Who takes the cup this year?
This time we didnt rank any company. These days companies are set up to produce one multimillion film (Final Fantasy), or enlarged for specific high-end film series (Lord of the Rings), and they ramp down drastically, or disappear, after the project is completed. Even long-established companies produce widely differing volumes of computer animation on a year-to-year basis depending on project loads.

The largest companies, those who produce more than $15-million-worth of computer animation production annually, account for less than 1 per cent of the total number of production facilities. The rest of the producers are in between mainly clustered in the $1-million-$6-million annual production value area. And 63.9 per cent produce less than $1-million-worth of animation per year.

What is the impact of the global economic recession on the computer animation industry? It is said that the entertainment industry is recession proof.
The global economic slowdown that began in 2000 and continued into 2001 did affect the computer animation industry. In addition, the rapid technological changes in the IT industry also had its impact on the animation industry. The result was that our total industry forecast for 2000 (and the following years) proved to be overly optimistic the actual computer animation industry global production volume level achieved at the end of 2000 was $25 billion, considerably less than the $29 billion we had forecasted earlier.

We based our earlier projections on the 25-per cent annual growth registered by the industry during the preceding five years. But the fact is that the increase from 1999 to 2000 was 6.14 per cent, which represents an increased industry-dollar volume of just over $1 billion. This is still considered a healthy growth rate by most industries, but it is lower than the computer animation industrys historical growth patterns.

The number of minutes of computer animation produced during 2000 has increased at a higher rate than the dollar volume of that production. This is a result of lower production costs from newer, faster and more capable systems, a more competitive industry, and an increase in the relative amount of low-cost offshore production.

Do you see any new trend emerging in the usage of operating systems by animation companies?
Windows NT/2000-based systems gained popularity and acceptance, resulting in a larger share and a growing position of dominance in the industry. The number of Unix-based systems shows a decrease from the preceding year. Linux-based computer animation systems did finally appear during 2000, but their numbers were minimal.

In the highly competitive computer animation industry, obsolescence is a major concern. The continually escalating power of Intels various CPU chips, better memory components, more powerful graphics boards and processors, and the basically universal acceptance of Microsofts Windows 98/Me, Windows NT/2000 and now Windows XP Pro and operating systems continue to foster a wide range of computer animation production platforms at remarkably affordable prices.

The computer animation software packages available to run on these systems, as well as Macintosh, Unix, and more recently Linux-based platforms, are also increasingly more competent and capable. Making the production job easier and faster is becoming the most important aspect if a computer animation production company wishes to remain competitive.

This is leading to more use of, and reliance on, a growing number of specialty software and hardware packages that simplify, or speed up, the computer animation production process. Motion capture, facial animation, lip-synching, laser scanning and modelling, faster rendering, desktop editing systems and a large easily-accessed pool of image datasets are all contributing to the faster production turnarounds, more complex images, and lower costs, which the industry is demanding.

What about the software segment?
With some software companies selling their business to others, the number of software providers for animation industry has come down to 19 from 25 listed in the earlier report. Another new situation in the computer animation software marketing area is the availability of limited use, or time sensitive test programmes, made available on company websites. This practice is becoming universal in the industry, but again most of these programmes became fully active during 2001, so we have not attempted to compile lists for this years document.

On the geographic distribution of the industry players and their relative strengths
The North/South America share of the total global computer animation pie increased in 2000 over 1999. The Asia Pacific region also increased its share, while production houses located in UK/Europe are feeling the pressure. The long-term trend has been for the N/S America region to lose share to the Asia Pacific region in 1996 N/S America accounted for 52 per cent of the total computer animation industry production. This trend will continue for several years.

As the general pressure to reduce production budgets increases, the lower costs offered by offshore producers becomes more and more attractive to North American and European film and TV producers and other computer animation buyers.

Also, offshore producers are becoming more experienced and proficient in their work. Many of them are trying to tie up with established North American producers as a means of hopefully garnering some production work while learning from the North American production process. By 2004 the Asia Pacific region will account for about one-third of the total global computer animation production dollar volume, and as that represents lower cost types of production, the actual minutes produced will be a few percentage points higher.

On the computer animation use category and growth opportunities
Of the 14 animation user categories six are related to the entertainment industry and the balance eight users are from corporate and industrial sectors. In 2000 the entertainment uses of the computer animation production accounted for 76.9 per cent of the production volume and the remaining 23.1 per cent represented corporate and industrial uses of the technology.

The largest use category on a percentage importance basis is the one for film and television production. It includes theatre films and TV programmes and episodic productions, as well as music videos. The web-use category continues to offer a great promise and potential, but is still overcoming technical boundaries. But with compression and streaming technologies rapidly advancing, as also the use of higher-speed digital residential lines and cable connections, the potential looks bright.

On future prospects...
As the general global economy stabilises, as it now appears to be doing, even showing signs of returning strength, the computer animation industry can only benefit. Entertainment continues to be the driving force. The need for content continues, even accelerating, as technology gives us more venues to display graphics and visual information. This bodes well for the global computer animation industry, those involved in it, and those who supply it and service it.

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