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February 19, 2005

Outsourced animation services

Business Today profiles the outsourced animation services sector including companies like Color Chips, DQ Entertainment, Toonz Animation, etc. Some extracts:
The animation production services sector in India is still small- about $200-300 million (Rs 880-1,320 crore), according to nasscom. That's less than 0.5 per cent of the $70-billion (Rs 3,08,000-crore) global market, but it's growing at a sprightly clip of over 20 per cent. Its USP: expertise in 3d, flash animation, and strong creative and marketing skills...

...It costs $250,000-400,000 (Rs 1.1-1.76 crore) to produce half an hour of animation programming in the US and Canada, and $90,000-100,000 (Rs 39.6-44 lakh) even in the Philippines. In India it costs only $60,000 (Rs 26.4 lakh). Put differently, producing a 26-episode 2d series of 22 minutes each in the US costs $4-7 million (Rs 17.6-30.8 crore), while a similar 3D series costs $6-10 million (Rs 26.4-44 crore).

...Despite the prospects, however, the path to this new technological El Dorado is strewn with booby traps. Says Jayakumar of Toonz: "Animation is a highly capital-intensive industry. A mid-sized studio costs $3-5 million (Rs 13.2-22 crore)." This amount of funding is enough for studios to get started with an initial run of pilot projects, but not sufficient to carry out high-decibel marketing. Crest Communications CEO A.K. Madhavan says several entrepreneurs tried their luck in the animation industry, but few have anything to show for their labour.

The main issue is an acute shortage of manpower. Against an estimated requirement of 30,000, there are just 12,000 animators in India. The paucity has spun off a whole new market for animation training academies in India. Crest Communications' Madhavan, though, is not too impressed with the quality of animators that many of these academies churn out. "They need about 12 months of additional training before they can be put on live projects," he says.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.