The Indian animation industry started out by doing work for foreign companies. Increasingly, it is developing characters, lines and voices of its own

Lord Hanuman did what Ghatotkach, Ganesha and even a Romeo couldn’t. He got
people to watch his antics as he burnt Lanka and wreaked havoc on Ravana’s army. The animation movie Hanuman 1, released in 2005, thus did what no other Indian animation flick had done before—it got the audiences to the big screen, and made a tidy profit in the process. The film, produced at a cost of about Rs 3 crore,

grossed almost Rs 10 crore at the box office. Conceived and executed by Silverline Technologies and released by Percept Picture Company, Hanuman 1 marked the coming of age of the Indian animation industry.

Until recently, Indian animation companies were mostly back-end production houses for American studios. Today, however, the industry is coming into the limelight with its home productions. "Animation studios are spending close to Rs 30 crore per project," says Alpana Mishra, COO, UTV Motion Pictures. UTV plans to release two films next year: Arjun-The Making of a Warrior and Alibaba Aur Chalis Chor.

Tapaas Chakravarti, Chairman and CEO, DQ Entertainment International, agrees: "The animation industry started as a pure services business, like the IT industry, about 10-12 years back. But players soon realised that the entertainment sector did not work like the technology sector. They had to move up the value chain."

The success of Hanuman 1 has spurred many other players. A Nasscom-Ernst & Young report says the industry will grow from $460 million in 2008 to $1.2 billion in 2012—a CAGR of 27%. The numbers are small compared to the $80 billion global industry. But the growth is encouraging Indian animators.

The winds of change are already visible in the shift from low-end outsourced jobs to concept-to-screen contracts. And increasingly, animation houses are partnering with Bollywood and Hollywood studios to come out with international quality shows and films. Margins have gone up by 10-15% due to this shift, says Chakravarti of DQ. Of the 100 or so films that are currently in the pipeline, 28 are already in production, and about 15 are scheduled for release in 2010.

Still evolving

However, progress has been slow. Four years after Hanuman 1, the Indian animation industry is still waiting for its next big hit. Even on television, Japanese shows dominate, though the characters and themes are alien to the culture here. Pokemon and Dragon Ballz on Cartoon Network, Doraemon and Ganso Tensai Bakabon on Hungama and Ninja Hattori on Nickelodeon are some of the popular Japanese shows here. Hollywood films are far ahead of any Indian production in terms of quality and storylines. Moreover, some recent local launches have bombed badly. The biggest failure was Roadside Romeo, produced by Disney and Yash Raj Films. Analysts say the Tata Elxsi team did a great job on the animation, but the theme and target audience did not sync. "The romantic theme did not appeal to the kids and adults could not appreciate the dubbing by the Bollywood stars," says a critic. Jumbo, a Thai movie that was dubbed in Hindi with Akshay Kumar doing the voiceover, also tanked.

"None of the Indian animation films have got the desired audience, but that is more
to do with the content and a poor script," says P JayaKumar, Managing Director of Toonz Animation. "If Indian audiences can consume Western animation films, why won’t they consume homegrown content?"

Perhaps, the biggest constraint has been tight budgets and lack of characters with global appeal. The Rs 10-12 crore budget for an Indian animation movie means the financial risk is hedged, but quality takes a beating. "How can we compete with a $100-200 million Hollywood production that is three to five years in the making with something produced within $2.5 million?" asks Toonz Animation’s JayaKumar. The company recently acquired rights to produce a movie and a TV series based on stories from Chandamama. It’s also working on a movie based on Lord Shiva.

Toonz was the first company to animate a folk character, with its Tenali Raman series. The project, which cost around Rs 6 crore, established the studio’s—and India’s—credentials in producing original animation films. However, the show took nearly five years to turn profitable.

Partnering for profits

Studios are looking at new business models, including partnerships, to produce films and shows. Sometimes, the partnership may just be an investment. In return, they get to own a big chunk of merchandising rights. Some are even negotiating distribution rights. This ensures flow of money even if there is no cash flow in the short term. For example, Toonz has bought the rights for the PlayMobil characters and will be producing content (films, TV serials, etc) to be distributed by Sony Pictures.

Today, global companies are looking at India for co-production. "Indian studios are now on par with American, European or Japanese production houses in terms of skills and infrastructure. But it will be another three to four years before we can actually produce world-class content," says DQ’s Chakravarti. Almost 70% of the company’s content is co-produced or with back-end rights (including home video, TV, DVD, music, merchandising, etc). Some of DQ’s production properties include Iron Man, Large Family and Little Nick.

The impact of the economic downturn also cannot be ignored. Big companies like Riding on own content, the industry’s size is projected to increase from $460 mn in 2008 to $1.2 bn in 2012—a CAGR of 27%

Toonz or DQ may not be severely hit as they have a number of movies and content deals, both their own and co-productions, in the pipeline. But smaller companies will suffer as they depend on outsourced work.

Still, the industry is young. The Japanese style of Anime has a robust domestic market, but it took almost 50 years to develop that style and build that market. Indian companies started end-to-end productions only about five years ago. So, they’re still on the learning curve.