Some of the key growth drivers for the animation industry in India are:
Possibility to leverage cost arbitrage
• Cost of animation production in India is one fourth of that in North America and about 35 percent lower than countries such as Korea and Philippines
• Key countries outsourcing animation production work to India include USA, UK, France, Italy and Spain
• There are synergies with the IT/ITES sector.
Growing Internet and Mobile Penetration leading to alternate platforms for content creation
• India has the second largest telecom subscriber base in the world and a rapidly growing Internet user base9
• Mobile VAS services account for 11 percent of total mobile revenues of telecom operations. This is going to increase as 3G penetration increases8 and as 4G is introduced in the next year as anticipated
• Animation is extensively used in areas of news broadcast and programming, defence, legal, medicine, architecture, design, etc. In this era of digital content creation, a large number of jobs are also being created for smartphone / tablet programming and applications.
Estimated cost of 30 minutes of
Animated Content (in USD) 2D Hand drawn 3D Backend
production Flash
Animation
India 45,000 - 50,000 90,000 200,000 20,000
Korea, Philippines 60,750 - 67,500 121,500 270,000 27,000
North America 180,000 - 200,000 360,000 800,000 80,000
07. NCAER, Ministry of Statistics and Programme Implementation, R K Swamy BBDO, Crisil Research, NRS, Datamonitor, Images Retail 2009, ResearchonIndia, Industry inputs, KPMG in India analysis
08. KPMG in India analysis and interviews 09. Telecom Regulatory Authority of India –
Recommendations on Telecom Equipment Manufacturing Policy report, 12 April 2011
Increasing domestic market consumption
• More than 9 percent of kids have access to television at homes. The kids’ genre is the largest genre in terms of viewership after mass genres like GEC contributing to 18.3 percent of the viewership pie10. In 2011, this genre not only recorded growth but also saw the entrance of new channels like Sonic. The kids’ genre grew in regional languages as well. In Tamil, for example, the share of Kids is higher than News. The continued investments in launching new channels and content prove that the kids’
entertainment space is a very viable market.
Education
• With the advent of digital books, as also with digital education solutions and audio-video aids proliferating in Indian classrooms, the use of animation in the education space is expected to grow at 11 percent.11
Challenges
Some of the key challenges faced by the Indian animation industry include:
High studio set-up costs and higher break-even period
• High-end, state of the art studios are required to service international customers and increasingly demanding domestic audiences and clients.
These require significant investments in software, hardware and talent
• Higher gestation and a lengthy break-even cycle, especially for movies, slows the investment flow into the sector.
Lack of Government support
• Countries like Canada, France and Malaysia provide significant incentives by way of subsidies, finance, etc for setting up of studios; while there is no such provision in India
• Some such countries also provide subsidies if the work is outsourced to a country with which the host/ engaging country has a co-production treaty;
India does not have similar treaties
• India, unlike some countries, does not have a policy which mandates that certain percentage of televised content be produced locally.
Lack of appropriately trained man power and training institutes
• There is low awareness for animation as a career option in India. Moreover, India has a large talent pool of creative youth interested in art and culture but most are either unaware of the industry as a career option or do not have access to these careers due to fewer institutes and higher fees
• Focus is mainly on only production skills. Some of the studio-based education academies have high-end infrastructure and technology that is required to be on par with their western counterparts. The most important factor is not about matching infrastructure and technology alone, but also to give a rock solid foundation of storytelling and film-making that goes a long way with the students.
10. Indiantelevision.com
11. KPMG in India analysis and interviews
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
“
“
There has been a stark apathy amongst policy makers towards kids’ media for the last decade!!!
This is despite the fact that we have a very young population. We do not have a single public broadcasting medium (TV or radio) which caters to kids exclusively.
This indifference is definitely afflicting the Animation and Gaming industry. However, the worst impact of this is serious cultural erosion. There is more Korean and Japanese animation on Indian Kids TV than Indian animation.
Given the reach of Doordarshan there is a strong case to start a DD Kids Channel.
This singular effort itself will go a long way in promoting responsible kids content and nurturing our cultural value system.
Also, we are losing ground to our Asian neighbors such as Singapore, Malaysia and China in the animation outsourcing and co-production business. These countries have shown remarkable foresight and swiftly forged co-production treaties with Canada and France while we are still on the table ‘negotiating’ for the past five years
- Munjal Shroff Director & CEO Graphiti Multimedia Private Limited India is gradually but surely moving away
from the shadow of being only an outsourcing destination for animated content. It is now recognised as a location that is capable of creating end-to-end high quality content for global audiences. On the other hand, there continue to be certain impediments to the Indian animation sector attaining its true potential and growing at the projected CAGR.
These concerns need to be addressed by the Central and State Governments as well as all other stakeholders urgently
- Tapaas Chakravarti Chairman And CEO DQ Entertainment International
“ “
The global animation and gaming market is expected to grow from USD 122.20 billion in 2010 to USD 242.93 billion by 201612. This represents a CAGR of 13 percent from 2011 to 201612. In comparison, the Indian animation industry is estimated to be INR 11.30 billion which is a small percentage of the world animation market13. This gives the industry tremendous growth potential. It is estimated that the Indian animation industry will grow by a CAGR of 16 per cent and will be INR 23.97 billion by 201613.
From being a country that helps Hollywood studios make animated films, we are now witnessing several Indian production houses making such films - Koochie Koochie Hota Hain, Alibaba Aur 41 Chor and Delhi Safari are some recent examples. Additionally, locally produced serials such as Chhota Bheem and Krishna Balram have proved that content development is not only here to stay but also the likely game changer in this highly competitive market.
‘Behind the scenes’ – the magic of visual effects (VFX and post production)
VFX continued to weave its magic at the box-office. As many as 8 out of 10 highest-grossing Hollywood movies in 2011 such as Harry Potter and the Deathly Hallows – II, Transformers – Dark of the Moon, Pirates of the Caribbean:
On Stranger Tides, Fast Five, etc relied heavily on special effects.
In 2011, the VFX and post production industry in India too witnessed a healthy growth of 45 percent over 2010 to reach INR 19.70 billion. The VFX market in India is still at its nascent stage and there is a lot of scope and opportunity for growth in this market, both in terms of the quality of work and the amount of work being delivered. However, the Indian audience is an educated audience and is exposed to
international quality. Success of Hollywood movies in India indicates that the audience is ready for it. While in the recent past there have been very few films that have had their scripts rely heavily on VFX to tell their story in mainstream Indian cinema, that number is significantly increasing - Robot, Ra-One and Don 213 are some recent examples. It is estimated that as much as 10 percent of movie budgets are devoted to VFX13. There is no dearth of competency – Indian companies have worked on Oscar-winning movies like The King’s Speech and the BBC TV Series - The Deep.13
12. http://www.marketsandmarkets.com/Market-Reports/animation-gaming-market-514.html 13. KPMG in India analysis and interviews
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
‘To infinity and beyond’ - Potential to leap frog
Source: KPMG in India analysis and interviews
Source: KPMG in India analysis and interviews
Segment
(INR billion) 2011 2012P 2013P 2014P 2015P 2016P CAGR %
2012-16
Animation services 6.80 7.62 8.68 9.90 11.18 12.53 13.00%
Animation production 4.50 5.18 6.05 7.33 9.16 11.45 20.53%
Total 11.30 12.79 14.74 17.22 20.34 23.97 16.23%
Segment
(INR billion) 2010 2011 2012P 2013P 2014P 2015P 2016P CAGR %
2012-16
VFX 4.47 6.20 7.75 9.30 11.16 13.39 14.73 18.90%
Post-production 9.08 13.50 15.80 18.95 22.74 27.29 30.02 17.33%
Total 13.56 19.70 23.55 28.25 33.90 40.69 44.75 17.83%
14. KPMG in India analysis and interviews
© 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Post-production in India is also witnessing phenomenal growth; the number of movies that are using high-end VFX are steadily increasing over the past few years. The key contributors to this growth are segments like VFX and DI, and newer segments like Restoration and Conversion. Increase in number of television channels, need for fresh content and increasing sophistication of advertisers has brought growth to the industry. Changes in the ecosystem – paradigm shift for high quality production of content for domestic markets, cost arbitrage of outsourcing post production to India, and the crossover phenomenon (growing popularity of Asian content in international markets) – have also supplemented this trend.
Additionally, the digital revolution has made the video editing work flow process immeasurably quicker – from time-consuming (tape to tape) linear video editing to online editing suites and to computer hardware and video editing software such as Adobe Premier, Final Cut Pro, etc.14 as well as incorporation of Cloud technologies for storage and technology/ software access.