Talent crunch hampers international growth of the Indian animation industry
Ashpreet Sethi 19 May 2010

Hollywood is increasingly knocking at the doors of Indian animation studios, but the industry is suffering from high tax rates, dearth of talent and lack of international focus

Indian animation studios are doing a lot of work for Hollywood productions. But why is the Indian animation industry not making any kind of a mark on the international front? Despite great opportunities at hand, the industry continues to remain the back-office of the world as far as animation is concerned.

In India, although several animated films were to be released in 2009, they didn’t make it to the screens because of limited screen space and lowered risk appetite of production studios. Pre- and post-production animation work is mostly driven out of US and Europe, but the script-to-screen journey with a ‘Made in India’ stamp may just take a little longer. 

P Jayakumar, CEO, Toonz Animation India, spoke on some bottlenecks which are hampering the growth of the industry. He told Moneylife, “Primarily, the domestic market is a growing one and as such is not established. There is apprehension about how people would take to a particular animated movie, which deters investors. Secondly, lack of skilled animation professionals impacts quality in-house productions. Animation institutions currently produce software professionals who can use the tools of animation, but are not creatively-inclined individuals who understand the nuances of animation from script-to-screen (production).”

Jehil Thakkar, executive director, media and entertainment, KPMG echoed the same views, “We are not equipped to make an end-to-end product. We won’t be able to make another Toy Story.”

Apparently, outdated animation content is literally dumped on Indian networks as there are no potential buyers for domestic content in India. Mr Jayakumar added, “As a growing industry and in the backdrop of a growing market, the emphasis is on producing movies that base themselves on familiar themes—and mythology is an area where the focus is. This may not suit the international market where a general theme may work well.”

The government is doing its bit, but taxation is also killing the industry. The ministry of information and broadcasting is looking at making it mandatory for all children’s channels to telecast local animated movies on a daily basis during specific slots. 

However, the entertainment tax rate—which is different from state to state—varies from 20% to 40%. If you look at Asia, entertainment tax is almost 3% in Japan and Singapore; 7% in Thailand and zero in Hong Kong.

The Federation of Indian Chambers of Commerce and Industry (FICCI) has requested the government for an exemption of entertainment tax on all animation feature films and movies meant for children. Mr Thakkar explained, “I think the waiver is warranted to improve this industry. This will surely help in raising the standards (of the animation industry) across all media platforms.”

The animation and visual effects segment of the entertainment industry registered a growth of 13.6% in 2009 and is expected to grow at a CAGR (Compounded Annual Growth Rate) of 18.7% in the years to come to attain Rs4,660 crore by 2014.

Most of the business will depend on outsourced work and co-production deals. But the fact remains that US studios are falling back on Indian talent. According to media reports, companies like Fox, Walt Disney and Warner Bros are using domestic talent to produce Indian-language films. India sold more than 3.2 billion movie tickets in 2009, which amounts to more than double that of the box-office sales in the US and Canada combined, in terms of number of tickets sold. Mr Jayakumar added, “To sum up, I think it’s not too far when we will see Indian studios churning out animated content for the international market.”




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