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The global animation market was estimated at USD 59 billion in 2006 and USD 68 billion in 2008 and is expected to grow at a CAGR of 9 per cent to reach USD 100 billion by 2012. In 2008, animation entertainment accounted for 74 per cent of the global animation market, followed by web design at 16 per cent and custom development at 9 per cent.

Global animation industry
Source: Industry estimates and EY analysis. 2006 number from NASSCOM Animation and Gaming report 2007

Animation development studios are still trying to strike a balance between risk and reward. Distributors and exhibitors often garner the major share of revenues with the excess trickling down to production houses and ultimately to studios. Studios need to carefully schedule, initiate and execute the production of an animation movie, which takes between three to five years to develop and cost over USD 100 million. Integrated production houses and studios realize that creative talents need to be supported by commercial talent, to exploit the content to the fullest and bring in the revenues. Co-production, share of profits and many other models are being evolved to enable equitable distribution of revenues. The successful growth of animation will therefore depend on buoyant consumer entertainment spending, commercial exploitation capability and subsequent revenues accruing to studios.

Growth drivers for the animation industry

The global animation industry is spurred by increasing consumer demand for digital entertainment. The entertainment segment, especially animated movies are the growth engine of this segment. Largely based out of US animation, productions has increased in scale, budgets and garner revenue from theaters/home video distribution worldwide.

The Japanese and European markets are driving the growth of animated television serials and animated content for other digital platforms. The television serials lead to volume growth with comparatively smaller production budgets.

This steady growth in animation entertainment production and consequent offshoring to India and South-East Asian nations, is leading to a demand of creative and skilled manpower. This demand is spurring the growth of animation education segment leading to establishment specialized animation training industries and courses.

Another Significant driver is the adoption of animated and multimedia content for segments beyond entertainment like custom content development for education, training etc, along with areas like web design and interactive digital platforms.

Animation and VFX has deepend its roots in the advertising industry with most advertisements involving a component of VFX and many advertisements having animated characters and themes.


The global gaming market was estimated at USD 21 billion in 2006, and at USD 36 billion in 2008 and is expected to grow at a CAGR of 10.5 per cent to reach USD 53.6 billion by 2012.

Exhibit 2: Growth of the global gaming market

Source: Industry estimates and EY analysis. 2006 number from NASSCOM Animation and Gaming report 2007

Growth drivers for the gaming industry

The global gaming is characterized by “console cycles” that start when new generations of gaming consoles are introduced in the market. These console cycles typically last between four to five years. During these cycles, a whole new range of gaming software is introduced around the new console generation and gaming companies see the emergence of new opportunities and a growth in revenues. Moreover, every new console cycle is characterized by innovation in design, graphics and technology that is advancement over the previous generation of consoles.

The other two drivers of growth are newer geographies and alternative platforms. Globally, the North American region is the largest consumer of console gaming products. In 2008, the consumer market in North America was estimated to be 43 per cent of the total revenues from gaming hardware and software, followed by Western Europe at 32 per cent and Japan at 16 per cent. Emerging markets in the rest of the world are at a nascent stage and contribute a mere 9 per cent to worldwide console gaming revenues. However the growth of the online gaming, especially that of MMORPGs in China and Korea, is significant as it marks the beginning of a new world order – the next level in the game. Games are not standalone and played by single players, but are extensively multiplayer with multiple sources of revenues. Most significantly, all this is taking place in non-traditional markets, bringing in a gust of fresh wind to drive the sails of growth.

In view of the economic downturn, forecasters predict that reduced customer spending will have a bearing on the gaming market. While this may be true in the near term, the long term scenario could be different.

Exhibit 3: Share of various segments in the global gaming market

Source: Industry estimates and EY analysis

The mobile and online gaming segments are relatively new segments in the global gaming arena, but have grown rapidly to account for 29 per cent (mobile) and 24 per cent (online) of global gaming revenues.

This rapid growth of the mobile gaming segment has been possible due to the high growth in mobile subscribers as well as a reduction in the cost of game-enabling mobile handsets. The growth of the mobile platform was escalated by the advent of niche gaming publishers focusing on the development of mobile games. These mobile games are small, and require limited time and cost to develop. The mobile gaming platform is likely to be one of the major gaming platforms till 2012.

The advent of extensive multiplayer role-playing games, or MMORPGs, has been a major factor in increasing the popularity of the online gaming platform. Increasing internet penetration, improving bandwidths and rapid advancements in PC hardware technology have also enabled its rapid growth.

Trends in the global animation and gaming industry

The following are the major trends witnessed in the global animation industry:

The production budgets of animation movies have gone up substantially. Since 1994, more than 15 animated movies with budgets over USD 100 million have been produced. Shrek 3, with production costs of USD 200 million, is the most expensive animated film made, which places it in the league of mega-budget live action movies.

Box office revenues have gone up as well, Indicating that the appeal of animated movies have extended beyond children and have evolved as complete family entertainment. The animated movie, Finding Nemo, garnered worldwide box office revenues of USD 866 million, making it one of the top grosser of all times. Other high earners at the box office include The incredibles at USD 631 million and Monsters Inc. at USD 525 million.

The quality of animation movies has improved with the incorporation of 3D effects to enhance visual appeal. Almost all recent hits, such as Ratatouille, Finding Nemo and The Incredibles, have made extensive use of 3D animation techniques.

Animation is increasingly being used in digital media platforms such as mobile phones, internet content, advertising and direct to home formats.

Earlier, animation was inspired by and based on comic book characters such as Superman, Spiderman, He Man, and X-Men. Today, some animated TV serials have inspired comic books that are based on them. A classic example is The Simpsons, based on which comic books has been produced.

Animation is increasingly being used in video games. Similarly, several characters that were originally produced for gaming are now being developed as long-format animation. For example, in the case of Japan, several successful computer games have been developed into animated series such as Pokemon, Monster Farm, Power Stone and Detective Conan.

Another key trend witnessed in the global animation industry is the outsourcing of animation content to Asia. Across Asia, several animation firms are engaged in offering outsourcing services to North American and UK film and television animation content creators. The predominant factors responsible for the emergence of animation production being outsourced to the Asia-Pacific region continue to be the availability of low-cost, powerful computer animation platforms as well as the availability of skill sets at a significantly lower cost as compares to those available in North America and Europe. With the current economic slowdown and increasing cost pressures, it is expected that outsourcing to low-cost countries such as India will increase significantly.

The following are the major trends witnessed in the global gaming industry:

Game developers are now looking to develop cross-platform games, moving away from single-platform game development with exclusivity. This is due to the fragmented market that has a low installed base and high production costs, which have gone form USD 12 million – USD 20 million in pre 2007 for an AAA title to USD 20 million – USD 50 million in post 2008. To recover these high production costs, the sales volumes have to increase. The new strategy is therefore to capitalize on the combined volume of the installed base.

Console penetration depends heavily on the exclusively launch of popular titles on the platform. With the supply of exclusive titles from independent developers diminishing, console manufacturers have to depend on their in-house studios to develop compelling titles and drive sales.

The free-to-play online gaming concept is shifting towards western countries. The so-called free-to-play model, which is popular in Asian countries, has little or no up-front costs for gamers, who pay subsequently for in-game digital such as clothes for an avatar or access to special features and levels.

New games allow players to customize the games creating their own levels and sharing them online.

Game consoles are evolving into multi-functional entertainment systems-consumers use them to watch DVDs, listen to music and download content.

Games are increasingly becoming a medium for advertising, with in-game ad placement or advergaming becoming the norm on all gaming platforms.

Internationally social networks are contributing to the growth of games. While small embedded games on social networks are extending casual gaming, social networks are also contributing to user developed gaming content. Many games have leveraged (SPORE, Guitar hero etc) social networks for encouraging users to develop custom characters level etc. Social networks have also emerged as attractive destinations to promote/advertise for console games. In India gaming on social networks is still in its infancy, but play an important role in widening the casual gamer base.

“Episodic content” is catching up as a focus for console game developers – this type of content allows developers to release a game in episodes with new levels, characters and events, rather than release it at one go and create a continuous revenue stream.

With the introduction of 3G-enebled handsets such as the iPhone 3G, mobile game play is getting more advanced with an increasing number of games with multiplayer option being introduced. These trends, Combined with escalating cost bases, are good signs for emerging markets. With industry players looking to trim costs and improve margins aggressively, the game may shift to the backyards of many emerging countries. China, Canada and South-East Asian countries have already taken the lead in promoting gaming offshoring. India is interestingly placed among these countries with the dual advantage of cost arbitrage and revenue potential from a small but fast-growing consumer market.

  "I have gained immensely from DQSVA. This 3D Course has helped me to become much more confident in the subject.
      1) Infocom
      2) IIT Spring Fest
      3) Woodrow Phoenix at DQSVA
      4) Shelley Page with students
      5) MDS Challenge
      6) Eye opening workshop on VFX
      7) Session on Film Making
1) Interview with DQ School Head, Global Operations Cyrus Mistry
2) DQE announces television rights deal with MediaCorp
3) DQE signs consecutive deal with     Sony Picture Home Entertainment