Jumbo and Roadside Romeo were sheer disappointment at the box office. Does that mean that Indian film companies are not capable of making successful animation films? Will India remain the animation workshop of the world without experiencing the glory (and the margins) that come with its own creative product on television or film?
Not necessarily. Irrespective of what the critics say, Jumbo and Roadside Romeo are baby steps towards taking the $460 million Indian animation industry to the next level. In this phase, the entertainment industry is trying to mate its creative talent with the technical skills of the country’s computer software business. The resulting output — like Jumbo or Roadside Romeo — may be patchy, but the attempts should continue. This is because, for the first time, the two industries have got together to address a fundamental problem with Indian animation — its extreme tech and therefore outsourcing orientation.
For too long animation has come out of information technology (IT) companies or tech shops. Note that animation data and conferences are organised by the National Association of Software and Services Companies or NASSCOM and not the usual entertainment industry bodies. So the entire orientation of the business is IT.
Yet even a cursory analysis of the business will show that the real value and margins in the business lie in creating and owning intellectual property rights (IPR) in entertainment products which form a bulk of revenue streams for animation anywhere in the world.
Take television — a large consumer of animation in most of the world. In 2007, animation formed a robust 4 per cent of all TV viewing in India and got 7 per cent of the ad revenues on television. But most of the animation programming on Indian television is a rerun of old Japanese or American shows. That is because animation comes under ‘computer software’, which gets a tax deduction of about 80 per cent on profits from exports. So the business is completely skewed towards outsourcing and away from attempting anything original.
This means that even as we subsidise the content that goes to the overseas market, we tax the one meant for the Indian one. Then we import animation content to fulfill the local need gap!
Now add another factor. Indian animation costs roughly one-fifth of that made in the US. As a result, much of the focus so far has been on outsourcing work and very little on owning IPR. While doing outsourced work is a great way to generate employment and revenues, especially in a country like India, this keeps the industry at the commodity and low-margin end of the business.
Being at the IPR-end of the value chain is an expensive and risky proposition. The average budget of a Hollywood animation film is $87 million. (In India the figure is closer to $12 million.) The returns are great, if you get it right. Animation formed 4 per cent of all releases in Hollywood from 2005 to 2007 and brought in almost 20 per cent of the total box office revenues of the film business during this time.
It is a path that Indian animation companies know they will have to follow soon. In recent years, low-cost competition from Philippines, Korea, Taiwan and China has been taking away the low-margin, high-volume, outsourcing business away from India.
However it is only a combination of tech-oriented animation companies and creatively-inclined film ones that can inch their way towards the high-end of the value chain. Roadside Romeo, jointly produced by Yash Raj Films and Walt Disney Pictures, and Jumbo from Percept Picture Company are among the first such combinations. Rajnikanth’s next film, Sultan — The Warrior, a Rs 100-crore animation project is another one worth looking forward to.
Their efforts, however flawed they may be, deserve a pat.
The writer is a media consultant and author of The Indian Media Business.