Export


Just some facts in this post – and apologies for the delay.

According to figures released in April by the Australian Bureau of Statistics (ABS), Australian-based game developers received $A116.9 million in revenue over the 2006/07 financial year.

The ABS data indicated that as of June 2007 there were 1,431 employees in the local industry, which indicates considerable growth from 9 months earlier in September 2006 when employees stood at 1,024.

Confirming the status of the industry as a service exporter, ABS figures showed that 92 per cent of developers’ revenue came from non-resident clients over the 2006-07 financial year.

In contrast, sales of game hardware and software in Australia reached A$1.32 billion in 2007, surpassing box office revenue, with software sales accounting for approximately A$750 million of this.

Korean content producers, supported by government, are looking to extend their reach further into international markets, beyond Asia.

An article in Variety

  • Korea’s content industries are likely to produce ‘more nuanced’ properties rather than relying heavily on the local star system, . Big names appear not to be getting the pre-sales that they were overseas.
  • Film commissions in Seoul and Busan are becoming more aggressive at establishing Korea as a viable shooting location.
  • The film industry is looking to the US and Hollywood both for distribution and co-production opportunities
  • The technological savvy of local firms is helping to give Korea a leg up in certain sectors like special effects and new media.
  • Korean animators, who have gained technical expertise through years of outsourced U.S. work, are becoming strong contributors. KOCCA and other government organisations provide significant funding for training in the industry.

My question though, is how developed their storytelling ability has become, and to what extent government policies are aiming to develop these non-technical creative skills.

Things are looking up for the character business in Korea, according to an article in the English Chosun.

Industry size. The sales volume of the character industry in Korea totaled W4.288 trillion in 2005, with Korean characters claiming a 41 percent share of the market, up 6 percentage points from three years before.

Trade Surplus. According to data on character-related products, the export volume of W163.6 billion surpassed the import volume of W123.4 billion in 2005. This is a turnaround from the previous year. 2004 figures suggest exports were W134.2 billion and imports W148 billion.

International collaboration.

The successful overseas debut of Pucca was the fruit of a multinational collaboration. Korea’s Vooz Character Systems developed and marketed Pucca, the U.K.’s Jetix put up the funds, Canada’s Studio B produced the animation, and an American writer took care of the story. Korea’s advanced information technology did its part in the development of the character.

News Release by the Media Development Authority on a joint agreement with the Australian Film Commission to explore a co-production agreement between Singapore and Australia.

An article in contentSutra states while Indian animation is attracting investment with tie-ups with US content firms (Turner [see MSNBC article] and Disney [see Variety article]) and Japanese animators, there are not enough animators to compete with competitive animation production centres such as the Philippines, Korea and Taiwan.

The article reiterates a claim in the Economic Times that India needs 10,000 professional animators of international standards.

But India faces a problem with quality, according to director Samanth.

“Barring one or two films, I am not happy with the quality of animated movies being made in the country,” Samanth said. “People are entering into the business just to make quick money. They produce low cost, low quality animation movies.”

The comments remind me of what some would argue to be the case even in Japan, which is often extolled as the world leader of animation, given that some figures put total animation broadcasts around the world as being 60 percent Japanese origin.

The article continues:

Without adequately trained animators, India could end up losing the race to this lucrative business. The Indian production houses inking deals with international companies need to take the initiative to train and retain employees. While it is true that animation houses find India attractive because of the lower labor cost, their Indian partners will have to remember that if they pay peanuts they are only going to get monkeys.

Lucrative business and paying peanuts. Again, there is substantial evidence to suggest that animation subcontracting is not the most lucrative business to be in, precisely because of what it pays: peanuts. This comes despite it being generally perceived as a high-growth high-value sector that policymakers are looking to bolster.

Original research sourced by DISCONTENTS on the animation industry in Tokyo suggests that the industry faces a cost/quality dilemma not too dissimilar (on some levels) to what these news articles depict in India.

Subcontractors face being squeezed by broadcasters and production houses for deadlines, which place emphasis on completion rather than quality. Given this low-cost environment, they can’t afford to train new animators, who are likely to leave if they are offered better (albeit still meagre) compensation. Despite industry reports such as those from JETRO stating that there are shortages of animators, there appears to be a fairly hefty supply of aspiring animators, with many willing to sacrifice higher wages in order to work in the animation industry. What there is a demand for is expert animators, which are in short supply. Given that most animation is for terrestrial broadcast, the vast bulk is based on existing manga characters and stories, meaning production companies get little share of the copyrights, and have little capacity to risk investing in the development of their own intellectual property. Broadcasters are more interested in their core business of satisfying domestic markets and earning advertising revenue so have little incentive to explore international markets with any degree of fervency. Finally, ‘OVA’ (original video animation) has managed to tap a profitable niche market that caters to otaku, which with its proclivity for disturbed and graphic sex and violence, has little hope of rising to mainstream popularity overseas, and is more likely to continue reinforcing stereotypes of Japanese animation as…weird.

This leaves feature-length anime as the most ‘promising’ market. Miyazaki’s Howl’s Moving Castle broke Japanese box-office records grossing 19.6 billion yen. Yet with its high upfront costs, long development timelines, and uncertain returns on investment, and a market dominated by Studio Ghibli, it is a market that is often too risky for investors and too small to house the bulk of those currently employed in the industry.

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Indian Animation Industry stats:

  • Predicted to reach $869 million by 2010, (compounded annual growth rate of 25 percent over 2006-2010).
  • Current industry has 300 small, medium and big animation companies employ approximately 12,000 people in India.
  • “Could use 3,00,000 professionals in content development and animation by 2008, up from 27,000 in 2001”
    [NB these figures are from the Economic Times article but I can’t vouch for their accuracy]

Several sources (IndianTelevision, C21Media) picked up the story of Singaporean firms chalking up US$128 million in sales deals at the recent MIPTV market in Cannes (S$193 million according to ChannelNewsAsia).

Featuring in the news were Singaporean production firms Big Communications collaboration with Flying Bark (EMTV) and Thunderbird Films based on a HarperCollins series (worth $6.5 million), and Scrawl Studios who concluded distribution deals for their animated series Nanoboy (on MediaCorp’s Kids Central), and co-production based on childrens book series Milly Molly was sold to various broadcasters around the world. Other companies striking distribution deals were or signing production MoUs were Upside Down Productions, Mega Media, Six-Six-Eight, Character Farm, and Media Freaks.

MDA CEO Christopher Chia held the sales up as an indicator of Singapore’s success, given the doubling from last year’s MIPTV sales. The biggest contributor to this however, was a collaboration deal by Singapore Technologies Electronics with Canada’s Nelvana Studios to co-produce three animated TV series and 10 DVD movies, which accounted for about US$100 million of the $128 million.

It is important to in the very least disaggregate this deal from the other deals, given that ST Electronics is the subsidiary of Singapore Techonolgy Engineering, and not necessarily the small to medium sized local content firms that the MDA is providing assistance to in Singapore.

Some related articles:
Channel NewsAsia: Singapore-made documentaries on Asia in high demand
Hollywood Reporter: MIPTV buyers pay attention to new media
IndianTelevision: $5 million India-Singapore-Korean TV co-production

This article Japan looks to keep sun up on animation exportsis an old one from 2005, but the key issues are still relevant, and highlight some of the themes in a forthcoming chapter in a book to be published in 2007 by Asia Pacific Press.

But the question remains how successful it will be to treat animation as another Japanese industry like selling hard drives or motorcycles, as animation has thrived — artistically, at least — leaving artists to their own devices.

What is behind the push however, is the perceived lack of exploitability of Japanese ‘soft’ know-how, and a considerable deficit in the terms of trade in copyright goods. This is compounded by a competitive imperative to earn more revenue from intellectual property rather than straight manufactures, given that neighbouring economies such as China appear on the verge of emerging as more than just the world’s production house/s.

A few key facts and figures quoted in the article are:

According to the Digital Content Association of Japan:

  • Japan’s total Content business in animation, film, publishing and music was at 14.7 trillion yen ($140bn) in 2003
  • Animation (including manga cartoons, films, videos and character products) accounted for 2.7 trillion yen ($26bn), according to the Digital Content Association of Japan.
  • This compares with 50 trillion yen ($474bn) in the US, – 40% of the world total
  • Despite the strength of Japanese animation competition is bound to emerge from other Asian nations like South Korea and China, where Japanese animation companies turn to for labour.
  • China’s culture ministry last year started a university programme to boost China’s animation industry, including via tie-ups in Japan.

It is not just Japan that is turning to other countries for, what is still referred to by some in the industry as “grunt work”. Australian and Singaporean animators and game developers often outsource work to China given the significant cost difference. This comes despite Singapore not yet being an “established” media content region, and significant government efforts to promote the industry. Yet, similarly to Japan, both policymakers and industry players seem to realise that the only way ‘forward’ is to focus on the high-end ‘creative’ aspect of IP creation and the retaining of copyrights.

For Japan (as for Singapore) the strategy for policymakers surely lies in capacity building rather than excessive control of industry activities.

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