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The state of the animation industry?


Or: I think we are going to need a better boat.

You may have noticed some rather spectacular news in the last few days concerning closures of animation studios and layoffs of seasoned folks at others. While this is not a new phenomenon it sure smarts when it happens.
Over the last two years there have been a number of company collapses and quiet closures across Canada. I fear that we have not seen the last of it. Why you ask?

Over the past few years there has been a lot of discussion about the animation bubble. The boom and bust the industry seems to go through every 7 years or so. This last boom it could be argued lasted well over a decade. If you want to believe in simplistic answers to complex questions this one might be right for you. I don’t buy it. I think that the answer is much deeper than a simple sentence could encapsulate.

Here is an interesting article from 1985, from the Spokane Chronicle. Discussing the Black Cauldron.

My favourite part of the article is the last couple of lines.
“ The release of the Black Cauldron could also spell trouble for animators if it isn’t a huge success.”
“It’s a very conservative business…> When you get a string of things that aren’t working well, people move into things that are.”
I think that could be said for any sort of business really. Animation is no exception to this theory.

Businesses fail all the time. I think that because we work in the entertainment world ( meaning not the real world ) we tend to be held to a different standard by the media and ourselves. When a company goes down in the TV/film/game world everybody hears about it.

In 2009 Canada saw over 5000 businesses go under.

For 2008, in the arts and entertainment sector alone we saw more than 3.4 per 1000 businesses go under.

That is a small % of the total.

These just become a statistic don’t they? We no longer connect with the people that have lost their jobs. Sad and true but I have digressed.

Boom or bust is not the issue. That is a normal cycle of economics in any of the major countries that we trade with. Things work for a while, things get more expensive, things change. No different for cartoons than it is for sausage making.

For me the bigger issue is that the model is broken. How we make TV shows and how we make a living making TV shows is changing and no one has the magic answer as to what it is changing into.
I find this scary and exciting at the same time.

The cost of production is rising all the time.
The desire for the end user to see and enjoy a quality product is rising.
The old model of “just send it overseas” doesn’t work anymore for both the reasons above.
The Advertisers, who pay the broadcasters to air the shows we make are running scared because they don’t understand where the viewers are going and how to reach them.
This in turn means broadcasters don’t have the money they used to for buying your show.

It becomes the snake eating it’s tail!
Downloads are the easy way to blame what is happening. I don’t buy it. I do think that illegal downloading is very bad for our business but trying to stop it is like putting your finger into the leaky dam.
I went to a conference not so long ago where an expert was talking about the loss of revenue due to illegal downloads. The numbers were frightening but like statistics, numbers can be made to do your bidding.
Heroes was the most pirated show in 2009. When it first aired the network was getting about 14 million viewers. As the series continued that number has dropped to about 6 million with another 6.5 million people downloading it. So the network says that they will cancel the show due to poor numbers.
In my books they have over 12 million viewers. Sure half of them are getting it for free so what do I, as the broadcaster or producer need to do to get some money from them?

Do I try and stop millions of internet users from downloading? Or do I look at other statistics that are readily available. For instance did you know there are now over 400 million users on Facebook? How about there are over 1.8 BILLION internet users worldwide. In my mind if you are thinking in terms of millions of viewers you are missing the big picture.
The audience is no longer nailed to their chair to be entertained on our schedule. They want what they want when they want it.

Until someone comes up with a better way of getting the message to the end user then we are going to see a lot more upheaval in this industry.
Marshall McLuhan once said, “the medium is the message”. I think that still stands as a viable theory but the medium has changed. It is no longer that box that sits quietly in our living rooms waiting for us to sit in front of it.

I think we need a better boat.


  1. Mark Mayerson Mark Mayerson March 17, 2010

    There are several things happening all at the same time. The Canadian dollar is rising again, which hurts any advantage Canada has due to the exchange rate. TV viewership is dropping because people are spending more time on video games and online. Advertisers realize that placing ads online is cheaper and more efficient. If they advertise on Google, they only pay for click-throughs, not eyeballs. That’s way more efficient than advertising on TV.

    Broadcasters and big media companies are all bloated dinosaurs, carrying enormous overhead based on their old business models, which are rapidly crumbling. While they are busy trying to survive, they’re not going to worry about their suppliers.

    How do you enforce Canadian content rules on the internet? Once the ‘net becomes the main source of entertainment, we can’t hide behind quotas.

    As Clay Shirky says, revolutions are when the old stuff gets broken faster than the new stuff gets invented.

    I’m convinced that the way forward is original content, not service work. Service work depends too heavily on the exchange rate and government tax incentives, both of which are undependable. It also depends on razor thin margins in order to win bids, so there’s little profit if things go well, and they often don’t.

    Your ideas are the only things that are valuable. Anybody can buy hardware and software. Anybody can open a studio in a lower wage country and undercut you. But if you own an audience, you have a direct line to the people who ultimately pay for all entertainment.

    I’m also convinced that the way forward is small, tight units with low overhead and no waste. Size and overhead are the enemy. Is it possible for a team of 2-6 people to create work for the web and gross half a million a year? That’s not going to make anybody rich, but it would be what Paul Graham refers to as Ramen profitable, meaning that it’s enough to feed you and keep you going while you try and grow the business.

    The only way to combat piracy is to make your work available for free online and pay for it with onscreen advertising, merchandising and premiums. If people want entertainment for free, give it to them and figure out how to convert some of them into fans who will pay for a relationship with you.

    The internet is the ultimate world wide market. Nothing can compete with the potential size of the audience. No one can stop you from offering your work. The people who go straight to the audience and figure out how to get the audience to pay their way are going to be the ones who thrive. The ones who keep pitching to dying broadcasters are going to waste their time and dilute their work. The ones who bid on service work are, at best, going to stand still.

    It isn’t going to be easy and there’s going to be lots of failure, but the old way wasn’t easy either and there was no shortage of failure.

  2. Grant Moore Grant Moore March 17, 2010

    Really well said Mark, I was going to make many of the same points, but I see you’ve already done it for me. 🙂

  3. Rob Anderson Rob Anderson Post author | March 17, 2010

    I agree with your points and believe that this is part of the future. But I suspect it is only part of the puzzle. There is too much money to lose.
    Already in Canada and the US large corporations are working on destroying net neutrality. This could mean legislation like we have never seen and an attempt to lock out the small producers of anything from the eyeballs on the net.

  4. Daniel Man Daniel Man March 18, 2010

    This was a very insightful article, Rob. I’ve honestly never thought about it this way. Thanks for sharing your ideas with us.

  5. Rob Anderson Rob Anderson Post author | March 18, 2010

    Thanks Daniel. My hope is to create dialogue and it seems that is taking place! Mark, you too have solid ideas!

  6. actuallyKnowSomething actuallyKnowSomething March 22, 2010

    Think back to 2002, except for Mainframe the Canadian CG studios were tiny and few. Overall there are many more CG studios and larger now then there was in 2002.

  7. Ron Ron March 24, 2010

    One must also consider the ever flawed system of broadcasters/executives and their mentality to what IS quality animated programming for children (and adults), and what is the entertainment value of these series and how much are they worth to the viewing audience.

    I don’t want to be the guy saying “blame the broadcasters or blame the government”. But keep in mind the god-awful corporate decision making of the last 2 years made by Canada’s animation distributors and top production firms, many of us saw this coming a mile away, now they are crumbling. Their system and logic was unrealistic and unsustainable. The ‘just send it overseas’ method was and IS always cheaper. But you get what you pay for. All these companies that began to farm out Flash series overseas are paying the price now by paying MORE than what the Canadian studio offered in the first place.

    Take this model for instance:
    18 months ago, I know of 3 productions that were originally produced all in Canada for about $120,000 per episode. When the production company asked the aniamtion studio to do it for cheaper beacause of advertisers backing out die to poor economy, the animation studios came back with zero-personal profit numbers like $100,000-80,0000 per episode. New (un-tested and un-proven) Flash studios in China offered $60,000 per episode. So seasons 2,3,4 went immediately overseas, not regard or thought to the fact they had no expereince.

    The show was so plagued with production problems that in ended up costing an additional $40,000-50,000 per episode to fix (or re-do) the series, and in the end the quality still suffered by a significant margin. Have the executives learned their lesson? Studios are still struggling to find work. Companies like Mercury Filmworks and a few others are weathering the storm and adapting (and striving). Excellent directors, managers and producers are keeping the quality high, and getting plenty of work in for their artists.

    When 10 year kids notice the dramatic drop in quality then you know you’re in trouble, no wonder the 12-16 demographic prefer to watch anime online then suffer through the awful programming on some of the Canadian animation stations. Should I mention the fact of how much Cartoon Network has been changing over to the more badly-written live action programming model as they phase out more and more animated series?

    I was at a conference a couple years ago, and a Teletoon rep was discussing Teletoon’s epiphany over the massive ratings they were getting by showing old-school/adult cartoons in their primetime and late-night slots. Of course I was laughing to myself, remembering the inconsistency of their programming and how much their content was entirely dependent on its co-owners and investors, severely limiting the diversity in their shows. While YTV focuses on mostly acquisitions they have always remained consistent, high quality and steadfast in their demographic and style.

    The larger the system, the more people involved and the more potential for corruption exists, just look at the CTF and Telefilm system. The bias is extraordinary, and the results have made the executives rich and the animation studios have suffered greatly because of it. Look at the tale of StoryCity and a a half-dozen other studios in Canada that were promised work in 2008, but were abandoned by their Canadian distributors in favor of overseas studios that could produce episodes for literally half the price.

    We can argue for ever about the economics, the adaptation level of Canadian animation studios, Can-con rules, Canadian Television Fund and its flaws, big studios and their crippling overheads, and the fact that cartoons get more expensive in price due to inflation every year. But in the end… PEOPLE are both the cause for the current state of affairs and also, the potential solution.

    If you dig deep, I mean really deep. Corruption at the corporate, government, TV distribution levels are the source of most of this. But THEY are not the solution, we the creators and artists ARE the solution, by cresting games and series and films for ourselves and letting the internet be our distributor.

    Similar to how the housing market in the U.S. crashed all those banks, the methods exercised by distributors and executives in Canada led to the demise of many of these Canadian animation studios.

    Studio heads were forced to expand in 2004-2007, there was sooooo much work coming in from the U.S. supplying canadian studios with mountians of work. WE were the new ‘overseas’. The U.S. saw us as the cheaper alternative, it didn’t hurt that we spoke English and were in the same timezone. Not to mention Canada was the first to learn Flash and develop this software into the inexpensive/easily-editable/quick-turnaround system that it came to be.

    Canada’s ingenuity, adaptability, creativity, and talent at the artistic and management levels in animation studios across the country produced mass quantities of cartoons. And for the first time ever, animation-trained students graduating from animation courses and colleges could actually ANIMATE now, and not just do boards and layout for overseas studios. Before, only Korea and India would have the fun in actually animating the hundreds of thousands of scenes produced in the 2000-2008 time period.

    Broadcasters/executives/distributors promised more and more work to their Canadian animation studios. Canadian cartoons made by Canadians for Canadians being paid Canadian salaries, and the U.S. was profiting by sending us their shows to be made here. Studios had no choice but to expand, the work was falling from the skies in seemingly unlimited amounts.

    Then the Writer’s Strike, then the economic crash in the U.S. spreading out everywhere, and the greed of broadcasters/distributors frantically trying to find a ludicrously cheaper way of doing production no matter what the cost – all this produced the mess we’re in now, along with the combination of a dozen other government/broadcast issues briefly mentioned in previous comments here.

    The internet is taking it sweet time revealing its exact money-making secrets. Studios are getting smaller, more efficient, more online & digital based, and along the way animators, directors and artists are finding ways to adapt, it’s scary and exciting at the same time. You may have old veterans falling by the wayside but one thing is certain; changes are happening, they are occurring at the source – Television is and was changing (whether the economy was going to crumble or not).
    Former television animation directors/artists created this:

    And this is only one of dozens of small online companies and avenues popping up. I’m not saying Online Flash Games are the answer. I believe there are many answers and opportunities. I personally know of over a dozen television animators who have made the leap to iPhone apps, online gaming, and 3D video game design and are quite successful at it.

    The field is changing, and I agree with all that Rob said except for one thing; yes the television/film/gaming industry is unique in how it fluctuates, operates, changes with the times, but it is also highly sensitive to all the changes around it. When the economy suffered in the past, the TV and film industry usually strives, the demand for escapism was always greater, yet that didn’t happen this time.

    The model isn’t broken, I say this in the sense that the model was ALWAYS like this, and it cannot be ‘fixed’ therefore it isn’t broken it will simply fade away and morph into a new model. It was a design flaw at its very foundation from the beginning, television animation in Canada has evolved A LOT in the last 10 years. But it was built on very shaky and unstable grounds.

    Facebook and YouTube beat out Google this month in site visits. The future will reveal that television will merge with the internet,but the technology and the applications for designing infrastructures to sustain profit from all this is still unknown. That’s why all the big broadcasters are just holding on for dear life. TV/film pirating is a problem, but it’s proof of the changing times. The sate of the animation industry is NOT (in my opinion) in the same cycle as it has always suffered through (every 7 years or so) like in the past. THIS is a unique period in animation history. The last 10 years were crazy and unique in their own way. Canada went from rapid growth and expansion to, well, the unstable state that it’s in now. I remember when I read a statistic 4 years ago that 60% of children watched more internet than television, that was in 2006! The internet isn’t taking-over, it’s just another method of doing the same sort of entertainment. The audience is changing and the source of finances are along with it.

    Cutting out the middle-man is an eventuality. The producers in the middle of the process taking their cut, and all the corruption that lies inbetween is bubbling up to the surface. It’s all taking the natural course of action: Creators/developers of games and cartoons need to look no further than the inspiring success stories of Castle Crashers, Battlefield Heroes and even Making Fiends and Happy Tree Friends. Internet webisodes and gameing success stories are becoming increasingly more and more abundant.

    I believe one must accept and make peace with the internet and its ways. Plus, it’s a fantastic source for becoming a better illustrator, artist, animator, designer, in fact I can see businesses like being the norm in 10-20 years. You won’t need to go to college to learn how to be a 2D/3D animation artist.

    Surround yourself with like-minded poeple. Look at Ben10, that shows costs the same to make as Johnny Test! Now there’s some efficiency for you… and a relaible overseas-studio too. The key to all these great films, internet games/series, and even current popular television cartoons got made in an efficient and high-quality manner because the right combination of people got to work together. Whether it’s 2 people working on an online game in their basement or 50 people working on a short film for festivals. Find the right person or people and crew and the creativity and resourcefulness will shine through.

    As difficult as it may be, adapt, adapt, adapt is the key. I know, it’s easier said then done. The internet is here to stay, video and online games are rapidly growing and evolving, and television is trying to keep up to all the technology and the ambiguous marketplace that it’s stuck in.


    • Mike Valiquette Mike Valiquette March 24, 2010

      Well said, Ron. And echoing a lot of my own thoughts. I’m trying to put together my next “Challenge of Animation” post, and you’ve touched on a lot of what I’m trying to articulate. I’ve been taking a lot of meetings in Toronto lately with broadcasters a nd distributors. They’re scrambling to figure things out, but they can’t shake their habits. Creative thinking is the answer, but it’s hard to find creative thinkers. I can say that I’ve witnessed the first signs of the transfer of power back to the creators. The cracks are showing and whether we see it or not, the power is in the hands of the content creators. The “suits” don’t know it yet, but they’re feeling it. It’s just a feeling they can’t identify. The conversations we’ve been having for years a finally creeping into boardrooms.

  8. Rob Anderson Rob Anderson Post author | March 24, 2010

    Hey Ron!
    That is a brain full thank you!
    We are moving towards a creator driven world yet again. The early days of TV were like that as well.
    actuallyKnowSomething! that is true, more CG studios are opening all the time but are they doing feature work, games or TV? I would think that few are doing TV. Not a bad thing mind you.

  9. Mastodon! Mastodon! March 24, 2010

    All this makes it harder for artists who don’t necessarily already live in an animation market town, but are willing to telecommute, or even relocate. “You must be a citizen of….blah, blah, blah…” This mostly applies to Canadian cities, which to me seems like they get tax credits for hiring locals. Thus, you’d have to move there first, and waste money on a chance of getting hired. *sigh* But even the U.S. is starting to do that. So I guess you have to be at the right place, the right time, with money to spare 🙂

  10. Ross Irving Ross Irving April 6, 2010

    Thanks for this post Rob, and thanks to Mark and Ron for providing additional insight as to the direction aspiring animators need to take. I’ve been sort of ambitious in that I’ve wanted to make my own animation studio where I would leave the artists who knew what they were doing to their own devices and trust in their competence, but the more I read posts like these, the more I see that setting up a studio in real life would most likely be a huge waste of money and time.

    There’s no risk in simply making a website for which you can showcase your stuff, right? Animation and comics? And then informally collaborating with other artists to form a “studio” in that way? Thanks again for these wonderful posts.

  11. Rob Anderson Rob Anderson Post author | April 6, 2010

    Hi Ross.
    Nothing is a waste of time unless you think it is!
    Despite all that was written above and notes that have been done on this subject already I still believe that creating a studio where people can collaborate on creating good things is a good idea. Just know what you are getting yourself into, like any business venture really.
    Finding new or better ways to create content for the various markets available is not a bad thing!

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