The animation and Visual Effects (VFX) industry continues to
steadily gain acceptance with Indian talent poised to rub shoulders with global
counterparts. According to the KPMG India-FICCI Indian Media and Entertainment
Industry Report 2017, the Indian animation and VFX industry grew at 16.4 per
cent in 2016 to reach a size of INR59.5 billion, driven majorly by a 31 per
cent growth in VFX, with animation remaining steady at a growth rate of 9
percent.
The animation services market in 2016 continued to be
dominated by outsourced projects from television and film sectors, which
accounted for around 85 per cent of the total animation services turnover in
India. Going ahead, digital advertising and films are likely to see a larger
share of the animation services pie, albeit, the domestic contribution to the
same is likely to remain tepid.
The animation IP production segment grew at a faster rate in
2016 on the back of increasing demand for localised animation content and
characters developed for the Indian market across TV and Over the top (OTT)
providers.
Broadcasters are partnering with animation studios for
original content, with channels like Sonic and Nick having 50 per cent of their
content localised with shows such as ‘Motu Patlu’, ‘Shiva’, etc. The digital
space, too, saw a spurt in demand for kids content with the introduction of
channels such as ChuChu TV, CVS 3D Rhyme on Youtube and global players such as
Amazon Prime and Netflix signing exclusive content licensing deals with various
studios in India.
Netflix is also aggressively looking to partner with studios
to come up with more content for kids in Hindi and other regional languages.
Further, with the growth of broadband and e-commerce, licensing and
merchandising opportunities related to animation characters/IP has also got a much
needed boost.
The VFX industry is fast emerging as an indispensable part
of film making, and the cutting edge work carried out by Indian studios has
catapulted the country on to the global VFX scene. The post production segment
saw a robust growth of 13 per cent in 2016, and continues to perform and reap
the benefits of an established ecosystem around the segment.
International projects continue to account for a lion’s
share of the VFX industry revenues at over 70 per cent, with Hollywood studios
leveraging the skill set and cost advantages of Indian talent. However, with
growing acceptance of VFX as an important tool for domestic productions
evidenced by films like the ‘Baahubali’ franchise, ‘Fan’, ‘M.S. Dhoni: The
Untold Story’, ‘Sultan’, ‘Shivaay’ and ‘Mohenjo Daro’, the contribution of
Indian films towards VFX revenues is expected to outpace internati ..
However, some challenges continue to plague the animation
and VFX industry. Animation in India continues to be perceived as a kids’
category unlike the US, where adults constitute a major audience for animated
content. Further, the Indian market has not been receptive to domestic animated
films, with only a handful of releases in 2016, which saw a lukewarm box office
response. This is contrary to the robust performance of Hollywood content such
as the Jungle Book, pointing towards a need for investing in local animated
franchises. Baahubali is an example which could be ripe for such
experimentation in the near future.
The relatively higher costs of production of animated
content on TV versus a daily soap, coupled with non-commensurate returns in
terms of ad rates, acts as a deterrent for investment in animated content on
TV. However, with the coming of age of OTT networks, content is being looked at
as a cross platform IP, potentially delivering ROIs over a longer shelf life.
The animation services sector would also benefit immensely from better
opportunities in skill development and formal training/education which could
help churn out future ready talent.
Some of the challenges faced by the VFX sector include the
bargaining power that international studios wield while hiring VFX vendors from
India and the lack of subsidies from both Central and the state governments,
which could lead to a number of studios considering a move to other countries
that offer better sops.
However, governments of various states like Maharashtra
(allocation of land for setting up National Centre of Excellence for Animation,
VFX, Gaming and Comics), Karnataka (Policy design to include digital art
education in curricula of certain fine arts schools), Telangana (planning to
set up an incubation centre in Hyderabad) have announced, or are coming up
with, policies in support of the animation and VFX industry. The same would
enable the Indian animation and VFX industry to effectively compete with
established markets such as the US, Canada and emerging centres like South
Korea, France, China and Malaysia.
The animation and VFX industry is estimated to grow at a
CAGR of 17.2 per cent over 2017–21 to reach a size of INR131.7 billion, driven
by a steady 9.5 per cent growth in animation and a 25 per cent growth in the
VFX segment. The uptake of local IP/domestic content is likely to be the key
growth driver for the animation industry, and the expected uptake of digital
consumption through OTT platforms will add to the growing demand for localised
content. While local animated films have traditionally seen limited acceptance,
learnings from animated Hollywood features on IP building could come in handy
for Indian producers.
The VFX outlook looks promising with the ‘Baahubali 2’
impact likely to usher in a new wave of VFX adoption in Indian cinema, and
India’s prowess in execution of cutting edge outsourced VFX projects is only
expected to get stronger. Although nascent, the coming of age of Augmented
Reality / Virtual Reality (AR/VR) technologies could be the key trigger for an
even better-than-estimated growth of the animation and VFX industry.
