TERM PAPER

OF
FILM AND ANIMATION INDUSTRY

SUBMITTED TO:
PALWINDAR KAUR
FACULTY OF LIM

SUBMITTED BY:
ADISH JAIN
ROLL NO.-B40
MBA 1st SEM
SECTION-C
REGD. NO.-10905517

BUSINESS ENVIRONMENT

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 ACKNOWLEDGEMENT

It is a pleasure to express my thanks and gratitude to Ma’am,

Palwindhar kaur, who has been very kind on me in completion of
my Term-Paper. I could achieve this target only because of her kind
and ever supporting guidance.

ADISH JAIN

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 TABLE OF CONTENTS

1. INTRODUCTION 04

2. FILM AND ANIMATION INDUSTRY IN INDIA 05

3. MEANING OF PESTLE ANALYSIS 06

4. POLITICAL ANALYSIS 08

5. ECONOMICAL ANALYSIS 09

6. SOCIAL ANALYSIS 11

7. TECHNOLOGICAL ANALYSIS 13

8. LEGAL ANALYSIS 15

9. ENVIRONMENTAL ANALYSIS 17

10. CONCLUSION 19

11. BIBLIOGRAPHY 20

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 INTRODUCTION

The liberalization efforts by the Indian government have resulted

in the emergence of numerous sectors, which offer great
possibilities for India’s development. One such recent sector is
interactive media and animation, along with information and
communication technologies (ICTs). The animation and interactive
media industry in India has been making headlines of late, not so
much for its impact on the domestic market, but as a premier
outsourcing destination for western animation companies. This
paper examines the growth and development of the interactive
media and animation industry in India. It discusses India’s position
and India’s advantages in the global animation industry, the
challenges that India faces in this industry, the path ahead, and
opportunities for international collaboration in this sector.

The global film and animation industry is expanding fast.

The Animation Council of Philippines estimates that the revenues
from animation industry worldwide have been growing annually at
20% to 30% over the past few years. According to India’s National
Association of Software and Services Companies (NASSCOM),
revenues from the global animation industry will amount to
US$50-US$70 billion by end-2005. Today, animation products are
increasingly used in films, TV programmes, commercials, games
and online education. Following Walt Disney’s 1988 production
Who Framed Roger Rabbit, worldwide interest in animation
feature films has been rising. Four major animation movies
released in 2004 collected record revenues. Children’s channels
across the world have seen their numbers rising ever so rapidly in
the last few years. Animation products also have applications in
the medical, architecture, and legal fields.1 the global non-
entertainment animation industry, including work in scientific and
medical animation, now accounts for revenues worth $15 billion.

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 FILM AND ANIMATION INDUSTRY IN
INDIA

The Animation Industry in India though a late starter, is considered

as one of the fastest growing segments of the entertainment and
media industry. The Animation Industry in India gained
significance as an outsourced destination for animation work due
to low cost, skilled labour as its many advantages. In the recent
past Indian animation companies and animation studios have been
moving up the value chain to create their own intellectual property
rights with Hanuman, Roadside Romeo, etc. and partnering with
international studios to produce animated properties for the global
audience. Though a majority of the work done by the animation
industry in India is outsourced work, this is expected to change in
the future with increased demand from the domestic entertainment
industry. This industry can be categorized into four different
components: Entertainment, education, content development and
multimedia/web design. The animation market in India is relatively
new compared to some other Asian countries. But it is among the
fastest-growing in the Indian entertainment sector. With
approximately 200 animation studios, India has emerged as a
global outsourcing hub for animation technology services. The key
drivers for the animation industry are the increasing domestic
demand for animation movies and the increase in animation
studios and training centers across the country.

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 MEANING OF PESTLE ANALYSIS

P-Political
E-Economical
S-Social
T-Technological
L-Legal
E-Environmental

• Political factors are how and to what degree a government

intervenes in the economy. Specifically, political factors
include areas such as tax policy, labour law, environmental
law, trade restrictions, tariffs, and political stability. Political
factors may also include goods and services which the
government wants to provide or be provided (merit goods)
and those that the government does not want to be provided
(demerit goods or merit bads). Furthermore, governments
have great influence on the health, education, and
infrastructure of a nation.
• Economical factors include economic growth, interest rates,
exchange rates and the inflation rate. These factors have
major impacts on how businesses operate and make
decisions. For example, interest rates affect a firm's cost of
capital and therefore to what extent a business grows and
expands. Exchange rates affect the costs of exporting goods
and the supply and price of imported goods in an economy
• Social factors include the cultural aspects and include health
consciousness, population growth rate, age distribution,
career attitudes and emphasis on safety. Trends in social
factors affect the demand for a company's products and how
that company operates. For example, an ageing population
may imply a smaller and less-willing workforce (thus
increasing the cost of labour). Furthermore, companies may

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 change various management strategies to adapt to these
social trends (such as recruiting older workers).
• Technological factors include ecological and environmental
aspects, such as R&D activity, automation, technology
incentives and the rate of technological change. They can
determine barriers to entry, minimum efficient production
level and influence outsourcing decisions. Furthermore,
technological shifts can affect costs, quality, and lead to
innovation.
• Legal factors include discrimination law, consumer law,
antitrust law, employment law, and health and safety law.
These factors can affect how a company operates, its costs,
and the demand for its products. Consumer protection laws
are designed to ensure fair competition and the free flow of
truthful information in the marketplace. These factors can
affect how a company operates, its costs, and the demand for
its products.
• Environmental factors include weather, climate, and climate
change, which may especially affect industries such as
tourism, farming, and insurance. Furthermore, growing
awareness to climate change is affecting how companies
operate and the products they offer--it is both creating new
markets and diminishing or destroying existing ones.

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 1.POLITICAL ANALYSIS OF FILM
AND ANIMATION INDUSTRY

• Government Support
Mr. Kapil Sibal, Minister of State for Science and Technology,
identified animation industry as one of the important sector for
India’s export oriented growth.10 However, compared to
governments in other countries; efforts by the Indian government
to encourage the sector have been very minimal. The government
of South Korea funds animation ventures on a partnership basis.11
Bangladesh has a World Bank-funded support programme for the
animation industry. In contrast, there have not been many
initiatives from the Indian government to promote the animation
industry, at least till the past one year.
The Indian government signed co-production treaty with France
about 20 years ago and efforts are on to reactivate it. A treaty was
signed with the Italian government, which in turn sent a delegation
to Goa. Efforts are also on to sign similar agreements with Britain,
Japan, Brazil, Canada, Netherlands and China. These treaties will
lead to sharing of costs by partner nations and also the dispersion
of technical know-how amongst the partner nations.

• New Government Initiatives

A 25-acre Special Export Zone (SEZ) is going to be constructed in

the outskirts of Thiruvananthapuram exclusively for the animation
industry. The commerce ministry is said to have approved the
creation of the SEZ within the Film and Video Park (FV Park) set
up by the Kerala Industrial Infrastructure Development
Corporation near Thiruvananthapuram. The state government is

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said to have created a 15,000 sq meters animation facility to
welcome animation houses to create their bases. The FV Park
made a good start when the Chennai-based Prasad Labs has made
it its base to process all Malayalam films for the next two years.
Kerala has been making efforts at convergence in the areas of
information technology and cinema. The Animation Production
Association of India recently suggested to the Information and
Broadcasting Ministry of India that all TV channels must ensure
10% reservation for local animated content. The government can
further encourage investments and participation in this sector by
providing tax benefits. It can provide grants to Indian animators for
participation in international conference and for taking up training
programs abroad.

2. ECONOMICAL ANALYSIS OF FILM

AND ANIMATION INDUSTRY
India’s attractiveness as an animation hub lies in the presence of an
English-speaking workforce, high-quality software engineers, a
large pool of creative talent, good studios and low costs. The cost
of producing a 30-minute 3D animation programme in India is
US$60,000 compared to US$250,000-400,000 in the United States
and Canada. India has a cost advantage compared to the
Philippines, which is another low cost producer of animations. The
average monthly salary of an animation professional in India is
US$600 compared to US$1,000-US$1,200 in the Philippines. The
cost of outsourcing one hour of animation work to India is
estimated to be 30% to 40% of the corresponding costs in leading
animation centres in Korea, Taiwan and the Philippines.
India’s advantages in low costs have been exploited by many
multinational firms and production studios. The advent of digital
animation coincided with the liberalization of the Indian economy
and India offered the benefits of lower production costs, strong

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creative and technical skills and a large English speaking
population. This has led to the development of state of the art
animation studios in several Indian cities, and these studios are
collaborating with global entertainment companies.

FACTOR THAT AFFECTING THE ECONOMIC

GROWTH OF FILM AND ANIMATION INDUSTRY

• Lack of Finance
Indian animation firms cannot match their western counterparts in
financial strength. It is pointed out that state support in the form of
tax holidays is crucial for success in the animation business.
Canada, for example, offers major incentives to its studios for
developing animation products. However, financial institutions in
India have not been much forthcoming in funding projects in
animation and interactive media. The long gestation period before
fruition of projects discourages potential investors. This can be a
major hurdle, and it has, in fact, led to the stoppage of a few
production ventures. For example, Jadooworks had to stop
production of animated epic of Krishna due to technical problems
and lack of funding. The firm was supposedly on the verge of

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bankruptcy and this has led to the retrenchment of about 250
workers.7 Interestingly, Jadooworks is the same firm which drew
appreciation from Thomas Friedman in an article in February 2004
for employing traditional artistes and transforming their skills to
computerised digital painting – he was arguing that globalisation
can have beneficial impact on traditional artists.8
The experience of Jadoo works underlines the fact that it is still too
ambitious for Indian companies to single-handedly enter into
animation projects. Even a small project in the animation industry
entails a budget of US$30 million, which is not affordable for
Indian firms.

3. SOCIAL ANALYSIS OF FILM AND

ANIMATION INDUSTRY

• Animation Products for Illiterates

The interactive media and animation industry in India has a large
domestic market too to tap on. A field-study based research
conducted by one of the authors in July-August 2004 on the
diffusion of ICTs in India’s rural areas offers some interesting
results in this regard.6 The study showed that television is a highly
popular medium as a source of information in the Indian
countryside, as it combines visual and audio effects and is less
demanding of the cognitive skills of the user. Almost 35 per cent
of India’s over 1 billion population is illiterate. There is great
demand from this segment of Indian population for an innovative
medium that facilitate communication and information sharing,
while at the same time, being easily accessible to the masses via
the television. Products of interactive media and animation can fill
this demand gap to a large extent; they can be great tools for

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education, entertainment and awareness among illiterates in India’s
rural and urban areas.

SOCIAL FACTORS AFFECTING FILM AND

ANIMATION INDUSTRY
• The Indian Animation industry: Facing the
manpower challenge
Despite the impressive growth forecasts, the Indian Animation and
Gaming industry will account for less than two percent of the
worldwide market in 2010. Obviously a much larger opportunity
exists beyond what is currently being envisaged and the potential
remains high. India can participate in a more significant way in the
global Animation market, provided the country has built up
requisite manpower, with the relevant expertise, to fuel its growth.
According to analysts, India has the potential to grow its
Animation industry to around US$ 1 billion by 2010, but will
remain restricted to US$ 869 million on account of a looming
demand-supply gap in the area of employable human resources.

A similar situation exists in the gaming segment as well, which

has the potential to achieve revenues of US$ 732 million by 2010,
but is expected to touch only around US$ 424 million by that
period, owing to the paucity of skilled manpower.

The employment statistics for the Indian animation and gaming

industry during 2006 were as follows:

• Around 16,500 professionals were employed by the Indian

Animation industry during 2006.
• This figure is forecast to increase at a CAGR of 14-15
percent and exceed 26,000 by 2010.
• There were nearly 150 gaming companies in India,
employing about 2,500 people.

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 • This number is forecast to increase at a CAGR of over 50
percent to exceed 13,000 by 2010, with the industry revenue
forecast to grow nearly ten-fold and reach US$ 424 million.

4. TECHNOLOGICAL ANALYSIS OF
FILM AND ANIMATION INDUSTRY

While it is true that India’s animation industry is growing at a

remarkable pace, the fact remains that this growth is largely a
result of the mushrooming of “studios-for-hire.” In animation
feature films, for example, while Indian companies carry out the
technological animation work, character design, and storyboarding
are done abroad. India is yet to become a successful player in
concept creation, the high value-adding segment of the industry
which remains a preserve of western firms. India’s advantages of
low costs in this industry will be too short-lived, and sooner rather
than later, the country will have to start developing new
technologies.

Skills
The animation industry is still young. Indian cinema is yet to make
its mark on the global stage. The booming animation outsourcing
industry is constantly demanding new skills and fresh infusion of
new talent into the industry. As such, it is imperative that we have
a healthy pipeline to supply talent to the industry. Skills required in
the animation field can be clubbed under two broad categories,
mainly technical skills and soft skills. Programming expertise,
analytical ability, and proficiency on the software are basic
requirements for technical skills. The number of professionals
joining the animation industry has been growing at a compound
annual growth rate (CAGR) of 18.2 percent and is expected to
grow at the same rate. Though India possesses the manpower with

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the requisite skill set, what remains an area of concern is the
education imparted to this manpower from the quality perspective.
This has resulted in mushrooming of multimedia institutes. What is
interesting is that quite a few reputed organizations have come
forward and started a chain of multimedia institutions for two
reasons. One, they can use the trained professionals for in-house
animation development and secondly, use this education channel
for market diversification and penetration. However, companies
need to invest considerable time and money in bringing these
students up to the levels where they start earning revenue for the
organization.

Need For technological training to employees

"There are no academic institutes like Indian Institutes of
Technology, Regional Engineering Colleges, Polytechnics, etc.,
churning out animators by the thousands. What we have are only
fine arts schools which teach the fundamentals but not the
technical skills required for production," points out K.
Chandrasekhar, General Manager, Media Works, and Tata Elxsi.
According to him, this is a major drawback for the industry in
India.

Education in new media has to be embedded into the mainstream

curriculum. Students have to realize that they can have a lucrative
career as animators, and the governments as well as educational
institutions have to start programmes for their career development.
The animation sector will benefit greatly by giving encouragement
to the community of traditional artists as much as to technically
trained professionals. In other words, integration of the rural and
urban talent will prove highly beneficial. Also, NASSCOM’s
President Kiran Karnik believes that there is a need for an
animation academy to build a steady inflow of animation
professionals in the industry. NASSCOM extended its help to the

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government for framing the curriculum and also work with the
industry players to enhance the academic-industry interface.

5. LEGAL ANALYSIS OF FILM AND

ANIMATION INDUSTRY

• Intellectual property

Outsourcers have always been concerned with the protection of

their intellectual property in India. India is one of the few countries
which have failed to take stern action against its infringement.
India needs to strengthen its IP policy and ensure that companies
operating in the outsourcing sphere take stringent steps to take care
of clients’ IP rights.

International Cooperation in the Animation industry

The Indian government is signing co-production treaties with other
countries. Professional organisations too are trying to promote the
Indian animation sector abroad. ASIFA, India, organises film
festivals, conducts workshops and animation film competitions at
the international level. Kahani and Animation Bridge have
showcased their animation shows at Cannes Mipcom (a summit
where mobile, broadband and interactive professionals from 95
countries interact with broadcasters, producers and distributors) in
October 2005.
X-media Lab has been floated to help local, independent digital
media producers reach their ideas successfully to the market with
assistance from outstanding international new media professionals,
who act as mentors to the companies and project teams. The
second lab held in Singapore from 17 – 19 November 2005,
"Creating Successful Computer Games”, attracted worldwide

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response. Indian developers have also been invited to interact with
eight of the best games people in the world. There is also a plan to
do a lab in India next year.14
According to Mohit Anand, Country Manager, Microsoft
Entertainment and Devices Division, Microsoft India, “Gaming in
the last 7-8 years has really come a long way but it still has a long
way to go. Critical factors like PC penetration, organised retail,
broadband, and gaming hardware need to be addressed to help the
industry. Those factors are gradually changing and the future
definitely looks bright. India is the youngest country in the world,
and the new generation is completely tech savvy. We believe that
gaming is definitely here to stay and evolve.”15
What are the opportunities for engagement between India,
Singapore and other Southeast Asian countries in the field of
interactive media and animation industry? To begin with,
Singapore and Southeast Asia will be an important market for
products from India’s animation industry. Singapore has
significant expertise in telecommunication and media industry.
Harnessing the favourable trade and investment climate offered by
the Comprehensive Economic Cooperation Agreement between the
two countries, firms in Singapore should consider investing in
India’s animation and media business. Maya Academy of
Advanced Cinematic, a leading player in the Indian animation
industry, is planning to extend its operations to Singapore. It is
currently working on a project for BBC and has also been involved
in the video games division.
Entertainment is one of the fastest growing sectors in India-
ASEAN relations. The entertainment industry is expected to grow
at a compound annual growth rate of 20 percent from 2002 to
2007. The entertainment industry, with total revenues of US$3.6
billion in 2002, is projected to grow up to US$8.7 billion by 2007.
ASEAN is a big market for Indian films. There are tremendous
collaboration opportunities between India and ASEAN in the area
of 3D animation, graphics, etc.

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The Philippines was, until recently, a fast growing animation
industry, rich in creative talent, and it was a major destination for
outsourcing by animation firms in the United States. However,
with rise in costs, the animation industry in the Philippines has
begun to decline, and Filipino workers in the industry have been
migrating to India and Singapore in search of jobs. India, the
Philippines, Singapore and even China must realize that there is
little to be gained in the animation industry in the long run by
competing with each other on costs. Rather, they should seek
avenues for cooperation, and direct their efforts at acquiring
intellectual property rights in this creative industry.

6. ENVIRONMENTAL ANALYSIS OF
FILM AND ANIMATION INDUSTRY

Ability to scale operations. Indian firms are facing a talent shortage

which affects their ability to scale up their operations based on
client demands. This also affects the client’s confidence in off
shoring large chunks of work. Though Indian companies have put
in place huge expansion plans, these are often marred by various
reasons. Tie-ups with educational institutes are helping overcome
this difficulty.

• Opportunities in Collaborations

Indian companies are trying to improve quality and making

attempts to compete globally with the market leaders in the
industry. It is said that the year 2004 is a watershed for the Indian
animation and gaming industry (according to the Federation of
Indian Chambers of Commerce and Industry [FICCI] report on the

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Entertainment Industry). The year was marked by increased use of
animation in the Bollywood segment. According to the FICCI
report, the increasing demand for downloads of games on mobile
phones will enhance the opportunities for gaming companies and
bring in new entrants.

Several Indian companies are entering into collaborations with

foreign new media companies, which outsource their work to the
Indian companies. Recently, Toonz Animation floated a joint
venture with First Serve International LLC, a global media
company which aims to produce and distribute top-notch
animation programming for the world market. The new venture
will be headed by former Walt Disney executive Ed Bordering. In
2004, a Chinese company also invested in India Games Ltd.

Toronto-based entertainment Products Company Kahani is

collaborating with Mumbai based Animation Bridge. In this
venture, Kahani is expected to invest US$30-US$40 million over
the next three years to engage in film production. The storylines
and scripts will be completed in Canada whilst product
development and promotion are expected to be done in India. The
company is also planning to tie up with Bangalore and Hyderabad-
based studios. Zee’s animation arm, Padmalaya Telefilms, has
signed a US$14 million contract with Italian producer-distributor,
Mondo TV, to co-produce four new animated series. Padmalaya
also has collaborations with British animation companies Mallard
Media and Ealing Animation.

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 CONCLUSION

The Indian interactive media and animation industry has seen

tremendous growth in the last year or so. It is fast emerging from
being an outsourcing destination for western animation companies
to develop and showcase its own capabilities and potentials. The
emergence of various industry-related organizations and
companies, and the availability of affordable and talented
expertise, point to tremendous potential this sector has to offer.

Whilst there are internal challenges to the Indian interactive media

and animation industry, given the efforts being undertaken by the
government and like-minded organizations, it will be sooner rather
than later, that India lays a strong claim as a major international
player in this industry. It is thus opportune for Singapore and
countries in the region to identify potential opportunities for
collaboration so that we are able to ride on the waves of the Indian
interactive media and animation industry.

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 BIBLIOGRAPHY

• http://www.wikipedia.com

• www.animationmentor.com/report/AnimationMentor-
IndustryReport.

• www.pwc.com/en.../ficci-pwc-indian-entertainment-and-
media-industry.

• http://www.dom.ontario-canada.com/ .../FICCI_Inida%
20Mission %20invite_vf_web

• www.aarkstore.com/reports/The-Global-Animation-Industry-
33048.html

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