Toonz Animation India Pvt. Ltd.

Case Details:

Case Length : 20 Pages

Period : 1999-2006
Organization : Toonz Animation India Pvt. Ltd.
Pub Date : 2006
Teaching Note:
Countries : India
Industry : Media, Entertainment, and Gaming

Abstract:

The case study deals with Toonz Animation India Pvt. Ltd., one of the leading animation studios in India.

It traces the beginnings of the studio when it largely executed outsourced work for overseas animation studios, and
then elaborates on the company's efforts to create original content and also engage in distribution of its own content.

The case also throws light on the challenges faced by the company. It ends with a brief discussion on the future
prospects of the company.

Issues:

» To learn more about the Indian animation sector;

» To understand the efforts made by a company to grow by moving up the value chain in the animation industry
» To understand the challenges peculiar to an organization that operates in a market that requires high levels of
individual creativity and productivity;
» To analyze the future prospects of the company and the animation industry in India, in view of the challenges
such as the shortage of manpower.

Contents:

Page No.
Introduction 2
Background Note 3
The Early Years 4
Creating Original Content 5
Continuing Good Work 6
Challenges 8
A Leap For Indian Animation 11
Outlook 12
Exhibits 13

Introduction

In April 2006, Toonz Animation India Pvt Ltd (Toonz), a major Indian animation studio, and Percept Picture
Company (PPC), announced that they were planning to release the movie Hanuman II in late 2007.

This movie was to be a sequel to Hanuman, India's first commercially successful full-length animation film. The
sequel was to be made using 2D and 3D animation with a budget of Rs. 90 million, the highest for any animation
film in India.
Toonz was established in 1999 at a time when India had started doing outsourced animation work for European and
American companies. Toonz provided animation services at prices that were 25 to 40% lower than other Asian
animation studios.

The company made steady progress in the initial years and was successful in securing a number of contracts from
major studios.

Toonz gradually gained a reputation for high-quality work. In 2002, it even figured among the'Top Ten Studios to
Watch' in the Animation Magazine6. However, the top management at Toonz was aware that the greatest
opportunity for growth lay in creating original content and not in doing outsourced work. In 2002, it created an
original series - The Adventures of Tenali Raman - which proved to be a success and made a name for the company.
On the strength of the success of the series, Toonz entered into several co-production deals with Indian and foreign
broadcasters, production houses, and animation studios.

Though the company was optimistic about its future prospects, the severe dearth of talent in the animation industry
was a nagging problem. Also, the domestic animation market in India was not developed which forced Toonz and
other Indian animation studios to depend on overseas studios for work. In spite of these challenges, the company
saw several opportunities for growth.

Background Note

G.A. Menon (Menon)7 , a US based entrepreneur and the chairman of Technomate Marketing Services (an
electronic component company under the ComCraft Group8 ), established Toonz Animation USA, Inc. (TA), in Los
Angeles.

Menon felt that, considering its cost advantages, India would be a good place to set up an animation studio. Soon
enough, TA set up Toonz Animation India Pvt. Ltd. with Menon investing $ 5 million (through Multitech
Investment based in Mauritius) and the ComCraft Group chipping in with an additional $ 2 million. Bill Dennis
(Dennis), an animation expert, was appointed as President and CEO of Toonz and TA. In November 1999, Toonz
set up a state-of-the-art animation studio at Technopark Campus, Thiruvananthapuram, Kerala. Toonz invested in
the best software and hardware, in order to provide high-quality animation services for television programs and
commercials. Its studio was India's first digital ink and paint 2D animation studio.

The studio used the latest software available then from Cambridge Animation System12 and Toon Boom
Animation13 . Even though it offered digital animation its core competence was in the Cel animation technique14 .
Toonz offered the entire range of services for animation production like layout, cleanup, animation, background, in-
betweening, scanning, ink and paint, compositing, and editing. It also provided pre-production services including
key animation, key background, character design, color models, and key layouts. In the initial years, Toonz targeted
the middle and top segment of the market for outsourced animation work. Unlike the software industry where
Indian companies did business predominantly with US companies, the animation industry was more widespread.
Predictably, Toonz targeted and sought contracts and production partnerships with major animation studios the
world over, competing directly with animation studios based in South Korea and the Philippines...

The Early Years

Even in the late 1990s, the Indian animation industry was in the embryonic stage. Most animation studios were
unaware of the cost advantages that India could offer. Toonz, being the pioneer in India, tried to present India to
animation studios as a cost-effective country for outsourcing animation work.

From its first year of operation (1999), Toonz began organizing a biennial event called "A Week with the Masters".
The event brought 'Masters' - distinguished and veteran animators, artists, and film makers - from around the globe
to India to screen their films and to talk about their art. They made presentations on their work and spoke about the
future of the animation industry.

Toonz also invited locally renowned filmmakers, animation directors, artists, animation enthusiasts, and other
guests to this event, which also included interactive panel discussions and open forums on various topics relating to
the animation industry. It held retrospectives on the masters' works...

Creating Original Content

In the early 2000s, India witnessed an explosive growth in the number of television channels available to viewers.
The number of kids' channels - both exclusive cartoon channels and channels which showed animation serials in
certain time slots - also increased.

Toonz, which till then was working mostly on outsourced work gradually moved towards creating original content
to earn higher margins and greater long term revenues. "While it pays today's bills, subcontracting does not provide
for a future. Products you develop are yours to promote, expand, and exploit. And by developing your own
materials, you also develop the skills of your artists. These enhanced skills help their work on service projects," said
Dennis. In 2001, Toonz set out to produce its own animation series. This presented a challenge because it had to
evolve from a provider of services to a content creation house, which required developing skills in character design,
story development, and storyboarding...

Continuing Good Work

Toonz's client list included some of the biggest names in animation. In 2003, Toonz entered into a major co-
production deal with Canada-based Vivatoon (Vivavision's animation division), France-based Toon Factory, and
the UK-based Treehouse Productions to partly develop an animation series - Brady's Beasts.

This series marked Toonz's major foray into the distribution of a product. While Toonz owned the rights to the
series in Asia (including in India), Indigo secured the TV, video, non-theatric, publishing, and licensing rights in the
UK, Continental Europe, Asia-Pacific, and Africa. Toonz entered into the co-production deal even though it knew
that it would earn very low margins from the project. "We are biting the bullet on this one. We are producing it at
less than we would normally. If we break even, I'll be very, very happy, but I think - as far as the cash we're getting
from production - we probably won't even do that," said Dennis. Toonz agreed to the deal because it expected that
the success of the venture would open up new opportunities for it in future...

Challenges

Toonz was gradually expanding worldwide and was working on several prestigious contracts. However, the severe
shortage of competent animators in India was a constraint to its growth. Part of the problem was that animation
professionals were required to possess several characteristics - creativity, a good sense of color, ability to visualize
scenes, a talent for acting, patience, etc. - which was difficult to find in one person...

A Leap For Indian Animation

Hanuman, India's first full-length animated movie was released in October 2005. Belying the reservations expressed
by many people who felt that the film would only appeal to a limited audience, it went on to become India's first
successful animated movie with gross earnings, according to box office estimates, crossing the Rs. 150 million
mark. Besides the content, the success of the film was attributed to effective pre-release marketing (promotion and
merchandising), and wide distribution by PPC which also produced the movie...

Outlook

The management of Toonz was optimistic about its prospects. Most global entertainment giants were satisfied with
the quality of animation services provided by Indian companies, and were outsourcing many of their projects to
India. 3D animation and special effects were also being outsourced to India.

Toonz believed that its deal with Marvel, one of the leading production houses in the world, would help it to win
larger animation projects. The company also tried to keep up with the latest developments in animation technology.
In April 2006, Toonz installed Harmony , a new animation software developed by Toon Boom which was expected
to greatly improve the quality of its work...

Exhibits

Exhibit I: The Process Of Creating Animation

Exhibit II: Production Costs In Some Countries (For A 30 Minute Tv Animation Program In 2004)
Exhibit III: Toonz - Major Projects
Exhibit IV: Major Awards Won By Toonz
Exhibit V: A Still From The Adventures Of Tenali Raman
Exhibit VI: Business Models In The Animation Industry
Exhibit VII: Nasscom Recommendations To The Goi With Respect To Indian Animation
Exhibit VIII: Industry Associations Representing The Animation Sector In India
Exhibit IX: 'The Baby Hanuman'
Exhibit X: Top Ten Animated Movies
Exhibit XI: Some Insights Into The Animation Industry In India
Exhibit XII: Major Animation Studios