The animation services pendulum is swinging from East Asia to South Asia, with India emerging as a major outsourcing hub that rivals the Philippines, South Korea and Taiwan.

Indian trade organization the National Association of Software & Service Companies (NASSCOM) forecasts that the global entertainment market will generate a demand for animation production services in the order of US$37 billion by the end of 2003 and claims that India is positioned to take the lion’s share of the business. One local report suggests that in 2001, 70 Indian animation companies pulled in US$300 million of production, while industry insiders cite a more realistic figure of US$100 million. Financial grosses aside, executives concur that animation production in India is growing at an annual rate of 25% to 30%.

Cheap labor is the primary reason for the shift from East Asia to India. A 22-minute episode that can cost between US$200,000 and US$250,000 to produce in North America or Europe can be made for between US$45,000 and US$75,000 in India, says Rajiv Sangaris, assistant VP of Padmalaya Telefilms out of Hyderabad, India. And those figures are competitive when compared to Taiwan and South Korea, where salaries have risen sharply, causing some studios to pass price increases on to their clients. Because Indian service houses can charge up to 25% less than some Asian suppliers, some North American and European clients are switching servicing centers.

‘It’s better economics – more work for less money,’ says Rajnigandha Shekhawat, communications officer for Maya Entertainment, a Bombay-based company specializing in 3-D animation and special effects for companies such as Vanilla Pudding producer Wild Brain out of L.A.

But money is not the sole reason for the migration of work to the South Asian continent. English skills, creative talent and the IT boom have also contributed to the changing trend, which has seen companies such as Paris-based Tele Images, the U.K.’s Treehouse Productions and Canadian prodcos CinéGroupe and Fun Bag Animation come knocking on India’s door.

‘We have advantages over other territories because we are a diverse culture and, as such, can easily adopt other cultures,’ says Sangaris, whose company’s animation wing recently merged with Zee Institute of Creative Arts (ZICA), the animation arm of Indian entertainment giant Zee TV. ‘And we read and write English very comfortably, so when it comes to dealing with pre-production, it’s convenient for [Westerners].’

While Sangaris’s company is gearing up for more service jobs (it recently animated the one-hour TV special The Night Before Christmas: A Mouse Tale for L.A.-based PorchLight Entertainment), it will unveil its own live-action/animated feature film entitled Bhamati: The Queen of Fortune at MIPTV. Budgeted at US$5 million, the family flick is based upon the legendary Indian love story of a peasant woman and the prince of Hyderabad. Sangaris expects that ZICA and Padmalaya will crank out a collective 900 minutes of animation this year.

Of course, this latest push is not the first time India has marketed itself as a servicing center. The country’s software industry was built on the same principle: cheap labor, decent English and an educated workforce. India is blessed with an abundance of well-trained software engineers – around 120,000 graduate every year from six institutes of technology. Thousands have been channeled into the computer service industry, manning help lines at international call centers or writing software. It didn’t take long for entertainment moguls to realize they could harness this resource for themselves by training IT specialists on animation software.

Rajiv Marwah, CEO of jadooWorks in Bangalore, was once flying high at an Internet company in Silicon Valley. But when the dot.com bubble burst, he decided to adapt his IT expertise to fit the new digital entertainment realm. He moved back to Bangalore and set up an animation company with Farrukh Dhondy, former commissioning editor for Channel 4 in the U.K., and Pawan Kumar of India-based Vmoksha Technology. ‘We discovered that we could combine our skills with 3-D animation and tap our creative side to enter the global market,’ says Marwah.

After a string of small service jobs, the 18-month-old company has now found international synergy. It’s co-producing CGI series Pet Alien (26 x 22 minutes) with L.A.-based Mike Young Productions, Antefilms International in France and Ireland’s ABU Media. The company is also developing a 13 x 22-minute series with Iskcon in Bangalore about the adventures of the god Krishna that it hopes to market internationally. Also in production is a 13-minute traditional 2-D animated episode called the ‘Multi-Coloured Jackal’ for the Animated Tales of the World series produced by Channel 4 in Wales.

When it first ventured into the animation market, Bombay-based film and television production company UTV believed its competitive advantage would be consistent delivery. ‘UTV had done a lot of live-action content in India, and we wanted to enter the animation world after seeing the trend unfold in Korea, Taiwan and the Philippines,’ says Biren Ghose, COO of animation at UTV. The field looked intimidating at first, but on closer inspection, Ghose discovered the competition had an Achilles heel. ‘Everyone working in the outsourcing game has to keep up with what they commit to,’ says Ghose. ‘What favored India – and UTV – is the fact that the Philippines lost its early advantage, to some extent due to an inability to meet deadlines and quality [standards].’ By establishing schools and the Animation Producers Association, the industry wants to ‘show that there can be a steady and reliable flow of talent from India,’ says Ghose.

Sensing an opportunity in 1998, UTV purchased Ram Mohan Biographics, a 25-year-old 2-D animation company with a core team of 40 animators. In addition to forging new ties with co-production partners, UTV’s strategy was to use the expertise of Ram Mohan’s team to train a new generation of animators to grow the company. ‘We founded a school and trained 2,000 people in five years,’ says Ghose. In 2002, UTV completed 100 episodes of 2-D animation for the international market – a 50% jump over its 2001 output. Some of the company’s co-productions include the 2-D series King for Ottawa’s Fun Bag and Toronto’s Decode Entertainment, and Toad Patrol (also with Fun Bag). As a co-producer, UTV works ‘partly for cash and partly for distribution territories,’ says Ghose. The company often takes Asian rights – the most lucrative territories being Japan and Korea.

Some of UTV’s larger service jobs include Weird Monsters (a Treehouse/Tele Images co-production for Disney Channel in Europe and Teletoon in France) and The Untalkative Bunny for Dynamite Productions in Canada and Big Al in the U.K.

Many Indian animation studios are now developing original programs, but UTV has its feet firmly planted in the service sector. Ghose wants the studio to mature before taking creative risks, but is prepared to meet technical challenges. UTV is currently experimenting with the digital realm by co-producing the Flash-animated series Daft Planet with CinéGroupe and Teletoon in Canada.

Back in 1998, when UTV created its animation arm, it was unclear how the business model would develop. Five years later, the animation studio now brings in 20% of UTV’s business – roughly US$10 million in 2002.

Local producers like UTV were not the only companies that recognized an opportunity in India. In 1999, Bill Dennis, former manager of the Hanna Barbera/Turner Broadcasting production facility in the Philippines, was approached by a group of entrepreneurs who wanted to open a new animation facility somewhere in Asia.

Rather than setting up shop in the Philippines, which had seen local budgets soar, Dennis made India his first scouting expedition. ‘We got only as far as Trivandrum in the southern-most state of Kerala, and decided this was the spot to build our studio,’ says Dennis, now CEO and president of Toonz Animation India and its sister company in the U.S. Among Trivandrum’s key selling points were its state-of-the-art technical institute Technopark – combined with great weather and the fact that the Indian government had passed a law exempting the export earnings of TV/film content from taxes, which gave the industry an added incentive to tackle regional markets. (It also helped that his original investors were Indian ex-patriates).

Dennis’s company landed its first animation service contract with Cartoon Network Asia in 2000 for a series of interstitials. Its first series job was Turtle Island for LaFete/Mimosa Productions in Canada. Co-production was the next step, as Toonz partnered up with Canada’s VivaVision and Treehouse in the U.K. on How to Care for your Monster (52 x 22 minutes).

Now Toonz Animation is originating its own projects. The company is currently producing 26 x 11-minute series The Adventures of Tenali Raman, which is loosely based on the life of a 16th century court jester from the ancient kingdom of Vijanagara. The US$650,000 show, which is nearly complete, is being distributed worldwide by U.K.-based Indigo Kids and has been picked up by Cartoon Network in Asia. In early development is the 13 x 22-minute series Hanuman, a 2-D/3-D hybrid based on the adventures of the Indian god of the same name.

One of the ingredients for successful projects originating from India is sourcing writers and art directors from the West. Toonz Animation hired L.A.-based story editor/art director Atul Rao to head up its Hanuman project. ‘Indian mythology and folklore is rich with tremendous material,’ says Dennis. But ‘to make our stories and shows appealing to a global audience, we must bring in the very best talent available to help guide our Indian teams.’ Although Dennis claims that may change in the next five years or so, Toonz Animation is currently sponsoring workshops featuring animation gurus like Robert Coleman, David Fine, Will Vinton, Jimmy Murakami, Bill Plympton and Paul Driessen to inspire local talent.

India’s fledgling studios formed an animation producers association several months ago, and the group recently met with the Ministry of Information and Broadcasting to lobby the government to sign co-pro treaties with countries like Canada, as well as request an exemption from import duties on digital animation equipment.

But despite all the advantages of servicing productions in India, there are still drawbacks. While India is software literate, its telecommunications lines are dismal – just try getting a good connection on your first attempt or making conversation without screaming down the phone lines. India is plagued by a lack of communications infrastructure, particularly the high-speed connectors needed to push through large data transfers.

And there is a need for better training institutes for the country’s animation talent. ‘Most of the really good animators learned their skills by trial and error rather than from a [school or studio],’ says Maya’s Shekhawat.

Still, insiders are bullish, and many foresee a day when India will become a powerhouse territory in the global animation industry.