FICCI-KPMG-Report-13-FRAMES

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152 The power of a billion: Realizing the Indian dream “ Indian Animation Industry has gone through a lot of highs and lows in the last decade. A lot of companies have struggled to carry on while a few have done well. With a boom for local Animation content on TV, the future should be bright for Indian Animation Industry. Its also time for the public broadcaster to come up with Kids Channel. I recommend that this kids channel focus mostly on Pre-school age group (0-4 years). The programs should address the educational and recreational needs of the pre-schoolers in an entertaining way, in order to prepare them for the world in an age-relevant way. “ - Rajiv Chilaka Founder & Managing Director, Green Gold Animation Pvt. Ltd. Looking ahead There is indeed scope for animation companies to grow in India. Animation is no longer a ‘sunrise’ industry 6 , it has begun expansion in different directions primarily due to factors such as growth of the overall M&E industry, the potential newer consumption segments like education and gaming, and the recognition of India as an outsourcing destination. Business models too are changing, at present, many Indian companies are graduating from traditional outsourcing to a co-production model. Besides this, custom content development is expected to grow into a larger segment, going forward. Segments (INR billion) 2012 2013P 2014P 2015P 2016P 2017P CAGR % 2013-17 Animation services 7.6 8.5 9.8 11.1 12.5 14.0 13.0% © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Animation production 4.5 4.9 5.4 6.0 6.7 7.6 11.2% Total 12.1 13.4 15.2 17.1 19.2 21.6 12.3% Source: KPMG in India analysis 06. www.thehindu.com Source: KPMG in India analysis
The power of a billion: Realizing the Indian dream 153 VFX in India The VFX industry, a rapidly evolving segment in India, is estimated at approximately INR 7.7 7 billion and can be broadly classified into the following verticals — movies, TV shows and advertisements. As the segment is still at a nascent stage and domestic consumption remains limited, with mainly low-end work being carried out in India, there is considerable dependence on outsourced projects from the US and the UK. However, the domestic market is now witnessing bigger budget film releases and ad campaigns, for which players have increased spending on VFX so as to provide an enhanced visual experience for viewers. The segment registered 35 percent 7 growth over 2008-2012 and is expected to grow approx 20 percent 7 CAGR to reach INR 19 billion in 2017. VFX Domestic / Outsourcing Revenue Split Source: KPMG in India analysis and industry interviews conducted by KPMG in India “ As the team leader @ Technicolor India, 2012 leaves no room for doubt that India has ascended to the top of the pyramid when it comes to CG Animation/VFX productions. MPC’s Life of Pi, Prometheus and Skyfall; DreamWorks Dedicated Unit’s -Madagascar 3 and Rise of the Guardians; Technicolor Animation’s services in Mattel’s Barbie& the Pink Shoes, and award winning episodic work for Nick on Kung Fu Panda and Teenage Mutant Ninja Turtles – is proof enough! “ Scan the QR code to hear more from Biren - Biren Ghose Country Head, Technicolor India Key trends VFX budgets On average, Indian movies have limited budgets for visual / special effects. In India VFX budgets are considerably below international benchmarks, even as a percentage of production costs. The VFX budgets for Hollywood movies range from USD 3 million to USD 9 million 8 , which could 07. KPMG in India analysis 08. Anand Rathi research report - India Media and Entertainment, August 2012 cover the cost of an average Indian movie. However, VFX budgets for Indian movies, including regional cinema, are showing an increasing trend and are expected to boost the segment. Also, spends by the advertising industry on VFX have been increasing. Outsourcing of VFX work to Indian studios While outsourcing of animation to Indian studios has a relatively longer history, outsourcing to Indian companies of visual effects/post-production/3D conversion work of Hollywood films has gained ground in recent years. The movie ‘Life of Pi’ changed the way VFX is employed in films, it has not only consolidated the belief that VFX can be used as more than just a gimmick, it has also managed to captivate audiences worldwide with imagery of oceans, realistic animals, etc. Almost 40 percent of the visual effects work was done out of Asia, primarily India and Malaysia. This was a landmark film for the industry and the region in many ways which hopes that the quality of work will be a catalyst for the growth of the industry in India. To do work for Hollywood productions, however, requires constant investment in people and technology and the larger studios would need to ensure sustained investment over the short term in order to reap benefits over the long term. Also, there is a dearth of artists with advanced VFX skills, reflecting in high recruitment and training costs. Testing overseas shores To overcome the challenges of limited domestic demand and residual skepticism of production studios in the US or the UK in outsourcing work, many dominant players in the VFX space (Tata Elxsi, Prime Focus, Reliance etc) have established overseas offices in order showcase their capabilities and service clients better. 3D conversion market Hollywood is witnessing a surge in the production and popularity of 3D films. Over the past three years, half of the top 20 grossing films in the U.S. were released in 3D. 8 Number of Hollywood 3D films released Source: Anand Rathi research report - India Media and Entertainment, August 2012 © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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FICCI-KPMG-Report-13-FRAMES

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