Animation Sector Profile
In total, the global market for all forms of animation is currently estimated to be worth $300bn p.a.
The UK has a significant position in this market, but the UK's animation industry faces a number of challenges and opportunities that will affect its various sub–sectors in different ways.
In order to remain competitive and secure the greatest yield from the international market for animation, the UK's animation businesses will increasingly rely on a highly skilled and specialised workforce that is responsive to market needs. Continuing the professional education of practitioners in the industry in an appropriate, relevant and "user–friendly" way is essential if UK animation is to be able to retain its ability to compete on quality rather than cost.
More than three quarters of the animation workforce are graduates and the quality of UK higher education in animation will be a key factor in determining the long–term future of the industry.
Animation Sector Profile
1.1 Introduction
The UK’s animation industry is part of a fast growing, global creative economy.
Over the period 2005-2010, aggregate worldwide consumer expenditure on CDs, DVDs and other physical formats will continue to rise whilst the number of broadband households in the world is anticipated to double and global spending on content for wireless and online consumption is forecast to treble. Purchases of Video games will increase by 125% to $48bn p.a., annual cinema box office, DVD and Video revenues are anticipated to rise by 62% to over $100bn and Television (advertising and subscription) revenues will increase by 93% to over $450bn. Internet advertising and access spending (i.e. excluding goods and services purchased via the internet) will have increased more than threefold so that by 2010 over $265bn will be spent around the world each year on web usage.
Animation will be integral to this growth, though where it manifests itself in, e.g. on-line communities such as Second Life or is incorporated into effects for live action feature films such as Pirates of the Caribbean or commercials for brands and products that are household names, the enormous size, breadth and depth of the market for animation may not at first sight be obvious.
Executive Summary
In total, the global market for all forms of animation is currently estimated to be worth $300bn p.a.
The UK has a significant position in this market, but the UK’s animation industry faces a number of challenges and opportunities that will affect its various sub-sectors in different ways. In particular, the decline in commissions from commercial broadcasters and their advertisers presents a major threat to traditional 2D animators who are already affected by the growth of off-shoring to low cost centres of production.
In order to remain competitive and secure the greatest yield from the international market for animation, the UK’s animation businesses will increasingly rely on a highly skilled and specialised workforce that is responsive to market needs.
Continuing the professional education of practitioners in the industry in an appropriate, relevant and “user-friendly” way is essential if UK animation is to be able to retain its ability to compete on quality rather than cost. There is, however, a lack of strategic coherence in post entry training and so a key recommendation of this paper is for Skillset to extend and increase its accreditation work to short course provision and to work with the industry to design recommended training “pathways” for practitioners to follow.
More than three quarters of the animation workforce are graduates and the quality of UK higher education in animation will be a key factor in determining the long-term future of the industry. There are in total 286 courses available in animation at HE level in the UK, unfortunately not a single one appears to meet in full the industry’s expectations.
Without adequate measures to increase the influence the industry has on those responsible for the education of the bulk of its future workforce, the difference between the skills the global market demands and those the UK industry can deliver may become irreconcilable.
Continuation of the action already undertaken by Skillset in areas such as course accreditation is vital and ways to leverage this work into a better understanding on the part of both students and staff of the industry’s needs should be sought.
These and other challenges, and ways that they may be overcome, are discussed in the body of what follows and the recommendations are summarized into a proposed strategy in section 8.
1.2 The Market for Animation: CGI and Features
Animation, particularly CGI animation, provides the majority of the visual effects for the £1.4bn[1] UK Post Production industry. The UK is the world leader in the production of visual effects for TV and commercials and only the US and New Zealand are ahead of the UK in terms of the value of visual effects produced for feature films.[2] The 22,000 people dependent on the UK games industry also employ similar expertise in generating their £488m of annual exports.[3]
The advent of high quality CGI animation has also invigorated the market for feature animation, and provided opportunities for new entrants in addition to established businesses to increase the volume, enhance the quality and improve the profitability of feature length animated films. Over just six years, between November 1999, when Disney released Pixar’s first Toy Story, and Warner Bros’ release of Happy Feet in November 2006, 36 feature length animations made with computers generated $10.2bn of box office revenues, an average of $283m each.[4]
Whilst films made and distributed by the US Majors continue to account for the majority of box office revenues, independently produced films have increasingly featured in the top ranked animated feature films released each year. Included in those 36 CGI animation films is Valiant, a UK produced film distributed independently by a UK based sales agent: Odyssey Entertainment. Also included is Aardman’s first CGI feature film, Flushed Away, which generated $175m in ticket sales.
The growth in CGI production has not spelt the end of other forms of animated feature film, the UK’s own Wallace and Gromit sold over $56m of tickets at the US box office alone for their first feature length stop-frame animation: the Curse of the Were-Rabbit.
1.3 TV / Broadcast
The buoyancy of the global feature animation market is not reflected in the UK TV market, where the business models of both commissioning broadcasters and the animation companies that rely on them are threatened by diminished revenues from advertising, with the role and purpose of public policy less clear. Producers are concerned that fragmenting audiences will result in reduced public service obligations on broadcasters, including providing programmes for children[1].
Total hours of new UK Children’s Programmes broadcast on commercial PSB Channels have already fallen every year since 1999 with the aggregate reduction being over 25%. Channel 4’s output fell from over 50 hours p.a. to virtually none, ITV1’s from approx. 450 to 375 and 5’s fell from over 250 to less than 175.[2]
It is in this context that the effects of the new restrictions on children’s advertising, which are estimated to cost £39m in lost advertising revenue p.a.[3], ought to be seen. As Jane Lighting remarked; “These restrictions [on children’s advertising] will deny us substantial revenue and make the economics of producing children’s programmes a lot more difficult… the long term future of UK produced children’s programming outside the BBC is bleak."[4]
Pact estimates that total investment in indigenous production of all forms of children’s programming by all types of broadcasters other than the BBC will have fallen by over 80% to under £5m p.a. over the period 2005-2007 and the diminishing prospects for funding and commissioning from UK television, combined with the knock on effect on the level of animation commissioned for broadcast as commercials, was one of the major challenges identified during Skillset’s consultation with the animation industry.
1.4 New Platforms and Markets
Animation producers may be able to update and adapt their businesses to new markets and new platforms, particularly in the online space where, e.g., Google is earning more in advertising revenue in the UK than Channel 4. However, after a prolonged period of relative stability in the analogue era, the market for animation, particularly animation produced for UK TV, is undergoing a period of dramatic change.
For those that can successfully manage that change, as individual companies or national industries, there will be significant rewards.
In total, the global market for all forms of animation[1] is currently estimated to be worth $300bn p.a.[2]. The UK has in the past been successful in servicing and exploiting it, from Dangermouse to Lara Croft, from Harry Potter’s magical effects to Wallace and Gromit’s comic adventures, culturally and commercially the UK has punched above its weight. To continue to succeed, a highly skilled, specialised and creative workforce will be required.
2.1 Introduction
Animation production is an increasingly complex process and requires the kind of high and mid range skills that represent a competitive advantage for a modern developed economy. Just under 80% of the animation workforce are graduates and over a third have a post graduate qualification[1], higher than the average for the audiovisual sector as a whole and far higher than the average proportion of higher educated staff in the total UK workforce (16%)[2].
As well as being intensive in its requirement for skilled labour, animation also brings long term, stable employment relative to live action feature film or TV production.
Good animation has a long shelf life and is readily accepted by a global audience. Critically, animation has relatively low “above the line” talent costs and the cost of animation production doesn’t leach out across a diverse range of temporary locations. The cost of manufacturing animation is largely spent in the immediate vicinity to the studio. Because of the potential for relative stability of production, animation lends itself to the growth of clusters of complementary businesses, as is the case in Bristol.
Approximately 2/3 of the UK’s Animation businesses are Micro-Companies, employing less than 10 full time equivalent (“FTE") staff each. A small number employ over 250 employees, the remainder are small to medium sized companies (“SMEs”)[3].
Figure 1: Qualifications Held by those working in Animation
2.2 Techniques
The most frequently employed technique[1] in animation production is 3D CG work, and there has been a marked downturn in production activity involving classical drawn animation in recent years. Companies specialising in 2D series, specials and feature films now rarely employ UK based animators, with the bulk of animation work being off-shored. These companies now offer employment mainly in pre-production roles such as design, storyboard and layout. Whilst the global economics of animation are contributing to a worldwide “softness” in traditional 2D licence fees, many in the industry feel the lack of state aid for UK TV productions compared with that available in other developed economies[2], has necessitated the off-shoring of traditional 2D production or the creation of co-productions even though there isn’t a shortage of skills or talent in the UK.
TV series production involving 2D digital techniques[3] is currently flourishing in the UK and specialists in CG, whether 3D or 2D, particularly those working in games development and Visual Effects (“VFX”) are enjoying an unprecedented level of production activity and often struggle to recruit key technical and production personnel. There is, however, some concern that this work is also starting to drift overseas.
2.5 Uncertain Future
Clearly the UK’s animation production businesses, particularly those focussed on 2D TV production, face an increasingly uncertain future. For those focussed on feature length animation, the introduction of the new UK tax credit and the changes in the UK’s co-production treaty network are perhaps too recent to discern their impact on the animation industry. Whether the current buoyancy of CG animation and VFX will continue, and for how long, are also major questions facing UK animation. It may be the case that to successfully navigate these changes in the broader environment for the industry, animation businesses need to address the ways in which they collectively lobby for, e.g., regulatory change or a fair apportionment of state support.
These questions help frame the context for this document but are outside the remit of a Skills Strategy. What is likely is that not only will the quality of Skills training and education be a vital factor in maintaining the quality of UK animation; its relevance to the new economic paradigm may well determine the industry’s sustainability.
3.1 General Information
Animation companies currently provide employment for around 4,700 people throughout the UK, of whom nearly two fifths are freelance or on short term contracts, with almost 20% Sole Traders, or self-employed. The largest key occupational groups are draw/stop frame animation employing around 1,000 people, producing (910), computer generated animation (900), and production (430). In addition, a further 1,100 more people are employed in key animation roles in other audiovisual sectors.
39% of the animation workforce entered the audiovisual industry before 1990, 39% during the 1990s and 22% since 2000. Less than a quarter of the workforce had received structured careers advice at any point in their working life.
3.2 Diversity
34% of the animation industry’s workforce are women, slightly less than the norm for the audiovisual industries as a whole[1]. At 3%, the representation of ethnic minorities is among the lowest amongst all sectors of the audio visual industry[2].
Figure 3: BAME Representation in Animation
3.3 Geography / Age
With 67% of the workforce based outside of London, animation production is more evenly distributed around the UK than the remainder of its audiovisual industries. It is also a relatively youthful industry, with 48% of the workforce aged under 35.
Figure 4: Animation in the Regions and Nations
3.4 Careers and Salaries
39% of the animation industry’s workforce secured their first job through making direct contact with a company, and 28% through a friend or relative. These two entry routes are far more common than elsewhere in the audiovisual sector, though in keeping with the rest of the sector, once established it is more usual to secure employment by being called than by calling[1].
Average earnings in 2005 were £25,983 per annum compared with £32,239 across the wider audiovisual industry and £23,389 for the UK as a whole[2].
3.5 Key Skills for Practitioners
The industry consultation has indicated a need for UK animation to develop more staff who are versatile and able to adapt to new platforms, styles and the needs of a new, more diverse range of clients. It is felt that the changing nature of productions will contribute to a further shift in the UK to an outsourcing mode where despite projects being originated in the UK, the financing and production of them will be more international. The effect of this on the workforce will be to reduce the amount of animators needed in the UK, but to increase the number of pre-production staff needed for projects initiated here. Industry representatives consulted felt that whilst training or re-training for experienced staff was needed, it was important that graduates and new entrants were aware of the roles available in order to avoid increasing numbers of practitioners competing for fewer jobs as animators.
Representatives from the commercials sector of the industry felt that commercials producers needed to update and adapt their businesses to new markets and new platforms, particularly in the online space, but that this could be dealt with by each company individually and was not a priority for external intervention.
3.6 Higher Education
There is an increasingly conspicuous presence of graduates trained abroad, particularly in Europe, in the UK industry. Some industry representatives felt that, UK graduates needed to be better able to compete in the market for jobs.
The BBC believes an aspiring new entrant to animation requires an academic qualification equivalent to a BA Honours Degree in a relevant subject, with an appropriate Postgraduate Degree “perhaps being an advantage’. Suitable undergraduate programmes are likely to require completion of one year’s Foundation or Access Course in Art and Design and a portfolio of work and/or show reel. On graduation the student will need to have acquired extensive technical knowledge of software applications, digital technology and broadcasting processes, a thorough understanding of computer generated processes and be able to achieve creative responses to design briefs within the restrictions of budgets and deadlines[1].
Whilst there may be ways in which a new entrant may migrate into animation from occupations on the periphery of the industry, it appears that the core of the industry will continue to be staffed by people with a higher educational qualification. Currently 78% of the animation workforce are graduates, of whom 34% hold a postgraduate qualification. 53% have a degree in a media-related subject, the highest of any sector in the audiovisual industry. It would seem reasonable to conclude that UK animation is particularly dependent on the quality and relevance of the higher education of its new entrants.
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