Nasscom.in, November 08, 2008

The Indian Animation and Gaming market has shown considerable growth over the past few years, with a larger number of players foraying the space. Large global studios have also shown interest in offshoring parts of their animation and gaming work to India, and take advantage of what it has on offer – low-cost labour, English-speaking talent, graphic designers and animators, who can be quickly made, “industry ready” with relevant training and gradually improving telecom infrastructure.

Biren Ghose, CEO, Kahani World Inc. states that these developments are a testament of the fact that the animation and gaming industry has crossed a threshold in which people have paid their dues and spent their time. “It is no longer a sunrise industry. It is an industry which is actually beginning to take wing in different directions. It understands the elements of the value chain,” he says.

Recognising the changes taking place in the sector, NASSCOM has recently released the findings of its Animation and Gaming Report 2008, a study which attempts to analyse the market, the trends driving it, the challenges it is facing and the opportunities that are being thrown up for the key players. In the last year alone, around 85 domestic animation movies, with mythological and contemporary themes, were announced. As of now, 28 are in different stages of production, while 15 are expected to be released over the next two years.

The findings also show the following:

• In absolute terms, custom content development is the largest segment of the animation and gaming industry, with an estimated industry size of USD 187.5 million, followed by animation entertainment at USD 120 million.

• Multimedia/web design contributes another USD 100 million, and education accounts for USD 53 million.

• In 2012, custom content development is expected remain the largest segment, though its percentage share will come down from 41 per cent to 33 per cent. This decrease is almost completely due to a corresponding increase in the share of animation education market, which is growing at a CAGR of 40 per cent from 2008 to 2012.

On the gaming front, the study reveals that by the end of 2008, the gaming industry in India will touch USD 212 million and go up to USD 1,060 million by 2012 at a CAGR of 50 per cent. The Report also suggests that the gaming industry is entering its next phase of growth, having done its ground work, and is now moving towards maturation.

The rise of gaming and visual effects.

The findings of the NASSCOM Study are supported by stalwarts in the animation and gaming business such as Rajesh Rao, CEO Dhruva Interactive, who says that India has been described in the past as a sleeping tiger and that applies to gaming now. “We have a local market that is beginning to happen. The Indian gaming industry is growing on all fronts—the mobile, console, PC, and online gaming realms,” Rao adds.

Vishal Gondal, CEO Indiagames agrees. “Gaming is going to be the biggest entertainment business in India.” According to Gondal, while today, piracy is a big issue and people are not paying for games, over the next five to six years, this will change as more “paying” subscribers will come into the gaming fold. Besides gaming, it is felt that the visual effects market too will emerge as a big revenue generator, bigger than possibly animation.

Says Prashant Buyyala, Managing Director, Rhythm and Hues, an animation and visual effects specialist operating out of the US and India. “Visual effects have a brighter future than animation. Even in the US, while animation movies are big, it is the films with special effects that have wider acceptance. Today, if you were to check out the top 20 blockbusters, you would find that 90 per cent of them use extensive visual effects. The visual effects potential hasn’t even been scratched in India. Visual effects will explode. The real potential lies in how film makers use visual effects in their regular stories, to overcome safety and cost challenges.”

Beating the global economic downturn

“From the Hollywood perspective, even with the downturn, we aren’t seeing any sort of depression in our business. It is still a booming period right now. During the time of recession, it is proven that people still want to watch movies, people still want to get entertained.,” comments Ed Fries, Founder, FigurePrints.

Prashant Buyyala concurs. “We are seeing new projects happening in animation and visual effects even though the economic crisis is continuing and that is because content is needed to fill the pipes of all the different distribution channels, whether it is the movies, television, DVDs, etc. All the studios need to have an inventory of content. Therefore, even if content dries up, we do not get affected since the trickle-down effect will be tremendous and the losses that would be derived from not developing that content would be much higher than the risks of making the content. In that sense, I don’t see any immediate downtrend. The financial crisis has in fact brought tremendous pressure on the Studios in the US to reduce their budgets. “USD 250-300 million movies are going to be a little bit more difficult to finance. So there is pressure to find creative opportunities and ways to reduce costs. Service providers have opportunities to do some of that work in India and bring down the cost.”

Addressing the challenges

Talent remains one of the biggest challenges for the animation and gaming players in the Indian market, though companies have managed to find solutions. According to Manisha Mohan, Director, Tata Interactive systems, a well known e-learning services provider, even though the company has a pipeline to talent from India’s prestigious National Institute of Design (NID) in Ahmedabad, there are areas where people are tough to find. “While we have no problems finding 3D animators, 2D animators are not available in the market. There is a huge shortfall of such professionals across the industry,” she says. As an answer to this challenge, the company has introduced induction programmes, alongside on-the-job-training and special training in the Flash software. Additionally, mentors guide new employees and help equip them with the relevant skills needed for the business.

Rhythm & Hues is also using in-house training to plug the shortage of rightly skilled manpower. According to Prashant Buyyala, when the computer animation and visual effects company entered India, there was virtually no talent available. “Almost 90 per cent of the people that we currently have been hired straight out of college and trained at the company itself.”

Charles Darby, CEO, Eyecube, believes that India needs to do more creative visual effects and approach animation from an artistic perspective rather than an IT-based viewpoint. “A lot of work which is outsourced to India, including visual effects, is handed over as very basic work which it is expected, will come back looking okay. It is for Indian companies to prove that the country can produce fantastic, believable, visual effects for third-party international films. And for this India must have creative, artistic talent, rather than IT specialists.”

The NASSCOM Animation and Gaming 2008 Study states that the players in the market must additionally deal with challenges such as lack of original IP, infrastructure related issues, dependence on outsourcing and lack of content variety.

Looking ahead

According to the NASSCOM Animation and Gaming 2008 Report, the animation and gaming sectors are poised to grow even further. Going forward, Indian animation and gaming companies and the industry as a whole needs to undertake the following:

• Improve skill sets: Companies must develop the right skill sets to produce high quality work.

• Launch new and upgraded courses: Courses on skill upgradation, targeted at professionals that have already spent two to three years in the industry, will need to be introduced.

• Step up acquisitions: Indian custom content companies will have to undertake acquisitions or enter into alliances in order to establish a presence in the overseas markets.

At the end of the day, Indian animation and gaming companies are set to grow and capture a larger share of the global market. It will take some proactive thinking by the key players and the government, to take the sector to its next level of growth.