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The Indian entertainment and gaming industry matured substantially with a number of new players joining the space. The year saw visual effects and animation too making further inroads into the world of movies and TV broadcasts.

As a result of growing interest and confidence in the Indian animation and gaming industry, foreign players are increasingly investing here while Indian players are expanding overseas to earn more money. A case in point is Crest Communications, which aquired Rich Animation, a US-based animation production studio, for $5 mn. Industry reports say that foreign studios too are planning to venture into the Indian animation segment by setting up their captive studios.

Growth of both the segmentsanimation and gaminghas followed a similar pattern. Shortage of talented manpower and good training institutes continued to pose a huge challenge. Growing opportunities abroad, a co-production model, increasing collaboration between training institutes, local content development, and some recognition of content developed in India were some positive indicators. Cost savings remained a key driver for companies looking to outsource animation and gaming.

Movie Magic
The Indian animation industry revenues were estimated at Rs 1,595 crore in FY 07, a growth of 24% over previous fiscal, with the entertainment segment contributing nearly 68% of the total market in India.

During the year also films became more technology-centric. The year saw increased use of VFX (visual effects) in films. Two of the biggest blockbusters last year, Dhoom 2 and Krrish, were rich in special effects. Krrish triggered the trend for big time investments on visual effects in films. (There were around 600 visual effects shots in the film, at an estimated cost of Rs 4 crore.) The movie, partly done in the studios of Chennai and Mumbai, was handled by Prasad EFX studio. Some of the other big budget films in the pipeline with a heavy dose of visual effects include Ashutosh Gowirkars Jodha Akbar, and Vidhu Vinod Chopras Talisman. However, the trend is also picking up with some small budget films.

Overall, insiders say that the visual effects industry is gaining momentum and has bright prospects, with quality consciousness starting to creep in.

The year 2006 saw increased use of the digital intermediate (DI) technology in Indian films. DI involves converting film to digital format, affording it more control of colors and images, as well as room for adjustment of images. Prasad EFX of the Prasad Group did the DI work for films such as Rang de Basanti and Taj Mahal.

The Outsourcing Game
The strategy of studios to move up the value chain and do more of co-production work resulted in increased outsourcing projects. Indian studios expanded their scope across the value chain and developed more expertise to tap this potential. This took place in two ways: slowly moving toward the co-production model, and getting more work done in pre- and post-production.

The outsourcing relationship between Indian and foreign studios was also seen undergoing a perceptible change. Indian studios increasingly entered into co-production agreements. Some major international projects which Indian animation studios successfully executed include Narnda, Skyland, Jakers, and Jack Frost.

Studios also shared risk through co-production setup for the development of content. Crest Animation, VCL, Maya Entertainment, Toonz Animation, and UTV Toons were some of the studios which developed capabilities to focus more on co-production projects. DQ Entertainment already had thirty eight co-production projects out of the fifty two signed the previous year.

Exports accounted for more than 70% of the revenues in 2006. A fact reflected by the number of people involved.

However, during the year Indian companies started focusing on the domestic market, with the increasing domestic demand for animated content.

Presently, most of the animated content is outsourced. This has been one of the serious impediments to growth of Indian animation. There are about 300 animation companies employing 12,000 people, in India. Nearly 3,000 freelancers are also working in the industry.

On the 3D animation films front, however, the year was not good. Quality consciousness remained low. The animation film, Krishna, proving to be a blunder didnt help either. Though there were some successes, like the 3D animation film Hanuman, released last year, tight budgets remained a big constraint for producers. Bollywood didnt seem ready to experiment with animation much. However, having said that, there are some filmmakers who are preparing to take the plunge next year: Yash Raj Productions is one such banner.

Major studios are targeting Indian mythological characters for the feature film category. Indian studios are partnering with foreign companies on a project basis to develop content for animation and gaming. Nipuna Services signed an $8 mn contract with German firm, 4K Animation GmbH. Under this Nipuna will execute various projects for them including special effects for some Hollywood movies.

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