Asia Shops Juggle U.S. Animation Jobs

The old ways, the Captain often says, are usually the best ways. Yet even though he keeps the cams of his linotype machine well oiled as a matter of routine, the newsman also realizes that times change. And this week he pulls out his box of crayons and pens a piece on the ever-changing animation outsourcing biz.

For decades it has been a rewarding cycle for both sides of the Pacific: Hollywood studios have sent their animation pre-production work (the storyboards, designs and character and background layouts) to lower-wage nations in Asia for final finishing.

But countries such as South Korea are not relying on lower costs as an advantage anymore, says Nikki Vanzo, prexy of Rough Draft Korea, an animation studio with 400 employees in Seoul that was founded in 1992 and has worked on such toons as "The Simpsons" and "Futurama."

"Production fees have not increased since they were lowered to compensate for the extremely strong U.S. dollar during the IMF crisis in 1998," she says, adding that a subsequently depreciating dollar -- down 25% over the past five years -- has cut into budgets. "Still, we are consistently producing the highest-quality animation and on schedule."

As other countries in Asia continue to make inroads in the outsourcing biz, companies like Rough Draft Korea, which collaborates with Rough Draft Studios, its sister operation in Glendale, Calif., are staying afloat by assuring its clients of topnotch work and adapting to trends in technology.

China is changing the animation field through its large pool of artists and lower labor costs. "Cheaper labor and a huge potential market will combine to make China the ultimate place for animation production and outsourcing in both the international and domestic markets," says Lifeng Wang, founder of Xing Xing, a digital animation company in Beijing.

Vanzo, however, has seen quality concerns result in work being returned to South Korea. "As companies began to experience problems in China with inconsistency in quality and delivery times, they found that it wasn't as cost effective as it first appeared, and work has gradually returned to South Korea," she says.

Though Rough Draft Korea has not engaged in co-productions with international companies, many South Korean animation shingles are using such relationships to compensate for a shrinking market. The biggest splash was this year's announced hookup between the Weinstein Co., the Gotham Group and the government of the province of Chungcheongnam-do in South Korea to produce and distribute animated films.

For its part, India has seen the success of animated features such as the adventure "Hanuman" and "Krishna," the country's first 3-D animation feature, open up the local market to co-productions. Kireet Khurana, director of 2nz Animation, an animation house in India, explains that co-productions allow some companies to take bigger risks: "With increasing pressure on bottom lines, Indian companies have opted for the co-production route. Ownership of intellectual properties will then hopefully build value for their studio or company over the long term."

In India, the emphasis has been on building a strong domestic market while utilizing the Western outsourced work as a revenue stream, says P. Jayakumar, CEO of India's Toonz Animation. "China and Korea entered into the animation outsourcing market well before India," he says. "But as is usual of any economic activity, a cycle has set in where more competitive options emerge elsewhere and the industry follows that. India gives a balancing option in terms of quality labor and production at a competitive cost."

India's strength has been in the recently popular CG format, whereas Rough Draft specializes in traditional cel animation. But Vanzo sees the trend of moving from 2-D to CG animation as perhaps already changing direction, which could mean more work in both disciplines. Between Disney announcing plans to revisit its hand-drawn roots and Fox's success with "The Simpsons Movie," she says, "There is renewed interest in 2-D animation."

Note: This story originally appeared in the October 26th issue of Variety.