Issue: Volume: 27 Issue: 8 (August 2004)

The Balkanization of Animation

The outsourcing of computer animation and game development provides an interesting lens through which to view the phenomenon. The industry is by no means immune; it is, in fact, very well suited to distributing production widely, and can provide a positive example of globalization.

My contention is that distributing production globally is both inevitable and beneficial to all sides. Among other benefits, the efficiencies from outsourcing: A. Democratize the financing of animation, opening it up to a much wider pool of independent creators; B. Expand the market (more movies, shows, and games will be made because of lower-cost requirements); C. Protect creative jobs in otherwise marginal businesses; D. Create more and better work in the developing world that will benefit all; and E. Improve job stability by evening out the boom-and-bust cycle of big-budget productions.
How I learned to stop worrying and love outsourcing.

One way to look at the issue is to remember one simple fact: We would not have television animation as we've known it for the past 40 years if Hanna-Barbera, et al, had not figured out how to outsource traditional cel animation back in the 1960s.

The "limited animation" techniques—such as animating "on twos," cycling backgrounds, and so forth—developed in the '40s and '50s by UPA and others were driven largely by a desire to open up the medium to smaller studios. Until then, the large studios dominated commercial animation, theatrical shorts were the only practical outlet for others, and television was simply out of the question because the cost of production couldn't be recouped. Those techniques were quickly adopted and were ultimately critical to the profusion of cel animation today, from The Simpsons to SpongeBob SquarePants.

By isolating the parts of the process that required great skill (such as writing, layout, and key animation) from those parts that didn't (in-betweening, inking, and painting), it was natural for studios to seek out the least expensive way to produce the latter. Hanna-Barbera led the way in establishing studios in the Philippines and Taiwan, and in creating production processes that accommodated the shipping of designs overseas and finished cells back.

The combination of less work and lower cost for that work through outsourcing brought the costs down to a level that television could justify.

Forty years later, the same cause (lower costs) and effect (more and bigger markets), accelerated by friction-free digital processes, are playing out today in the 3D animation and game worlds. Pixar, PDI, BlueSky, and Nickelodeon are analogous to Disney and Warner Brothers before UPA. They are the only ones that can afford the $40 million-plus budgets of 3D features today.

However, just as with 2D in the 1960s, outsourcing 3D animation reduced costs dramatically. So it will no longer be necessary to own a production studio such as Pixar or PDI to be able to finance a $40 million feature-film production budget.

That's great news for creative talent because it dramatically lowers the barrier to getting a great idea greenlit. It's a lot less risky to take a chance on a $20 million film than on a $40 million-plus one, and more choices of production houses means the big players don't have a monopoly on what gets made.

As budgets go down, the need for megahits also goes down, and content can be produced for more specialized audiences. For instance, the population of India represents a huge market, but little if any 3D animation is being created for it because the buying power of that audience is much lower than in the US and Europe. So they watch The Simpsons and Finding Nemo.

But if the cost of producing a film, television show, or game is cut in half, it becomes twice as easy to recoup costs and, thus, markets that would otherwise be out of reach suddenly become attractive.

Toonz Animation in India ( is beginning to prove that. And many such markets will open up as costs drop, thereby creating more demand for creative talent overall.

The natural "division of creativity" from outsourcing will tend to favor talent in developed countries that have the clear leadership in the high-skill parts of the process. The early stages of conception, writing, design, and production management will largely stay in Hollywood, Europe, and Japan, where the talent, infrastructure, and capital for it are solid.

As new markets open up because of lower costs, demand for that talent should actually increase, more than compensating for the less-creative work that moves overseas in search of cheaper labor.

Digital media work, even the rote work that outsourcing favors, is great for developing countries: It requires skill, and is clean and relatively well-paying.

Macedonia (the former Yugoslav Republic, hence the term, the "Balkanization" of animation) is an interesting case study. The country has low wages, high unemployment, but near-European levels of education and access to technology. In concert with the US Agency for International Development, the government has created E-Schools by wiring every school in the country with computer labs connected by broadband (for more information, see educating_modern_macedonia/ Education_Information_ and_Technology_Project.asp).

FX3X (, an innovative studio in the capital city of Skopje, wants to grow the business it receives from Hollywood, but it needs more talent to support that. So it proposed 3D @ E-Schools, a distance-learning program to grow the 3D talent pool in Macedonia, using E-Schools as a training platform for Alias's Maya. It is considered a big success, with more than 400 eager students going through the first level of training in the first 27 schools, and more are on the way.

To attract US work, Macedonia's FX3X proposed 3D @ E-Schools to train students to create 3D animation such as this.

The increased use of low-cost overseas production should actually create more job security in the 3D animation industry. Studios will have reduced economic pressures that might threaten their existence, and less of a boom-and-bust mentality that creates big swings in hiring and firing. Large effects houses already "outsource locally" for just that reason. Dozens of small studios provided effects for The Matrix movies, in fact.

Glass Egg ( in Saigon is an excellent case in point. Phil Tran, its founder, was born in Vietnam and moved to the US after the war. He returned to Saigon to establish an offshore studio for CD-ROM pioneer Morgan Interactive. With the volatility of the CD-ROM business, Morgan was struggling to survive, and everyone's job was at risk because the studio's costs were too high. In that case, outsourcing actually saved American jobs. Glass Egg's latest work entailed creating half the race cars in Microsoft's new racing game, Forza Motorsport.

I believe that what is inevitably happening in the outsourcing of 3D animation production for movies, television, and games will be a great example of globalization done right. It seems clear that the appetite for animated entertainment is far from saturated. The more we can bring costs down, demand and opportunity for creative talent will grow, the developing world will gain high-quality new jobs, profitability will be more easily achieved, and more creative properties will get made for more diverse audiences.

Brad deGraf, a programmer, animator, and entrepreneur in 3D animation, founded deGraf/Wahrman, Protozoa, and the digital media division of Colossal Pictures. He consults for International Finance Corporation and the US Agency for International Development.

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