Originally at
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Philippine Animators Try To Redraw Their Strategy
By JAMES HOOKWAY Staff Reporter of THE WALL STREET JOURNAL
MANILA -- Globalization doesn't end when jobs move from the U.S. to Asia or Latin America. The integration of the world economy is also threatening jobs in countries such as the Philippines, which is worried about the future of its animation business as U.S. studios look for less-costly places to produce cartoons such as "Scooby-Doo" or "Biker Mice From Mars."
Not so long ago, the Philippines was a vital cog in the world's animation industry. Talented English-speaking artists -- working for far less than their American or Japanese counterparts -- attracted a steady flow of business from big U.S. and Japanese studios.
Now, new Asian cartooning hubs -- notably India and China -- are forcing Philippine animators to innovate to survive. Some studios are taking on advertising work; others are creating original cartoons to earn a share of royalties instead of merely a contract fee.
"We were arrogant, we thought we were safe because we had our production contracts with the big studios," says Joy Bacon, managing director at Onlinks Media in Manila. "Now we have to look at new ways to grow."
Ms. Bacon's dilemma is increasingly common in the developing world. Globalization enabled relatively poor countries to build service-based industries to rival those in the West. But those businesses, in turn, are facing competition from even poorer countries with lower wages. The textiles trade is another example, as it has migrated to less-costly production centers over the past few years.
A stroll around Toei Animation Inc.'s operations here offers a glimpse of the Philippines' glory days of the 1990s, when local cartoonists helped produce about 25% of the world's estimated $25 billion-a-year animation output. Toei, which employs 60 people, still runs around the clock from a studio in Manila's northern suburbs, where scores of young artists hunch over digital screens, sketching characters for Japanese cartoons while a powerful sound system blasts out Philippine rock songs. The artists hand-draw backgrounds onto which the digital stars of series such as "Dragonball Z" and "Sailor Moon" are superimposed. It takes two days and 48,000 individual drawings to create a 22-minute episode, says general manager Nestor Palabrica. Toei is a unit of Toei Animation Tokyo Co. of Japan, which invested here a decade ago and says it plans to stay.
Philippine Animation Studio Inc. in Manila's southern suburbs also is still churning out cartoons such as "The Mask" and "The X-Men" for U.S. customers. But big cartoon factories such as Toei Animation Inc. and Philippine Animation are increasingly rare here; most studios aren't doing nearly as well.
During the early 1990s, a typical Philippine studio could charge $150,000 for a 22-minute show. But competition and new computer technology have reduced the fee to $80,000. Yet in India or China the same animation costs as little as $40,000 because labor is less costly, Mr. Palabrica says.
India poses a particular threat. The country's National Association of Software and Service Companies says animation is the fastest-growing part of India's information-technology sector. Industry executives say business is growing 25% to 30% a year and estimate revenues from Indian animation work exceeded $100 million last year. India's cartoon factories are expanding apace.
Some Indian animators began to win big contracts in the U.S. only after following the path set by Philippine studios. Madras-based Pentamedia Graphics Ltd., for example, employs 2,000 people, all earning less than their Philippine counterparts. Pentamedia's credits include contributions to an animated version of "The King and I" for AOL Time Warner Inc.'s Warner Bros. and a three-dimensional animated movie called "Sinbad: Beyond the Veil of Mists," released by Lions Gate Entertainment Co.'s Trimark Pictures.
Ironically, some Indian animators only began to win big contracts after learning how Philippine studios won such a large share of the U.S. market in the first place. In 1999, for instance, Indian entrepreneurs approached Bill Dennis -- the former manager of a Manila studio -- to set up an animation studio. He formed Toonz Animation Ltd. in Kerala state, and recruited Filipinos to oversee production and help Indian animators understand American humor.
"Labor prices [in the Philippines] have risen sharply and the studios have been passing these increases on to their clients," Mr. Dennis says. "With India and China pressing hard with lower prices, a lot of their clients are switching."
Lower costs aren't the only reason India is winning more animation business. The country's English skills and its growing information-technology know-how are also assets. "We discovered we could combine our skills with 3-D animation and tap our creative side to enter the global market," says Rajiv Marwah, chief executive officer of Bangalore-based jadooWorks Ltd. who worked at an Internet company in Silicon Valley in California before the dot-com bubble burst.
A major innovation by Indian studios was to negotiate co-production deals with overseas investors to secure an interest in the intellectual property rights for their product and the related royalty income. Pentamedia Graphics, which earned production credits on "The King and I" for AOL Time Warner Inc.'s Warner Bros., began producing an English-language animated feature aimed at a wide international audience about the life of Buddha in 2001 with Singapore's Economic Development Board. The film is expect to be finished this summer.
Philippine animation companies, long content to work for contract fees, are scrambling to take a stake in the animated products they create. They also are looking for ways to use their skills to produce new products, such as educational CDs. Onlinks Media is producing animated interactive compact discs for corporate clients and makes its own educational CDs. Holy Cow! Animation Inc. is going into advertising, producing, among other things, breezy animated commercials for Nestle SA of Switzerland that feature the love lives of cartoon characters who sip instant cappuccino.
Gecko Productions, meanwhile, has developed a domestic cartoon series called "Dragonfly Patrol" for young children. "There are 80 million people here, which is a large-enough market for us," says Grace Dimaranan, managing director of Top Peg Animation & Creative Studio Inc., which co-produced the Dragonfly series with Gecko.
"We have the same sense of humor as the Western studios, and we pay attention to detail like the Japanese," says Ms. Bacon of Onlinks Media. "But maybe next time we shouldn't tell the Indians how to replace us."
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