The digital animation industry in the Philippine has been around for a number years. There was a notable growth in the sector during the 1980s when a number of local animation firms expanded their work with foreign studios. Today, there are about 50 or so animation companies in the country, mostly small and medium scale in size. In addition, there are also free lance animators working independently, either on their own projects or temporarily linking up with studios. About 6,000 animators are estimated to be working in the industry. The sector is estimated to have generated exports of around US$74 million in 2005 and is expected to reach a level of US$100 million by 2010. Most foreign contracts are with principals in the US, Europe and Japan.

According to NASSCOM India1, the global animation sector is estimated to be worth some US$59.1 billion in 2006. At an annual growth rate of around 7.8%, the world animation market is expected to reach US$79.7 billion by 2010. Animation covers a variety of segments, the largest being the entertainment sector accounting for about three fourths of industry revenues in 2006. This includes movies, broadcasting and direct-to-DVD animation. Other markets include e-Education and web design.

Demand for animation work is largely generated by the large studios in North America and Europe. Concept, pre-production and post production work are usually done by these studios while some of the production work are outsourced to companies in other countries, particularly in the Asia-Pacific area and Eastern Europe.

Some of the major outsourcing partners in Asia are in the countries of India, South Korea, Singapore, Taiwan and the Philippines. China is an emerging outsource provider for animation work, although it is still focused mainly on its local market at present. Competition is keen in the area for outsourced animation contracts and is expected to intensify in the near term.

The local animation industry is presently focused on doing contract work for foreign studios. Lack of skilled animators, especially in 3D work, however, has limited the capacity of the sector. This situation has persisted over the past years and remains a pressing concern of the industry. While measures have been adopted to try to alleviate this situation, progress has been slow due to insufficient number of creative talent going into animation related courses and lack of facilities in the training institutes. A related issue in the industry is the slow process in developing competent animators. Studios have to make a significant investment in terms of time and resources to train new animation graduates before they become skilled enough to be productive.

This adds to their cost even as there is the risk after training that the worker may be pirated by another studio or leave for better paying work abroad. Another issue in the inbound logistics part of the value chain is the high cost of animation software licenses.

Since most animation studios are small in size, they can only afford a limited number of licenses which again limits their capacity. Sometimes, clients may require upgrading to more recent or advanced software versions which further adds to the studios’ acquisition cost.

In operations, retaining skilled workers still remains a concern for most firms. As mentioned previously, animators may be pirated by another studio or take a position in a firm abroad. Local animators also need to increase their competencies in 3D work and other emerging technologies to meet increasing demands from clients.
In marketing, there is a lack of sustained marketing effort for the industry focusing on its key strengths. Since most animation firms are small in size, most of them cannot afford an extensive promotional effort on their own. Marketing skills at the company level are also limited. Few personnel have any formal marketing training. For most firms, it is usually the owner who does much of the marketing work which limits the scope and coverage of company level promotional efforts.

Over the next few years, the local animation sector has to protect its competitive posture in the global market. Some competitors in the region are presently offering lower prices and the industry needs to respond to this by positioning itself as a reliable outsource partner for quality work. The sector should avoid falling into a pricing war with other countries which it cannot afford. To support its market position, however, the industry has to resolve the various issues identified in its value chain. Skills of animators has to be continuously improved to keep pace with emerging demands from clients. The pool of available animators also has to expand substantially to enable local studios to get larger contracts. A way also has to be found to afford the smaller firms with sufficient software licenses for their operations.

The industry also has to sustain an intensive marketing program aimed at specific markets or clients. This program should follow a carefully crafted strategy based on the desired market position mentioned earlier. Over the medium term, the industry should strive to develop a more stable market base. Larger animation studios can expand their original local content, initially for the domestic market and later for exports. A growing, stable market can provide more incomes and opportunities for animators which can stem the loss of skilled personnel to other countries and attract more talent into the industry.


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