Wishful thinking

Entering the 12th floor of the Hangzhou National Animation Industry Base, the only tip-off that  you haven’t stepped into an internet bar is the absence of smoke. In a quiet, dimly lit room, young designers sit at rows of computers, modeling birds, locomotives and girls wearing capes.

This a cartoon command center, one of 16 nationwide. Set up over a three-year period thanks to tax incentives, subsidies and bonuses, the centers are part of Beijing’s ambitious plan to cultivate an animation industry able to contribute 1% of national GDP within 10 years. The figure stood at 0.1% in 2005.

“Beijing thinks [developing animation bases] is a kind of sexy thing to do because it links in to electronics and media,” said John Howkins, author of The Creative Economy and an advisor to the Wuxi government on developing its animation industry. “But [Beijing] doesn’t have a long-term plan and doesn’t understand the global industry.”

China’s short-term strategy seems to be a production blitz coupled with government measures to ensure domestic cartoons are aired. China produced 102,000 minutes of animation in 2007, up 20% from the previous year and 137% from 2005, according to a recent report by Morgan Stanley, an investment bank.

In May, the State Administration of Radio, Film and Television extended a 2006 ban on broadcasting foreign cartoons by an hour, creating a daily blackout period that runs from 5 pm to 9 pm. Stations must also show seven minutes of domestic cartoons for every three minutes of foreign output. As a result, Chinese animators claimed a 50% market share last year, up from 15% several years ago.

Bountiful supply
But a torrent of animation minutes does not add up to profits or prestige for most of the country’s 5,400 cartoon companies. Though Beijing dreams of a world-class animation industry to compete with Disney or Dreamworks, a local industry champion is unlikely to emerge soon, as broadcasters still favor studios that produce cheaply and bountifully.

“China is creating the supply, but it is not increasing the demand and this is making [profitability] difficult for straight animation companies,” said Chris Bremble, president of Beijing-based Base FX animation studios. “Cost is still the driving force in the business.”

For televised animation, broadcasters like CCTV and provincial television stations pay studios by the minute. Higher-quality 3D animation fetches a higher price than 2D. Paying more for better animation should, in theory, attract more viewers, and allow stations to charge higher advertising rates. But state-controlled CCTV is less dependent on advertising revenue than a private broadcaster would be. Filling cartoon quotas – not boosting TV ratings – is its top priority. A survey by the China Animation & Comics Association found that only 11% of Chinese teenagers preferred domestic cartoons, compared with 60% who favored ones from Japan.

“Lots of poor-quality animated TV shows are just being made blindly,” said Ye Min, director of the animation series Magic Wonderland, produced by Hangzhou-based Zhongnan Animation.

Many in the industry point to the low amount CCTV pays studios for their work as a major obstacle toward higher-quality animation.

CCTV pays a “a few hundred yuan” per minute for animation, but production costs in China average RMB10,000 (US$1,500) per minute for 2D and RMB30,000 (US$4,400) for 3D, said Shen Yuliang, general manager of Zhongnan Animation. Last year, Zhongnan turned a profit for the first time since it was set up in 2005. It is rumored to be one of the only studios in Hangzhou to have crept into the black.

For studios, getting paid at all is an improvement over the old system.

“Before, it was free for broadcasters to air cartoons,” said Nie Jinxing, media relations manager at Sunchime Cartoon Group, which produces Blue Cat, one of China’s most widely syndicated cartoon series since its launch in 1999. The company came close to bankruptcy in 2001, after spending US$8.7 million on production for a series that was broadcast by 15 television stations for free.

Though producing cartoons to broadcast pro bono was an extreme, global animation markets aren’t set up much differently. Worldwide, animation companies make very little money from broadcasting, but profit from DVDs, toys and other merchandise that the cartoon programs themselves advertise.

Unfortunately for Chinese animators, these sources of revenue are virtually non-existent. Merchandizing is underdeveloped, while DVD sales are undermined by China’s virulent pirate market.

Sunchime told Asia Times last year that it estimates the value of Blue Cat and its derivative products at US$582 million annually, but only makes US$14-29 million.

Piracy and lack of profitability are also dissuading potential foreign investors.

Foreign studios have outsourced labor-intensive, technical animation work to China since the 1990s, but they rarely invest in the country’s animation industry. This results in limited foreign expertise at China’s new animation bases – one reason the industry is short of creative directors and storytellers.

A creative vision to shape the millions of cartoon minutes into a world-class industry is not a matter of numbers.

“If you look at America’s industry, it was really created by Pixar,” said Bremble. “That was just having the right six guys sitting in a room with a blank check. ”