ANIMATION AND VFX MARKET ANALYSIS

The high initial investment requirement to set up animation and VFX studios is a major roadblock in the growth of the global animation and VFX market. Creating animation content requires heavy investments in high-end computers, specialized software, rendering farms and hiring talented artists and technicians. Setting up the necessary infrastructure alone may cost millions of dollars depending on the scale and scope of operations. This disproportionately favors large, well-capitalized studios while independents and startups find it extremely difficult to enter this field.

The specialized rendering processes and complex software involved in creating photo-realistic CGI and computer-generated animations demand computing power that is highly capital intensive. State-of-the-art designing and rendering software like Maya, 3ds Max, Houdini, etc. come with hefty price tags running into hundreds of thousands of dollars for commercial licenses. On top of it, studios must invest in high-end graphics workstations costing upwards of US$ 10,000 each to effectively utilize these tools. Since a single project may involve dozens of such workstations, the capital outlay on hardware alone can run into millions.

Moreover, the artistic talent required for animation and VFX is also very expensive to hire and retain. Experienced 3D animators, concept artists, texture artists, match movers, and riggers command huge salaries in competitive international labor markets. Significant recurrent expenditure is also incurred on regular software updates, rendering farm maintenance and artist training/upskilling. These costs present formidable barriers for new and small players to break into this specialized field. As a result, according to the World Bank, more than 80% of global animation output is concentrated among just 10 large transnational studios. This level of industry consolidation has slowed innovation and held back the potential growth and job creation prospects of this promising sector.

Opportunities: Growing social media & digital advertising

Growing social media and digital advertising platforms have opened up new avenues for animation and VFX companies to showcase their work and attract potential clients. With over 4 billion active social media users worldwide according to World Bank data from 2022, these digital platforms offer unprecedented reach for studios to A/B test content and generate viral popularity. Animation and VFX content is very well suited for short form, engaging videos targeted at social media users. Studios can leverage popular social media personalities as digital influencers to promote their work. Successful promotions on platforms like Instagram, Facebook and TikTok could exponentially increase awareness for studios' services amongst global audiences.

Furthermore, digital advertising continues to grow as the preferred medium for brands. According to UNESCO data, digital ad spending grew over 18% year-on-year globally in 2021. Animation and VFX companies can take advantage of performance-based online advertising methods to cost-effectively target prospective customers. Producing animated or VFX ads that tell brand stories in an impactful way allows studios to both increase their client base and showcase their creative talents. The data-driven nature of digital ads also provides opportunities to continually refine content strategies based on viewer analytics. As advertising budgets continue shifting online, remaining active across social media and utilizing different forms of digital ads will be instrumental to the growth trajectories of animation and VFX studios.

In the coming years, the proliferation of mobile and streaming content is anticipated to further boost opportunities. UNICEF forecasts over 6 billion smartphone users by 2026 who will consume vast amounts of visual entertainment on the go. Regional animation hubs can tap into the growing demand for localized content across devices and platforms. Attracting contracts from major streaming platforms and mobile games/apps will be important for animation studios worldwide to sustain business in an increasingly digital-first era. Continuous innovation and embracing new technologies will be crucial as the digital ecosystem evolves at a rapid pace.