Animation Industry Seeks Lift-off

The animation industry in China has entered a critical moment.

In a country of 1.3 billion people—300 million of whom are teenagers—with about 2,700 television (TV) broadcasting entities, which are struggling to obtain new programming to be more competitive in a more market-oriented economy, some say the Chinese animators’ time has come.

But others say China’s animation business environment needs to change for the industry to reach its potential. The controversy has cultural and business dimensions.

A recent State Administration of Radio, Film and Television (SARFT) statement that foreign-made animation may not be broadcast nationally between the hours of 5–9 p.m. was nothing new, and its effectiveness remains uncertain. This move followed SARFT’s imposition of a 60 percent (local)/40 percent (foreign) content broadcast provision in 2000 that required TV stations to broadcast more than 10 minutes of animation each day. But few local animators have been able to seize the opportunities SARFT has attempted to provide or to make the business activity self-sustaining.

Ge Yangqian, of the popular new animation monthly Twenty-four Frames, said: “Of course, these rules may never be enforced, because, as yet, there is not enough domestically produced animation and the airways cannot be left empty.”

Animators and broadcasters find themselves “between a rock and a hard place,” because the demand for animation programming is growing at a time with government funding of animation activities seems to be drying up. The industry produced 30,000 minutes of animated programming in 2004, but State broadcasters had ordered 300,000.

“There are four main reasons why the industry is in trouble in China,” said Ge, “Illegal duplication of copyrighted materials, no proper funding system, a talent drain and poor content. Local cartoon content lacks market appeal.”

Ge points to Japan where animation companies buy time from TV companies to broadcast their films, using sales of spin-off merchandise to finance their projects. In China, the opposite happens. Broadcasters pay the animation companies to broadcast their product and there is no spin-off merchandising to speak of.

Wang Lifeng, president of Xing Xing, said, “It’s an impossible situation for domestic animation companies in China.” Xing Xing is a highly successful Beijing-based animation company primarily involved in the production of outsourced advertising, gaming, film and documentary animation products for the international market. Along with Becky Bristow, former Rugrats and Wild Thornberrys director, now a Xing Xing vice-president, Wang's company has the skills and experience to produce work for the top end of the global animation market, not something domestic companies in China can easily say.

"The industry here has been struggling for so long, and not a lot has changed since I first started coming here in 1988," said Bristow, a graduate of and former trainer at the California Institute of the Arts (CalArts), one of the most prestigious animation training grounds in the world.

The crux of the matter is funding. Production costs for each minute of TV animation are between 10,000 yuan and 15,000 yuan, for which not even CCTV, the national broadcaster, will pay more than 1,000 yuan per minute.

"Obviously, we have no funding problems at CCTV," says animation designer and director Li Jianping. "But, I am absolutely not happy with how things are in the animation industry in China."

“Our cultural products are definitely worth protecting. The government says it wants to protect the local industry, but then refuses to provide more funding to develop it. They never think about our audiences or the market’s needs. This must change,” Li said.

The change-resistant current system developed from a time, not so long ago, when there was one official animation producer, the Shanghai Animation Film Studio, and one official customer, the State.

Although China's animation industry has had its golden moments during a sometimes glorious 90-year history, its animation production has never been prolific. Animated film has been considered a work of art in China and has been used for a variety of purposes, but making money for its producers was not one of them. This has become part of the problem.

From the stylised art forms of China's short films of the 1920s and ‘30s, to its first full-length animation feature Princess Iron Fan by the Wan Brothers in 1941 and to Qian Yunda’s Red Army Bridge in 1964, the sector has been steadily producing but not thriving. The memorable Monkey King cartoons of the 1960s, now considered classics of Chinese animation, are 40 years old. They included Havoc in Heaven produced in 1961–64 and Nezha Conquers the Dragon King in 1979, which was China's first widescreen animated film. Other popular cartoon films followed, including A Da’s Three Monks in 1980, Wanderings of Sanmao in 1984 and the Calabash Brothers in 1987.

Since 1979, despite this legacy, the gradual entry of foreign animation products to the mainland market has changed the situation. Industry leaders interviewed said that to keep up with changes in the market, national educators need upgrade their training methods. A lack of resources and qualified educators with market know-how, an overemphasis on technical expertise at the expense of creativity—the lifeblood of the industry—has stifled improvements in training and quality.

The first full-time animation film course on the mainland, developed by The Beijing Film Academy and The Beijing Science Education Film Production Unit in association with CCTV, debuted in 1990. It still produces animation graduates trained to work for CCTV and other studios. More than 70 design centres that provide animation and digital-design courses have been opened in the last couple of years, and in the market, CCTV alone employs 100 animators, mostly between the ages of 16 and 24.

Today, the Beijing Film Academy Animation School is in the hands of Sun Lijun, who, as with Li Jianping, is a 1988 graduate of the BFA. Drawing and programming styles from the United States and Japan are taught there; there is an understanding of the domestic industry’s travails.

“Yes, there has been misplaced marketing of animation from abroad, but while the government is trying to control foreign content, it must also encourage domestic companies to produce original products," Sun said.

Sun is producing Childhood Memory a 20-minute animation “short” he hopes to enter into international competitions in 2006. The short is an autobiographical account of someone growing up during the Cultural Revolution (1966–76).

Since the early 1980s, foreign animation companies seeking access to the Chinese broadcast audience had to be willing to accept payments offered by national broadcasters who received government subsidies to do so, a fraction of their original production costs per minute, but the foreign companies took what they were given, seizing on opportunities to enter the Chinese market in anticipation of a wider opening. This, of course, has been slow to materialize.

And, while the State was easing away from its role as a sole consumer for animation products, international demand for outsource animation services in China, a prime source of revenue for local animators, came and went. Most international outsourcing opportunities have now moved on to destinations elsewhere in Asia, where market conditions are more beneficial and profitable for producers. This reflects the fact that factors other than inexpensive labour are exerting pressure on the animation industry worldwide.

There are an estimated 1,500–2,000 animation production companies in China today. Few are thought to be capable of producing full-length feature animation or TV-quality productions. Most are outsource partners of international companies.

Today, foreign animation competitors such as Dreamworks or Viacom, principal rivals to the domestic product, are in many ways no better off in China than home-grown animation producers and distributors. In the international market, foreign companies like these make money on fast turnaround digital video products, under what is now being called a "shelf squeeze," where underperforming products are literally squeezed out of the market; they also benefit from “spin-off merchandising,” neither of which are viable options in the Chinese market. Until the local market matures, none of the major local industry players will get a look in, regardless well positioned in the market they may appear to be. Since earnings in the China market alone can only ever be a secondary income stream, only the “big guns” in the market will benefit from the current situation. This thwarts the development of the domestic animation industry.

Making no or gradual changes in the domestic industry and its regulation hardly seems an option. The market is moving on.

Since the costs of producing animation are said to be almost double that of live-action TV, a best-case scenario might provide a return on investment in a typical animation product of 4–6 years. Without State subsidies, no domestic animation studios could survive by producing solely for the Chinese market. Without finding or allowing other funding sources, government intervention seems the only way to rescue or develop the ailing domestic industry.

But there are some reasons to be optimistic.

On the government side: The Chinese Government recognises just how popular the Japanese anime (film and animation) cartoon culture is. Last year China’s culture ministry launched a university programme to help inject new life into China's animation industry in close co-operation with Japanese companies.

The government has also established digital zones, in Beijing and Hangzhou, Zhejiang Province, and offered incentives enticing foreign companies to establish domestic production companies for digital animation in China. Some, like Xing Xing, have done so, but their target market is international, not domestic, and they continue to ignore the incentives offered by the government that include rewards for airing animation material across national broadcast channels, because it just does not pay to do so.

As two prime animation producers, CCTV and the Shanghai Animation Film Studio, are at pains to imitate the styles of popular genres from the United States and Japan, such as anime, but without adequate funding or distribution markets to do so, even though the government recognize that anime is a US$2 billion industry in the United States with merchandising worth a worldwide US$4.3 billion in 2004.

One upcoming film, with an obvious debt to the Japanese style, the second major domestic product this autumn, is Dreaming Girl, a 26-episode cartoon series from the CCTV animation department, directed by Li Jianping and airing on October 1, China’s National Day. Dreaming Girl centres on the adventures of Li Mengling, a Chinese middle school student who dreams of becoming a young warrior.

The market appeal of the film is strong but as a State-funded production, there are no profit-return expectations. Dreaming Girl cost about 10,000 yuan to 20,000 yuan per minute to produce, with a total spend of "somewhere" in the region of 7 million yuan, according to Li.

Li said, “Technically, it easily compares to European and American animation, but the story, perhaps, is not quite as sophisticated. But, yes, as I have said, we have no funding problems."

While media regulators appear keen to capitalise on market opportunities, they attempt to do so without making necessary changes in the regulatory framework which will make this possible.

With this stand-off between fact and reality, it is hard to see how the government target of 60 percent domestic production will be achieved.

One of the more obvious ways would be to build and develop feature length animations with popular appeal. This is happening under the guidance of Sun Lijun and Li Jianping.

Little Soldier Zhang Ga is a feature-length animation film due out in cinemas nationwide this September. The film took six years to make at a cost of 12 million yuan involving the work of over 600 people.

Made in association with BTV, Youth Film Production Unit (under BFA), an unnamed US-funded Chinese company and the Ai Yi Mei Xun Animation Production Company Limited, the film will achieve box-office viability primarily because of its ability to co-opt support for the 60th anniversary (in 2005) of China's victory in the War of Resistance Against Japanese Aggression which took place in 1937–45.

As the film's producer Sun Li Xu has no doubt Little Soldier Zhang Ga will appeal to a multigenerational audience. Because of the anticipated demand for the film, a special pricing system of 2 yuan per seat is being employed in cinemas nationwide to offset the loss in anticipated revenue to illegal duplication of the film. Sun says that pirate DVDs of the film will achieve costs of anywhere between 6-8 yuan each.

This will be joined by a two-hour animation film entitled Rest on Your Shoulder, which will be the debut work of the Beijing Xiele Art Company, a Chinese subsidiary of the Osamu Tezuka company of Japan that will employ local talent.

Part reality, part dream, the future of China's animation industry lies in the hands of people like Sun, Li, Wang, Bristow and young commentators like Ge, who find they must work with the government to achieve change, perhaps even a sea change, in thinking that will make it possible for the local animation industry to survive in the marketplace without government funding.

"I lobby and give advice, but the system is not yet fully developed even for us to take advantage of that, yet," Li said.

But Wang said, “If you don't compete internationally, you don't survive, it’s that simple.”