Cartoon Planet: Worlds of Production and Global Production Networks in The Animation Industry

Industrial and Corporate Change, Volume 19, Number 1, pp.
239271
doi:10.1093/icc/dtp040
Advance Access published September 7, 2009
Cartoon planet: worlds of production

and global production networks in the
animation industry
Hyejin Yoon and Edward J. Malecki
As more animated films are produced, new worlds of production have emerged.
The animation production system is distinct from film production, relying on
different technologies and labor skills. Its globalization, therefore, has taken
place differently, although both are structured by the global production networks
of the media conglomerates. We present a framework for understanding the
animation industry, its international division of labor, and its diverse markets,
enabled by pools of artistic labor, growing demand, and the diffusion of
production skills.
1. Introduction
Animated films, or cartoons, are popular throughout the world. Animation grew up
with the film industry, typically exhibited for many decades mainly as short
subjects or shorts prior to a feature-length film. An Academy Award (Oscar)
has been awarded since 1931/32 for Best Short Subject (Cartoon).1 Slowly but
steadily, animation found its way as well into feature-length filmsdefined here
as those over 40 min. Television (TV) opened up a new market, stimulating
demand for animations of varying lengths: short, feature-length, and in between,
accommodated by the 30- and 60-min programming blocks. Recently, proprietary
animated properties, as they are called, have become central, highly profitable
elements of global media firms.
The animation industry, reliant on artists and animators rather than live actors, is
distinct in its production process from the live-action film industry and has evolved
differently. Technological developmentin particular, the evolution from hand-
drawn cel techniques to computer graphics imagery (CGI)has brought about
1
The category was changed to the Best Short Subject (Animated) in 1972 and to Best Short Film
(Animated) in 1974 (Academy, 2007). Animated feature films did not have their own category until
2001, preceded by special awards to Walt Disney for Snow White and the Seven Dwarfs in 1938 and
John Lasseter for Toy Story in 1995.
The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved.
240 H. Yoon and E. J. Malecki
new priorities and opportunities. Labor-intensive tasks in both cel animation and
CGI continue to disperse geographically. World-class feature-length CGI, however,
embodies barriers to entry and requires a combination of artistic talent and technical
skills that areso farfound in relatively few locations worldwide.
In addition to presenting data on the technological transformation of animation
through the advent of CGI, we combine two conceptualizations that bear on the
animation industry: first, worlds of production and how the worlds of animation
production have evolved; and second, global production networks (GPNs), seen
mainly as the dominance of Hollywood studios and major media conglomerates
and exploitation of global labor pools. These dynamics open up opportunities for
differentiated production by artisan entrepreneurs for niche markets, including mar-
kets not controlled by the media giants. The combination of new technology and new
markets has widened opportunities for studios from many countries, largely through
the increasingly common phenomenon of international co-production. We illustrate
the technological shift and global production with data on feature-length animated
films. Finally, we discuss the upgrading path from subcontracting to feature films.
2. Animation as a creative cultural industry

Cultural industries agglomerate in a few locationsthe creative hubswithin
national economies (Power, 2003; Scott, 2005; Currid, 2007). In such hubs, agglom-
eration reinforces local creative fieldswebs of production activities and associated
social relationships that shape patterns of entrepreneurship and innovation (Scott,
2006a). Hollywood, the capital of the world motion picture industry, is a common
focus of study, including the organization of studios and their employment patterns
(Christopherson and Storper, 1989; Scott, 2005). As in other creative industries, the
industrys persistent agglomeration is a response to the expertise and skilled labor
found there and the transactions-intensive nature of nonroutine work (Caves, 2000;
Pratt, 2000; Scott, 2006a; Scott and Pope, 2007; Cole, 2008).
The cultural industries, however, are not exactly the same as the creative
industries. As emerging sectors of cultural production, such as multimedia and
software production, the audio-visual industries, architecture and design, became
increasingly difficult to fit within traditionally defined sectors of the cultural indus-
tries, cultural industries were transformed into the (now larger category of) creative
industries (Richards and Wilson, 2007). Creative industries are are at the cross-road
among the artisan, services and industrial sectors (UNCTAD and UNDP, 2008: 13).
Film and animation have co-evolved with fundamental changes in the concept of
culture. High culture, such as classical music and fine art and its manifestations,
has given way to a large degree to popular or pop culture and its mass consump-
tion, stimulated by young populations with disposable incomes (Pratt, 1997;
Lukinbeal, 2004). The production of culture has grown to encompass advertising,
Cartoon planet 241
photography, pop music, films, cartoons, fashion, design, textiles, and other artifacts
and symbols of style and fashion (Lash and Urry, 1994; Peterson and Kern, 1996;
Gans, 1999; Scott, 2000, 2004). The production of each of these cultural forms has
become a significant source of production and employment in advanced economies
(Hesmondhalgh, 2002).
Earlier cultural policies had preservation and maintenance of high culture as the
most important aims. Places with high culture (such as France and Italy) compete for
tourists (Kong, 2000). A new dimension of this competition is street-level
culturelocalized niche versions of pop culturewhich can only be consumed
in particular places (Florida, 2002). In both high culture and street-level culture,
cultural industries have become sectors that can be profitable and beneficial to
regional economies (Power, 2002). Attracting artists and other creative people
pays an artistic dividend to cities where creative people and alpha industries
agglomerate (Markusen and Schrock, 2006; Schoales, 2006).
The cultural industries are what Jeffcutt and Pratt (2002) call chart businesses
businesses that live or die by the volume and success of their output being valued as
best in the market place for a limited period. The focus of firms is to produce novel
products, which results in the fact that there is no single ideal organizational form
rather different forms that emerge as local solutions at different times, and for
different technologies and industries (Jeffcutt and Pratt, 2002: 228). Because of
their novelty, production is typically project-based, with talent provided by freelance
entrepreneurs who accumulate experience with a series of employers in various
locations.
The development of technology also has stimulated growth of cultural industries
(Leyshon, 2001; Power and Jansson, 2004). Mass production of culture has gone
digital in TV, film, publishing, and music compression, brought about and made
widely available by the technological development of digital formats and their storage
and transmission. New devices, from iPods to mobile telephones with video and
Internet capability, bring cultural forms to the individual, challenging the power of
long-standing distributors of content, such as Hollywood studios, to control enter-
tainment in a digital and networked economy (Currah, 2007). Differentiated
demand beyond theatrical audiences, such as TV and video, means that studios
need not only blockbuster theatrical films as their objective, but also products
for various media platforms, including iPods, mobile phones, and web sites
(Kompare, 2006; Screen Digest et al., 2006).
The production of culture for mass consumption has resulted in the domination
of many markets by the global media conglomerates. The media giantsUS-based
Disney, Time Warner, Viacom and NBC Universal (80% owned by General Electric
and 20% by France-based Vivendi), Australia-based News Corp., and Japan-based
Sonyown the big Hollywood studios as well as arrays of broadcast stations and
satellite television channels (Gomery, 2003; Mossig, 2008). The global media con-
glomeratesand others, such as Bertelsmann in Germany and Vivendi in France,
have chosen aggressive strategies of merger and acquisition to expand their control
over the global media market through over the past three decades, aided by
neoliberal privatization and deregulation (Jin, 2007).2
The power of the media giants rests largely in their ability to identify properties
in which they can take a financial interest if not outright ownership, and to bring
these properties in their various forms to the marketplace. They are, therefore, active
in all aspects of the media production process, from conceptualization through
distribution, whether with internal staff or outsourced through affiliates or other
providers in the marketplace (Wasko, 2003; Scott, 2005).3 Together, the mass
production of culture, its commoditization, and digital forms have enabled the
emergence of both wide and niche markets for cultural industries. Cultural diversity
adds to the supply of, as well as the demand for, specialized cultural production
which typically clusters in industrial districts in large urban areas (Scott, 2004, 2005).
Animation is, like comic book production, an example of the new artisan culture,
where subcontracting has become common, but also characterized by a transnational
social economy that congregates periodically in regional or global venues (Norcliffe
and Rendace, 2003; Cole, 2008). Moreover, animation studios compete to be
creativecreating new characters and new story ideas that can form the foundation
of a franchise of products across media platforms and consumer products (Raugust,
2004; Screen Digest, 2007).
The media giants dominate the market for proprietary products based on
animated characters. Merchandising commodities based on movie themes and
characters was pioneered by Walt Disney (Wasko et al., 1993; Bryman, 1999), and
consumer products remain a key profit center in the company (Staggs et al., 2007).
Disney characters are embodied in toys, school supplies, childrens apparel, home
furnishings, stationery and, recently, wedding gowns (Marr, 2007a). A successful
animated character has toyetic applicationsa personality that can be easily trans-
ferred to dolls and playset environments (Wasko et al., 1993: 285). Creating such
a charactera proprietary animation propertyis a talent that is a blend of art and
business (Neuwirth, 2003; Raugust, 2004).
For the Hollywood film industry, runaway production has been a nagging
problem. Economic runaways from Hollywood over the last couple of decades
have fanned out to locations in many different countries, but predominantly in
Canada, particularly Vancouver but also Montreal and Toronto (Coe, 2001;
Christopherson, 2006; Scott and Pope, 2007). Emerging satellite film-production
2
The Columbia Journalism Review maintains a web site that tracks who owns what what broad-
casting, film, and other holdings the major media companies currently own: http://www.cjr.org/
resources/.
3
There is some debate as to whether the film industry is a tight oligopoly (Askoy and Robins, 1992;
Wasko, 2003) or webs of transnational companies (Bergfelder, 2005; Strover, 1995). We believe it
exhibits elements of each.
Cartoon planet 243
locations are found in other parts of the world, including Australia, New Zealand, the
Czech Republic, Romania, Mexico, and South Africa (Miller et al., 2005; Scott and
Pope, 2007). While details on runaway and offshore animation are scarce, Sito (2006)
provides many examples of animation studios opened by the Hollywood studios in
an effort to control labor costs. Moreover, Scott and Pope (2007) present data
showing that although Canadian production has reduced the percentage of foreign
projects to nearly 60% of film and TV production in British Columbia in 2004, in
animation Canadian projects accounted for only 38%. In general, co-production has
become nearly as common as outsourcing animation production, in large part to
exploit talent pools with varying levels of cost, creativity, and quality.
Despite the apparent similarity to manufacturing production gravitating towards
low-wage locales, in film production the cultural products are not mass-produced
even if facing race-to-the-bottom cost pressuresbut rather are customized and
unique. More critically, the labor in animation studios is both skilled and artistic:
not merely docile and easily replaced as in a clothing or toy factory. As in manu-
facturing, however, Asian locations became early on the preferred destinations of
runaway production. Asian traditions favoring animation are strong, for example, in
Japan and the Philippines (Russell, 2003; Francia, 2004). What is emerging is a
far-flung and constantly evolving mosaic of productive agglomerations at various
levels of development with the elements of the mosaic becoming steadily more
integrated with one another in complex relations of competition and collaboration
(Scott, 2006b: 1533).
The history of animation embodies both technology and industrial organization.
We next illustrate this history, and the different worlds of production that have
evolved, illustrated by data on successful animated feature films.
3. The evolution of worlds of animation production

To explain how production of animated films has evolved and been influenced by
technologies and markets, we borrow the analytical framework of worlds of produc-
tion (Salais and Storper, 1992; Storper and Salais, 1997). Their four categories or
worlds of production are defined by combinations of technology and market char-
acteristics of products. Although their four worldsstandardized generic products,
standardized dedicated, specialized dedicated products and specialized generic
productsdo not apply precisely to animation, we utilize this analytical framework
to understand production in the animation industry.
3.1 The two worlds of animation production prior to 1980

From the 1920s until the early 1980s, animation production systems were of only two
types (Figure 1a). Traditional animation production, found in the upper left cell, was
represented by the early generation of animated films by artisan studios in Eastern
(a)
Artisan Style Animation The globalized Hollywood system
Focus on artistic quality For theaters: Focus on market appeal

For TV: Focus on cost and schedule
Example: Examples:
Lotte Reiners silhouette animation Snow White (Disney)
Japanese anim The Flintstones (Hanna-Barbera)
(b)
Artisan style animation The globalized Hollywood system
Focus on artistic quality For theaters: 2D animation has almost

Frequently subsidized disappeared
For TV: Focus on cost; often limited
animation
Examples: Examples:
Japanese anim (eg, Studio Ghibli) The Lion King (Disney)
Wallace and Gromit (Aardman) The Simpsons (AKOM)
Princes et Princesses (La Fabrique) SpongeBob (Nickelodeon)
Theaters (Mainly CGI) Mass production for non-theatrical

markets
Focus on originality; characterized by Focus on large non-theatrical markets,

high cost and high risk such as videos for home entertainment
Lower quality (and lower budget) and preschool children
products for TV
Examples: Examples:
Toy Story; Finding Nemo (Pixar) Baby Einstein series (Disney)
Shrek 1, 2, 3 (DreamWorks) Pororo (Iconix)
Happy Feet (Kingdom Feature) Barbie Fairtopia series (Mainframe)
Figure 1 (a) Specialized and standardized production 19301980 and (b) Diverse and
segmented production since 1980.
Source: adapted from Salais and Storper (1992); Storper and Salais (1997).
European countries, generally supported by governments. For example, then-

Czechoslovakia was a dominant high-quality animated-films producer.
Such artists concerned to produce creative works of animation were no match for
the Bray-Hurd process of cel animation, which uses transparent cels to separate the
action from the background, no longer requiring a stationary background to be
redrawn for each frame. This Fordist animation production facilitated rapid produc-
tion on a regular schedule (Bryman, 2000; Langer, 2005). Walt Disney mastered the
business of animation, blending richness, technical perfection, and economic power
Cartoon planet 245
which artisans could not match (Bendazzi, 1996). Disneys studio depended on
overseas markets for as much as 45% of its income throughout the 1930s before
a ban imposed on Hollywood movies by the Third Reich in 1940. With the loss of
the European market, Disneys overseas revenue nearly vanished (Sito, 2006).
For decades, theatrical exhibition was the center of film consumption, a situation
that changed dramatically with the advent of television. Animated cartoons became
a regular fixture, first in after-school hours and Saturday mornings and later in
evening prime-time hours as well. New studios, such as Hanna-Barbera, focused
on the TV market. The arrival of television caused many studios to eliminate anima-
tion jobs. The seasonal programming schedule also resulted in cyclical employment
(Scott, 1984). Fewer theatrical animated films were counterbalanced by new oppor-
tunities presented by TV, such as the new territory of commercial advertising.
Advertising remains a key market for animation, attractive because of its short
products (30 seconds or shorter) and steady demand for new ideas.
To produce the large quantity of animation required for television, US studios
found cheaper labor elsewhere, employing the limited animation system perfected
by Hanna-Barbera and first tested overseas in 1971 in a studio in Sydney, Australia.
US and Canadian animators were sent to train Australians and, later, others in
Hollywood-style animation production, which changed the focus from visual
images to the dialogue (Wells, 2003; Sito, 2006). The regular schedule of cartoons
on television created continuous demand for animations which, together with labor
issues in the US, led to widespread runaway animation production. By 1985, Hanna-
Barbera was producing 100 half-hour TV shows a season in eight countries (Sito,
2006). GPNs for animation production had been created.
Until recently, two industrial standardsHollywood and animehave predomi-
nated and are universally accepted. Growing demand from TV made the US market a
major customer of animation studios. Japanese anime, long a standard of Asian
artisan animation, has also embraced both computers and merchandising (Krikke,
2006; Wong, 2007). Anime remains far more popular in Asia, but it is steadily
internationalizing (Lu, 2008).4
3.2 New worlds

3.2.1 New platforms, new markets
The Disney model was imitated by other firms in two ways. First, Disneys marketing
savvy and early television ventures provided a strong model for other media giants.
Second, its box-office success based on artistic perfection led other firms to master
newly-developed technologies for computer animation. These two paths formed
the basis for the emergence of two new worlds of animation production.
4
The Anime News Network is a rich source in English for the growing base of anime aficionados
outside Asia.
The two original production worldslocal, artisan production and the globalized
Hollywood systemcontinued into the 1980s. Until then, the only markets for the
animation industry were theatres and the cartoon blocks in TV networks schedules.
This equilibrium changed when cable and satellite TV providers began specialized
animation channels showing cartoons for up to 24 h a day. The number of childrens
channels has proliferated: there are now 14 full-time channels in the USA, 17 in
France and the UK and nine in Germany. The new channels show many old cartoons
but also provide tremendous demand for new material. The big three in television
animation are Viacoms Nickelodeon, Time Warners Cartoon Network, and Disney
Channel (Westcott, 2002; Screen Digest, 2007). The relocation of feature film
animation viewing to the privatized sphere of the home (through the establishment
of pay cable and home video as routine sites of film consumption) made production
of cartoons a growth market (Larson, 2003: 62). As cable and satellite channels
proliferate and demand new material from studios, geographical and cultural
specialization has emerged. Iranian animation studios, for example, target markets
in Turkey and throughout the Islamic world (Harrison, 2005).
Animation is expanding on the program schedules of broadcasters and cable and
satellite operators throughout the world, largely a result of the attractiveness of
revenue from ancillary products such as toys and clothing (Wasko et al., 1993;
Larson, 2003). This increased demand has not translated into higher prices.
Simultaneous with the focus of media firms on the childrens market was the shift
to low-budget reality shows, which dramatically lowered the price which media
groups are willing to pay for programming, including animation (Raugust, 2004).
Price is the most important criterion in the TV world. As a result, Lent (2000: 3)
estimates that about 90% of all American television animation is produced in
Asia, with all pre-production work done in the USA. European studios with their
artisan style have entered the market of US cable channels, but most have had
difficulty getting distribution to theatres (Panzner, 2005a, b).
The first new world of production, then, is a result of the popularization of new
electronic devices, such as video cassette recorders (VCRs) and digital videodisk
(DVD) players, which has created a large new market (the lower-right quadrant in
Figure 1b). Since the advent of videofirst video cassettes and now DVDsmany
animations are never shown in theatres but are released directly to video, a growing
source of revenue to studios (Larson, 2003; Marr, 2007b). Thanks to the develop-
ment of personal exhibition technology, such as home and portable electronic
devices, DVD sales have become one of the main growth segments of the global
animation market. Adams (2006) documents the major shift in studio revenue.
Theatres were the source of 58% of revenue in 1981; this fell to just 14% in 2006
(Figure 2). The largest source of revenue today is video sales, or sell-through,
which now account for 42% and, together with video rentals, 50% of studio
revenues. Television, including broadcast channels, cable and satellite, has grown
as a source of revenue from 24% in 1981 to 34% in 2006. A currently small (less
Cartoon planet 247
Figure 2 Studio revenue by source, 1981 and 2006.

Source: Adapted from Adams (2006).
than 2%) but potentially huge source of revenue is video on demand (VOD), via
both streaming and downloading (Screen Digest et al., 2006). Therefore, box office
data, while complete and readily obtained, provide an ever-smaller part of the picture
of the film business, and DVD sales themselves are now shrinking (Barnes, 2008).
The latest trend is toward interactive content and convergence toward platforms
which the media giants do not (yet) control, such as video to mobile phones and
iPods, and to the Internet via massively multiplayer online games (MMOGs) and
social networking (Cardillo et al., 2006; Raugust, 2007b). As animation moves
toward these less-familiar platforms, the media giants and small studios alike want
to avoid the fate of the music industry, where sales fell following the emergence of
digital file-sharing systems (Leyshon et al., 2005).
The overall popularity of cartoons is seen in the number of feature-length films
produced in each year (Figure 3). No more than ten films per year were produced
worldwide from 1917 until 1974. Since 1998, no fewer than 25 animated feature-
length films have been released each year.5 The number released in the ten years since
1997 (509) is nearly as large as the total for the first 80 years of the craft from 1917 to
1996 (596). In part, this is a result of direct-to-video films which are never seen in
theatres.
5
The source we used (Wikipedia, 2007) is far better than all alternatives we have found. It includes
all films from every country beginning in 1917, and for recent years it includes films that have been
produced for the growing TV and direct-to-video markets. No other source is as comprehensive.
This source uses a fairly liberal definition of 40 min of animation, which includes most television
specials and direct-to-DVD products, but excludes compilations of short television episodes.
100
90
80
Number of animated feature-length films
70
60
50
40
30
20
10
0
17
21
25
29
33
38
42
46
50
54
58
62
66
74
70
78
82
86
90
94
98
02
06
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
Year released
Figure 3 Number of feature-length films, by year, 19172006.

Source: Calculated from Wikipedia (2007).
Since the first feature-length animated film in 1917, 53 countries have been
involved in at least one of the 1105 animation productions. The most prolific sources
of animated films are the USA and Japan, which account for 39.0% and 19.1% of the
world total. Studios in just 13 countries have produced 10 or more feature-length
animated films in the 26 years since 1981. Argentina remains in the group of top
animators; in Europe, France, Germany, Russia, Spain, Hungary, the UK, Denmark,
and Sweden join the top group, as do Canada and Australia.
International co-productions represent 147 (13.3%) of the feature-length films.
German animators have been the most collaborative, involved in 61 films with
partners in 23 other countries, followed by French animators, with collaborations
in 54 films with partners in 16 countries. The most frequent alliances have been
between studios in the USA and Japan (15) and those in the USA and Canada (14).
3.2.2 New technologies

The second new world of animation production is the emergence of CGI technology
in production of animation and its dominance in theatrical films (the lower left
quadrant in Figure 1b). Computer animation began in the 1960s, and CGI has
been incorporated in special effects in live-action films since the 1970s. CGI in
animation has raised the standards of audiences regarding aesthetic appeal (they
were visually richer and more exciting), broadened the audience for animation to
Cartoon planet 249
include adults, and incorporated more adult story themes. The artistic, experimental
nature of CGI makes it the contemporary successor to artisan animation (Jones
and Oliff, 2006).
The CGI production process begins with 2D techniques in the conceptualization
stage, especially the design of the characters. This modeling step needs many skilled
workers and takes much more time than in cel-animated films, requiring bigger
budgets (Robertson, 1998). The large budgets and assembly of skilled CGI animators
are high barriers to entry. Consequently, full-length CGI animations released in
theatres are made by very few studios, even though CGI techniques in special effects
are widespread. As technologies diffuse, however, we are beginning to see large-scale
technological innovation, leading to relocation of production, foreseen by Scott
(1984).
Although CGI production uses computer graphics, not human hands, to draw
and color each frame, the process is still labor-intensive, relying on artists who have
computer skills (Crawford, 2003; Jones and Oliff, 2006). For a full-length feature
film, the rendering process (calculating the position of each characters body parts for
each expression or movement) can take more than a year of round-the-clock
calculation (The Economist, 2005). CGI has become a staple in video games, whose
popularity relies largely on their realistic graphics (Aoyama and Izushi, 2003; Johns,
2006), and advertising, such as depicting medical benefits of pharmaceuticals.
In addition to CGI animated films, new digital technology has brought huge
changes into the industry. Technology using computers and ICT networks has
become commonplace not only in production but also in consumption.
Consumers participate in the new forms of production in the networks (Benkler,
2006; Flowers et al., 2008). Animation fans share their interest with other consumers
by translating subtitles and providing feedback with no financial reward. They also
change films into other forms to make them available to watch online (as webisodes,
YouTube or Veoh videos) or as peer-to-peer files to share with other users.
The network participants also create new music video clips using animation cuts
and adding music. In this sense, the new technologies have changed passive
consumers to (inter)active users as well as expanding the overall market.
3.3 Theatre audiences prefer CGI

CGI techniques have led to spectacular successes for a few major studios, such as
Pixar (now part of Disney), DreamWorks and Blue Sky. However, the high produc-
tion costsnow routinely surpassing $100 millionare a major barrier to entry
for new firms.
We have compiled a database of the commercially most successful animated films
through 31 December 2006, based primarily on Box Office Mojo (2007) (hereafter
Mojo), supplemented by data from the Internet Movie Database, or IMDb (http://
www.imdb.com). We supplemented Mojos list of top animated films by
worldwide box office revenue with two films which did not appear on that list but
had total worldwide box office revenues over $250 million: Sprited Away and Bambi.
Box office revenue for DreamWorks Shrek 2 (2004), the top animated film, was $920
million, the seventh-highest box office total of all time for all films.
Through 2006, only 217 films of all genres had attained $250 million in
total box office revenue; of those, 32 are animated films (Table 1). Of this list,
15 animations rank among the top 100 films (by worldwide box office revenue) of
all time (Box Office Mojo, 2007). Of the 32 films, the US box office averaged 43.3%
and non-US box office 56.7% of the total. The film whose box office success has been
greatest outside the US is Spirited Away (originally Sen to Chihiro no kamikakushi),
an anime film by Studio Ghibli in Japan, for which non-US box office represents
96.3% of the worldwide total. Only one film produced before 1988 is among the
32 animations: Walt Disneys Bambi (1942). More tellingly, 19 of the 32 films are
CGI animations; each year, new CGI animations replace 2D films at the top ranks
of all-time box office revenue.
The year 1995 was a watershed year for animated films. In that year, Pixar
Animation Studios released Toy Story, the first full-length animated film using
CGI technology, ultimately accumulating $362 million in worldwide box office
revenue (Price, 2008). Prior to Toy Story, only Disney cartoons had reached that
level of box office success. After the onslaught of CGI animations from Pixar,
DreamWorks and Blue Sky, Disney films success never equaled those of the early
1990s. From 1995 through 2006, 17 CGI films reached $300 million in total
worldwide box office revenue.
Of the 32 2D animated films released 1995 through 2006, whose
worldwide box office revenue reached $50 million, we have production cost data
for 31; their average box-office profit was $109.6 million.6 The 2D animations have
generally been profitable (box office revenue greater than production budget), but
revenue from them has been declining steadily. Three Disney 2D animated films
released between 2000 and 2004, despite production budgets over $100 million,
did not recoup those budgets at the box office.
The steady trend, shown in Figure 4, is that CGI films have generally been far
more profitable than 2D animations. The average profit of CGI films was $230.8
millionmore than double that for 2D animated films produced during the decade.
Disney saw that it could not maintain profitability from animation without CGI,
6
Sometimes missing from both data sources was a films production budget. Of 87 animated films
(those with $50 million or more in worldwide box office), Mojo had the production budget for 58;
IMDb had production data on 69 films. For 49 films, both sources provided a production budget.
For 28 films, both sources had the same budget figure; neither source had systematically higher
budget figures. For 78 films, we had a production budget from one or both sources; when we had
data from both, we used the mean of the two figures. For four films, we found an estimated budget
on another online source. For five films, we were unable to assign a production budget.
Cartoon planet 251
Table 1 Top animated films by total worldwide box office revenue
Film Type Animation Production Total world Percentage Year

studio budget box office non-US released
(millions of (millions of box office
US dollars) US dollars)
Shrek 2 CG DW 72.5 920.7 52.1 2004

Finding Nemo CG Pixar 94.0 864.6 60.7 2003
The Lion King 2D Disney 62.0 783.8 58.1 1994
Ice Age: CG BlueSky 80.0 647.3 69.8 2006
The Meltdown
The Incredibles CG Pixar 92.0 631.4 58.6 2004
Madagascar CG DW/PDI 250.0 528.9 63.4 2005
Monsters, Inc. CG Pixar 115.0 525.4 51.3 2001
Aladdin 2D Disney 28.0 504.1 56.9 1992
Toy Story 2 CG Pixar 90.0 485.0 49.3 1999
Shrek CG DW 60.0 484.4 44.7 2001
Cars CG Disney/Pixar 120.0 461.8 47.1 2006
Tarzan 2D Disney 140.0 448.2 61.8 1999
Ice Age CG BlueSky 59.5 383.3 54.0 2002
Beauty and 2D Disney 25.0 377.4 54.6 1991
the Beast
Shark Tale CG DW/PDI 75.0 363.5 55.8 2004
A Bugs Life CG Pixar 82.5 363.4 55.2 1998
Toy Story CG Pixar 30.0 362.0 47.0 1995
Dinosaur CG Disney 127.5 354.2 61.1 2000
Pocahontas 2D Disney 55.0 346.1 59.1 1995
Over the Hedge CG DW 150.0 331.6 53.3 2006
Who Framed Part live- Disney/IL&M 70.0 329.8 52.6 1988
Roger Rabbit action
The Hunchback 2D Disney 85.0 325.3 69.2 1996
of Notre Dame
Chicken Little CG Disney 105.0 314.4 56.9 2005
Mulan 2D Disney 70.0 304.3 60.4 1998
The Polar Express CG Universal CGI 157.5 297.8 41.7 2004
Happy Feet CG Kennedy Miller 92.5 291.8 39.0 2006
Spirited Away 2D Studio Ghibli 16.5 274.9 96.3 2002
Lilo & Stitch 2D Disney 80.0 273.1 46.6 2002
Bambi 2D Disney na 267.4 61.8 1941
Robots CG BlueSky 75.0 260.7 50.8 2005
Hercules 2D Disney 77.5 252.7 60.8 1997
Brother Bear 2D Disney 90.0 250.4 65.9 2003
Source: Authors estimates based on data from Box Office Mojo (2007) and Internet Movie
Data Base (2007).
1000.0
252
800.0
600.0
H. Yoon and E. J. Malecki
400.0
Gross Profit
minus production budget)
200.0
(worldwide box office revenue

0.0
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
200.0
Year Released
2-D CGI
Figure 4 Profit of 2D and CGI animated films, 19882006.

Cartoon planet 253
leading it to acquire Pixar in early 2006. Disneys acquisition of Pixar will bring
sequels of Toy Story and other box office successes (Solomon, 2006; Price, 2008).
In summary, the development and use of new CGI technologies allowed artisans
to create a new genre of animation (Jones and Oliff, 2006). The global media giants
have also diversified into both new markets and new platforms. Outside the four
worlds of the animation industry that we have presented, animation continues to
be produced for advertising, education, training, and scientific markets; CGI is
prominent but not monolithic in each of these. The theatre and TV markets, how-
ever, leave plenty of room for the giant media conglomerates to influence strongly,
if not completely control animation production throughout the world.
4. Global production networks

A second analytical framework that accounts for the global nature of animation
production is that of GPNs (Coe et al., 2004, 2008). In animation, the runaway
production portion of the production process requires pools of workers with artistic
abilities, thereby limiting the set of possible locations. This contrasts with runaway
shooting locations, which save costs on labor for a variety of tasks, such as set
transportation, catering, carpentry, and dry cleaning services, and extras. In both
live-action and animated films, however, the pre- and post-production tasks remain
rooted in Southern California, where the agglomeration of skills is unmatched by
other locales (Christopherson, 2006; Scott and Pope, 2007).
The large multinational conglomeratesthe majorswhich are involved in all
phases of production, from content origination, through distribution, to final sales,
are engaged in building global networks of creative partnerships such as interna-
tional joint ventures, strategic alliances, co-productions, and so on. One of the
benefits of these arrangements is that they allow producers to scour the world for
talent, skills, and ideas (Scott, 2006a: 7778). The TV market is the venue for most
international partnerships in animation, however, and the runaway production seen
since the 1970s remains common for television series (Tschang and Goldstein, 2004).
To penetrate local markets, the media conglomerates are involved in animation
production for local as well as global markets. The media giants own animation
production subsidiaries (News Corp. owns Blue Sky and Disney has purchased
Pixar) as well as cartoon channels on television, such as Nickelodeon and Cartoon
Network. However, vertical integration co-exists with a network model in which the
media giants also wield power through distribution. The Big Three of TV anima-
tion are Disney, Viacoms Nickelodeon, and Time Warners Cartoon Network.
A notable strength of the Big Three is their ability to fill programming blocks
of several shows aimed at specific age groups to be shown at particular days and
times (Westcott, 2002).
The global media conglomerates, each with a presence in Hollywood, are central
to the production, financing and distribution of films, including animated films
(Mossig, 2008). As Scott (2005) and Wasko (2003) have shown, Hollywood is
much more than a set of studios producing films; it is more than anything
a system for distribution to a variety of markets beyond cinema audiences, such
as television, video, and toys. The dominance of the global media giants is found
in the key finance and distribution relations:
[T]hese two stages are closely linked as finance is often secured by selling
distribution rights in advance of production. . . . In essence, power within
the system largely resides with those that have the resources to finance and
distribute films (Coe and Johns, 2004: 194; cf. Aksoy and Robins, 1992).
The ability to create synergies among a studios properties is critical, as up to 90%
of a films profits may come from sources other than theatre audiences. As theatre
attendance has declined steadily since the 1950s, studios have sought audiences on
the newer platforms (Newman-Baudais, 2007) as well as customers for licensed
products.
At the same time, the major media firms do notand cannotcontrol comple-
tely the worldwide market for cartoons. National and local channels continue to
dominate childrens viewing in many countries, and national (including public)
networks compete for viewers, and therefore also seek out alternative programming
to that from the majors (Westcott, 2002, 2004).
4.1 Co-production for cartoon channels on TV

As animation on television has expanded worldwide, new sources of ideas have had
to be identified and brought into the GPNs of the media giants. The preferred vehicle
is co-production, and animation is experiencing a new wave of runaway produc-
tiontoward locations where local co-production funding is available. The
geographical shift has been recent as well as massive. A great deal of co-production
takes place among studios outside the USA, both to lower costs and to create new
proprietary animation properties outside the media giants control.
As the GPN framework suggests, states as well as firms determine patterns of
global production. Many animated television series are targeted for local consump-
tion to meet local content requirements, and subsequently picked up for distribution
elsewhere. An increasing amount of animation is being produced in Europe and
Canada, largely due to public policy initiatives (especially in France and Canada),
which subsidize the development of domestic production. These two countries
are now pivotal to international co-production (Westcott, 2002 p. 74).7
7
Westcotts Animation Europe web site (http://www.animationeurope.com) is a useful source and
data base on European animation, particularly feature films.
Cartoon planet 255
Support schemes have aided development in other countries like Germany and
Australia and are now in place or under consideration in Asian countries, notably
China and South Korea (Larson, 2003; Asia Image, 2004b; Raugust, 2004; Wong,
2006). Production subsidies may cover only production, however, leaving distribu-
tion to markets a major challenge (Iordanova, 2002). Co-production with US firms
also require that a producer replicate the Hollywood formula or recruit Americans
to bestow the American commercial touch (Strover, 1995: 115). For many
producers, however, co-production is a passport to international recognition
(Stein, 2005: 18).
Increasingly, then, transnational capital is complemented by transnational labor.
Experienced animators with managerial skills were common as new runaway
production studios were opened by Hollywood majors since the 1950s (Sito, 2006).
LA artists were offered tempting deals if they would go abroad and train
artists in Hollywood production techniques. . . . Canadians proved par-
ticularly useful as trainers. . . . by virtue of their British Commonwealth
passports could work in many parts of the world where Americans would
have difficulty: Singapore, Hong Kong, Australia, and the European
Union. Wherever you went in the world to visit an animation studio,
there probably was a Canadian supervising artist to meet you. (Sito,
2006, 258).
New Argonauts (Saxenian, 2006)animators with big-studio experiencehave

become entrepreneurs in new studios in Canada, Korea, and elsewhere (Raugust,
2007a, 2008a). Nowadays, movement of film professionals is more intense than
ever, and with cross-border financing for films more and more of them work
internationally. . . . They are no longer exiles, and not even emigres, but members
of the new class of people involved in transnational filmmaking (Iordanova, 2002:
527). For instance, Nelson Shin, a Korean animator who worked at major studios in
the USA, started as a subcontractor for Hollywood studios and then created his own
animations, drawing on both his experience and knowledge of the production system
from Hollywood and its expectations (Rao, 2007). In addition, stories of Indian
animators who had worked in studios in the USA, UK, Canada and Germany,
returning to their countries to train local animators and initiate subcontracting in
India are no longer rare (Overseas Indian, 2008).
The transnational character of animation in Europe is promoted by the Council of
Europes Eurimages program, which supports co-production of animated feature
films, and by CARTOON, funded by the MEDIA Programme of the European
Union. CARTOON, the European Association of Animation Film, sponsors
gatherings where artisans meet for collaboration, knowledge-sharing, and training,
including Cartoon Forum, a co-production forum for European animation TV
series; Cartoon Movie, a co-production forum for feature-length animation mainly
for the cinema; and Cartoon Masters, four training seminars per year, dealing with
specialized subjects. These venues and animated film festivals in Annecy and
Stuttgart serve as temporary clusters for the dispersed network of animators
throughout Europe; such gatherings substitute to some extent for agglomeration
economies found in Hollywood (Cole, 2008). Bathelt and Schuldt (2008) and
Maskell et al. (2006) make a more general case for the benefits of professional
gatherings for knowledge-sharing activities. The media giants have taken advantage
of the innovative animations being produced in Europe, doubtless enjoying as well
the subsidies for co-production (Masters, 2005).
For example, the UK Film Council has bilateral co-production agreements with
seven other countries (Australia, Canada, France, India, Jamaica, New Zealand, and
South Africa) intended to encourage cross cultural collaboration between film
makers from both countries. The location of labour (personnel) determines
eligibility for film tax relief (UK Film Council, 2008). Hirsh, former CEO of
Canadian animation studio Nelvana, points out that successful co-production
requires sufficient capital, a creative script, and an international team of animators
(Hirsh, 1998). In short, a co-production strategy becomes an efficient way to explore
foreign markets and protect local culture from transnational capital while gaining
experience and international recognition (Cole, 2008).
4.2 Unbundling the animation production process

The production process for animation is the same as for films generally, and com-
prises five stages: conceptualization, pre-production, production, post-production,
and distribution (Kratke, 2002). More central in animation is the conceptualization
stage, prior to pre-production, when the development of characters and backgrounds
takes place. This is done through the storyboard, the visual presentation of the script
in a series of sketches, which contains the storyline and instructions to animators and
also may indicate the soundtrack and dialogue (Neuwirth, 2003; Wright, 2005).
New characters may be modified as they are developed to make them more suitable
for toy production (Patrick, 2006).
The spatial division of labor and the unbundling of tasks seen in manufacturing
sectors now encompass service industries, including animation production (Baldwin,
2006; Blinder, 2006). A division of creativity sharply delineates creative work, such as
character ideas, scripts and direction, done mainly in North America and Europe,
while production tasks remain in Asia (deGraf, 2004; Tschang and Goldstein, 2004).
While labor-intensive work, such as repetitive drawing and coloring, is subcontracted
to distant studios, storyboards and characters in the animated film are planned
within the major studios. This division of labor is standard for studios that subcon-
tract in Asia, whether based in Canada, France, Germany, Japan, or the USA (Aghion
and Merson, 1998; Bull, 2006). In the words of Rainer Shoellein of BFC Berliner
Film Companie: All our stories, all our scripts come from L.A. . . . If you dont do
Cartoon planet 257
development in L.A., or maybe New York or London, you lose that special sensibility
that is key for success in the North American market (quoted in Roxborough,
2006). When cel animation is outsourced, then, subcontracting studios in developing
countries work in isolation from pre-production tasks, such as character develop-
ment, and post-production tasks, such as adding voices and sounds. The choice of
voices is a critical element for marketing, particularly in the lucrative US market
(Panzner, 2005b; Denison, 2008).
In Asia, Singapore is emerging as a hub for studios like German BKN. Ideas for
local shows come from London and the USA and animation production takes place
in China and the Philippines (Stein, 2005). Singapores Media Development
Authority (MDA) promotes and subsidizes co-production with studios both
within and outside Asia (Chan, 2007). Similar priority has recently been placed on
animation in China, Malaysia, the Philippines, South Korea, and Taiwan (Wong,
2006). Generally, and despite policies and subsidies, firms in cultural-products
industries face high levels of uncertainty and riskconsequences of fickle
tastes and the need to create a distinct and differentiated product (Scott, 2006a).
Even leaders such as Disney face difficulties entering new, unfamiliar markets,
such as India, necessitating co-production arrangements with local studios to
create culturally customized animations (Marr 2007c). Creating local animation
content means work for local studios, but only if they are linked to the global
conglomerates. Without a comprehensive understanding of the full production
process, subcontracting studios cannot compete on an equal footing with major
animation studios.
Until recently, CGI work was rarely outsourced but, since 2000, the cost of the
hardware and software has become so inexpensive that it is now commonplace
among Asian studios (Asia Image, 2004a). Finding people with the necessary blend
of software skill with artistic animation, however, remains difficult (Neuwirth, 2003;
Jones and Oliff, 2006). Therefore, in 3D, the creative pre-production tasks are rarely
outsourced, since they demand frequent interaction between artists, software experts,
and others in the studio. Accounts of Pixars process emphasize a number of char-
acteristics: story-telling, artisanal perfectionism, and intensive creative interaction
(Robertson, 1998; Tschang and Goldstein, 2004; Schlender, 2006). A few years ago,
it was difficult, if not impossible, to separate the creative tasks in CGI production
from the technical or mechanical tasks (Tschang and Goldstein, 2004). Now, how-
ever, it seems that CGI can be outsourced to low-wage locations, such as North
Korea (AWN, 2006). Chinese studios now face competition from India, North Korea
and studios in Africa (Raugust, 2008b,c)
Thus, unbundled production with an international team of animatorstheir
labor differentiated by cost and therefore by locationis now the global norm.
Not all animation is alike, varying widely in quality and creativity. As animators
gain experience and reputation, the trend is to add feature films to their portfolios,
which can attract, in turn, financing for future projects. The industry remains highly
fragmented, mainly depending on the dependable (and still growing) demand from
television.
5. Different strategies, different markets

Until recently, the animation industry focused on only two markets: feature films
and television. To these major markets, we can add two others: the preschool market,
and interstitials and mobile platforms as a point of entry. The potential cross-over of
animated characters from one platform to another means that contract work can
attract an audience and bring new success to a small studio (Strike, 2007a,b).
New platforms such as mobile video, Internet sites and podcasts remain somewhat
less constrained by the rigid contractual norms of the film and television divisions of
the media giants (Raugust, 2007c). Despite the cost-related shift to Asia, clusters of
animators thrive in perhaps unexpected locations such as Berlin, Cologne, Paris,
Singapore, Toronto, and Vancouver. Entrepreneurial new artisans in these clusters
prefer the flexibility of project work and the creativity they can exhibit by working in
many genres and for a wide variety of distribution channels (Eberts and Norcliffe,
1998; Raugust, 2007a).
The combination of flexibility and risk are customary in the project-based world
of animation, which it has in common with other cultural and media industries
(Grabher, 2002; Sydow and Staber, 2002). Project-based production is considered
more appropriate for highly-customized products, incorporating a great deal of
flexibility in labor relations and in contracts between firms (Christopherson,
2002). Feature-length films, including animations, are erratic in their schedule,
responding to creative opportunities. Animation for television adheres more to
fixed production schedules while sacrificing creativity. The risks are smaller for
animation intended for the home video market, which requires only distribution
to retailers (both shops and web sites), and for TV. Both markets have had seemingly
insatiable demand for new animations.
We provide next two vignettes that illustrate that an animation studio need not be
stuck or locked in to only one market or platform. Just as many studios do work
for advertising clients and others, it is possible for a studio to shift among markets as
opportunities arise and ultimately to upgrade to feature films.
5.1 Upgrading from television series subcontracting to blockbuster:

AKOM and The Simpsons
AKOM, the largest animation studio in South Korea, produces for many foreign
companies (Yu, 1999). Its founder, Nelson Shin, who had worked on the film Star
Wars and was familiar with the animation production system in the USA, began
work on The Simpsons, a regular series on US television, in 1989. For each 22-min
episode of The Simpsons, AKOM spends three months and needs 22,000 sheets of
Cartoon planet 259
cels. To meet this rigid schedule, the offshore production adheres to a strict division
of labor: AKOM does only the production stage, but not conceptualization or pre- or
post-production (Lent, 1998). For several years, AKOM was a hidden subcontractor
of The Simpsons, not acknowledged in the credits of each episode. It is fully credited
recently as well as in The Simpsons Movie (2007), the first feature-length film.8
The South Korean animation industry has grown by concentrating on subcon-
tracting work for major studios in the US and Japan, a result of a weak domestic
market and little investment by TV stations in Korea in original TV animations.
The focus on subcontracting has meant that creativity takes a back seat, with foreign
animators directing every detail in every cel. Even Nelson Shin admits, Koreans
technique is okay, but they dont know anything about creation (quoted in Russell,
2003: 44). Local governments in South Korea recently invested in an incubator
supporting young animators and since 1995 support the Seoul International
Cartoon and Animation Festival (SICAF) (SICAF, 2009). In addition to the
government support, Tooniverse, a cartoon channel, started to broadcast in 1999
(Tooniverse, 2009).9 The development of 3D animations, connected to the game
industry, began in the late 1990s and enjoys a booming Internet market. Korean
animators now try to withstand cost competition with countries, such as China, that
have lower labor costs (Lent and Yu, 2001). As one strategy, AKOM has outsourced
work to North Korea (Russell, 2003).
5.2 The preschool niche market: Pororo, the little penguin and Wonder Pets!
Some animation studios in Asia, having accumulated skills and know-how through
their subcontracting experiences, have entered the competition for feature-length
animated films and creation of original cartoons. Although these newcomers have
developed capability to produce 3D animation, they lack the resources to produce
feature-length films as well as an established reputation on which to acquire
resources. Thus, they enter a different market niche: television and feature-length
educational films for video, rather than the more risky market of theatres (Kim,
2007). The preschool market for animation is boomingentirely outside theatres
in DVDs and television, providing opportunities for animators (Gupta, 2005; Strike,
2007b). The childrens market is divided into preschool and several age-related
subsets (Gupta, 2005). This market demands, perhaps more than any other,
a good story, memorable characters, and good music (Sito, 2006: 296). Among
the media giants, Disney acquired the Baby Einstein Company, which specialized in
animations on DVD for the preschool market, and is expanding it further with
8
Outside Korea, Taiwanese studio Wang Productions has followed a similar path.
9
Tooniverse is a cartoon cable channel that shows cartoons 24 h a day, similar to Cartoon Network
in the US. In addition to original Korean cartoons, Tooniverse imports many Japanese and US
animations.
Einstein Pals and Little Einsteins, both seen on TV as well as on DVD, to retain the
market familiar with the Einstein name. KidsCo, started in early 2007, is a fourth
global childrens network, owned by Toronto-based Corus Entertainment and The
Cookie Jar Company as well as (by acquisition) NBC Universal. Along with
Nickelodeons NOGGIN, News Corp.s Fox BabyTV and Playhouse Disney, all
target the preschool audience (less than 5 years). Even though the major animation
studios have made efforts to profit from these niche markets, the following cases
show possibilities also exist for small studios to enter these niche markets.
A 3D animated series, Pororo, the Little Penguin, produced by the Korean studio
Iconix, is an example of Korean animation moving from subcontracting or service
work for other studios to development of proprietary animation (Iconix, 2007). It is
now seen in 80 countries, including tough markets such as France and the UK, but
the list excludes Japan and the US (Raugust, 2008a). As the series has become
popular, a feature-length film led to a toy and book licensing business as well
(Kim, 2007). In Pororo, Iconix adopted and blended both American and Japanese
styles. The Japanese style looks like a traditional hand-drawn cel type, even if
incorporating CGI technology (Krikke, 2006). The animation styles of US studios,
such as New York-based Little Airplane Productions, pursue a more 3D effect. Once
again, we see examples of the infinite variety suggested by Caves (2000). Little
Airplanes Wonder Pets! TV series pays particular attention to music, commissioning
compositions that will appeal to their young audiences (Strike, 2007a). As each of
these studios has found success in the preschool market, licensing of toys and other
products has followed.
5.3 An upgrading path

Coe et al., (2004, 2008) see their GPN framework as more comprehensive than that
of the global value chain (GVC) (Gereffi and Korzeniewicz, 1994) and its producer-
driven and buyer-driven models, which are powerful explanations of routine global
production. However, while both models describe rather well static conditions and
historical evolutions, neither model explicitly points toward an upgrading path for
economies that have specific roles in a global chain.
An upward development trajectory can be proposed for animation, based on
elements of the GVC and GPN frameworks, to capture the upgrading process and
concomitant ability to capture value. A studio builds skill and a portfolio of anima-
tion production doing small animation tasks, such as advertising and subcontracting.
Both are precarious work, with little value added and only slight chance to build
a reputationan essential element of creative industries (Caves, 2000). Therefore,
all animation studios aspire to produce a feature film, even if it cannot compete with
Hollywood productions (Panzner, 2005b).
Gereffi et al. (2005) suggest that three variables determine how global value chains
are governed and change: (1) the complexity of transactions, (2) the ability to codify
Cartoon planet 261
transactions, and (3) the capabilities in the supply-base. This framework results in
five types of global value chain governancehierarchy, captive, relational, modular,
and marketwhich describe a range from high to low levels of explicit coordination
and power asymmetry. Although Gereffi et al. deal only with four manufactured
products (apparel, bicycles, horticulture and electronics), we now analyze animation
in light of their framework. In 2D animation, as discussed in section 3, the limited
animation system permitted highly codified, low-complexity transactions, which
could be communicated to workforces with low capability. Thus, offshore animation
production was typically in captive studios either owned by or subcontracting to
the major studios in a hierarchical manner.
As CGI animation has become more commonplace, the complexity of
transactions has increased, the ability to codify has fallen, and the capabilities in
the supply-base are more variable. For high-quality suppliers, such as Wang and
AKOM, relational governance is likely. For newer studios, whose work is not of
sufficiently high quality and may have to be fixed by animators in places with
greater capability, which suggests a modular supply chain, with the customer in effect
using two sets of animation suppliersthose with hierarchical and relational ties.
Raugust (2008a) says that Korean animation studios are called upon to fix or finish
work that has been done in India or other low-wage countries. The power over who
does which work continues to rest with the major studios and television customers
who control distribution (Scott, 2005; Mossig, 2008).
Similarly, Monitor Company (1999) suggests a four-stage development path for
a countrys film production industry, based largely on the Canadian experience.
Initially, an undeveloped industry attracts film productions that shoot films locally
but import most of the key crew members. Second, service capabilities grow to
include facilities, equipment supply, and service companies, while Hollywood studios
also open offices and build sound stages. During these first two stages, tax credits are
used to attract productions. Third, as the local industry matures, US producers are
able to hire most key crew members from the local labor pool, which has begun to
accumulate industry-specific expertise and skills. At the same time, the industry
configures itself to serve as a production location, and post-production capabilities
grow. The government is able to restrict the import of crew members in below-the-
line positions. Finally, in the fourth stage, the local industry achieves critical mass
and begins to hold its own as a major player in film production. Labor tax credits are
initiated to encourage further employment.
Monitor proposes a time trend in which only US producers in California and
New York had attained the highest capabilities. The earliest runaway producers were
in Canada and the UK, followed by Australia and, more recently, Ireland. The film
industry in New Zealand and Mexico are suggested as undeveloped locations.
In animation, Japan, Australia and Canada were the early sites of runaway
or offshore animation. These were followed by Taiwan and South Korea,
where animated TV series were regularly outsourced, followed, in turn, by the
Philippines and Vietnam. Consequently, studios in all these countries have both
accumulated experience and built up critical mass of expertise and support for
animation. The key indicator of expertise is the ability to produce a feature film,
which requires finance as well as talent.
The most recent animation industries are in India, where Chinese studios sub-
contract work, and North Korea, an outpost for South Korean studios (Sito, 2006).
And now studios in Egypt, Kenya, and South Africa are utilizing co-production links
with the UK and the US to enter both TV series and feature film markets (Raugust,
2008c). The multiple objectives of outsourcers have changed from cost orientation
alone to concerns also for quality and innovation (Maskell et al., 2007). The insati-
able demand for animation for TV gives opportunities for new studios (typically with
experience and connections from previous work) to build their reputations for
quality and innovation. A feature film remains the standard for displaying a studios
management skills, even if the ultimate goala box-office blockbusterremains
elusive for most studios.
6. Conclusions
In this article, we have examined the different segments of the animation industry.
Production of traditional 2D cel animation is global, seeking cheap and skilled
artistic labor with little creativity required. This type of global production has
occurred since the 1970s, and has expanded at a tremendous rate since the 1990s.
The major studios in the US and Japan led the search for subcontractors, finding
them in small studios in South Korea, the Philippines, Taiwan, and Vietnam. The
conceptualization, pre-production and post-production stages of the animation pro-
duction process are controlled by and remain located at the major studios. Thus, the
division of labor in animation production restricts the work done by subcontractors
to only production tasks. Subcontractors gain experience from this outsourcing but
they learn little know-how relevant to production of original animation and cannot
easily find investors for their original animations.
The development of new technology, CGI, by contrast, influences geography very
differently. CGI films have attained huge success at the box office all over the world.
In theatres and, to a lesser degree, on television, 3D techniques are now a mainstay of
animated films. However, 3D animation production requires much more time and
capital than 2D animation and the entry barriers into 3D production are very high.
The risk of box-office failure is also high. Thus, only a few major studios can afford
to produce CGI animations. To hit it big, as a group of Australian studios did with
Happy Feet, the 2006 Academy Award winner for best animated feature film, remains
the goal of many animation studios. For other studios, shortages of artistic and story-
telling ability continue to hamper their ability to make animation production as
widespread as the apparel industry.
Cartoon planet 263
The flood of cartoons on theatre screens and, even more, on TV suggest that more
studios in more countries have been able to produce high-quality animation.
However, a creative product such as an animated film embodies some cultural
characteristics that thwart attempts to attain global market success. The specific
cultural codes in which the outputs of animation are embedded, embodying history
and traditions that are not globally familiar, make it difficult for studios from many
Asian countries to tap into global markets (Scott, 2006a). Government support in
Korea, China, and elsewhere in Asia is aimed at building competitiveness in animation
production but can have little influence on demand. Impediments to newcomers
include the risks of a fickle market and the massive capital requirements to produce
a computing-intensive CGI feature-length animated film. It is much less risky to feed
the TV market, and a successful series can propel a studio to visibility for feature-
length films and the increasingly prominent DVD and streaming video markets.
The global production of animation illustrates both how technology affects the
division of labor in production and how the major studios and their networks of
subcontractors have responded to demand from new markets. The larger, differen-
tiated markets for products of the animation industry are being supplied by major
studios, artisan studios and new start-up studios. However, for now, the emergence
of 3D animated films has reinforced the agglomeration of the industry in the USA
and Japan, slowly spreading to studios where animators have been trained to meet
the demands of the major markets. These studios outside Japan and the USA have
been able to enter the global market with smaller, less costly products for TV, thereby
building recognition for their characters, and then producing feature-length videos.
As theatre box office revenue shrinks as a percentage of studio revenue, theatres have
become less critical as a point of entry to audiences. By entering TV markets, which
can be done incrementally, one country at a time, a studio can build a reputation and
a revenue base for assault on the theatrical market and its larger potential profits.
The media giants model is a division of creativity sensitive primarily to the US
market. Animators continue to create alternative models, taking advantage of
a booming market for cartoons.
Acknowledgements
The article has benefitted from the helpful comments and suggestions of two
anonymous referees.
Addresses for correspondence

Hyejin Yoon, Global Studies, University of Wisconsin Milwaukee, P.O. Box 413,
Milwaukee, WI 53201, USA. e-mail: yoon3@uwm.edu
Edward J. Malecki, Department of Geography, The Ohio State University, 1036
Derby Hall, 154 North Oval Mall, Columbus, OH 43210, USA. e-mail:
malecki.4@osu.edu
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Industrial and Corporate Change, Volume 19, Number 1, pp.

Cartoon planet: worlds of production

2. Animation as a creative cultural industry

3. The evolution of worlds of animation production

3.1 The two worlds of animation production prior to 1980

Focus on artistic quality For theaters: Focus on market appeal

Focus on artistic quality For theaters: 2D animation has almost

Theaters (Mainly CGI) Mass production for non-theatrical

Focus on originality; characterized by Focus on large non-theatrical markets,

European countries, generally supported by governments. For example, then-

3.2 New worlds

Figure 2 Studio revenue by source, 1981 and 2006.

Figure 3 Number of feature-length films, by year, 19172006.

3.2.2 New technologies

3.3 Theatre audiences prefer CGI

Table 1 Top animated films by total worldwide box office revenue

Film Type Animation Production Total world Percentage Year

Shrek 2 CG DW 72.5 920.7 52.1 2004

(worldwide box office revenue

Figure 4 Profit of 2D and CGI animated films, 19882006.

4. Global production networks

4.1 Co-production for cartoon channels on TV

New Argonauts (Saxenian, 2006)animators with big-studio experiencehave

4.2 Unbundling the animation production process

5. Different strategies, different markets

5.1 Upgrading from television series subcontracting to blockbuster:

5.3 An upgrading path

Addresses for correspondence

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