Time to get animated: FICCI-KPMG report

20th March 2010
Time to get animated: FICCI-KPMG report

Indian Animation & Gaming industry poised to grow at 18.7%: Govt to pump in Rs 520 million for national centre (Sourced from Animation Xpress reports)

The FICCI KPMG Indian Media & Entertainment Industry report was released last week at FICCI Frames 2010. The report finds that in 2009, the Indian animation industry continued to rely on outsourced and co production deals that led to a growth rate of approximately 9 percent over 2008. While industry sentiment was low for the first half of the year resulting in a few shakeouts, Indian studios were approached with new projects and collaborative deals indicating that market was looking up once again in the second half. The animation services segment registered a growth rate of 15 percent in 2009. During the past year, no Indian animated film witnessed a theatrical release.
The use of VFX in live action films has also seen a steady and significant growth over the years. Many live action films today include a VFX sequence and the sheer duration of these screen shots has also risen substantially. Taking into account the low base for this service, it is estimated to have grown by nearly 40 percent over 2008. This is driven by both international and domestic for special effects. However billings generated by the domestic market are at a lower price points than when compared to the rates charged for outsourced work. While VFX demand for films continues, over 50 percent of the work is currently created for ad film productions.
Overall market growth
The Animation and VFX industry has seen an overall growth of 13.6 percent over 2008 and is expected to grow at a CAGR of 18.7 percent in the coming years to reach an INR 46.6 billion by 2014
driven by increased consumption of animated content, creation of global IP formats, acceptance of 3D graphics and venturing into international markets.
Future Trends suggested by the report include increased consumption of animated content, IP creation and the number of 3D screens in India is increasing due to increased awareness for the format and an enhanced consumer experience. While the challenges foreseen are lack of capital, lack of talent development and low focus on merchandising revenues.
The report also suggest a regulatory wishlist with following highlights
1 Government sponsored Special Economic Zones (SEZs): With the Finance Bill 2010 not extending the STPI regime which expires on 31 March 2011, many animation houses are expected to set-up new operations in SEZs. However, given the increased cost of operating out of SEZs (on account of high rental costs), the government should consider government sponsored SEZs on the lines of government sponsored IT Parks.
2 Tax sops for localised content: Currently, only export proceeds are eligible for tax sops and there is no incentive for studios to develop localised content. Accordingly, the industry awaits a tax holiday for developing the content for the Indian market. Further, the industry wants exemption from service tax for use of specialists like game designers/senior game developers from overseas
3 Industry status: The government should accord such recognition to enable the industry to have access to several benefits, including loans from banks, formalised policy from the concerned ministry (including introduction of degree courses by Government universities)
4 Promoting the use of animation in education: The use of animation in education programmes of the government can be effective in checking the high drop-out rates.
The size of the Indian gaming industry was estimated at around INR 7.9 billion in 2009, compared to INR 6.5 billion in 2008, implying a growth of 22 percent during the period. The industry is expected to grow at a CAGR of 32 percent between 2009 and 2014 to reach INR 31.9 billion by 2014.
Mobile Gaming
Global gaming companies opened India offices or entered into distribution agreements with Indian gaming companies. For instance, in April 2009, Indiagames Ltd. tied up with EA, Disney and THQ to distribute their games in India.
The stunted growth of the gaming industry can be attributed to the following factors.
Limited awareness about gaming products
Poor gaming experience due to lack of infrastructure
Continued disagreement between game publishers and telecom operators on the revenue share arrangement
Drivers of growth
Increasing telecom bases and arrival of 3G: The expected rollout of 3G services is likely to provide efficient high speed data networks to mobile gamers. The telecom subscriber base expected to increase to 725 million by 2013 with a mobile penetration of 60 percent.
Console Gaming The console gaming industry in India is expected to grow at a CAGR of 19 percent from INR 5.8 billion in 2009 to INR 11.6 billion by 2014 on the back of increasing disposable income and favourable demographics.
Localised content
Games with a local flavour such as Hanuman and Kabaddi on PS2 have also become popular among Indians.
Regulatory Hurdles
The high customs duties and indirect taxes have made legitimate console hardware and software approximately 40 percent more expensive than grey market imports.
Emerging Business model Console gaming companies are moving away from a product to a services oriented model enabling users to not only play games off the console but also watch movies, upload photos and so on. Till such time as the consumer is educated about the shift by console gaming companies from a product to a services model console gaming is likely to remain more of an urban phenomenon.
PC/Online Gaming With over 85 million PC literate users in 2009 as compared to 65 million PC users in 2008, the PC gaming market too has been growing at a steady pace. In 2009, increased usage of social networks in India and awareness created by online gaming companies through the distribution of large number of games offered across different genres enabled an increased level of user conversions leading to a 30 percent growth for this segment in 2009.
Gaming modes Advertisement supported online games have been an important source of revenue for online gaming companies in India. Companies like Zapak have established a chain of gaming cafes across the country and hosted gaming tournaments in metro cities to give a multi player experience. However poor infrastructure for high speed internet and low PC penetration, it is difficult to graduate to advanced multiplayer gaming modes.
Link to Animation XPress report:  http://www.animationxpress.com/?file=story&id=26831  

Govt to set up National Centre for Animation and Gaming

Delivering the valedictory address at the FICCI FRAMES 2010 in Mumbai, Union Minister for Information & Broadcasting Smt. Ambika Soni said that the government was going to establish a National Centre for Animation and Gaming with a view to give boost to this segment of the M&E industry, which had a very high potential. She said that an initial budget of INR 52 crore has already been allotted to it. The Union Minister said that a budget of INR 660 crore has been allotted for the National Heritage Mission, which would undertake celebrations of the 100th year of Indian Cinema in 2013. She said that Museum of Indian Cinema, which was coming up in Mumbai, would be completed in three years and that the consultants for the same have already appointed. ( Animation X Press/ March  20 2010)