Animation industry poised for transition from outsourcing to original content

THE 5,000 EMPLOYEES of the Philippine animation industry, though toiling in obscurity, make up part of the production line for some of Disney or Cartoon Network’s biggest hits.

Over the past three decades, Filipinos have hunched over drawings of hits like The Emperor’s New Groove and

Big Hero 6 as talented but cost-effective outsourced workers.

But the animation industry is now strong enough to contemplate expansion beyond the US production line to Filipino original content.

To achieve that, the industry’s dilemma is how to nurture its top draw — talent — in an environment where student-level training has its shortcomings, while also ensuring that workers’ rights are protected and pay is good enough to fend off overseas offers.

GROWING INDUSTRY

Automation, protectionism, and geopolitical shifts have seen the Philippine Information Technology and Business Process Management (IT-BPM), an industry association, tempering its goals, though the animation sector remains somewhat robust.

The compound annual growth rate for the revenue of the combined animation and game development sectors up to 2022 was projected at 14% in 2016, according to the Information Technology and Business Process Association of the Philippines.

This year, Animation Council of the Philippines, Inc. (ACPI) President Juan Miguel del Rosario now projects the animation sector’s growth in the “low double digits,” but above the overall industry’s 3.5% to 7.5% target.

Mr. Del Rosario said that the specialized creative sector is largely exempt from the immediate threat of automation. It also makes up a small fraction of the over one million-employee, $20 billion IT-BPM industry.

“The qualifier is we’re a really at a low base compared to the whole IT-BPM industry, so we’re looking at only about $20 million revenue collectively,” he said.

He attributes the sector’s growth to accelerated demand for animation, as video on-demand and over-the-top platforms become more accessible.

“(There is an) opening up of a whole distribution channel — Netflix, Amazon Prime — that has created demand that we’ve never seen before… Netflix alone is putting so much money in creating so much content.”

Netflix and the increased adult demand for cartoons have brought new work for Filipino animators, with Mr. Del Rosario’s Toon City animation studio helping produce the first two seasons of Rick and Morty.

He said the Philippine animation industry is now headed to creating original content — a venture that will require support from the government.

“Creative economies that are supported by their governments (make up) 12% of GDP (in some countries),” he said.

He added that the entire creative industry could grow between 12–15% a year, with the animation sector mirroring that growth.

But getting there would mean addressing the sector’s current challenges.

EDUCATION GAP

Animation outsourcers are attracted to the Philippines, Mr. Del Rosario said, because Filipino animators speak English and understand Western culture and humor.

This eases the production process, because Filipino animators need less instruction and feedback on portraying how Americans gesture or behave.

Three decades ago, Filipino comic book and billboard artists were recruited and trained into producing cartoons for the industry.

Animation schools later sprouted, but have not kept up with industry needs.

Recent graduates are not production-ready, Philippine Animation Workers Association (PAWA) Vice-President for Internals Adel S. Garangan said.

“There are many production studios who have to train extensively before they even let the employees get into production with any TV shows.”

He and PAWA Assistance Committee member Hali Navarro said that there is a gap between the pace and depth of what is taught in the college classroom and what is needed on the job. Even the software used in training may not match industry needs.

Technical Education and Skills Development Authority (TESDA)-certified training institutions sometimes bridge that gap, with some students opting out of university for six-month in-depth training directly from the animation companies.

The education gap can prove to be a bigger problem as the industry attempts to shift to original content.

Philippine animation, said Mr. Garangan, is like a factory line assembling shoes.

“We don’t design the shoes. We just do the assembly. They (US animation studios) finish up — they stamp it for themselves because they have the IP (intellectual property).”

Filipino animators replicate backgrounds and interpret character movements for already-designed films and TV shows.

Original content development will require more skills, from storyboard production to sound design.

Mr. Del Rosario said: “That’s something we still need to level up as far as skill is concerned.”

FREELANCE-DRIVEN INDUSTRY Trained animators tend to leave the country.

Mr. Del Rosario said that Filipino animators go to work at studios in Singapore or Malaysia because of better pay — “it’s really economic more than anything else.”

The industry has recently received online attention for its freelance work arrangements.

Mr. Navarro of PAWA said there is a vague and non-standardized definition of freelance versus in-house work in the industry.

“In freelance, you should set your rates; you set your own time. But in their contracts, there are required days you come into the office,” he said in Filipino, describing pay reductions for absences and lunch breaks that exceed an hour.

He said that for the most part, only directors, assistant directors, and other high-ranking employees are regularized. Most other animators work as freelancers.

Mr. Navarro also described a set retainer fee below minimum wage from a certain studio. Rates are added according to seconds of animation produced.

He also noted how freelance animators are not protected from blacklisting by studios.

“Compensation is not very high,” Mr. Garangan said in Filipino. “The reality of animation is that you cannot support a family.”

Mr. Del Rosario said that studios work with animators on a freelance basis because the skillset and style needed for different shows also differ, which means studios hire by matching skill to particular shows.

“You have to hire people who are tailor-fit for the style of animation that is demanded of you by the client,” he said.

He added that he sees the attendance requirement for freelancers as a responsibility. “You have to produce a certain number of scenes in a certain time — so it’s just logical that you have to be there all the time for you to be able to deliver.”

Employees leaving for other countries have decreased in recent years, Mr. Del Rosario said, noting that the industry has improved in terms of fair treatment and on-time payment of salaries.

Speaking for his company, he said that salaries don’t dip below minimum wage, and skilled employees make an average of P40,000 to P50,000 a month.

The two PAWA members however agree that young animators in many studios are treated as “disposable,” with newer employees getting lower pay rates per second of animation produced.

“Every year there are all these animators who are eager to join a big studio, work in a show — they don’t run out,” Mr. Garangan said.

CREATIVE ECONOMY

Organized earlier this year, PAWA aims to educate young animators about their labor rights.

The association’s Facebook page currently informs animators about work contracts, after they noticed that some employees don’t take home copies of their contracts.

Mr. Garangan said that he hopes to push for a Magna Carta for Animators that standardizes work and basic pay.

PAWA is also closely following updates on the proposed Freelance Workers Protection Act, which would require written contracts between the company and freelance worker to protect against exploitation.

Mr. Del Rosario, in his bid to support the creation of more original content, is hoping the government would provide incentives to attract more investment. He said that the Philippines competes with Canada, Malaysia, and Singapore — countries that provide financial incentives to their creative industries.

“We are only competing on the basis of price and talent. Can you imagine if the government understands the magnitude of giving incentives to attract people to come in? If they open the floodgates, I’m sure we will have enough work for us.”

He said incentives will not likely be offered given the government’s current push to rationalize tax incentives. But he said he appreciates the government’s support for industry outreach to other countries and the drafting of a creative economy road map.

“It is high time the government takes notice of the potential of the creative economy,” he said.

He sees the creative industry as “the next BPO (business process outsourcing),” not in terms of magnitude, but as a sunrise industry — a burgeoning sector that rapidly grows and attracts investment.

The Joint Foreign Chambers of Commerce of the Philippines last year released policy recommendations on Philippine creative industries, urging the government to declare the economy as a national priority, to incentivize creative hubs, and to develop a creative education task force.

Mr. Del Rosario is hoping to attract pre-production outsourcing jobs such as storyboard creation. The industry is also looking into working with Japanese animation, but is running into challenges in terms of pricing and working with Japanese production requirements.

Beyond outsourcing, he said original content would create a large industry that could expand to merchandise and video game sales.

He said the increased global demand for animation is spilling over from the US-dominated industry to Canadian and European storytelling.

Filipino animation can be a part of that, he said, with content taking two to three years between conceptualization to investment.

“We’re developing that because we think we have a lot of stories to tell.”