Local animation companies have to flex their creative muscles to develop their own cartoon characters rather than depending on contracts from multinationals, industry professionals said yesterday.
"If we try to survive on OEM [original equipment manufacturer] design work, we may starve," James Chen (
Taiwan has had a role in the US' animation industry since the late 1970s, and was involved in work on many familiar cartoon characters such as Donald Duck, Mickey Mouse, the Little Mermaid, Snoopy and the Smurfs.
Local production houses such as Wang Film Production Co (宏廣), SmecMedia Entertainment and Hong-Ying Universe Co (鴻鷹) have produced more than 5,000 animated features for multinationals.
While Disney and other overseas companies create original cartoon characters and plots, local production houses take on the labor-intensive illustration work of the production.
"Profit margins in the OEM animation business are very limited," said James Wang (
Wang Film, Taiwan's largest production house, generates more than 200 animated episodes annually. US-based AOL Time Warner holds about a 10 percent stake in Wang Film.
The real cash cow of the animation industry is not in OEM, but in creating original characters that can generate royalty fees and products based on character images, Wang said.
Taiwanese production houses have heavily relied on the US market for decades.
According to the Market Intelligence Center, a government-funded think tank, production value of the global animation industry last year was US$26.8 billion, of which 49 percent was generated in the US.
The world market is estimated to grow by 10 percent year-on-year and are predicted to reach US$29 billion this year.
Although the pie is expanding, local companies are unlikely to see profits rise.
"Profit margins for drawing animations are dwindling," Wang said.
Thirty years ago the profit margin was about 30 percent, but now it's down to below 15 percent, he said.
Last year Taiwan's animation production value was NT$2.4 billion, and it is estimated to reach NT$14.8 billion in 2006, according to the Industrial Development Bureau under the Ministry of Economic Affairs.
An industry watcher said competition from South Korea is also tough.
"In 2000 the South Korean government spent nearly US$300 million in funding South Korean animation companies in film production and talent incubation, and the results are very impressive," said Lin Yu-shen (
South Korea is the world's third-largest animation market behind the US and Japan, Lin said.
Local animators say government aid is necessary to help them stay competitive.
"The capital investment needed for producing, marketing and distributing an animated film is astounding -- we definitely need government funding," James Chen said.
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