This year, we decided not only to interview representatives of animation studios, but also post our own articles from time to time. In Konstantin Kharitonov‘s first article, he analyzed the animation market. We hope his work will shed some light on many facts and events from the world of Russian animation and help beginners understand the industry.
This article contains a detailed analysis of 3D animation in Russia and the CIS. We are not trying to make excuses for the industry or blame the government for how they treat us animation creators. This is just an attempt to create a 3D image of the animation industry, instead of the one–dimensional picture that everyone tends to see.
This article will be constantly updated with new info. Want to add something? Konstantin will answer all questions submitted through his Reddit post.
You can find almost all news related to Russian animation on the Russian Animated Film Association website. It also has a list of studios and animation projects, especially original ones. You can also find industry news on the Facebook pages of CG Russia and moPicture, and that news is often pretty hot!
Conferences like CgEvent (Moscow, St. Petersburg, Kyiv) and Slet Animatorov (Moscow) will help you get acquainted with the industry. You can meet representatives of many animation studios, listen to their reports, and take part in workshops. If you wish to see a cross–section of the Russian animation industry, visit The Open Russian Festival of Animated Film in Suzdal.
If you are looking for serious analytics, check out the report by Movie Research. It contains all the information you need, from box office grosses and target audiences of 3D animation in Russia to script analysis.
The Staya platform will help you find new jobs in VFX and CG and see wage averages for the year 2016 in its salary report, and for the year 2015 in the following materials: all data and a job trends presentation.
We, the Cerebro company, maintain a list of commercial studios, projects, and schools in the CIS in a Google spreadsheet. If we filter the companies by the Animation and Status categories, we get some 45 companies in the CIS with a total of 2,500 employees. The exact number of freelance workers and contractors is impossible to know as of yet. Almost all animation studios in the CIS, except for two, are Russian–based. The tab Anim.Projects contains over 150 projects, both series and features, released after the year 2000. For cinema releases, we indicate budgets and grosses for Russia according to Kinopoisk. Worldwide grosses are not specified, since there is very little data on this subject.
The quality of Russian 3D animated series is pretty high–a fact that is recognized in all international film markets. Most animation studios in Russia create their own brands, drum up investments for them, or at least enter into co–production agreements (like Hurvinek. Magic Game by KinoAtis). These studios literally sell their intellectual property, which seems fair enough in the long run. For example, studios in India tend to work on third–party projects as contractors.
As for animated series, the most important thing for a copyright holder is brand recognition, so that children will want to buy their toys or backpacks or whatever. Revenue from advertising broadcasted on video platforms is a bonus. Those platforms are YouTube (worldwide), IVI, Okko, Rutube, VK (Russia), Youku, iQiyi, Tencent Video, and Mango TV (China).
For example, all three seasons of the show Masha and the Bear (2009–2019), after 10 years of existence, had over 50 billion YouTube views as of late 2018. For the producers this is a serious source of income. At the same time, “in 2015, revenues from the sale of Masha and the Bear merchandise under the Animaccord license amounted to USD 225 million.” Read more here.
According to Kidz Global, 95% of children in Indonesia are familiar with the animated series Masha and the Bear. In Italy, 88% of children are familiar with the show. Netflix calls it “a Russian phenomenon.”
If you want to learn more about the animation business, the licensing market, and brand protection, read the summary of this 30–minute presentation by Dmitry Loveiko, general producer of the Animaccord studio given in front of 15,000 people at the Olympic Stadium.
There are five essential elements of brand infrastructure. These elements are intellectual property protection, a localization framework, a style guide/brand book, licensee relations, and a team that implements all of these.
The main business model for animated features is fees from Russian cinema theatres and revenues from distribution abroad. Although we’ve had no high–profile releases in Russia so far, budgets for 3D animated features start at around 400–500 million rubles (according to 2018 data). Box office grosses for Russian animation movies released in cinema theatres within the country range from 150 to 500 million rubles. Direct cost recovery is impossible, since cinema theatres take up to half the amount from ticket sales. In addition there are marketing and advertising costs that need to be covered. Box office revenues in the CIS may reach 3 billion rubles, but not for animation; animated features gross no more than 0.8 billion rubles. For the record, in 2017, Russia had 4,790 cinemas, while the U.S. had over 40,000 and China had over 50,000. Moreover, foreign film distributors that buy movies from the CIS, as a rule, pay the minimal fee of somewhere between 30–100 thousand dollars per one country. The rest write letters saying, “We did show the film, but it did not earn enough, so we will not pay you.” In this situation, copyright holders often try to find strength in numbers and sell rights to over 50 countries to cover production costs. For animated features from the CIS, this is already normal. For feature films, this is unusual.
Among Russian cinema releases, The Bogatyrs franchise by the Melnitsa studio is clearly an exception, because it was very successful in the domestic market and had low production costs. It would be almost unbelievable to dominate the market with a breakthrough movie after the first film, so only the second feature in the series about the three bogatyrs paid off. And this was not the first feature film by Melnitsa. Later, the franchise became a brand, so people wanted to go see the movies. Besides, these films are virtually the only example of a studio successfully engaging older audiences by adding more adult–oriented humor as a second layer.
As it stands today, everywhere in the world except Hollywood, people don’t know how to make and—most importantly—sell an expensive animated feature worldwide. When it comes to live action, it’s just as bad. In fact, the majors have a kind of a monopoly on global releases. Yes, in domestic markets, local 3D animation projects are successful: here I mean in Korea, China, Russia, France, and India. In Japan, 2D animation is undoubtedly successful, but the Japanese have been systematically taking their production towards 3D stylized as 2D for several years now.
A producer can hardly ask a rich entrepreneur to fund a large–scale animated release: “I need 100 million USD, please.” The entrepreneur would say, “You are only a foolish producer, you don’t even have any relevant experience, because no one does!” I know of two such projects in Russia. The investor assessed the risk and bowed out while the projects were in different stages of production. At the same time, European producers are very jealous of Russian producers of animated series. In Russia, we’ve learned to not only create “cartoons,” but brands, i.e. characters, merchandise, games, licensed live shows, books, etc. For example, Netflix and Chinese video platforms offer local projects (e.g., Russian ones) as well as Hollywood and Korean projects. The year 2018 saw 10 large deals with brands from Russia. For example, Netflix added Masha and the Bear (since 2017), Mi–mi–bears, Smeshariki, Leo and Tig, Buba, and Yoko.
For “pixels” (i.e., details: animation, 3D models, visualization), creators need a budget. 3D TV shows in the CIS mean 1.5–3 times fewer people involved, and 3–10 times fewer for animated features. Do not forget the difference in resources for rendering, which requires 5–15 times fewer people for animated features.
R&D software development in projects from the CIS is lower by an order of magnitude. When it comes to series, there is a certain cinematographic expectation for a final result, which, as a rule, greatly simplifies everything.
I think it is quite clear why Russian TV shows are more competitive around the world than features.
We need to continue making shows for worldwide audiences that promote universal human values (not just Russian values) and for older target audiences (the target audience is about 3–8 years old). If the global film distribution system changes and becomes less monopolized, then there is a chance that we’ll get larger budgets for cinema animation in the CIS. On the other hand, if your brand is already super–famous because of your series, you can talk to the majors and they might show your feature film around the world.
The best script writers and directors go to the U.S. and Canada to follow their dream. Studios and majors can choose the best talents and have thousands of scripts on their shelves.
People who come from Russia do too, especially those from live action shows and the movie industry. So they stay in LA for some time and try to make something there, then quietly come back. So far, no one except Bekmambetov has managed to blend in in Hollywood.
The target audience for animation in Russia is 4–8 year–old children, therefore adults won’t like it by default. But this audience is already bringing in the money!
It looks like no one in the world except Hollywood can make 3D animation for those above the age of 10–14, and no one else can create a second tier of jokes for parents as well on a consistent basis. But creativity is not like an assembly line. It requires a selection of strong minds who only work for a pretty penny.
At the same time, 10–14 year–old Russian teens are already ashamed to watch animation, much less go see animated features in the cinema. But we need to at least start trying to make changes, because for now, the most frequent answer we get from investors is, “We have no idea how to sell it.” The second one is, “The target audience is too small.”The risk is high so it’s much safer and more secure to invest in an average kids show, because children will watch anything and everything. The visual part plays a very insignificant role for younger viewers. And they aren’t particularly interested in a high–quality script, decent dialog, strong character motives, or the general logic of the show. That’s a given, which is rather sad.
The secret to making really good movies can be found in the book Creativity, Inc. by Ed Catmull. It can be described in one simple phrase, “A good story takes time.” Western movie–makers spend years developing their stories. What for? To ensure their stories can stand the test of time. In Russia, we can make a full feature in a year and a half, constantly rewriting the script in the process. There are also two tiers of selection in the cinema market. The first tier is your own memory. You only remember the animated masterpieces, but quickly forget the average ones you see with your child. However, when new CIS releases come out, you compare them to the masterpieces. The second tier is buyers attending cinema markets and buying the best content for their country, i.e., us. Russia still has a little oil and gas, so almost all the animated films we see in theatres are quite alright! TV shows, on the other hand, are often pretty awful.
Seven years ago, there were about 10 schools of CG and Animation in the CIS, almost all of their staff being self–taught. On the one hand, everything’s changed for the better: our spreadsheet contains schools as well as projects; there are a total of 32 institutions that teach both in a classroom and online.
In addition, Russia introduced professional standards in 2018. This will help state–run colleges get budgets from the state in the new year and start teaching new professions. We’ll see new faces in the industry. Read more in this article describing how the Ministry of Labor and Social Protection of the Russian Federation established professional standards for animators. Until that moment, the Gerasimov Institute of Cinematography (VGIK) was the only state–funded institution that trained future workers for the animation industry. I hope that other colleges will employ those who already work in studios, that is, those who will combine actual work with teaching. Perhaps later, people will be able to become professional teachers, because for now, even commercial schools only have a few of them.
On the other hand, there is a huge talent shortage. We need an institute for both ordinary employees (animators or 3D modelers), managers and rare specialists, such as directors and scriptwriters. For example, at the CG Event Conference in 2017, we surveyed CEOs on which job openings are the hardest to fill. All agreed on the character animator role. Perhaps that is why we need to start educating producers and CEOs of studios and explain how long it takes to nurture a strong 3D animator.
The lack of talent is one of the reasons why high–end animation is made in the West, while the cheapest is made in the East. Turns out, our Russian animators do not fit anywhere in this system, because they do not provide the same quality as their Western counterparts, and ask for higher wages than their Asian colleagues. Among those who’ve managed to advance to a higher professional level, some people go to the West to make cool projects. And this goes not only for animation artists, but for other specialists as well. We cannot fight this trend, but it’s definitely worth thinking over to understand the reasons.
In 2017, Russia landed in second place worldwide for the consumption of pirated content after the U.S.
The number of visits to sites hosting illegal content in the country has increased from 14.4 billion in 2016 to 20.6 billion in 2017.
However, for animated series, video piracy is essentially not a threat. The current business model of show production involves the availability of free content on all possible platforms, so pirating it is unprofitable—it is already everywhere.
For films, video piracy in Russia used to be a big issue three years ago, but the situation has changed recently. If distributors or creators pay money to companies that fight piracy for a living, then the impact of piracy will be low even for movie releases. Lawyers for these companies block video streaming websites (and links to torrents) within three days (according to the new laws and the Federal Supervision Agency Roskomnadzor). Although many users remove copies on demand, most foreign films are not protected on the Russian Internet, so pirating websites have something to show. All social media and many video hosting websites also delete content on demand. They automatically compare videos with samples from distributors, and they usually do it for free. Companies that tried to fight against torrent trackers did this. They created hundreds of hosts, sent wrong data blocks to users, changed IP addresses and sent new blocks. This lowered the download speed considerably. Users of VPNs (which help you view blocked websites) make up some 2–4% of all Internet users in Russia. Let’s just say, this is too difficult for a wide audience, and you often need to pay money for a VPN that allows you to watch online video.
There is yet another indirect reason why this problem is not so acute: meetings of the Association of Film and Television Producers have not seen talks about video piracy for two years, and revenues from legal online video platforms in Russia have been growing by 30–40% per year for three years in a row. Soon, the law on search results will enter into full force, although the Yandex search engine is already blocking pirated content.
We should also consider that even before 2013, Russian cinemas underreported their number of views and their fee amounts. What really helped was that the the EAIS ticket registration system and new laws increased the penalties for cinema theatres that provide false information. By the way, the EAIS has a convenient mobile application for viewing box office grosses.
We’ve all heard about the enormous cuts in the CIS. This is also a problem; the magnitude of corruption in animation and visual effects is not as great as in advertising and motion design. It’s like when you run a restaurant: your business often bears losses not because of a lack of guests or spoiled food, but because your staff steals. The same situation applies here.
If the cuts were used for industry development, and video piracy did not reduce profits, this money could help a lot! For example, we could spend it on livable wages for teachers, who are often forced to work while they teach (this is typical for the Russian industry). We need to stop such things, and use the money to pay bonuses to deadliners that work 24/7.
If animation, cinemas, and visual effects are so good all over the world, then why do governments of many countries financially support the industry? The answer is simple: it drives their economy and creates jobs!
Let’s consider this using a 3D animated series as an example. You are an animation studio, you’ve made a couple of seasons of your product, but then there is a whole chain of events. A TV channel purchases the rights to show your project on air. A local internet provider supplies a good Internet connection to your friend’s house. An IT company has developed an application (plus a tablet) that shows your series to children. A game company makes a game based on your characters. A French company conducts a poll in your country to see if children know your characters. A shopping mall buys this poll. A toy manufacturer launches a line of dolls, and a well–known clothing brand buys your license from an agency you hired to sell your licenses. All of this starts to sell in the nearest store. Your friend’s son becomes a fan of your series, and when he visits a shopping mall, your friend just can’t help buying him a T–shirt with a print of your character!
It’s hard to count how many people could earn money because of the two seasons you’d made, as well as how many jobs would appear. There are undoubtedly a large number of people in your country, and there are also manufacturers in Mumbai and Beijing who make your merchandise. But your own team only consists of 30 people!
Things are not so simple for movies and visual effects by the way. No one but Hollywood knows how to promote brands via live action franchises. No one else has learned how. Besides, it requires a budget no one else has. In animation, especially when it comes to animated series, costs are lower, and distribution is not monopolized throughout the world.
Canada was the first to take this chain seriously. If a studio, say, based in the U.S. (which is usually the case) orders animation, a feature film, or visual effects, then Canada pays them back (gives them a rebate) of 35% to 55% (depending on the location of the Canadian studio) to cover staff costs for the studios in Canada. A year ago, the percentage was 50–55% for all locations. Now it has been reduced in some districts, since the number of individuals who move to Canada to work in this field has reached 50,000. Make it stop! VR has been applicable to the special government compensation program since 2018: VR is booming there now. There have been multiple protests in the United States since 2013, but people still move there, and many companies shut down because the industry has changed completely. In total, the Canadian government has spent about 14 BILLION dollars over the last 10 years on the program, which is a lot!
There are similar programs in the UK, New Zealand, Australia, etc. Otherwise, there are local programs, such as in the state of California: they spend 300 million dollars a year. Here is some more recent news from Europe: a law that specifies a 30% rebate for Poland and 45% rebate for Germany.
Ukraine is currently testing testing a rebate, but we need to wait and see. In the meantime, Russia compensated no more than 1.1 million dollars in 2018 in a similar scheme, as well as only 70 million rubles in the Kaliningrad region, the Primorsky Kray region, and the Ulyanovsk region.
European countries have a well–developed grant system for animation makers. For example, France and Belgium offer grants that amount to 50–100 thousand euros. To qualify for them, one must have released a movie. Some short films are only shown for 10 sessions, and this falls under the requirements for a grant. The EU may partially compensate studios for the purchase of software and also offers small tax breaks.
Asian countries (Korea, Singapore, India, and China) install impressive stands at film markets to highlight their studios. In India, the government sponsored the construction of five offices for foreign studios. It’s hard to explain exactly how and how much the government of China invests in animation. The Chinese government arranges whole clusters — you just need to see them! I recommend this article about a 2013 expedition. Since then, much has changed in China.
From sources close to the ruling party elite in China, I have learned that the budget for the animated film industry will be increased nearly tenfold over the next 10 years…I am sorry to say this, but the earlier generation of the country’s leadership has dumped billions of dollars into the industry as well…. As for now..one should just repeat this like a mantra: “Tenfold… tenfold…”
Now let’s talk about what was, is, and has been promised in Russia.
The Cinema Foundation of Russia spent about $ 65 million to support live action films and animation in 2018. Some 40% of these funds are repayable loans at a 0% rate, while 60% are non–repayable grants. The share of state funding for an animated feature was usually no higher than 20%, but not all projects managed to get it. Russia’s Ministry of Culture supports mainly original animation: in 2018, they allocated some $ 7 million in non–repayable grants. Roskino and Russian Export Centre partially compensated the costs of companies that play in the cinema, TV, and licensing markets. These steps, albeit small, greatly help Russian companies promote Russian animation and live action films.
In other news, in 2018, Russian state authorities fulfilled what they promised in 2017. To all those who pushed these initiatives through, thank you so much! It wouldn’t have happened if it weren’t for you! Now let’s take a closer look at government–sponsored support initiatives.
A reduction in insurance fees to the Russian Pension Fund to 14% occurred, just like for the IT sector, if (a studio’s?) staff includes 7 people or more. Many studios will see substantial tax deductions for 2018, and next year, companies will be able to hire more professionals who now work as individual entrepreneurs. This should be applicable to VFX studios. I hope the Ministry of Culture doesn’t mind. Read about the registration process here.
Exemption from VAT on licenses for movies and animated features awarded with national film certificates.
The grant from the President of the Russian Federation still does not apply to the development of software for animation. There was an attempt to reduce the cost of software for Russian users. Due to foreign vendors, some features are moving to the cloud, so pirating is not easy anymore. The number of unlicensed CG softwares in Russia has lowered, but at the same time, payments per month are growing steadily.
We’ll be able to reduce the cost of software use if we develop 3D animation software here in Russia. This software should be up–to–date with a modern architecture, like the domestic Maya. These steps should help vendors of CG software in Russia by providing them with more opportunities to make a good product and enterWestern markets, as the local market is very small. To read more about CG software in Russia, check out this hot new discussion.
Animated series and brands are developing quickly, and their quality is being recognized in all foreign film markets. Major projects have appeared in Western markets and live action film makers in Russia are green with envy.
At the same time, we have next to no animation brands for the 8+ audience. The few timid attempts were not very successful. Production budgets for 3D animated cinema releases are unlikely to grow from 5–9 million dollars to 30–50 million, and this is required to be competitive in the global market.
The industry approximately doubled between 2015 and 2018 in terms of the number of employees. By the middle of 2018, that growth had slowed. The industry is waiting for a return on investment from the teams that are already working. New major investments are not yet planned. At the same time, the Russian government once again “noticed” the animation of 2018 and provided additional incentives, new opportunities for training at state–run colleges, and tax breaks. There is a chance that this will accelerate the growth of the industry.
Conclusion: things are good and bad at the same time! As you may have guessed, 3D Animation in the CIS is not awful at all. It is quite good, at least the animated series! To improve the quality of feature films works, especially for animated features, we need a lot: time and perseverance for state support to work, more courageous producers, as well as thoughtful directors and screenwriters. But the main thing we need is the desire to stop trolling each other and keep making good stories!
This article will be constantly updated with new info. Want to add something? Konstantin will answer all questions on the Reddit post.
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