ANIMATION AND VFX MARKET ANALYSIS

Market Size and Trends

The global animation and VFX market is estimated to be valued at US$ 182.13 Bn in 2024 and is expected to reach US$ 348.24 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 9.7% from 2024 to 2031.

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The animation and VFX market has seen tremendous growth over the past few years. With growing demand for high-quality animated and VFX content across industries like gaming, entertainment and advertising, the market is expected to witness even stronger growth during the forecast period. Increased spending on animated films and series by major streaming platforms is driving new opportunities. Additionally, rapid growth in international markets like China and India will further boost demand. Expanding application of virtual reality and 3D technology is another factor expected to accelerate the market growth in the coming years. Developments in areas like real-time animation and photorealistic characters using Deep learning are likely to open new avenues for animation studios.

Rapid growth of digital animation, visual effects and gaming industry

The global animation and VFX market is increasingly being driven by the rapid growth of digital animation, visual effects, and the gaming industry. Over the past decade, the digital gaming industry has witnessed exponential growth in terms of revenue as well as user base. Mobile gaming in particular has emerged as one of the biggest drivers propelling the global gaming industry revenues. As games become more realistic with each passing year, the demand for high-quality animated characters, visual effects, interactive environments and scenes has surged tremendously. Leading game developers are heavily investing in building own animation studios as well as outsourcing work to top animation and VFX studios to support their creative needs. This rising emphasis on visually immersive experiences among gamers as well as developers is fueling significant demand for animation and VFX services worldwide.

At the same time, animation and VFX have become mainstream in digital entertainment beyond gaming as well. Streaming services are investing billions in producing animated web series, movies as well as live-action titles with VFX elements to engage audiences. Popular franchises like The Simpsons, Family Guy, Frozen, Avatar, Marvel movies, etc. have demonstrated how animation and visual spectacles can engage global fanbase for decades. This encourages more studios and producers to leverage animation, VFX for storytelling. Rising popularity of VR/AR technologies is also opening new interactive avenues for animation studios to explore. All these industry trends point towards continued growth in demand for high-quality CGI animated films/shows, VFX-enabled movies and so on. As digital technologies progress further, the applications of animation and VFX will also diversify across industries, ensuring steady expansion of this market.

Market Concentration and Competitive Landscape

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Emergence of Southeast Asian countries as hub for outsourcing

Another major driver for the global animation and VFX market is the emergence of Southeast Asian countries like India, Philippines, Indonesia, Vietnam, etc. as preferred outsourcing destinations for animation and VFX services. Over the past decade, these countries have substantially scaled up their animation and VFX capabilities to cater to worldwide demand at competitive costs. Countries like India in particular have produced top-tier VFX and animation studios on par with international standards.

Key Takeaways from Analyst:

The global animation and VFX market is poised to grow significantly over the next few years driven by growing demand from various industries such as media and entertainment, healthcare, and manufacturing. Increased consumption of animated and visual effects rich content across streaming platforms, video games, and films will accelerate revenue opportunities for industry players. Advancements in technologies such as augmented reality, virtual reality, and 5G will further fuel the adoption of animation and VFX worldwide.

North America currently dominates the market owing to strong presence of major players and rising investments from media companies and studios. Meanwhile, Asia Pacific is expected to be the fastest growing regional market with China and India emerging as hotspots. The demand in Asia Pacific will be driven by the expansion of domestic animation industry and abundant availability of low-cost skilled workforce.

However, intense competition among players and shortening product life cycle may pose challenges. Moreover, the market is highly dependent on a few big-budget movie releases and acceptance of new digital formats by consumers could restrain growth to some extent. On the opportunities side, growing in-game ad spends, expansion of animation studios into new content genres and demand for character merchandising present avenues for monetization.

In conclusion, while risks remain, the animation and VFX market has strong long-term prospects supported by secular demand drivers across industries.

Market Challenges: High initial investment requirement

The high initial investment requirement to set up animation and VFX studios is a major roadblock in the growth of the global animation and VFX market. Creating animation content requires heavy investments in high-end computers, specialized software, rendering farms and hiring talented artists and technicians. Setting up the necessary infrastructure alone may cost millions of dollars depending on the scale and scope of operations. This disproportionately favors large, well-capitalized studios while independents and startups find it extremely difficult to enter this field.

The specialized rendering processes and complex software involved in creating photo-realistic CGI and computer-generated animations demand computing power that is highly capital intensive. State-of-the-art designing and rendering software like Maya, 3ds Max, Houdini, etc. come with hefty price tags running into hundreds of thousands of dollars for commercial licenses. On top of it, studios must invest in high-end graphics workstations costing upwards of US$ 10,000 each to effectively utilize these tools. Since a single project may involve dozens of such workstations, the capital outlay on hardware alone can run into millions.

Moreover, the artistic talent required for animation and VFX is also very expensive to hire and retain. Experienced 3D animators, concept artists, texture artists, match movers, and riggers command huge salaries in competitive international labor markets. Significant recurrent expenditure is also incurred on regular software updates, rendering farm maintenance and artist training/upskilling. These costs present formidable barriers for new and small players to break into this specialized field. As a result, according to the World Bank, more than 80% of global animation output is concentrated among just 10 large transnational studios. This level of industry consolidation has slowed innovation and held back the potential growth and job creation prospects of this promising sector.

Opportunities: Growing social media & digital advertising

Growing social media and digital advertising platforms have opened up new avenues for animation and VFX companies to showcase their work and attract potential clients. With over 4 billion active social media users worldwide according to World Bank data from 2022, these digital platforms offer unprecedented reach for studios to A/B test content and generate viral popularity. Animation and VFX content is very well suited for short form, engaging videos targeted at social media users. Studios can leverage popular social media personalities as digital influencers to promote their work. Successful promotions on platforms like Instagram, Facebook and TikTok could exponentially increase awareness for studios' services amongst global audiences.

Furthermore, digital advertising continues to grow as the preferred medium for brands. According to UNESCO data, digital ad spending grew over 18% year-on-year globally in 2021. Animation and VFX companies can take advantage of performance-based online advertising methods to cost-effectively target prospective customers. Producing animated or VFX ads that tell brand stories in an impactful way allows studios to both increase their client base and showcase their creative talents. The data-driven nature of digital ads also provides opportunities to continually refine content strategies based on viewer analytics. As advertising budgets continue shifting online, remaining active across social media and utilizing different forms of digital ads will be instrumental to the growth trajectories of animation and VFX studios.

In the coming years, the proliferation of mobile and streaming content is anticipated to further boost opportunities. UNICEF forecasts over 6 billion smartphone users by 2026 who will consume vast amounts of visual entertainment on the go. Regional animation hubs can tap into the growing demand for localized content across devices and platforms. Attracting contracts from major streaming platforms and mobile games/apps will be important for animation studios worldwide to sustain business in an increasingly digital-first era. Continuous innovation and embracing new technologies will be crucial as the digital ecosystem evolves at a rapid pace.

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Insights By Animation Platform: Television and OTT contributes the highest share of the market owing to rising demand for internet-based streaming content

The television and OTT segment has experienced significant growth in the global animation and VFX market. This segment is expected to account for 31.3% of the market share in 2024 owing to the rising popularity of streaming video on demand services. Traditional television networks are facing mounting competition from streaming platforms that offer a huge library of content to users with far greater flexibility and freedom of choice.

Viewers today increasingly prefer to watch their favorite animated shows and movies according to their own schedules and across different devices. The availability of high-speed internet access and low-cost data plans have further spurred the consumption of on-demand content via subscription-based streaming services. OTT platforms are investing heavily in original animated web series and movies to attract new subscribers and boost engagement on their platforms.

Meanwhile, television networks are recognizing the need to offer their content online via the networks' own streaming platforms or through partnerships with major streaming players. Advertising-supported streaming is also gaining traction as brands leverage advanced targeting capabilities to reach wider audiences. As viewers continue consolidating around digital platforms, animation and VFX studios are ramping up direct-to-OTT output to capitalize on the opportunities in internet streaming and video on demand. With their ability to transcend boundaries, animated productions are especially well-suited for the borderless world of digital distribution.

The pandemic has further accelerated the migration of audiences towards OTT platforms for entertainment at home, boosting prospects for animation content providers targeting the television and OTT segment. Increased media spending by streaming companies to attract new subscribers will continue fueling demand.

Regional Insights

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North America has been the dominant region in the global animation and VFX market. The region is expected to account for 39.1% of the market share in 2024. Major studios like Disney, Pixar, DreamWorks Animation, etc. are headquartered in the U.S. and have produced some of the most successful animated films globally. The region also has a strong presence of VFX and animation firms like ILM, Digital Domain, and Rhythm & Hues which have worked on several big-budget Hollywood movies. With a thriving entertainment industry, skilled workforce, and supportive policies, North America provides filmmakers with all necessary resources to create high-quality animated content. Major sports leagues in the U.S. and Canada also hire animation studios for creating explainer and promotional videos. The presence of large media companies has continuously generated more animation projects in the region.

Asia Pacific has emerged as the fastest-growing market for animation and VFX in recent years, especially countries like India, China, and South Korea. Lower production costs have lured many international studios to outsource work to the region. Countries like India offer tax incentives for visual effects work, supporting the growth of local studios. To cater to the rising domestic demand, many Asian production houses are investing in original animated content for films and TV. China's expanding movie industry has seen the release of several Chinese animated films that were huge commercial successes both locally and internationally. South Korea's cultural influence through K-pop and K-dramas has boosted the growth of its animation studios. With rising incomes, Asia Pacific is witnessing a surge in theatrical and digital consumption of animated features, fueling further investments in production capabilities.

Market Report Scope

Key Developments

• In October 2022, Industrial Light & Magic (ILM), the renowned visual effects division of Lucasfilm Ltd. and a subsidiary of The Walt Disney Company, announced the opening of a new full-fledged visual effects and animation studio in Mumbai, India. The new ILM Mumbai facility will operate a complete VFX and animation services pipeline, working on content for the local Indian market as a means to tap into the Southeast Asian talent pool. The studio will take on VFX and animation projects of varying sizes and scales for film, television, streaming, and in-person attractions, leveraging ILM's decades of experience and expertise in delivering award-winning visual effects.
• In August 2022, Cinesite, a leading global visual effects and animation company, acquired a majority stake in FX3X, a long-time visual effects studio with offices in Skopje and Belgrade in the Balkans. The acquisition added a deep roster of talented creative VFX supervisors and production managers to Cinesite's team, significantly increasing its global capacity to serve clients across feature films, episodic television, and streaming content on a larger scale with even higher quality visual effects.
• In July 2022, Netflix, the global streaming giant, announced the acquisition of Animal Logic, the renowned Australia-based animation studio with over 30 years of experience in producing award-winning design, visual effects, and animation. The acquisition is expected to strengthen Netflix's existing animation business and significantly increase its long-term capacity in the animation space, enabling the company to better entertain its members worldwide with high-quality animated content.
• In July 2022, Cinesite, a leading global visual effects and animation company, announced the acquisition of a majority stake in Squeeze, an acclaimed animation and motion capture studio based in Quebec City and Montreal, Canada. The acquisition is expected to allow Cinesite to further expand its animation content and service offerings for international markets, while also bringing Squeeze's mocap and Unreal Engine capabilities into the Cinesite group to enhance its offerings for video game and film productions. Squeeze is known for its world-class animation portfolio, including the popular animated series "Cracké", and will continue to operate under its existing brand and leadership team.

*Definition: The global animation and VFX market consists of companies involved in the creation of animation and visual effects for various media such as films, television shows, advertisements, games, and other digital experiences. Key services include character animation, 2D/3D modeling, texturing, lighting, rendering, and compositing. The market has grown significantly with increased demand for high-quality animated and visual content across industries worldwide. Major players in this space provide animation and VFX services as well as animation and design software and tools.

Market Segmentation

• Animation Platform Insights (Revenue, US$ Bn, 2019 - 2031)
  • Television and OTT
  • Films
  • Advertisement
  • Gaming
  • Other (Ed-tech, etc.)
• Regional Insights (Revenue, US$ Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • Israel
    • South Africa
    • Rest of Middle East & Africa
• Key Players Insights
  • Adobe Inc.
  • Animal Logic
  • Digital Domain
  • Framestore
  • Industrial Light & Magic (ILM)
  • Luma Pictures
  • Method Studios
  • MPC (Moving Picture Company)
  • Pixar Animation Studios
  • Rhythm & Hues
  • Sony Pictures Imageworks
  • Technicolor Creative Studios
  • The Mill
  • Weta Digital
  • Worldwide FX