I wanted to talk about outsourcing of animation that many US companies are doing. The main reason to outsource work and make the experience of producing animation more challenging is because of cost. In my previous roles I had learned the Salary for one US-based artist could pay for 4-5 artists in India. Even if it takes the overseas artist 3 times as long to complete the task it will still be a cost savings.
Outsourcing animation is by no means a new trend, and has been going on for decades. In a 2012 interview Steve Hulett of the Animation Guild said “We instituted strikes over run-away production in 1979 and 1982, winning the first and losing the second.” So you can see this is not a new issue. I believe what we have seen in recent years is technology making it easier and more possible to do business in this way. You can now easily have a video call with artists in India, Malaysia, or China which you could not do as easily a decade ago.
One of the popular arguments I would often hear is that the quality of work is not as good, and your value of production will go down. Unfortunately, that is no longer as strong of an argument as the overseas artists get more talented and more efficient.
Outsourcing overseas is not the only worry for a US-based artist or animation/VFX company. Our neighbors in Canada are also under bidding US animation companies. I’m sure you have heard of their amazing tax credits, and I have heard for every $1 spent on labor they get $0.60 back. While I have not been able to find anything backing up that claim I have found the Ontario Computer animation & Special Effects Tax Credit is for 18% of eligible labor costs for a Canadian corporation that is Canadian or foreign-owned, has a permanent establishment in Ontario and files an Ontario corporate tax return. Being able to cut 18% of your costs would allow you to save a lot of money when you are talking about project budgets that are $100,000 to $500,000 or more.
The larger studios like DreamWorks Animation, and Disney are also outsourcing a lot of their animation work. In animated TV production they will often have pre-production here in the US, but then outsource all the production work. Many of the Disney Junior and Cartoon Network shows are done in this way.
All this really makes one wonder why anyone would open up an animation production company in the US. These are things you have to come to terms with when we have a global market. There will always be someone that can do it faster, better and cheaper then you can. Even with all the outsourcing the US animation industry is stronger then it has ever been. The budgets for projects might be going down, and that is a reality we all have to come to accept. Labor rates in other countries are increasing, and Canada’s tax credits are getting smaller. I feel this is a natural balancing out that will take place over the next decade. I don’t know if US rates will ever be as low as overseas, but it is not always about price. Having an excellent business experience is a big factor. There is a tipping point where the savings are not enough to give up working with someone next door to you, or at least in the same time zone.
While I plan to work with as many US-based artists as possible I have to be open to working with artists from all over the world. There are a lot of really talented people who live outside of the US, and it would be silly not to work with someone simply based on their location. Hopefully the industry will change to making hiring decisions based on talent, and less about saving money. Regardless of where you are, you have to be able to offer great work, reasonable budgets, and an excellent business experience.
If you have not already, I hope you will join me on my journey by subscribing to my blog. If you have any thoughts or advice I would love to hear what you have to say, so please feel free to leave me any comments below. Otherwise, be sure to stay connected with me on Twitter (@MillerAnimation). Only Time Will Tell.