Animation World Can’t Stand Still : Valley’s Studios Must Adapt, Compete, Merchandise

Cartoons are big business in the San Fernando Valley.

Three of the top five studios are in the Valley area, and so are most of the animators, their union, the Disney studios and a number of smaller animation businesses.

Cartoons also are a changing business. The industry is growing increasingly competitive. Computers threaten to change the nature and economics of animation drastically. And the cartoons themselves have changed as well: They are tied more closely to merchandise than ever before.

The growing competition reflects how much money there is to be made. Combined, the three major television networks will spend an estimated $75 million on new episodes of Saturday morning cartoons this year. Local stations will spend another $120 million for new syndicated shows. Even more will be spent on licensing, full-length features and animation for commercials.

Growing Business

DIC Enterprises is evidence of that increased competition. A Studio City subsidiary of Radio-Television Luxembourg, the European entertainment conglomerate, DIC appears to have seized the top spot in the little-studied industry in less than three years of existence.

“A lot more people have gotten into the business,” said Ken Spears, executive producer at Hollywood-based Ruby-Spears Enterprises, which has scored hits with “Alvin and the Chipmunks” and “Mr. T.”

Walt Disney Productions in Burbank is among those moving into new areas. After ignoring the lucrative Saturday market for years, Disney now is producing two Saturday morning shows for airing by the networks this fall. Competitors say Disney, traditionally a bastion of animation-as-art, considered Saturday morning shows beneath its dignity because budget restraints require those cartoons to be made using a cheaper method called limited animation, in which there are far fewer drawings per second--and far less movement on the screen.

Then there is the challenge of technology. Computers already have infiltrated the cartoon business, where they now are used for coloration and other kinds of drudgery that make cartooning so time-consuming and expensive. But most in the industry say computers are not yet capable of animating people or animals.

‘Can’t Breathe Life’

“It can’t breathe life into our characters,” said Ed Hansen, Disney’s vice president for animation.

Rapid advances in hardware and software are likely to change that, however, and some say that computers will revolutionize the industry.

Hanna-Barbera, perhaps the most famous animation company and the one where several industry leaders got their start, spent nearly $10 million to develop a state-of-the-art computer that saves time and cuts production costs. Other smaller companies use computer graphics to produce special effects and designs.

One company, Robert Abel Associates, even has produced a computer cartoon that simulates human movements, something traditional animators have long held to be beyond the capacity of a machine.

Abel thinks technology like his--Abel Associates writes its own cartooning software--will produce new opportunities for riskier cartooning of the sort that networks, local stations and the animation companies themselves are increasingly unwilling to create.

Ties to Merchandise

“With computer technology, you could probably make a modern version of “Fantasia” within the next two years,” said Abel, whose company has won 21 Clio awards for its commercials.

“Fantasia,” a Disney classic first released in 1940, took three years to make and cost $2.2 million, using the kind of animation that is prohibitively expensive for almost anyone else nowadays. By comparison, Disney’s new film, “The Black Cauldron,” opening in New York in July, took four years and $25 million to produce.

These days, cartoons are tied to merchandise--toys, dolls, and so forth. That helps cartoon producers maximize profits and helps the networks seize a greater market share since they are offering cartoon characters who already are known. It also gives them promotion they don’t have to pay for: A child carrying a Smurf lunch-box is advertising Smurf dolls and cartoon characters simultaneously.

Indeed, cartoons now are often derived from merchandise. Cartoons have been made based on the Pac-Man video game, the Rubik’s Cube, Go Bots toys and Smurf figures. Relatively few original cartoon characters find their way onto the air these days, and classics such as Rocky and Bullwinkle, the hallowed squirrel and moose whose Cold War antics are practically legend in the industry, might never get off the drawing board today.

‘Risks Are Enormous’

“It’s a far more competitive environment than it used to be,” said Squire Rushnell, an ABC vice president who buys programs. “For a network to come in with a character no one has heard of, the risks are enormous.”

It is hard to say how much the cartoon business is worth to the Valley economy, but it is clearly worth a great deal. The Valley’s three largest studios--DIC, Filmation in Reseda and Marvel in Van Nuys--have 1,000 employees among them, and Local 839 of the Motion Picture Screen Cartoonists Union, based in North Hollywood, even runs a school for cartoonists with 150 students enrolled.

“Ninety-some percent of our members live in the Valley,” said Harry Hester, business manager for the 1,300-member union.

Those members have felt some of the changes in the cartoon business already, and are likely to feel more.

Much of the work in cartooning, which is extremely labor-intensive, already has been shifted to the Orient, where labor is cheaper and more plentiful seasonally. That suits producers, whose busiest season is summer, when they prepare for the fall schedule.

Union-Free

But increasing competition for television dollars is likely to put increasing emphasis on reducing costs. DIC, for example, is the only one of the major animation producers with a union-free workplace, and its competitors say that gives it lower costs. A Hanna-Barbera vice president also said DIC does more of its work overseas.

Solid revenue figures for the top animation companies are hard to come by, but ranked by the number of half-hour episodes now in production, DIC is far and away No. 1, with 351, followed by Hanna-Barbera, with 270. DIC says it anticipated revenues of $60 million this year, while Hanna-Barbera and Ruby-Spears, sister companies owned by Cincinnati-based Taft Broadcasting, had combined revenues of about $40 million for the year ended March 31. Both are in Hollywood.

Filmation, another major competitor, is doing just 98 half-hours, but that includes the fantastically successful “He-Man and the Masters of the Universe,” which is syndicated to stations reaching 94% of American households, the company says.

No revenue figures were available for Filmation, a division of Westinghouse Broadcasting, but based on its production schedule, it should gross at least $20 million, not counting licensing fees.

Money From Reruns

Marvel, which says it is producing 275 half-hours over the next two years, expects to gross $50 million this year. It produces “Spiderman,” “Dungeons and Dragons,” and many commercials. This fall it also will have a series based on the Muppets.

The animators make most of their money from reruns, syndication and merchandising. For example, Warner Bros. in Burbank is largely out of the cartoon business, but it still makes money off of Bugs Bunny features created more than 20 years ago.

For the skilled craftsmen and artists in the industry, the competition could be for jobs. Cartoons are expensive to make--$200,000 to $250,000 per half-hour episode--because of the huge amount of labor needed to produce them, despite the no-frills, cut-rate animation that is now the norm for television.

By now, Filmation is the only major studio that does all of its work in the United States, according to its president, Lew Scheimer. “It costs 30% to 40% more,” Scheimer said. With 500 employees, Filmation is the biggest single employer in the field. Disney, which is in Burbank, only has 200 people working in animation.

TV ANIMATION’S FIVE LEADING COMPANIES

Firm 1/2-hour U.S. segments employees in production DIC, Studio City 351 300 Marvel, Van Nuys 275 200 Hanna-Barbera, 270 300-700 Hollywood (seasonal) Filmation, Reseda 98 500 Ruby-Spears, 97 80-150 Hollywood (seasonal)

Firm Major shows DIC, Studio City Inspector Gadget, Kidd Video, Heathcliff Marvel, Van Nuys Spiderman, Dungeons and Dragons Hanna-Barbera, The Smurfs, Scooby-Doo Hollywood Filmation, Reseda He-Man and Masters of the Universe, She-Ra Ruby-Spears, Mr. T, Alvin and the Hollywood Chipmunks

Over next two years