A nation of animation: How Irish studios can sketch a bright future

Cartoon Saloon boss Paul Young with some of his studio’s creations: clockwise from left, The Breadwinner, Puffin Rock, Song of the Sea and The Secret of Kells
Cartoon Saloon boss Paul Young with some of his studio’s creations: clockwise from left, The Breadwinner, Puffin Rock, Song of the Sea and The Secret of Kells

The rise of the streaming giants has fueled growth, sparking a fight for fresh talent, writes Sean Pollock

Just off the golden Greek beaches of Paros, Paul Young, co-founder and chief executive of Oscar-nominated Irish animation company Cartoon Saloon, sketched out his first business lesson – that his talent for illustration could make him money. In the early 1990s, Young was travelling across Greece with friends, having completed a degree in art and design at the University of Ulster. The “extended holiday” included having to take on odd jobs to finance the trip.

It was on the tiny Greek island that he learned there was money in animation. “I started working selling sandwiches outside the front of nightclubs to make money,” he laughs.

I soon learned that I could make far more sitting next to these two Ukrainian guys on the beach doing caricatures of tourists, while they were doing longer portraits.

“I found I was making more money than my mates by just selling one caricature, that wouldn’t take so long, direct to tourists.

You could say I learned my first bit of business on the streets of Paros; it was the first time I really earned money from drawing anything.

Armed with his first experience of earning money from his passion, Young returned to Ireland with an appetite to embark on a full-time career in illustration. In 1995, he enrolled in Ballyfermot Animation College in Dublin, where he met his fellow co-founder, Tomm Moore.

After college, the pair went on to form Cartoon Saloon in 1999, alongside Nora Twomey, starting with a small team of 12.

Young says the animators were scrambling to find investors and grants to allow their collection of drawings to jump from the storyboard and on to the screen. He found himself drawn toward the business side of the venture, mainly because his desk was next to the phone.

Cartoon Saloon attracted the attention of Frenchman Didier Brunner, who ran Les Armateurs at the time, following a trip to Berlin. He backed The Secret of Kells animation project, going on to co-produce the film and helping it to secure investment in his homeland and Belgium. “Kells came out and didn’t really make much of an impact in Ireland,” he says. “It made more waves in the US. It got picked up by GKIDS Films, which was the first time they had theatrically distributed a movie.”

The project went on to achieve success, leading to the Kilkenny firm’s first Oscar nomination. Buoyed by more internationally successful productions, including Angelina Jolie’s Oscar-nominated The Breadwinner and a partnership with Canadian company Mercury Studios, Cartoon Saloon is thriving. It now employs 300 animators, across its studio and Lighthouse Studios, its joint venture with Mercury. “It all grew very organically,” Young says, “but driven by our creativity.”

The story of Cartoon Saloon’s growth is one synonymous with many other animation studios. Animation in Ireland has flourished over the past decade. According to figures from Animation Ireland, 10 years ago, only 70 people worked in the industry. That figure has grown to over 1,600.

The demand internationally for original content has also increased exponentially. According to Loup Ventures, a venture capital firm, Netflix was projected to have spent $1.1bn (€997m), 11pc of its overall original content budget, with Amazon spending $300m on animation in 2018.

By 2022, the firm estimated that this investment would grow dramatically to nearly $5bn for Netflix and $1.86bn for Amazon Prime Video.

According to figures released by Screen Ireland on Friday, the annual production activity in the animation sector has increased fourfold over the last 10 years to €180m in 2019. The screen industries contributed €357m to the Irish economy.

Traditional broadcasters including the BBC, Nickelodeon and Disney are well in there with the Irish industry, as are the new streamers such as Netflix, Amazon and Apple.

John Gleeson, a tax partner at Saffery Champness specialising in the Irish film and television sector, believes the animation industry in Ireland is probably the biggest per capita in the world.

“I think the Irish animation sector has a far higher profile than the UK sector or any other European country for that matter,” he says. “As far as my perspective on it is, Ireland has a very scaled industry, and Canada does. They both seem to be the international market leaders. If you look at the amount of content spend per population compared to any other jurisdiction, I’d be surprised if it were not the largest one per capita.”

Gleeson, who has advised on over 600 individual film and TV projects since 2005, and helped raise €500m in equity finance for projects, says the sector here has enormous potential for further growth thanks to several strengths, including the favourable environment for investment, the skilled studios and the flourishing relationship with new, content-hungry online streamers.

“The online streamers have been a real catalyst for growth,” he says. “Their need for content has driven the sector.” But Gleeson also has concerns for the sector. He says there is a need to attract more talent to help feed the streamers’ insatiable demand for content.

He also mentions some issues with the Section 481 tax credit. The rate of the tax credit is worth up to 32pc of eligible Irish expenditure, with an additional 5pc uplift for projects shooting in the regions, bringing the value of the tax credit up to 37pc in these circumstances.

Earlier in the year, the animation industry highlighted concerns over moves to make claiming the tax credit self-assessed and also a lack of guidelines for the process from Revenue.

While industry sources believe many of these issues have been addressed, Gleeson says there is still a bit of “bridging”.

One issue is the coupling of animation and live-action within the same rules under Section 481, despite animation creating longer-term jobs compared with live-action filming. He also says the regional uplift system, which was designed to boost industry training schemes and skills development across the regions, is not working for everyone in the industry.

This issue had affected rurally located indigenous animation studios such as Cartoon Saloon, which mostly provides full-time, pensionable jobs and has its own training schemes.

“It could potentially [be an issue for foreign direct investment],” says Gleeson. “Foreign companies could be coming here with the expectation of achieving the regional uplift and then not get it.”

Overall, Section 481 has been a driver of growth for animation, making it easier for creatives to attract the backing of deep-pocketed investors. Louise Cornally, senior vice president of finance and business affairs at the animation studio Brown Bag, says Section 481 has played a massive role in driving the sector’s growth: “People misconstrue the importance of Section 481. If we didn’t have it, we wouldn’t have an industry here. It is really that plain and simple.”

Cornally says one of the main challenges the industry is facing is accessing and attracting more talent. She says the sector was bolstered by changes to employment permit regulations, which made it easier for businesses in animation sectors to source talented animators from outside the European Economic Area (EEA).

Brown Bag, which was bought by Toronto-based 9 Story Media Group in 2015, has established a relationship with the Department of Business due to the high number of employees from outside the EEA it requires. “It has certainly helped matters,” says Cornally, who adds that the business has also been supporting schemes to bolster local talent entering the sector.

Business at Brown Bag has been positive, with Cornally recognising that it can be challenging at times for her as a business person, rather than a creative, to get people to acknowledge the importance of specific policies.

According to the most recent accounts for Brown Bag’s parent company, Niagara Films Ireland, revenues were €50.7m for the year to August 2018, up 24pc, while pre-tax profits were €6.8m.

The need to embrace business skills within the industry is something noted by John Phelan, independent chairman of Animation Ireland. He says it is essential for the industry’s long-term growth that it becomes more professional.

Growth is one thing that we need to do, but it’s reliant on the talent coming in,” he notes. “What we’ve been trying to do over the years is professionalise the industry so it’s not just a creative, fluffy bunny industry, but one that is getting wrapped up with deep technical skill sets and professional accountants, project managers and commercial employees.”

Of further importance for Phelan is to see more Irish studios not just service the explosion in demand for the online streaming companies, but also move their work up the value chain by creating more intellectual property (IP).

Paul Cummins, founder and chief executive of Galway-based Telegael, says that developing IP is such a significant and sustainable revenue generator that it has been a policy to retain as much of it at the animation studio as possible.

In our case, we try to retain some of the rights, and that has been significant for us and allowed us to build up a library of rights and intellectual property,” he says. “That’s important for the industry, animation in particular. If a series is successful, you can generate revenue from selling broadcast rights internationally, merchandising, spin-offs, publishing and music.”

“Everyone is trying to create a Peppa Pig,” he adds. “That’s probably worth a billion euro.”

The rise of the streaming companies has meant some animation studios in Ireland have solely acted to serve the need to produce content while ignoring developing IP.

Young, Cummins and Cornally all agree that the rise of the streamers has been the catalyst for growth in the industry in recent years, but that it is important for studios to produce IP and create new revenue streams.

Industry tax expert Gleeson says the demand for more content could end up putting pressure on the Irish industry as it attempts to “keep up” with the market, while maintaining its solid reputation for delivering.

The demand has also led to some studios setting their sights on further expansion. Cornally confirms that Brown Bag has three or four new projects, meaning it could be hiring up to 60 new roles. Young also confirms there will be job growth across Cartoon Saloon’s two studios, growing from 300 employees to around 400.

As Young reflects on the company’s success, he mentions that Cartoon Saloon is currently carrying out an exercise to help it “figure out” what is likely to occur over the coming six years.

With the high-profile release of Wolfwalkers coming up through Apple’s streaming service and the development of My Father’s Dragon with Netflix, the studio is also exploring opportunities, with particular focus on China and Japan.

Young says when it released its series Puffin Rock in China through the streaming service Tencent Video, it accrued 100 million views in one month. “It inspired us to do more,” he notes, mentioning that the company is actively trying to get its original productions into more regions.

With business booming, Young says he is looking ahead with confidence. The entrepreneur believes retaining IP is essential and will help keep the pennies rolling in, even if the demand from streaming services drops. But with the appetite for content showing no signs of abating, Young is excited about the future;

“I’ve never felt better,” he says. “It’s a great time to be producing content; maybe it’s a feeding frenzy. These kinds of periods come and go but one thing is for sure: there is definitely a thirst for content.”

Source: Sean Pollack, Irish Independent Business