Animation Is Eating The World

he turn of the millennium brought a wave of improved 3D and CG technology that we've seen proliferate through fully animated properties as well as live action visual effects. This can be attributed to a mixture of things including an insatiable desire on the consumer side for higher quality CG content, a continuation of Moore's Law, and James Cameron.

In 2001 we saw the first feature-length film to attempt photorealistic CG humans with Final Fantasy: The Spirits Within (a film that went $67M over its initial $70M budget). 

A year later Lord of the Rings: The Two Towers utilized real-time motion capture for the first time in a feature film. But all of this paled in comparison to what James Cameron was dreaming about.

James Cameron's obsession with technology, perfection, and thus, massive risk-taking in filmmaking has been well-documented. In 1977 Cameron quit his job as a truck driver and entered the film industry after seeing Star Wars. He worked his way up from a miniature model maker to special effects and design work, culminating in a special effects director role in 1982 (which he was fired from). Cameron had always been obsessed with science fiction and wrote the screenplay for The Terminator (1984) after dreaming about the story while he had food poisoning, eventually releasing the $6.5M budget film to an over $78M worldwide box office success.

After a string of successes, Cameron took the biggest risk of his career with Titantic in 1997. Cameron's perfection led to him deep-sea exploratory filming, expensive large-scale sets, and other boundary-pushing digital effects done by Digital Domain, a VFX company Cameron helped start in the early 1990s. Titanic became the most expensive film ever made at the time, with a budget that ballooned all the way to $200M. The bet paid off and Titanic went on to make $1.8B and win 11 Academy Awards.

In 1994 Cameron wrote an 80-page treatment for an epic science fiction film that he planned to make after the completion of Titanic in 1997. He planned to release the film in late 1999 but after Titanic, he realized that the visual effects technology was not yet ready to achieve his grandiose vision of an entirely CG world with hybrid human-CG actors. Cameron would wait over 10 years (or as he would later argue for legal sake, 50 years) for the technology to catch up to make his dream into a reality, eventually beginning preliminary work on what would be known as Avatar in 2006.

Cameron continued to push the envelope of technical possibilities in film across motion capture (or as Cameron would create, performance capture), real-time rendering, and CGI with Avatar.

Cameron wanted to improve upon the past decades worth of technological development by blending human actors into their CG characters, mapping their emotions in real-time, and allowing him to see how their acting performed in the entirely CG world of the film in real-time. To do so Cameron worked with Peter Jackson's Weta Digital to create a new device that would incorporate every facial movement into the hybrid CG/3D character with minimal post processing.

"…the process of motion capture served only as a starting point for animators, who would finish the job with digital brush strokes. "Gollum's face was entirely animated by hand…King Kong was a third or so straight performance capture. It was never automatic." This time, Cameron wanted to keep the embellishment by animators to a minimum and let the actors drive their own performances."  - Joe Letteri, Weta Digital effects master

After seeing early renders of their first attempts, he complained about uncanny valley effects and Weta spent an entire year perfecting Cameron's invention with improved algorithms that would allow for raw motion capture data from the rig to render into a realistic, hybrid character. The results were groundbreaking.

Leading up to its release, rumors were flying about the film's near $300M budget (an additional $150M was spent on promotion) and concerns around any original story being able to reach the high bar for such a budget, even with Cameron attached. Avatar premiered on December 10th 2009 and went on to be the highest grossing film of all-time, doing $2.79B at the box office (Avengers: Endgame recently took 2nd place from Titanic at $2.77B).

Like Toy Story did for 3D Animation, Avatar is often considered one of the most important films in CGI technology history. As time has gone on, we've only seen these pioneers like Pixar and others continue to push the limits through the 2010s. 

James Cameron is currently working on four consecutive sequels to Avatar due for release in 2020, 2021, 2024, and 2025, at a collective budget of over $1B.

What parachutes he is building on the way down is anyone's guess.

Since Avatar, we have seen a steady progress of CGI technology innovation. The Lego Movie (2014) was widely praised (ironically) for its photorealism of entirely CG lego characters. Earlier this year the internet recently collectively freaked out about the staggering progress in physics simulation and photorealism for a Toy Story 4 (2019) cat. Pixar had been building towards this in public through simulations of hair physics and rendering since the creation of the hairy Sulley from Monsters Inc., to Ratatouille's simulation of hair when Remy jumps in water, and through Merida from Brave's large red hair. The team at Pixar has covered their technical progress across multiple research papers

Pixar has taken a similar approach when it came to modeling humans. The team rarely showed full humans in the original Toy Story, but as their technical abilities progressed through their next four films from 1995-2004, they were able to fully feature humans for the first time with The Incredibles' release in November 2004.

Later this year we'll see the live action remake of The Lion King (2019) (as Disney continues to trot out once profitable or popular 2D animated film remakes) which has started a debate about what constitutes "live action" anymore.

While The Lion King is no longer 2D animated, it is entirely done via CGI as tech has continued to blur the lines between animation and live action, or as Sean Bailey, President of Production at Walt Disney Studios put it:

While these properties all continue to push the envelope on blurring the lines between what's real or not, perhaps none has done so more aggressively than Netflix's series of shorts Love Death and Robots (2019).

Led by David Fincher and Tim Miller, LDR is a tour de force of state-of-the-art and experimental animation, featuring 13 studios and animators from nine countries.

Another episode titled The Witness, utilized a piece of software from the fashion industry (along with keyframing) to create an aesthetic and physics surrounding clothing that led the internet to accuse the filmmakers of lying about their lack of use of motion capture and live action actors. Creator Alberto Mielgo described it in detail below:

"The characters were animated naked, and then we started putting clothes on top…We used a software called Marvellous Designer. It's a fashion software that was originally created to help designers to create their clothes, but it has a brilliant way of simulating clothes. However, the program is not ready for a pipeline inside of it, so it's not the main program that people use. It's my favorite for the look of it, and I pushed my team to use it. We created a pipeline that doesn't actually exist, and that's why people are in shock because they've never seen clothes move that well." IGN, 2019

LDR wasn't without its issues, specifically surrounding claims of sexism, excessive nudity, as well as complaints about the actual stories. Despite these shortcomings it was the result of something larger happening within animation; a shifting distribution model, expansion of capital, and perhaps more opportunity for experimentation. 

Today's over-the-top (OTT) players are the 10,000 pound gorillas in the room, and while the animation throne of tomorrow could start with Netflix and possibly end with Disney+, two decades before BoJack Horseman was a twinkle in Netflix's eye, we had Cartoon Network.

After Turner Broadcasting acquired a portfolio of animation IP from MGM/United Artists as well as the entire Hanna-Barbera catalogue for $320M in 1991, they created Cartoon Network. The creation of Cartoon Network in 1992 helped push forward the idea of single-genre television channels (a contrarian bet that Turner had already had success in with CNN). This single-genre television channel strategy led to package deals within cable, driving the adoption of Cartoon Network and making it the fifth most popular cable channel in the United States in 1994.

With the new distribution, Hanna-Barbera's new division, Cartoon Network Studios was founded to create new shows exclusively for their network. Descriptions of this division sound a lot like Netflix today, as the division was known for offering creative power, high budgets, and even used data on short films to understand which pilots to create and spin-off as entire series'. Most notably, Dexter's Laboratory was the first spin-off, but other hits followed including Johnny Bravo, The Powerpuff Girls, and Courage the Cowardly Dog.

In addition to original content, Cartoon Network is widely credited for being the first company to successfully bring anime to the US, offering new distribution to cable TV via their Toonami block in 1997 for shows such as Sailor Moon and Dragon Ball Z.

The dedicated audience that would show up to Cartoon Network any time of day, craving cartoons also led to the rejuvenation of multiple properties via its Adult Swim (AS) programming block. After the rise of adult animation in the 90s, Cartoon Network launched Adult Swim (AS) in 2001, originally airing Sunday from 10pm to 1am ET (it now airs daily from 8pm to 6am). AS was created to capitalize on the fact that at this time almost one third of their audience was adults.

By 2003, AS had become a place for reruns of animated series that had been cancelled and none was more popular than Family Guy. Peter Griffin and his family premiered on AS on April 20th, 2003 and boosted viewership of Cartoon Network by 239%. After one year of running Family Guy reruns on the network, Fox brought back Family Guy. The same thing happened 4 years later when Futurama (which at that point had been on AS for 4 years) was revived after being cancelled by Fox in 2003.

Today, Cartoon Network is competing head to head with a plethora of new entrants within animation for both original content and syndication rights. This next age of animation could end up being an existential threat to the company that capitalized most on the 90s renaissance. But Cartoon Network's new distribution method and genre-focus foreshadowed what was coming as viewers became insatiable for vertical-specific content and commerce.

I don't feel the need to rehash the digital streaming boom and its impact on entertainment broadly. The graphic above accurately displays the progression of distribution from TV to the internet and the money that has followed. But while Netflix was a first-mover, the economics of more players has only led to a further explosion of demand for content, and animation is core to that demand.

The increasing number of players from tech platforms to startups like Jeff Katzenberg's Quibi to traditional studios like Disney getting into OTT distribution, should lead one to only expect the demand for original animated series to increase.

With an economic model surrounding subscriptions and scale, Netflix has taken note of the importance of animated content as it both travels incredibly well globally and has significant retention dynamics. Specifically, 60% of Netflix subscribers watch kids and family programming, and families cancel at half the rate of other subscriber cohorts.

This has resulted in 11% of Netflix's original content budget ($1.1B) being spent on animated original content in 2018, a figure they expect to increase to 15% ($5B) by 2022.

All of this demand is being felt on the creative side of the business which has led to the streaming services offering up to $1.2M per 30-minute episode, a figure that is double that of traditional players. In addition, companies like Netflix are giving up merchandise rights and in cases like Quibi, are even giving up long-term exclusivity of IP. The power dynamic has certainly shifted where content (and its creators) in some ways are king.

On the creation side, animation production companies have grown revenues at staggering rates. Most notably, Technicolor's visual effects division which is expected to do about $1B in revenue this year, was doing only $35M a decade ago.

While many of these figures are related to television, the dollars are also flowing on the film side of the business for 3D animation, as 2019 could be headed for a record year at the box office. In 2016, 3D animated films such as Finding Dory, Secret Life of Pets, Moana, and Zootopia grossed a cumulative $2.2B at the domestic box office, a figure that could be beat in 2019 with a slate of Toy Story 4, Frozen 2, and Secret Life of Pets 2. If Lion King is included in this category statistically, 2019 will almost certainly pass $2.2B.

With a seemingly sudden influx of demand over the past few years, the industry is struggling to keep up. Vince Pizzica of Technicolor says that the limiting factor today is availability of talent.

George Elliot, the head of Elliot Animation recently said in an Information article that he had turned down hundreds of millions of dollars of work because of a shortage of talent.

As we've seen with prior animation industry cycles, technology has created step-function changes in the industry at each inflection point. Whether this was during the golden age that benefitted from the advent of cel animation, the Dark Age which achieved scale from Xerography, the Renaissance which greatly increased pace and economics due to CAPS and digital ink and coloring software, tomorrow's animation industry will also benefit from a technological shift, and perhaps in an outsized way.