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Animation Business questions

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Animation Business questions

Hello all:

I'm new to the forums and as I posted on my "hello" post I hope to become a frequent poster. I'm currently a film student but looking at attending a graduate school with a program in film and animation in Fall 2009. Maybe you have suggestions?

The primary reason for this post is that I was seeking help from people who have worked for or own animation studios. I have a project for a "Business of Film" class in which I have to create a business. I decided, since my interest is in animation, to "start up" an animation studio.

Here is the assignment (abridged):
"You will be presenting to the class your company, your company name, its structure (which legal entity you chose), your mission statement which is to be at least one half a page typed, your brand, and some information on the competition in your market. Having a logo for your new company is also a good idea. This is what you will be presenting to your banker. Your mission statement is basically a written statement about your company, why you are starting it, who you are, what is your background, and how you will start up and compete."

I have the company name, structure, logo and brand decided but I'm not too sure what my competition would be - let's say for assignment's sake that I'm starting this on the East Coast - but what are some things that I might want to present to a bank in order to get a loan? I might say that I want to start an animation company that, right now, only does 2 and 3D animation projects as needed for commercials, whatever, but plan on doing "big" projects within five years. Is that a good selling point to an investor? What kind of staff do I start with at the outset? What sort of equipment do I need if I plan on doing, maybe, 5-30 second spots in 2 or 3D?

I just wanted to get some ideas and suggestions from people who have actually gone through this before.

Thanks!
Chris

I have the company name, structure, logo and brand decided but I'm not too sure what my competition would be - let's say for assignment's sake that I'm starting this on the East Coast - but what are some things that I might want to present to a bank in order to get a loan? I might say that I want to start an animation company that, right now, only does 2 and 3D animation projects as needed for commercials, whatever, but plan on doing "big" projects within five years. Is that a good selling point to an investor? What kind of staff do I start with at the outset? What sort of equipment do I need if I plan on doing, maybe, 5-30 second spots in 2 or 3D?

I'm not fully sure of the best way to answer this, but here goes....

Approaching a bank about starting up a animtion studio is like approaching them for funds to build a UFO--its something quite outside their usual exposure.
That is unless they have a banking client that is an animation or film studio already.

Studio startups have the problem that a studio business just doesn't fit the cookie-cutter template of other businesses. This is because the commodities you'd have are purely skills and intellectual properties, things that banks have a very hard time qualifying.

What a start-up needs to do is establish their existing business for the sake of the loan officer--that is to say, to establish they have "sales" ( re: freelance contracts) as a individual, or small group of individuals, that have them so busy that they need to accquire real estate and equipment to take their small business to the next level.

The reputation an animator would have as a freelance contractor would, in essence be the starting reputation of his studio.
Their competition is essentially irrelevant, because they simply become another service supplier in the overall system. Their ability to land contracts comes solely from their reputation, not their location or presence like other traditional business.
In fact, your "competition" might actually be your main suppliers in the opening days of your studio, as you could well take on outsourced work that they cannot handle themselves.

If the person(s) that starts the studio cannot supply work to their clients, then their income stream will dry up very fast.
There's many examples of start-ups suffering exactly that fate.

Under-bidding for contracts doesn't always gain said contracts, because lacking a proper budget means the production line (and business) itself suffer due to talent turn-over, inability to accquire or maintain equipment or supplies or other considerations.
Its very hard to project income streams because those are dependant ( at first) on the contracts you accquire, something that can change frequently.

Its very hard to give a banker hard numbers that state you can move X-number of units in Y-amount of time, earning Z-amount of dollars--simply because animation studios don't work in those terms.
The assets you'd have, therefore the only collateral you can offer is your abilities.
Your other assets would be your job experience, the numbers and prominence of studios you have worked for in the immediate past--and your contacts within those other studios.
See, a lot of that is bullshit to banks because they are ephemeral qualities, loaded with uncontrollable variables.

As for staff numbers....
Well......who does what job? You should probably know what those answers are by now, based on material covered in your classes.
Anything your immediate staff cannot do means someone has to be hired, or that job outsourced.
Equipment has to cover the relevant tasks at hand.
If you are doing 2D, then you need desks and discs for anyone providing art, a camera set-up or two to shoot line tests, with another camera for shooting final takes.
For 3D, computer work station for all concerned again, with considerations to what degree of technology do you want to embrace. Do you want multiple monitor set-ups, or Cintiqs? Do you want very high grade processing power?
Obviously you'd have to have legit software or perhaps even proprietary software created.
Then all of that needs to be compiled, rendered, edited, sound and effects added, and so-on.
Then it needs administration to guide it all along.

Selling points to an investor........well, ideally you'd want to find someone that knows something about the entertainment business.......or some fool smitten enough by the glamour of the biz to trust you with their money long enough for you to make a profit. An animation studio is a RISKY investment because its subject to very fickle trends in entertainment, and creative people. There's a glamourous (a myth) connotation about animation, that most of the public at large just do not fully understand.
More than a few investors have jumped on board with nascent studios because they see some folks with talent, working on some properties that look like stuff they have seen on TV or in movies, and using skills and methods they seldom understand at all.

That self-same investment support can pull out just as fast because that same lack of understanding can have investors evaluate the business by qualifications that just do not apply to an animation studio.

"We all grow older, we do not have to grow up"--Archie Goodwin ( 1937-1998)

Ken:

Thanks again for your help!

Not sure of the letter grade but the comment I got was, "Overall great. The idea and concept is solid." So I'm guessing I will get an A when I return to school on Monday.

The next part of the project is to create a budget for my animation studio including the initial investment as well as any expenditures and revenue over the course of the first year. What are some things I might want to take into consideration? I have a list of expenses, but I'm not sure what an animation studio, in its first month or three of opening, can expect as far as revenue and costs. Any thoughts?

Here is a list of some of my expenses:

MONTHLY COSTS
Salary of Owner
Full-Time Receptionist
Full-Time Artists
Part-Time Artist
Lease Payment
Loan Payment at 7%
Worker's Compensation
Electricity and Utilities
Telephone and Phone System
Internet/Web Hosting/Bandwidth
Computers
Meals and Entertainment
Janitorial
Office Supplies
Commercial Phone Bill
Insurance
Postage
Marketing
Mailings
Business Cards

ONE TIME COSTS
Carpet
Business License
Logo Design
Kitchen Furniture
Software
Cintiq Tablets
Animation Tables

Chris

Ken:

Your post was great. I'm wrapping up the "paper" now and plan on presenting it tomorrow afternoon at some point. I'll let you all know how it goes.

Some questions I had, though:

I wouldn't be hiring animators on full-time at the onset because I probably wouldn't have many contracts, right? What is the average pay rate for 2D or 3D animators if, say, I had a request for, let's say, an animated bunny for 15 seconds of a thirty second commercial? I guess 3D would pay more than 2D but how much more? What are the average turn-around times for something like that?

Thanks again so much.

Chris

I guess 3D would pay more than 2D but how much more? What are the average turn-around times for something like that?

Oooohh don't be thinking that........2D is far more labour-intensive than 3D.

As far as pay goes: consider that skilled animators ( 2D or 3D) are classified in the same arena as Astronauts, Doctors and Airline Pilots for "expertise"--so ideally they should be paid at about the same level.

Definitely not minimum or low wage--figure $1500 to $2000 a week, going up to $3000 to $5000 per week depending on skill level.

Anything less than those minimums and you'd have to wonder what incentive is there to work for your shop as opposed to another one with an established rep?

Figure an animator can produce about 10 feet of good quality animation per week.
10 feet is 160 frames, or about 6.5 seconds.
In 2D, that'd be just the animation, you can add clean-up and inbetweening on top of that.
In 3D, you'd have builds/rigging and what-not taking up time before animation itself.
For a 15 seconds of animation for a 30 second spot, a safe timeline is around 3 weeks to complete.

"We all grow older, we do not have to grow up"--Archie Goodwin ( 1937-1998)

Plan:Follow the Leader

Hi I'm posting on this thread so I can follow the conversation if it starts again. Also if anyone is interested in reading my business plan for an animation media company message me.

:D

I don't know if this is related enough to the topic at hand, but I have a project of my own that needs some animators. Right now, my funds are tight, but I am also working on that as well. To make things cheaper, simpler, faster, and easier, the project will be a composite of 3D render, 3D machinma, 2D hand-drawn, and 2D falsh. For this reason, I will hire multiple animators.

randomness