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Will B.C.’s animation sector ‘settle back’ or surge?

Uncertainty over future spending increases as Hollywood giants cut back
Animal Logic animated the summer feature film DC League of Super-Pets, which was produced by Warner Bros. | Warner Bros.

Walt Disney Co. (NYSE:DIS) classics like Beauty and the Beast, Aladdin and The Lion King were pretty much mandatory movie treasures for any child of the 1990s. 

For animator David Burgess, they were another day in a rather magical office.

“I’ve managed to work on some really amazing projects and … be at the right place at the right time,” said the animation supervisor at Animal Logic Studios (Vancouver) Ltd., who cut his teeth in the 1980s animating TV series such as The Smurfs before landing at Disney in 1990. 

His latest employer most recently worked on the animated feature DC League of Super-Pets, which has grossed more than US$170 million globally since opening this past summer.

“I was [working] in that 10-year period where the studio was kind of on fire, you know, and really every film that came out was more successful than the previous film. And it was a really exciting time. It felt like we were making movies that the culture was interested in.”

The American-born, B.C.-raised animator eventually returned to Vancouver in 2017 after a three-decade sojourn to find the city had morphed into a bustling hub of animation populated by studios like Sony Pictures Imageworks (Vancouver) and WildBrain Ltd. (TSX:WILD).

But it’s also a city in the midst of a tightrope act as other studios have been flooding in to set up shop and scoop up talent from a labour pool markedly smaller than that of L.A. The industry is also facing potential headwinds as Hollywood studios and streaming giants re-evaluate their spending this year after investing heavily in content.

Both Disney and British visual effects (VFX) giant Double Negative Ltd. (better known as DNEG) unveiled plans last summer to launch animation studios in the city and hire hundreds more workers.

Aussie animation house Animal Logic followed suit this past spring and announced it would double its headcount to 600 workers in the coming years. Construction on a new 110,000-square-foot studio is underway in the city’s Mount Pleasant neighbourhood, directly across the street from Hootsuite Inc.’s headquarters.

This surge in activity comes as B.C.’s combined film, TV, animation and VFX sectors generated a record $4.8 billion for the provincial economy in 2021, according to the Vancouver Economic Commission. 

Animation dollars were not segmented into their own category but the combined animation and VFX sectors generated $1.2 billion of that total spend. That’s up from $974 million a year earlier, when the pandemic sent animators to work from home en masse.

While those dollar figures exceeded the expectations of acting Vancouver film commissioner Geoff Teoli, he said “we expect it to settle back a bit going forward.”

This comes as questions hang over further spending at Warner Bros. Discovery Inc. (Nasdaq:WBD), the parent company behind DC League of Super-Pets. The entertainment giant generated waves of headlines over the summer related to spending cuts that saw the nearly complete Batgirl film – made for the HBO Max streaming service – scrapped altogether in favour of taking a tax write-down.

Meanwhile, Netflix Inc. (Nasdaq:NFLX) chief financial officer Spencer Neumann told investors in April that his company would be “pulling back” on how much it spends on content after investing US$17 billion in those ventures in the 2021 fiscal year.

This comes after the company, which counts on B.C. for animated content and service work for live-action production, began shedding subscribers earlier this year. But co-CEO Ted Sarandos also indicated during an investor call that Netflix would maintain spending, leaving it unclear just how much money the world’s largest streaming service will be putting into future productions.

Its designs on B.C. are less opaque.

Three months after that investor call, Netflix revealed in July that it was acquiring Animal Logic for an undisclosed amount. The all-cash deal includes both the company’s Australian headquarters as well as its Vancouver operations.

Burgess said the Netflix acquisition came as a big surprise, but he’s been told the company doesn’t plan to make any changes as Animal Logic expands its headcount and prepares to move into its new Mount Pleasant studio. The deal is expected to close by the end of the year.

“They really are loving what we’re doing. We have two live projects with them right now we’re wrapping. We’re in the production of another,” he said. “As we get more involved with Netflix that means we can consult more, we can get involved in more projects early. It kind of changes that vendor-client relationship a little bit because … we’re all the same company.”

Meanwhile, Ironwood Studios co-founder Alex Godfrey sees some “belt-tightening” ahead for Netflix.

“But I don’t think you’re going to see a decline in content being produced,” he told BIV.

He helped launch Ironwood’s Vancouver facility in 2015 by converting a warehouse into studio space amid significant studio shortages across the region. (Netflix’s A Series of Unfortunate Events was among the first TV productions to book space there.)

Ironwood was later acquired by William F. White International Inc., where Godfrey now serves as vice-president of studios.

“I think you will see some smarter spending. But, ultimately, I don’t think we’re going to feel it.”

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