Chris Delaney, founder of Vancouver animation house Delaney & Friends Cartoon Productions, began to notice a lull in demand for 2D animation four years ago and it hasn’t shown any signs of picking up. In the early to mid-’90s, Delaney was producing 30 to 40 spots a year, and now, he says, he’s lucky to get eight or 10.

Commercial animation work has been dwindling steadily for the last five to seven years and Delaney says the last two years have been the worst ever. Although partially due to reduced advertising budgets in general, rapidly changing technology, an increasingly saturated marketplace and the industry’s sporadic appetite for animated spots also contributed to the decline.

The closure of The Animation House in Toronto, which stopped operating in April, is a testament to the changing marketplace. Yet, while Canada’s most successful and established commercial animation facility was unable to survive, many smaller animation companies, like Delaney & Friends, which opened in 1984 doing primarily commercial cell animation, have been able to survive and even thrive in this uncertain marketplace by diversifying into long-form series work and adopting new animation technologies.

In the case of Delaney & Friends, long-form work has helped it through the lulls in commercial work and provided a more stable source of revenue. In the mid-’90s, Delaney & Friends produced 26 episodes of Nilus the Sandman for Family Channel. Currently the shop is in production on the animated series The Bottle Imp for Teletoon.

‘Unlike commercials, which you get paid for and they’re done, with longer programming, if you own part of it, you have a long-term earning potential,’ says Delaney.

Delaney’s company has further diversified into 3D and game development with the addition of 3D animation company Brainchild and interactive game developer Furious Entertainment, making Delaney and Friends the 2D arm of parent company Second Sun Entertainment.

This, says Adam Shaheen, executive producer at Toronto’s Cuppa Coffee Animation, reflects a wider trend in the business. At one time, 2D animation was the only choice, but today there are more companies offering a wider range of services as CGI and 3D character animation compete with traditional animation for reduced board flow.

‘Gone are the days that there were only one or two companies offering the same services,’ says Shaheen.

In its 10-year history, the majority of Cuppa Coffee’s work has been in commercial production, but over the last five years the animation house has expanded into long-form series to supplement dwindling commercial work.

While new technology may have cut into the traditional animator’s workflow, it has also eased the pressure of shrinking budgets. ‘[Technological advances] have enabled us to keep costs down and still make a profit,’ even though the production costs of making a commercial have not grown in the last eight years or so, says Delaney.

In the case of The Animation House, a constant flow of work and a long list of steady clients may have worked against it.

‘Animation House had all the big agencies in Canada in their backyard, so they may not have detected the trends as early as we would,’ says Delaney. ‘We always had to kick and scrape for everything we got, so we knew how tough it was and could see the trends coming early. That may have been an advantage for us at the end of the day.’

The trick now for animation companies is to predict trends and specialize enough to be among the best at what they do, but not so focused that they cannot survive a time where their specialty goes down in popularity.

Specializing in stop-motion animation made sense for Philip Marcus, who was represented as a stop-motion director by Animation House from 1996 to 2000, because there were few competitors and the style was in fashion…at the time.

In the late ’80s and early ’90s, there was a lull in demand for Marcus’ specialization, but in the mid-’90s, he says ‘stop action became the flavor of the month again’ and in 1994 he opened his own Toronto studio, Quack Quack.

When the flow of commercial work dropped off again in 2000, Marcus realized that to specialize in stop action, he could not depend on commercial work and began looking to longer-form work and children’s series to fill the lulls in commercial work.

Marcus recently animated The Stone of Folly, a stop-action short produced independently by director Jesse Rosensweet, which won the Jury Prize for best short film at Cannes 2002.

Toronto house TOPIX, which for 15 years generated 98% of its business from commercial work, has also been able to diversify effectively in response to decreased demand for commercial animation by keeping its business structure flexible. ‘We’ve never had a five-year plan. This business moves in six months, not five years,’ says TOPIX partner and executive prroducer Sylvain Tallion.

In early ’96, TOPIX went through a significant drought on the animation side, going five months without a single job. However, Tallion had predicted changes in the flow of commercial production and a year earlier started a division called Mad Dog, which opened the company up to digital compositing, digital post-production and the F/X world. In January 2001, TOPIX added long-form work to its commercial foundations, opening sister company Mr. X, which does compositing and CGI animation for feature films.

Up until ’95, TOPIX’s revenue was derived entirely from either character animation or graphic design work; now Tallion says a larger portion of their revenue comes from post-production.

‘I don’t know why, but animation falls in and out of favor, whereas post-production doesn’t seem to dry out as much,’ says Tallion. ‘We’ve been fortunate to have just enough diversification so that we’re still specialists in a number of areas that complement each other, but can also survive the trends when certain things fall out of favor for six months and then are all of a sudden back.’

Growing up amongst the influence of new technology may have been an advantage to companies that started during the last several years in that they are accustomed to a rapidly changing industry that is tied intricately to the pace of technological advances.

‘Commercial work is sporadic, you have three months work then there is a lag,’ says accountant-turned-animator Jason Surridge, owner/director at three-year-old Vancouver animation studio Pork ‘n’ Beans. ‘The problem is retaining the artists and keeping your staff busy.’

Pork ‘n’ Beans entered the commercial industry on the new media side, creating online spots for sites like Nintendo, Macromedia and Shockwave. This gave the shop a head start in Flash animation, which helped it land a job animating 13 episodes of Yakkity Yak, a children’s series on Teletoon produced by Vancouver animation company Studio B.

-www.delaneyandfriends.com

-www.cuppacoffee.com

-www.topix.com