Faced with a loss of service work, animation houses across the country are exploring new ways to stay in the black, such as developing in-house content or branching out to the side industries of teaching and video games.

Barry Ward, president of Vancouver’s Bardel Animation, compares the current state of affairs in the animation industry to that of the Internet. Both have reacted to a glutted market.

‘There was the dot-com boom and bust, but the Internet survived. That’s what’s happening in animation, although to a lesser degree,’ he says, offering that companies with solid business plans will get through market changes big or small. Cartoon profits have dropped in recent years, due largely to greater overseas competition driving down licence fees. U.S. networks such as NBC and Fox, unable to compete with Cartoon Network and the like, have also stepped away from Saturday morning cartoons.

At Bardel, and many companies like it, being solid means being diverse. Ward says his company is ‘not hurting too bad’ thanks to a hodge-podge of film, video and gaming jobs it has taken on for Disney Interactive (The Emperor’s New Groove) and DreamWorks (The Prince of Egypt, Spirit), among others.

‘A portion of revenue still comes through service work, but what we’re all really trying to do is own our own franchises and get into the game of content creation,’ he says, pointing to similar moves at Vancouver’s Studio B Productions and Ottawa’s Funbag Animation Studios and Dynomight Cartoons. ‘That’s the gold at the end of the rainbow. As soon as you own content, those assets add a huge amount of value and allow you to capitalize on the product as a franchise.’

Bardel’s wholly owned half-hour special The Christmas Orange aired last month on Teletoon in Canada and ABC Family in the U.S., and the company is preparing its 13-episode series Silverwing, having recently picked up the rights to the series of best-selling kids books. (‘We own everything – licensing, merchandising, distribution – the whole kit and caboodle.’) The Vancouver company also sold 13 five-minute eps of its adult-aimed Mr. Dink series to CTV’s The Comedy Network.

Toronto’s Cuppa Coffee Animation has likewise stayed in the black thanks in part to its diverse client roster, says president Adam Shaheen. The company has done brisk business in broadcast design for a decade, but four years ago expanded into long-form service and proprietary projects. Cuppa Coffee will deliver 52 11-minute eps of the stop-motion series Jo Jo’s Circus to Disney later this year, and has partnered with a ‘major U.S. and U.K. broadcaster’ on its in-house series Ted’s Bed.

A loss of service work has spurred both in-house development and animation classes at Ottawa’s Boomstone Animation. ‘We service the large companies like Nelvana and Funbag, so [the slowdown] has hit us even harder. It’s a little scary,’ says president Lee Williams, referring to the fact that Nelvana has cut 250 people from its staff and is facing a $200-million writedown. Two months ago, Williams’ company branched out into teaching, and now runs classes, three days a week, for local kids and adults, a bonus of which is the creation of a handy talent pool.

‘We’re being very honest with them, telling them that the industry has come down, but I don’t believe [the slump] is going to last,’ he says. ‘I think everybody is just getting more careful with their story ideas.’

Boomstone is currently seeking partners in Europe for an unnamed in-house project. ‘I think we’re going to see a lot edgier, more adult-type humor, and that’s the kind of stuff we’re pushing right now,’ Williams says, citing the demand for adult cartoons, such as The Ripping Friends, and the primetime slate on specialty channels such as Teletoon. ‘We’re also putting a lot more music in our concepts. I think that’s the biggest swing you’re going to see, a lot of music-oriented animation coming back, like Josie and the Pussycats.’

New revenue is also a priority at Lost Boys Studios in Vancouver. ‘We’ve had to diversify as far as service goes,’ says producer Roula Lainas. ‘We still do series, but we’ve gotten into commercials and a big door we’re getting into is video games…We’ve done six solid projects with Electronic Arts, Sega and Funcom.’ The company recently worked on Need for Speed Hot Pursuit 2 for EA and Sega Soccer Slam for Black Box Games – this on top of its considerable TV f/x work on series including Gene Roddenberry’s Andromeda and Stargate SG-1.

Lainas thinks her company is well positioned to take advantage of the increasingly cozy relationship between games and series. ‘It’s all meshing and we know both ends,’ she offers. ‘Our strengths are 3D and character animation and photorealism.’

CG expertise, coupled with proprietary titles, has also buoyed the fortunes of Ottawa’s Noitaminanimation, says senior VP and CTO Jason Belec. ‘We’re modeling ourselves after Pixar – our ideas, our content, our way of doing it, and having someone else distribute,’ he says.

The first of Noitaminanimation’s three CG projects, The Dragon and the Phoenix, is expected to air sometime this summer, followed by Egypt. ‘We’ve had a lot of attention from the big boys,’ says Belec, although he says he can’t yet name names. ‘We don’t seem to have any shortage of people who want to air them.’

And yet the company is also toying with the idea of marketing Socket, its prized 3D and reportedly lightning-fast animation software, to bring in some extra revenue. But that’s still at least two years off, says Belec.

But despite its high-tech pedigree, Noitaminanimation has stayed out of the gaming trade. A smart move, according to Clint Eland, CEO of Vancouver- and Toronto-based Mercury Filmworks. He and his company shy away from diversification, preferring instead to play to their strengths. ‘It’s not a good idea to step too far outside our core business,’ he says. Mercury recently broke into feature films service (The Powerpuff Girls Movie, The Tigger Movie) and has just inked a deal for Looney Tunes: Back in Action, the new animated feature from Warner Bros. ‘Gaming – that step is a little too large. It’s a different pedigree, it’s a different skill set and production methodology. It’s smarter to not diversify too much. You spread yourself too thin and make yourself vulnerable.’

-www.bardelentertainment.com

-www.boomstone.com

-www.noitaminanimation.com

-www.lostboys-studios.com

-www.mercuryfilmworks.com