Deal focus: Indian cartoons poised for proliferation
NewQuest Capital’s acquisition of Cosmos-Maya from KKR-backed Emerald Media punctuates a crystallizing opportunity set in Indian animation. The next step is going global
India’s animation and visual effects industry has a smaller than 10% global market share, but Boston Consulting Group and the Confederation of Indian Industry project it could hit 25% within four years. They believe this will be a driving force in a quadrupling of the country’s broader media and entertainment market from $24 billion in 2020 to $100 billion in 2030.
The local animation and visual effects niche has been growing 17% a year since 2015, when Mumbai-based Prana Studios made waves by creating three fire-breathing dragons for HBO’s fantasy hit “Game of Thrones.” The market reached $1.3 billion in 2019 before retracting 44% due to pandemic-related shocks. By 2023, it is set to hit $1.7 billion.
The longer-term impact of this hiccup is perhaps more interesting. COVID-19 has accelerated in-home digital consumption, especially direct, on-demand services known as over-the-top (OTT) media. In India, the trend is further propped by the Bollywood factor, which mixes a diverse local audience, international demand for local content, a broad and relatively inexpensive local talent base, and a large, culturally influential diaspora.
Basically, this means that fire-breathing dragons notwithstanding, consumer-facing cartoons are expected to outpace the visual effects side of the industry.
“On a global level, India is a late entrant in the animation business, but the delay was balanced off by the immense volumes of content laid out for the over 300 million kids that make up our audience, and we’ve consequently done well in keeping up with global industry standards,” says Anish Mehta, CEO of Cosmos-Maya, an animation studio headquartered in Mumbai’s Bollywood hotspot Film City.
“This has been aided especially with the explosive growth of the OTT space in the past few years, and kids content seeing double the growth with a boom across this new digital space in addition to the linear television space.”
Emerald Media, an Asia-focused platform backed by KKR, acquired Cosmos in 2018 for an undisclosed sum and sold it last week to secondaries specialist NewQuest Capital Partners in a deal reportedly worth $90 million.
In the past five years, Cosmos has produced more than 1,000 half-hour episodes, primarily original intellectual properties (IP), from 70,000 square feet of studio space. There are 18 shows currently on the air and another 10 in production. The best-known title is “Motu Patlu,” a children’s comedy originally made for Nickelodeon India that has run for four seasons.
Value-add work under Emerald was largely hygienic: tightening up transactional systems and bringing direction and structure to an ongoing growth story. This period also included an expansion into education, with Cosmos now claiming to be among the largest animated content providers to education technology players in India and the US
“This was a business segment that acted as an extension to our work and it also helps us with 360-degree monetization of our IP, something we’ve done recently with the edtech brand Twinkl, where we launched creative and educational kits for kids using our characters,” Mehta says, adding that Cosmos has also branched into vocational training for animators.
“Edtech is a business that has seen a stellar increase in market presence, especially owing to the pandemic, and in all kinds of fields ranging from academic to professional skill-based to creative.”
Go-forward plans will involve some exploration of other new business verticals such as gaming, but the focus will be on accelerating early traction for the company’s core entertainment programing in overseas markets.
Progress on this front can be seen in the expansion of WowKidz, a suite of YouTube channels that now reaches 65 million viewers around the region. It had clocked 35 billion views as of May 2021, much of which is attributable to overseas successes such as the Chinese series Boonie Bears.
“With NewQuest on board, we are looking to expand globally and acquire animation companies with global footprints and high-end quality of international standard,” Mehta says. “We plan to begin our expansion from Bangalore and Kolkata and explore studios in Vancouver and Los Angeles.”
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