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e The Information EXCLUSIVE (IETS euniseravereussze How Netflix Created a Boom in the Cartoon Industry ByJessicaToonkel and Tom Dotan Feb 06,2019 6:31 AM PST s the war between video streaming services heats up, A the biggest battleground is being fought over cartoons like “Kung Fu Panda,” “Captain Underpants” and “Curious George.” Hoping to draw in families and children, services like Amazon, Apple, Hulu and especially Netflix are ordering so many new animated movies and series that studios are struggling to keep up, producers say. That's creating a rush of work for newer animation outfits like Kuku Studios as well as more established companies like Technicolor and Wow Unlimited Media, a Canadian animator. THE TAKEAWAY * Streaming services paying double of what networks have for shows * Animation studios facing talent shortage * Studios adapting gaming technology to help speed up process “This is the biggest boom in kids programming production that we have ever seen,” said Michael Hirsh, chief executive of WoW, which makes cartoon series such as “Barbie Dreamhouse Adventures” for Netflix. The emphasis on cartoons reflects an often-overlooked reality about streaming services like Netflix: Viewership is heavily driven by children. Sixty percent of Netflix subscribers globally watch kids and family programming, most of which is animated shows, said Melissa Cobb, vice president of Kids and Family at Netflix. Executives at another service say that families tend to cancel at nearly half the rate of the average subscriber. Netflix is also interested in animated content because it travels well around the globe, said Ms. Cobb. Netflix over the past 18 months has assembled a team of about 40 executives around the world to commission and develop children’s programming, she said. Meanwhile, its rival streaming services are also active in the market. Hulu last year announced a licensing deal with DreamWorks Animation for a slate of original series based on DreamWorks’ popular characters. In March, Amazon will debut “Costume Quest,” an original animated series by Wow’s Frederator Networks studio, Apple recently signed a deal with DHX Media for “Peanuts” shows for its new TV service expected to go live this year, according to a person familiar with the deal. All are competing with Disney and Viacom’s Nickelodeon, both of which have a longstanding presence in the children’s TV market. Disney's upcoming steaming service Disney+ is expected to have a big component of kids’ shows, although it is. unclear how much it is commissioning new programs from independent studios. Better Pay But streaming services pay better. They're offering up to $1.2 million per 30-minute episode, which is double what the traditional entertainment companies generally pay, three animation studio executives told The Information. Additionally, Amazon, Hulu and Netflix have allowed some companies to maintain the rights to sell merchandise based on their shows, so long as Netflix can own the worldwide streaming rights. Toys and other spin-offs from animated shows are one of the main ways producers make money fiom shows. The boom is benefiting both big companies and startups. Animation production work has helped increase revenue at Technicolor’s visual effects division to about a billion dollars annually from around $35 million a decade ago, according to Vince Pizzica, a ‘special advisor to the CEO of the France-hased company. Then there are smaller firms like Toronto-hased 9 Story Media Group, which is curently working with Netflix, Apple, Amazon as well as cable networks and broadcasters. Today about 50% of 9 Story Media's projects, which include “Magic School Bus Rides Again” for Netilix, comes from streaming platforms, up from 10% three years ago. The fum has increased its staff by more than 45% in the past three years to 800, according to Vince Commisso, CEO of 9 Story Media. Additionally, the company just announced Monday that it had acquired an Indonesian animation studio, Base, to help with its computer-based CGI animation to keep up with the demand from the streaming services, Mr. Commisso said. The animation boom is also creating opportunities for startups, like IoM Media Ventures, founded by the former CEO of DHX Media, Dana Landy. In November, he struck a deal to buy one of DHX’s animation studios, seeing the demand for animated content, according to Ben Mogil, a former Wall Street entertainment industry analyst who joined Mr. Landry at JoM.