Studios challenging Pixar for toon throne

The world of feature animation — once thought to be the exclusive domain of Disney and DreamWorks — is getting increasingly competitive, as studios left outside the gates of the toon kingdom are employing aggressive tactics to break in.

With the successful bow of “Dr. Seuss’ Horton Hears a Who,” Fox Animation reaffirms its place in the top tier, thanks to a string of hits from its Blue Sky CGI studio, capped by “Horton.”

The other studios are jockeying to join that select crowd.

n Universal successfully courted former Fox toon topper Chris Meledandri, who oversaw development on “Horton” and the “Ice Age” franchise, by helping him establish his own independent family entertainment company. The studio’s exclusive deal with Meledandri includes partial ownership of his production house, Illumination.

n Though it has struggled with its two first releases, Sony recently put new execs atop its animation unit and claims to be re-committing to the space.

n Coming off the success of “Happy Feet,” Warner Bros. has thrown a multitude of projects into development and is hoping to become a destination for live-action filmmakers interested in toons, and for independent animation studios.

Disney is still the king, thanks more to Pixar than Disney Animation Studios. DreamWorks Animation produces two toons per year, distributed by Paramount, and now has two successful franchises in “Shrek” and “Madagascar.”

And even though Meledandri is gone, Fox managed to successfully sell “Horton” without him, demonstrating it has built an animation presence with staying power.

Though the past couple of years have disproved the industry maxim that CGI toons are invulnerable at the B.O. — see “Flushed Away,” “Meet the Robinsons” or “Surf’s Up” — they still remain the industry’s most reliable genre, especially in homevideo.

That’s particularly important as the U.S. economy teeters on recession and Hollywood starts to worry about consumers cutting back on spending. Compared to most other forms of entertainment for a family, movies remain a bargain. In 2007, it cost an average of $141.20 for a family of four to buy themepark tickets and $94 for a baseball game, according to a report recently released by the Motion Picture Assn. of America. An afternoon at the movies? $27.52.

“These are precarious times. Anybody who is prudent would be taking a look at the family category,” says National Assn. of Theater Owners John Fithian.

The recent surge of interest in digital 3-D has also fueled studios’ investments in animation, since CGI toons are easier to adapt for digital 3-D projection and targeted at the young auds who love the technology.

DreamWorks Animation plans to make all its pics in 3-D, starting with 2009’s “Monsters vs. Aliens.” Other 3-D toons in production include Fox’s “Ice Age: Dawn of the Dinosaurs” and Disney’s re-release of “Toy Story.”

On DVD, of course, animation is feeling the pinch as the whole industry slows down. DreamWorks Animation recently reported holiday returns for “Shrek the Third” that were well behind those of “Shrek 2.” But toon DVD sales are softening from such a major high, insiders note, that they still represent major coin. Many parents will agree, after all, that animated films are a good value given how many times kids watch them.

Fox in particular has seen the benefits of a strong presence in the space lately, not only with “Horton’s” boffo bow, but what many consider to 2007’s biggest B.O. surprise: “Alvin and the Chipmunks.”

“Many pundits rolled their eyes at us,” recalls Fox Filmed Entertainment co-chair Tom Rothman. “The CGI-animation was just terrific. We don’t mail it in just because it’s a family film; we actually work harder.”

People stopped rolling their eyes when “Alvin” turned into a runaway hit, ultimately grossing $204.1 million domestically, and more than $350 million worldwide.

The pic was made in part under the auspices of Fox Animation. The unit is exploring some work without outside animators and live action/toon hybrids, but is primarily devoted to “Horton” and “Ice Age’s” New York-based maker Blue Sky, which Fox continues to fully own.

“We’re very focused on Blue Sky and making sure they’re provided with a pipeline,” says Vanessa Morrison, who became prexy of Fox Animation last year after Meledandri left.

The relationship is somewhat akin to Disney’s with Pixar. While John Lasseter’s crew operates almost as an independent unit, Morrison and her L.A. team still develop most of Blue Sky’s projects. The next one up is the summer’s “Ice Age: Dawn of the Dinosaurs.”

Sony is the only other studio to produce its CGI toons entirely inhouse, though it hasn’t seen much success. Despite its Academy Award nom, “Surf’s Up” wiped out at the box office, and 2006’s “Open Season” performed only a little better.

Since deciding not to sell f/x house Imageworks, which produces Sony Pictures Animation’s toons, the studio claims it is committed to improving the unit’s fortunes. The recent appointment of Hannah Minghella, formerly a creative exec for Amy Pascal, as head of SPA raised some eyebrows since she has no experience in animation, but it’s also a sign that Pascal cares enough to put someone she trusts at the helm.

New Sony Pictures Digital Productions president Bob Osher, who serves as Minghella’s boss and oversees f/x house Imageworks, says he’s committed not only to improving the performance of SPA’s CGI toons, but expanding its output as well.

“On the high end of animation, we’ve proven we can execute. We will strive to find stories that resonate with larger audiences,” he says. “There are also real opportunities for us with smaller budgets and live action/animation hybrids.”

SPA is already making a direct-to-video sequel to “Open Season,” and Osher says that has him thinking about doing more lower-budget toons, which can be targeted at more specific auds. He’s also particularly interested in the success of “Alvin,” noting that that they can benefit from Imageworks’ experience in doing special effects for live- action pics.

Following the success of “300,” Warner feels it already has a toehold in that area, especially since it has one exec in charge of both f/x-heavy pics and toons. Exec VP of digital production Chris Defaria hit a bump with 2006’s “The Ant Bully,” WB’s first CGI animated feature and a B.O. disappointment, but quickly followed it up with smash “Happy Feet.”

Warners’ only announced project is a feature version of ’80s TV toon “Thundercats.” However, WB has a co-development fund with “Happy Feet” maker Animal Logic for new projects, and Defaria says the studio has several films that he hopes will move into production shortly.

“Our model is to internally develop properties with writers, artists, and live-action filmmakers who may be familiar with digital production and are interested in animation,” he says.

That’s akin to Meledandri’s Illumination, which doesn’t have any internal animators and is developing projects with filmmakers, and later enlisting independent toon studios to handle production.

Even though his new company, which has some money from Universal and will be raising outside coin, is entering a crowded and competitive space with little more than experienced execs, talent deals and a bunch of ideas, Meledandri says the market has matured to a point where that can be enough to succeed. He can assemble his own creative team and go to whatever animation house he wants for each project.

“The last five years has seen an eruption of creative talent that for the first time lets us join creative talent and animation studios for single projects,” he says. “That gives us a lot more flexibility in assembling a team and setting a budget than we ever had before.”

The animation boom, in other words, is far from over.

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