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French Animators Lure U.S. Studios With Tax Rebates, Diverse Talent

Hollywood once outsourced animation mostly to Asia. Now it has an alternative destination: France.

Major U.S. studios are following a trail blazed by Chris Meledandri’s Illumination Entertainment, whose “Despicable Me” movies and “Minions” spinoff for Universal — both worked up across the Atlantic — were huge successes; the latter took in $1.16 billion in global box office. Illumination’s latest, “The Secret Life of Pets,” premieres this week at France’s Annecy Festival.

Among the players tapping French animation expertise are Paramount and MGM, for their upcoming spinoff “Gnomeo & Juliet: Sherlock Gnomes,” and DreamWorks Animation, for “Captain Underpants.” Disney TV Animation is turning to France to help produce its “Elena of Avalor” TV series and two Marvel spinoff shorts series, “Ant-man” and “Rocket and Groot.”

The studios have been lured to France by a combination of generous tax incentives and a growing animation talent base. Three of the world’s top 10 international animation schools are in France, led by Gobelins in Paris, according to a survey by the Animation Career Reviews website.

“France has always produced talented animation artists,” says Tim Westcott, senior principal analyst at IHS Technology. “There’s a lot of French production — since TV channels commission lots of animation — and a culture of animation expertise.”

Beyond that are the financial realities of today’s movie marketplace. When Pixar and DreamWorks Animation launched in the 1990s, they delivered fresh animated films to an underserved market, and nearly all their titles were hits. Now, consumers are spoiled for choice, and studios are churning out tentpole films that end up cannibalizing each other’s audiences.

Animation studios have had to cut back on production (DreamWorks Animation dropped its output to two titles per year in 2015), and economize in other ways, including outsourcing work to countries with lower costs.

France’s generous rebate system addresses that. In January, the government raised the tax credits on animation work from 20% to 30%, with a maximum rebate of $34 million per movie or series. The 30% easily beats out Britain’s 20% tax incentive.

The results are clear. Between 2009 and 2014, Illumination was the only big Hollywood player to outsource animation work to France, through sister company Illumination Mac Guff, set up in Paris. In 2014, just four animated projects won France’s tax rebate for international production. But in the first half of this year, 11 productions have applied and been approved for such credits. The national film commission Film France is expected to announce those recipients at the Annecy Festival.

“The improvement of France’s rebate makes a big difference for American companies,” says Valérie Lépine-Karnik, CEO of Film France. She adds that the euro has depreciated 18% over the last two years, making France even more cost-effective.

Hollywood studios contacted for this story, including Disney, Illumination, and DreamWorks Animation, would not comment on the tax breaks or the attraction of working with French animators.

“Hollywood studios have always done some production outside the U.S., where it has been advantageous from a cost point of view and the talent is available,” says analyst Westcott. “France has now been able to provide the right skill base and combine it with a favorable tax regime.”

It’s not a one-way street. At least 18 French cartoon shows have aired this year on U.S. TV, either on animation-heavy channels such as Nickelodeon, or via streaming platforms. Gilles Gaillard, managing director of Mikros in Paris, which is slated to work on “Sherlock Gnomes” and “Captain Underpants,” says the success is partly based on French animators’ creativity and willingness to try new techniques.

“Animation in the U.S. has a long and rich history with established practices,” he says. “It’s harder to change old habits. Whereas in France, we’re very flexible and have the capacity to shift gears as rapidly as necessary depending on the projects.”

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