Skip to content

State of the Art

Tax incentives and the streaming wars are hollowing out the animation industry

Welcome to a land where the tax credits are juicy and the computer generated graphics are crisp. Canada today is home to a vibrant animation and visual effects (VFX) sector, with a good set of time zones, a weak currency, and government incentives that can entice any studio head to buy into the dream of “Hollywood North.” As the “streaming wars” continue, with platforms going head to head to vie for your subscription dollars—brother against brother, Netflix against Disney+, Amazon Prime Video against Apple TV+—more of that business is traveling north.

Animation and VFX are in the early stages of what some television critics have called a new “golden age.” With algorithmic precision, streaming platforms have been engaged in an animations arms race, looking to secure big name talent and conjure the next cult title. Children’s programming guarantees generational brand loyalty, lucrative spinoff potential, and the chance to justify family subscriptions. Adult programming can trace universal themes in rotoscope and attract rabid fanbases to parallel even the most devoted shock-jock armies.

“If you’re watching [animated content] on a streaming service, there’s a very good chance that either part of it or all of it was made in Canada” says Vanessa Kelly, head of the Art Babbitt Appreciation Society, a non-profit advocacy group for Canadian animators and VFX workers. Rick and Morty, Klaus, My Little Pony, and Spider-Man: Into the Spider-Verse have all gone through Canadian studios. “Canada has spent a number of decades making it as comfortable as possible for these productions to be made in Canada,” says Kelly. And they’ve largely been successful. In the 1990s, studios in Los Angeles began sending the bulk of their work up to Vancouver. The tax credits justified outsourcing the work and became an integral part of how the studios would budget and schedule projects.

Animators in Canada are comparatively cheap, and as it stands, they are without any major union representation.

But the platforms’ insatiable need for more content has had some adverse effects. Earlier this spring, the Art Babbitt Appreciation Society began publicly circulating a letter to the animation and VFX conglomerate Technicolor. The company is one of the biggest and oldest of its kind and had recently made the news with its disastrous adaptation of Cats. The Society’s letter detailed how hundreds of animation and VFX workers at Technicolor’s Canadian studios—including those who had worked on Cats—had been abruptly laid off, without pay, at the height of the pandemic.

As the Society points out, even without the pandemic, mass layoffs and the temporary collapse of studios have become a familiar part of animators’ lives. A larger trend of instability and burnout has been exacerbated by the streaming wars and the entrepreneurial chase for cheaper and cheaper productions, harkening back to a longstanding precedent within the film industry, where studio execs eat first, and animators are left to fend for the scraps. “The expansion has created a number of problems for workers. Unpaid overtime is extremely common and a massive problem,” says Kelly.

Because small Canadian studios are subcontracted by larger studios like Technicolor, negotiating these contracts is difficult; as a dominating force in the industry, large studios essentially set the terms in advance. Smaller studios are expected to bid low, and the steady flow of cash makes it hard for management to refuse. Animators are expected to make up the difference by meeting impossibly high quotas. Pre-filled time sheets, weekend work, and complex sub-subcontracting agreements to studios in South Asia have become the norm. Among other incentives provided by Canada’s provincial governments are exemptions to various labor laws to provide for longer working hours—which the Art Babbitt Appreciation Society helped to fight in the case of Seth Rogen’s Sausage Party, winning compensation for animators who had been miscategorized as part of the scheme. Still, animators in Canada are comparatively cheap, and as it stands, they are without any major union representation.

The history of unionization within the Hollywood trades is often told through an odd mix of celebrity hagiography, vaudeville playfulness, and old-world guild systems. With animation, though, the story is slightly different, largely because of the medium’s ability to function as an assembly line, originally through celluloid sheets over painted backgrounds that allowed for a hierarchical division of labor. Animators have eaten a lot of shit through the years. The first golden age of animation—usually dated from the late 1920s through sometime in the 1960s— was characterized, at least in the beginning, by unimaginable profits for studio executives and endless toil for animators.

The Art Babbitt Appreciation Society takes its name from animator Art Babbitt, the illustrator behind Disney’s “Goofy” character and one of the workers who led the famous 1941 animators strike. Personally hired by Walt Disney, the two men frequently butted heads, but Babbitt he was nevertheless part of the company’s old guard. As an animator, he was fixated on the challenge of bringing lively, emotive movement to his characters, studying acting theory and working with Disney to set up a training academy for those working in the studio. This institutional training setup remains an entrenched part of animation and VFX to this day, including at one of Technicolor’s Montreal offices, which just laid off an undisclosed number of trainee workers.

In 1937, Babbitt worked on Disney’s first feature blockbuster, Snow White and the Seven Dwarfs. For a period, it was the highest grossing movie of all time, a feat it achieved mainly through the sale of matinee tickets for children. During the production of Snow White, the studio had pushed for animation speed-ups, relying on the assembly line model that split up inking processes among several artists simultaneously. As the studio began to realize the implications of the astronomical success of Snow White, it was heavily professionalized, with Disney increasingly preoccupied with his role as a manager and entrepreneur. After the film’s release, he nixed promised animator bonuses to fund a major studio expansion in Burbank. Though Babbitt was himself well-remunerated, he became frustrated with poor working conditions and pay for junior animators.

“The Disney Studios is what it is today because Babbitt torpedoed himself.”

With Disney’s tacit approval, a company union, the Federation of Screen Cartoonists was organized in 1938, with Babbitt tapped to lead it. But it quickly became clear to Babbitt that a studio-sanctioned group would be ineffective. Three years later, midway through the production of Dumbo, Disney fired sixteen animators, including Babbitt, who had been advocating for workers to join the Screen Cartoonists Guild, which triggered a major strike. A few weeks into the action, Babbitt spotted Disney driving by the picket line. Grabbing a loudspeaker, he berated Disney with cartoonish melodrama. “There he is, the Great Man! He wants brotherhood for all except himself! Shame on you, Walt Disney!” he screamed, prompting Disney to stop, get out, and try to start a fight with Babbitt, the two nearly coming to blows. Chuck Jones, one of the Warner Brothers animators behind Looney Tunes, would join the Disney picket in solidarity along with other artists from his studio, hauling a guillotine with an effigy of Disney lawyer Gunther Lessing inside it to the picket line for a high-camp intimidation effect.

The strike ultimately resulted in the establishment of strong animators’ unions in Los Angeles, which helped to secure a degree of relative stability for the industry. Babbitt’s career, however, was a different matter. He would go on to organize a class-action suit against Disney for unpaid overtime; he was fired, reinstated, and—after serving for a period in the Marines—would eventually walk away from the studio altogether. “I think Walt never forgave that: he never forgave losing it in public in front of everybody,” says Tom Sito, an animator and animation historian who knew Babbitt in the last years of his career. Disney became more shut off, and Babbitt, Sito claims, became melancholic, doing mostly shorts and commercial work for the remainder of his career. “The Disney Studios is what it is today because Babbitt torpedoed himself,” says Kelly, when I ask about the inspiration for her group’s name.

Disney would go on to denounce the 1941 cartoonists strike before the House Un-American Activities Committee, while Babbitt eventually become a  mentor to Richard Williams, the cartoonist who served as animation director for the cult favorite Who Framed Roger Rabbit in 1988. That film sparked a Disney Renaissance of its own, prompting the rise of musical blockbusters like Beauty and the Beast and Toy Story, as well as opening up a raunchier adult audience that would be developed in the 1990s. It revived classic characters and opened up possibilities for half-computer generated, half-live action works that are common today. Who Framed Roger Rabbit had a profound effect on a generation of animators, some of whom pushed the field forward with low-budget weirdness and the late-night antics of Adult Swim.

Characterizing the head of his former studio, Babbitt once declared that “Walt Disney had the innate bad taste of the American public.” He had an intuitive feeling for middle-brow content, slapstick, and breathing new life into folk stories and fairy tales. If, as some have claimed, a third golden age of animation is upon us in the streaming present, the mercurial state of the industry is cause for concern. In bringing together Silicon Valley and Hollywood, the streaming wars have come to subsist on a logic of project-managed workarounds and unrelenting growth. The technical feats are over-engineered, over-consulted, and largely soulless.

The free flow of capital into the sector, along with bloated management budgets in animation and VFX houses, has started to affect the caliber of the final product. “Cats is a really great example of that, where the production is so mismanaged and so difficult that by the time you see it on the screen, you can’t even believe what you’re seeing,” Kelly says. One recently laid off Cats VFX worker I spoke to recounted how poor scheduling had resulted in a trend of long hours for animators with little recourse in the workplace. While the tax credits are meant to develop the workforce, they’ve turned animators into human capital, keeping them firmly outside of the creative process. “If Technicolor had their way it would be all Cats all time,” says another former Technicolor worker recently who was recently laid off from one of their Toronto studios.

The technical feats are over-engineered, over-consulted, and largely soulless.

The short life span of animation and VFX houses has also become a looming threat to the craft. Across the industry, in Canada and elsewhere, burnout has become a recurring problem, with entire studios frequently worked into the ground. Artists at the long-running VFX studio Rhythm & Hues won an Oscar for Life of Pi in 2012, two weeks after the company declared bankruptcy. Just this December, Moving Picture Company, one of the studios operating under the Technicolor umbrella, unexpectedly shuttered its Vancouver office, laying off members of the VFX team who had worked on the critically panned Sonic the Hedgehog.

And late last month, it was announced that Technicolor subsidiary Mill Film, one of the VFX studios behind Cats, has been folded into another Technicolor studio, leaving behind only the slightly unsettling shadow cast by computer-generated fur. In their pursuit of animated success, Technicolor and companies like it have done more than subject animators to exploitative working conditions: they’ve put their own output at risk of homogenization—content coddled by too many layers of management concerned only with the bottom line. “They hate the idea of not having a guaranteed hit,” says Kelly. “But without that ability to fail, the medium stagnates.”