Propping up the box office chart over the weekend was Astro Boy, an animated feature out of Hong Kong’s Imagi Studios. This is the sad and cautionary tale of how one poor performer bankrupted a company.
In 13 weeks Astro Boy has taken $251,318 here and, currently on one screen, is unlikely to add much to that total. Worldwide it has taken US31.5 million, plus US$4 million in DVD sales: all this against a US$65 million production budget.
Here, it has performed poorly when compared to other children’s fare currently doing the rounds in the school holidays. Also screening here for the delight and delectation of younger eyeballs are Nanny McPhee and the Big Bang ($2,269,241); Alice in Wonderland ($5,129,726); Fantastic Mr Fox ($837,621); and Alvin and the Chipmunks: the Squeakquel ($3,904,462).
What went wrong with Astro Boy and how did it bring down a company, forcing over 300 people out of work?
Imagi began life looking very different to the animation company it grew into. In 1983, it was established – under the name Boto – as a manufacturer of artificial Christmas trees and other giftware and decorative items. By 1997 it had listed on the Hong Kong Stock Exchange, as Boto International Holdings. In 1999 the founder’s son, Francis Kao, joined the company, diversified into online business and during the following year initiated a plan to create “a world-class CG animation studio” in Hong Kong.
Two years later the company sold off the Christmas tree and giftware business, rebranded as Imagi International Holdings, and delivered its first animation project, TV series Zentrix. The show screened in France, Germany, Hong Kong, Japan and the UK.
The following year, 2003, the company entered into a relationship with DreamWorks, to supply CG work for TV show Father of the Pride, which screened in the US on NBC. Buoyed by this success, and the work it gained from Japanese film production company Toei on the first CG exploitation of Japan’s popular Digimon franchise, Imagi opened offices in the US and Japan.
In 2005, Imagi began work on Teenage Mutant Ninja Turtles, which was picked up by Warner Brothers and the Weinstein Company.
Along the way, the quality of Imagi’s work and its business model attracted a number of US animation experts – many of them from DreamWorks – to the company.
Imagi planned to produce one CGI feature every eight months, all based on existing franchises, predominantly comic book and anime properties.
One might question the capability of turning around a complete production in eight months, but in Hong Kong at least one studio turns around live action features in less than two, including post-production.
Imagi’s business plan included the intention to sell worldwide distribution rights to each film, excluding Hong Kong, China and Japan, but to retain licensing and sequel rights.
The plan, while ambitious and expensive to implement, was not pie-in-the-sky. As the box office regularly demonstrates, franchise films do good business, and labour costs in Hong Kong are considerably cheaper than in the US (or Australia and NZ for that matter). Since computers and software licences cost much the same anywhere, the numbers appeared to stack up.
As Imagi CEO Douglas Glen said, “You only have to look at the number of animations, action films and sequels in the box office top 10 last year to see where we are aiming.”
Imagi built a staff of 400+ people. Most were animators working at its Hong Kong facility, while several of its key personnel were based in its Los Angeles offices.
Cecil Kramer (Shrek, Antz, Chicken Run) took the role of executive VP of production; Maryann Garger, (producer Flushed Away) came on board as producer for Astroboy; Lynne Southerland (co-director Mulan 2) signed on for Gatchaman; DreamWorks’ Mark Tarbox took the job of line producer, overseeing all Imagi output. Animal Logic’s Brett Feeney (Happy Feet, The Matrix Reloaded) became Imagi’s Production VP.
In 2007 TMNT released in the US market, debuting at #1, the first time an Asian produced feature had achieved that result. TMNT took over US$24 million on its opening weekend, and went on to take over US$54 million (US) and over $95 million (worldwide). It also sold over 2 million units on DVD.
The film didn’t generate enormous revenue for Imagi, but was profitable against its production budget of US$33 million. More importantly, it cemented Imagi’s reputation internationally as an animation house capable of delivering feature work for the US market.
A few days ahead of the opening of TMNT, Imagi released a Gatchaman trailer to very positive response at the Digital Entertainment Leadership Forum (DELF) in Hong Kong. “Absolutely incredible and gorgeous and we cannot believe how cool this looks NOT coming from Japan,” said one attendee.
Also taking part in DELF that year was Scott Ross, founder of FX house Digital Domain (True Lies, Titanic, Apollo 13, Benjamin Button), who hailed Imagi as a future “Pixar-sized powerhouse for Asia”.
In 2008, as well as advancing work on Gatchaman, Imagi confirmed production had commenced on a second based-on-a-Japanese-manga title, Astro Boy.Very much with a view to the US market, Imagi cast voice talent including Kristen Bell, Donald Sutherland, Nicholas Cage and Charlize Theron.
Late in 2008, Imagi announced licensing deals around Astro Boy and a distribution deal with Summit (the Twilight franchise).
Licensee and fledgling TV producer American Greetings (Care Bears, Strawberry Shortcake) licensed greeting cards, stationery, gift wrap and party goods in a deal intended to extend beyond Astro Boy. Toy company Jazwares took the toy rights; Penguin took some publication rights with IDW Publishing taking rights for comics and graphic novel titles; D3Publisher took rights for game software.
It seemed that all was well until early 2009, when Imagi announced that it lacked the funds to complete Astro Boy and Gatchaman as planned. Due to previously secured funding of US$20 million not eventuating, Imagi rescheduled Gatchaman as a 3D release for 2011. Some US-based staff were stood down for two weeks, while replacement funding was put in place. Hong Kong staff were less affected as the shut-down coincided with the national holidays around Chinese New Year.
Work resumed in early February 2009, with the company still on target to deliver Astro Boy late in the year as planned.
Given far broader financial challenges arising in 2009, little attention was paid to the difficulties at Imagi, especially since the planned rescheduling of Gatchaman and confirmation of the release date for Astro Boy inspired confidence.
Astro Boy premiered in October 2009 in Japan, two weeks later in the US, rolling into other territories to coincide with school holidays. And the problems started to escalate.
Projected earnings were streets ahead of its eventual US$35.5 million. Produced for US$65 million, the poor box office return spelled trouble from its opening weekend in the US of $6.7 million. It placed 6th, with Paranormal Activity taking the top spot (US$21.1 million) and Where the Wild Things Are third (US$14 million).
Reviews were mixed, although neither horrible nor ecstatic. Both The Hollywood Reporter (“Derivative bits aside, the pint-sized Japanese icon takes flight in vibrant CG animation – no 3D glasses required”) and Variety (“a well-oiled CG-animated superhero pic that makes up in competence and vitality what it lacks in originality … the film easily should draw sizable family crowds and hold their attention well”) gave it decent reviews.
Locally, Flicks gave it little credit (“this film is severely lacking in rocket power. A tired, paint-by-numbers storyline”), while TVNZ gave it 6/10 (“not the most original film – but for a younger core of the audience it will prove to be a diverting use of their time”).
In Hong Kong, Astro Boy did US$390,901, placing #91 in 2009’s releases. (Chart topper Avatar took US$22.4 million). In Japan Astro Boy did US$864,683, ranking outside the top 100 for the year. (Avatar also topped the chart there, with US$162,664,539.)
To continue production on Gatchaman and other projects, Imagi was relying on Astro Boy income that did not appear. On 11 December it laid off 100 of its 450 Hong Kong staff and announced plans to seek additional financing and to restructure to the Hong Kong Stock Exchange on 30 December.
Imagi made further announcements on its situation on 20 January 2010 and again on 26 January.
The second announcement, referring to the review of operations outlined in warlier announcements, contained the statement:
As part of this exercise, with effect from 25 January 2010, the Company has withdrawn funding support from its United States subsidiaries in order to safeguard working capital. The Company has terminated the employment contracts of approximately 30 staff, and the United States office in Los Angeles has now been closed.
Imagi also gave notice it might close its doors in Hong Kong, saying:
If the possible investment in the Company does not successfully complete and/or the Company is unable to obtain other funding, the Company may be unable to meet its financial obligations and its ability to operate as a going concern in such circumstances would be in doubt.
Two weeks later, the company was effectively gone, at least as a functioning animation house.
On 5 February, a week ahead of Chinese New Year, the company laid off its 300 remaining Hong Kong staff in order to “protect the interests of its parent company”.
The closure of the animation house, with an estimated US$4.6 million owing to staff, led to the appointment of a liquidator. In the US, Imagi assets were offered for auction online.
A week later, unemployment seemed a more palatable option with the company’s announcement on 12 February of the death of one of the company’s three directors and acting CEO, William Courtauld.
Imagi was not dead, however, and planned to continue to produce animated films, although it would “outsource the labour intensive digital production elements of this film making process to other animation houses, or use third party animation capacity available in [mainland China].”
The company also propose to continue operating its subsidiary, Imagi Services, “to develop the commercial potential of its IP rights and exploit the creative aspects of its CGI movie business.”
In mid-April 2010, the company’s share price yo-yoed on the back of a number of announcements. Starting the week at HK$0.038 (a little over half a NZ cent), it climbed as high as HK$0.24 (4 cents NZ) on news of a restructuring deal and a cash injection from selling half the company to Idea Talent. By the end of Friday, with further details announced, the value fell back to around HK$0.14.
Viewed from a distance, there was a sad irony to even Asian companies needing to outsource work to mainland China for cost reasons, but the bigger picture was even more bleak.
In the same way that Peter Jackson’s Lord of the Rings boosted awareness of New Zealand’s filmmaking capabilities internationally, Imagi was one of a small number of Hong Kong companies making the breakthrough into international markets.
Had Astro Boy soared, rather than plummeted, there would have been a strong Asian player (other than Studio Ghibli) in the world animation marketplace.