GAMING, FILM AND DIGITAL ANIMATION:MExICO’S CREATIVE INDuSTRY’SCLIMB TO RECOGNITION

Susana Martinez N.

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Table of CONTENTS

Creative Economies: A Primer 4

Riding the Spanish Digital Wave 5

Entertainment and Media Indicators: Mexico 6

Main creative exporters, worldwide, 2008 7

Main creative exporters, emerging markets, 2008 8

Industry Incentives 9

The Creative Economy: Mexico’s New Rice and Beans 11

Moving Away from the Maquiladora and Toward Outsourcing 12

Gaming, Film and Digital Animation: Mexico’s Creative Industry’s Climb to Recognition

Creative economies, also known as knowledge-based or cultural economies, have taken center stage in the world economy. Combining technology, creativity, art and innovation, these fields – which range from the performing arts to multimedia – have contributed to economic growth, posting staggering growth even

during times of economic downturn. Some developing countries, led by China and India, have taken a lead in the growth of creative industries, generating employment and revenue across borders.

Mexico, with its rich cultural heritage and strong economic growth, is on the way to becoming a global player in terms of cinema, digital animation and videogame design. A long-time provider of Spanish-speaking media content, the country has more recently specialized in high-tech production of digital animation, special effects and videogame design. This has placed it on the map, even as an alternative for outsourcing from US, European and Canadian companies. The sector enjoys increasingly strong government support and Mexico is well poised to overcome challenges and become a leading country in the global creative economy. No small feat.

Introduction

About the author:Susana Martínez, is a regular editorial contributor with Nextcoast Media.

She lives in the Dominican Republic.

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Creative Economies:A Primer

The concept of a creative or knowledge-based economy was devised in the 1990’s, referring to the socio-economic potential of activities related to knowledge, information and creativity. These otherwise economically intangible activities become assets and gain economic value once treated as intellectual property. Although definitions vary, the United Nations includes the following activities within this category: performing arts, audiovisuals (film, television, radio), new media (software, video games and other digitalized creative content), design (interior, graphic), publishing and printed media, visual arts and cultural sites. Together, these activities comprise the cultural and creative capital of a country, which is in turn honed and maximized by public policy, education and training.

Global creative industries have posted staggering growth since 2008, contributing to

the growth and prosperity of both developed and developing countries by offering alternate sources of revenue.

The UNi notes that knowledge-based industries managed to stay isolated from external shocks during the international financial meltdown in 2008 and the ensuing recession, growing by an average of 14% in 2002-2008 to US$592 billion (meanwhile, world trade contracted by 10% in 2008 alone). Creative industries are both knowledge- and labor-intensive, and accounted for 2% to 8% of global employment in 2010. By their nature, creative industries promote social inclusion and contribute to social cohesion by being equally accessible to youth and women.

The developing world has played an important role in the growth of creative markets. According to the UN, developing nations contributed to 43% of total world trade in creative industries in

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2008 (latest available data), around US$176 million. Furthermore, US$60 million of this trade occurred between emerging or “South-South” markets. However, the emerging

world is generally still limited by insufficient infrastructure, technology, and start-up capital, all key aspects of a healthy creative industry.

Riding the SpanishDigital Wave

In a world that is becoming increasingly without borders, Mexico has gained an edge in audiovisual productions. Be it film/cinema, television production, digital animation, special effects, or videogame programming, the Mexican media scene has skyrocketed in the last decade as the country has capitalized on its proximity to the United States, which is home to over 50 million Spanish-speakers seeking specialized content, according to the US Censusii. Labeled “The Matrix of the Spanish Digital Wave” iii, Mexican content has long been at the forefront in terms of films and television. Mexico is also home to mass-media giant Televisa, the second largest such organization in Latin America. More recently, a new generation of increasingly digitalized population has combined technology, culture,

art and a high internal demand for quality content, giving way to a new era in Mexican creativity. The industry is an increasingly important driver of economic growth. Aggregated cultural activities accounted for approximately 7% of GDP in 2008iv and for 3.6% of total employmentv. The media segment, which includes open and cable television, digital marketing and advertising, reached US$20 billion in 2012, a 36% rise from 2008, according to PricewaterhouseCoopers’ “Global Entertainment and Media Outlook: 2012-2016.” Videogame production has also skyrocketed. Mexico is one of the 15 biggest videogame consumers in the world, with US$664 million in sales in 2012, and it accounts for 47% of videogame distribution in Latin America.

“Mexico is the heart of exported Spanish-speaking content, and the holy grail of this content is the rising Hispanic population in the US,

which is increasing in size, power, and demand”

Enrique VázquezTEChBA VANCOuVER

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Entertainment and Media Indicators: Mexico

2008 2009 2010 2011 2012

2008 2009 2010 2011 2012

Videogame sales 572 587 616 636 664

Entertainment and media market 14,941 15,277 17,180 8,777 20,385

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Source: PricewaterhouseCoopers, Global Entertainment and Media Outlook: 2012-2016

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Main creative exporters, worldwide, 2008

According to the UN’s Creative Economy Report 2010, Mexico is the world’s 18th biggest exporter of creative goods, with creative exports having grown 9.1% between 2003 and 2008 when they reached US$5.2 billion (from a total of US$292 billion in FOB exports). Furthermore, the country ranks 5th top exporter among developing economies – with 1.3% of the region’s market share – and is the only Latin American country in both lists.

Source: UNCTAD, based on UN COMTRADE database http://unstats.un.org/unsd/trade/

05 10 15 20 25Singapore 1.20%

Thailand 1.20%Mexico 1.30%Poland 1.30%Turkey 1.30%Spain 1.50%

Austria 1.60%Japan 1.70%

Canada 2.30%Belgium 2.30%

India 2.30%Switzerland 2.40%

Netherlands 2.60%France 4.20%

United Kingdom 4.90%Italy 6.80%

Hong Kong SAR 8.20%Germany 8.50%

United States 8.60%China 20.80%

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Main creative exporters, emerging markets, 2008

Source: UNCTAD, based on UN COMTRADE database http://unstats.un.org/unsd/trade/

Malaysa 0.87%

Korea, Republic of 1.05%

United Arab Emirates 1.17%

Singapore 1.24%

Thailand 1.25%

Mexico 1.27%

Turkey 1.32%

India 2.32%

China, Hong Kong, SAR 8.17%

China 20.84%

KPMG’s Guide to International Business Location Costs index for 2012

Mexico is also competitive in terms of audiovisual development and production costs. According to KPMG’s

Guide to International Business Location Costs index for 2012, which examines business costs and other

competitiveness factors for fourteen countries (including BRICs), business costs in Mexico are 21% below US

baseline costs.

Costs in the digital sector reflect underlying salary levels and other benefit costs related to the employment of

creative and technical IT professionals. Among the high growth markets, which include India, Russia, Brazil, and

China, results indicate that Mexico offers among the lower costs, 38.2% below the US-baseline. Furthermore,

two Mexican cities are ranked top ten among high-growth cities in terms of the lowest costs for software design –

Monterrey with a 61.4 index (5th place), and Mexico City with a 63.2 index (7th place). In terms of digital entertainment,

which includes the production of multi-platform video games for release on major gaming platforms, the results were

similar, with Monterrey posting a 60.5 index (6th place) and Mexico City 61.8 (7th place).

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Digital EntertainmentCountry (high growth) Video Game Production Software Design

Brazil 95.5 95.8

Mexico 61.1 62.3

Russia 60.7 60.6

China 53.8 59.5

India 53.2 55.8

US (baseline) 100 100Source: KMPG’s Guide to International Business Location Costs

http://www.competitivealternatives.com/

IndustryIncentives

The starting point for the advancement of a knowledge-based industry is the creation of efficient public policy aimed at identifying the country’s most attractive creative capabilities, attracting investors, setting up proper training and talent development, enhancing the required technology, and marketing the creative end-products.

Awareness of the need to prioritize the sector’s development in Mexico has risen in

recent years, given the industry’s increasing contribution to economic growth. In 2012 alone, large industry-related events were held in several parts of the country, including CROMAfest, a visual effects and videogames festival in Mexico City; the Encuentro- Nacional de Industrias Creativas in Jalisco, a national dialogue on the industry’s future; and Paralelo 9X in Zacatecas, a UNESCO-sponsored training program for cultural-based enterprises.

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International and regional events are also in the pipeline. This year alone, DEVHR.MX 2013, an international forum for game developers will be held in Mexico City in October 2013; and PulsoConf 2013, a regional conference for entrepreneurs, investors, and industry experts, will take place in Guadalajara in mid-September. Also, the 19th World Congress on Information Technology (WCIT 2014), dubbed as the “Olympics of the ICT World,” will be held in Guadajalara in May 2014, the first time the event will take place in a Latin American country.

Another indicator of the growing awareness of the sector’s significance is the emergence of multiple-industry clusters aimed at influencing policy and raising awareness of the industry’s importance.

Unlike in large emerging markets like India or China, which have integrated policies to

develop creative-based industries, measures in Mexico have been more piecemeal. At the federal level, successive governments have implemented industry-tailored incentive schemes in order to fund and promote creative and knowledge-based enterprises, which have paved the way for global-scale productions in Mexico. Among the strongest are: EFI Cine 226: Provides a tax break for cinematographic producers.• FIDECINE: An investment fund that

finances the production, postproduction and distribution of feature-length films.

• TechBA (Technology Business Accelerator): Sponsored by the Mexico-US Foundation for Science (FUMEC) and the Ministry of Economy of Mexico (SE), TechBA provides a platform for technology-based local companies to facilitate their success in the international market.

• ProSoft Mexico: A development program for technology and information-based services.

• National Council of Science and Technology (CONACYT): Provides government funding for private-sector research that can lead to commercial outcomes.

• Pro-Audiovisual Fund (ProAv): Government support for cinematography and audiovisual productions, with the aim of internationalization.

“The government is aware that the creative industry is important, it is the new rice

and beans... we have the content and the demand”

Andrés ReyesCEO BOxEL STuDIOS

Industry clusters in Mexico – Raising Awareness

Monterrey Interactive Media & Entertainment Cluster – Monterrey

Clúster de la Industria Creativa Roma-Condesa –Roma-Condesa

Monterrey Interactive Media & Entertainment Cluster - Nuevo Leon

InteQsoft – Querétaro

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The Creative Economy:

Mexico’s New Rice and Beans

Giving in to the mounting demand for support from the sector, President Enrique Peña Nieto of the Partido Revolucionario Institucional (PRI), has promised to propel the growth of Mexico’s cultural economy by implementing an “integral vision of culture” as part of his structural reform agenda. He has appointed Rafael Tovar y de Teresa as the head of his cultural team and the Consejo Nacional para la Cultura y las Artes (Conaculta), Mexico’s ministry of culture (Tovar led Conaculta during the PRI’s last tenure and has wide expertise in the area). The government’s first order of business was to launch the Programa Nacional de Fomento y Estímulo a las Industrias Creativas y las

Empresas Culturalesvi, a federal program to provide funding and technical training for the creative and cultural industry. The program is based on loans granted by the commercial banking system at favorable terms, which is a firm step toward initiating public-private cooperation in the sector. Peña Nieto also installed the Instituto Nacional del Emprendedor to coordinate and support policies for entrepreneurs and SMEs, which will benefit the flurry of start-ups in all areas of audiovisual design and production.

“There are now venture capitalists and investors interested in supporting start-ups. This is important, since the industry is now beyond just asking ‘papa-government’ for help”, says Fausto Cantú, the CEO of Render Farm Studios, which specializes in 3D animation, commercials, and VFX Movie & Virtual reality.

Mexico will also follow the lead of the likes of the US, Canada, France, Ireland and the Czech Republic by building a Digital Creative

City in Guadalajara, Jalisco. Designed to attract high-level investment in the

technology and information sectors and built in coordination with the Massachusetts Institute of

Technology (MIT), the City is said to be the largest multimedia project in Latin Americavii.

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Moving Away from the Maquiladora

and Toward OutsourcingMexico has long been a hotspot for

outsourced manufacturing, especially from its neighbor the US. As the country moves up the value-chain to become a high-end tech supplier, its flourishing capabilities in all things multimedia have put it on the map as an attractive destination, especially for videogame design. This is evidenced by the presence of outsourcing giants like Ubisoft and Miniature Precision Components (MPC) in Mexico.

In addition to pushing for more funding, experts agree that Mexico also needs to push for more training. The stats are healthy – the Asociación Nacional de Universidades e Instituciones de Educación Superior (ANUIES) indicates that there were over 50,000 engineering and technology graduates in the top seven provinces of the country alone, and over 117,000 nationwide, a number that is expected to double in the next few years as top-ranking universities like the Tecnológico de Monterrey, the Universidad del Valle Mexico, and the Universidad Panamericana prop their programs in fields like digital animation and videogame design. However, in such an innovative and fast-changing industry, the existing training is still insufficient. As a result, most studios have their own in-house training labs for their new recruits. The learning curve takes about a year.

As Andres Reyes, the CEO of Boxel Studios, a Tijuana-based studio specializing in 3D that has made it big in important productions in Los Angeles, indicates, “Mexico is facing an educational reform, to transform the system and be able to teach and train a generation that was born in the digital age.”

Alfonso Fernández, who heads AMS Media, agrees that there is strong content, but weak commercial skills. AMS Media focuses on e-learning and produces educational videogames. Along those same lines, Enrique Vázquez, a Digital Media Coordinator at TechBA Vancouver, which currently advises around 120 Mexican enterprises hoping to compete in the Canadian market, notes that training is especially warranted in the area of mass marketing. The content, creativity and quality are all there, says Vázquez, but selling the final product, especially in the US, Canada and Europe, is a different story. Global-scale productions, especially for purposes of outsourcing, require strong and timely training, efficient intellectual property processes, and thousands of proficient local programmers in order to attain economies of scale. That is Mexico’s challenge.

i. http://unctad.org/en/Docs/ditctab20103_en.pdf

ii. http://www.nielsen.com/content/dam/corporate/us/en/newswire/uploads/2011/04/Nielsen-Hispanic-Media-US.pdf

iii. Leading to this source: Archundia Ortiz, Luis. “Creative Industries in Mexico: Matrix of the Spanish Digital Wave”. March 2012.

iv. http://www.iadb.org/om/pdf/epiedrasp1.pdf

v. http://www.unesco.org/new/es/culture/themes/cultural-diversity/diversity-of-cultural-expressions/tools/policy-guide/como-usar-esta-guia/panorama-de-las-industrias-culturales-y-creativas/

vi. http://fonca.conaculta.gob.mx/IndustriasCreativas2013_vertical.pdf

vii. For more information on the Digital City, see http://www.economia.gob.mx/eventos-noticias/informacion-relevante/9182-boletin283-12

References

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Gaming, Film and Digital Animation: Mexico’s Creative Industry’s Climb to Recognition

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