Animation firm sets up shop in Valley.

The home of industry powerhouses such as Dreamworks Animation, the Walt Disney Co., and Nickelodeon Animation, the Valley animation world has a new face: Chatsworth-based CGI firm, GigaPix Studios.

Helmed by animation industry veteran, GigaPix President John Savage, and CEO Chris Blauvelt, the company will alternate between developing original content and forming strategic partnerships with major local studios.

Though the company was founded in 2002, it has only recently begun to assert itself as a fledgling player in the ever-competitive animation industry. Since the beginning of the year, GigaPix has begun to settle into a sprawling 32,000 square foot studio, in a warehouse district in Chatsworth. The 30-plus employee firm has hired approximately a dozen people over the past few months and plans to rapidly accelerate its hiring, adding 15 new artists in the next 90 days. Savage claims that when at full capacity, the company will employ between 120 and 160 people.

But competing as an independent animation studio can be difficult. For every success story like Pixar, there are failures like defunct Chicago-based animation house, Veggie Tales. GigaPix hopes to mitigate this possibility, by forming strategic partnerships with large studios.

"We're structuring strategic partnerships with studios that have intellectual property. Though I'm not at liberty to talk about our partners, they are all household names," Savage said. "These current projects are collaborative. It's not just taking a concept and running with it. We bring something to the table. We have technology, expertise and talent in areas that they may not necessarily have. They'll take care of certain aspects and we'll take care of others."

In order to obtain such deals, Savage and Blauvelt targeted specific under-utilized studio properties, pitching studio executives with a tentative distribution model that expressed how such a partnership would work. While much of the presentation discussed what GigaPix had to offer artistically, the studios also opted to partner with GigaPix for the financial benefits.

"They liked what we were doing and they told us that we were fantastic. But it took a while to get worked out because the studios thought that we couldn't fulfill their animation needs in our former (3,500 square foot) studio. Now that we are in our new office, the deals are coming into place, "Savage said. "There are four projects on the slate. Some are being developed to be animated for TV, while some will be feature films.

They will target a variety of interests and partners. The projects were developed for a specific age group and with a studio partnership in mind. One project is specifically targeted for Disney Television."

Developing prototypes

The prototypes that GigaPix is currently developing include: "Junk Bots," an adventure comedy; "Twilight," an "irreverent fantasy about a young bunny making his way in a world of eternal twilight;" "Alien SAR," a sci-fi thriller; and "Hypnopig," a super hero spoof set in a world populated with anthropomorphic characters.

While it is much too early to tell whether or not GigaPix will strike it rich, Steve Lidberg, a senior research analyst for Pacific Crest Securities, believes that there is definitely gold in the CGI-animated hills.

"It's still a definite area of growth, especially with all the major studios making increasing investments. Lucas Arts, Fox, and Disney are all looking to build their CGI capabilities," Lidberg said. "I don't think the industry has cooled off at all."

CGI, which stands for computer generated imagery, is certainly a hot property of late. Despite mixed reviews, "Madagascar" debuted to a $60 million box office take on Memorial Day Weekend. Past CGI hits have included critically acclaimed blockbusters such as "Shrek," "The Incredibles," and "Finding Nemo." But according to Lidberg, GigaPix's ultimate success will depend largely on the quality of the stories that it manages to tell.

"At the end of the day, success is largely under your own control. It comes down to how compelling of a story you can create. The advancements we've seen in animation over the past 10 years can really create an attractive environment for the consumer," Lidberg said.

Steve Hulett, the business representative for the North Hollywood-based Local 839 Animation Guild, agrees that CGI has created a boom period for local animation. However, he attests to the difficulties of making it as an independent animation house.

"The whole animation industry is roaring. Just look at the box office take of "Madagascar." In order for an indic house to do well, it will depend on getting a distributor. Going the indic route is very tough," Hulett said.

Most studio CGI films run at above or the $100 million dollar mark, but Hulett estimates that at an indic house like GigaPix, the budgets will run closer to between $15 and $25 million.

Cost factors

This cost-effectiveness is one of the things that GigaPix is counting on to gain a leg up on the major studios.

"As an indic, you spend a lot of your time devising ways to be more cost effective. Disney has a 40 percent fringe budget on every project, which means that 40 percent of all costs are spent paying for over-head. We're small, our fringe is almost nonexistent," Savage said. "People here don't make outrageous salaries because everything goes back into the studio. Some of our animation will be done overseas. There are ways to leverage huge staffs at a fraction of the cost that other studios have." Obviously, no matter how cost-efficient one is, running a fledgling studio costs a great deal of money. For now, the studio is relying on financing from a small group of private investors. But Savage insists that at some point, GigaPix will have to go public in order to compete on a large scale.

"Our goal is to do an IPO. It has been in our plans from the very beginning, It's not feasible to have it happen before the next three or four years. But it's unlikely that we'll wait as long as six. It will be based around when the opportune moments are and it will likely fluctuate based on the properties."

As for the near future, Savage is focused on the unannounced deals at hand, hoping to have GigaPix's partnerships locked up by the end of the year. He hopes that these arrangements will allow GigaPix to have an available distribution outlet for not just its partnered productions, but for its original productions as well. If all goes according to plan, Savage expects the first major GigaPix project to hit audiences by the end of 2007.