How Hollywood’s Budget Crunch Is Fueling a Canadian Toon Boom

As the streaming giants cut back on spending and Hollywood recovers from the strikes of 2023, one sector of the industry has continued to thrive: animation. And nowhere is this more evident than in Canada, which offers a fully established industry and a wealth of talent — all at an affordable price. 

Animation insiders north of the border say they’ve seen an uptick in activity thanks to cost-conscious producers looking for more bang for their buck — not to mention other advantages like currency savings (the Canadian dollar is currently 74 cents to the U.S. dollar), speed and efficiency, experienced local talent and cross-border proximity to Los Angeles. 

“Now that budgets have come down, we need to go back into our creative approaches of how we achieve a look and a result onscreen that works within a particular budget,” Michael Hefferon, president and COO at Vancouver-based Mainframe Studios, tells THR.

After years where working with Hollywood gave Canadian animators international ambition and scale, the industry now sees itself as a buzzy part of the solution as the era of peak TV begins to fade. Indeed, given the high cost of live-action content, animators in Canada can provide the type of high-end shows viewers have come to expect without the exorbitant budgets that prestige TV normally calls for.

“Rather than play the volume game and spread your chips across multiple pieces of content, [producers are] doubling down on fewer projects with the spectacle that viewers demand today. And you create spectacle with visual effects and animation,” says Jonathan Bronfman, co-founder and co-president of Monsters Aliens Robots Zombies (MARZ), a technology and visual effects studio based in Toronto.

Adds Jenn Twiner McCarron, CEO of Vancouver-based animation house Atomic Cartoons, a subsidiary of Canadian content juggernaut Thunderbird Entertainment: “Canada’s profile as a destination of choice has been raised because where people are looking to put quality over quantity, create successful brands and do it on a budget and get to the screen more quickly, we have a history of doing high-quality work, plus we bring funding to make sure it’s more affordable.” 

That focus on quality can be seen in Rocket Saves the Day, a 45-minute special for PBS Kids from Atomic Cartoons’ kids and family label. The show, based on Tad Hills’ best-selling Rocket books for toddlers learning to read, has a full TV series in development and a possible animated feature down the road.

Leveraging Canadian animation tax credits —available at a rate of 25 percent on qualified labor expenditure — is also in the mix as U.S. entertainment giants embrace new business models.

“With Hollywood trying to figure out exactly the direction they’ll go with content — with theatrical content, with streaming content, with originals and franchises — a natural part of that discussion is Canada with its tax credit and a wonderful talent pool that Cinesite works with,” says Bradley Wald, COO of the Vancouver-based VFX and feature animation house.

Cinesite’s Montreal studio became the production hub for artists working on Walt Disney Animation Studios’ Iwájú, a six-part Nigeria-set series that hits Disney+ on Feb. 28. The project marked the first time Disney Animation tapped an indie studio to work on the kind of content it usually produces in-house. 

“We’ve got such strong, capable companies that are world leaders in the animation space, plus educational institutions feeding talent into their pipeline,” says Karen Thorne-Stone, president and CEO of Ontario Creates, which markets the province to Hollywood. “And we’re doing work for productions all around the world, not to mention our own domestic productions.” 

Canada also offers an international co-production financing model that allows local animation studios to share with foreign partners the risk and rewards on content with global appeal, with each bringing soft money to the table. 

For example, Canada’s Mercury Filmworks is working with U.K.-based Serious Kids to co-produce A Mouse Called Julian, a CG-animated special about a shy mouse who befriends a fox. And Heath Kenny, chief content officer of Mercury, says Canadian animators work fast: “Generally, folks are looking for smaller orders because they simply need a quicker turnaround so they can test content on their platforms and see if they want more.”

The quality-over-quantity approach is also extending to features. Toronto-based Guru Studio optioned a book property that is in development as a possible film franchise. “There’s a concerted effort for us to lean into higher-quality work and not put as much focus on volume coming out of a period when there was a lot of volume,” says Guru president and creative director Frank Falcone.

At the other end of the spectrum, Canadian toymaker Spin Master and Nickelodeon Films are at work on Paw Patrol 3, the next feature based on the popular TV show (animated by Guru Studio) and set for a 2026 theatrical release by Paramount. 

But Jennifer Dodge, president of Spin Master Entertainment, says that despite all the positives within the Canadian animation sector, the overall downturn in spending from Hollywood has forced her and others to identify new digital lanes for her animated content pipeline. “I think Spin Master is in a very fortunate position in a very difficult time,” she tells THR, adding that in today’s risk-averse climate, her company no longer can look to a behemoth like Nickelodeon to launch rookie projects, as it did early on with Paw Patrol. 

Spin Master recently produced the animated series Unicorn Academy for global partner Netflix. The series includes specials, TV episodes, music videos and more released over a two-year period — with a toy line and video game also in the mix. Significantly, Netflix allowed Spin Master to premiere the initial TV feature-length special on Roblox and stream excerpts from the movie on YouTube and myriad other content on social media platforms. “It’s about meeting the audience where they are and finding out how to do that,” says Dodge of building buzz ahead of Unicorn Academy’s premiere on Netflix in October. 

The lack of a Canadian animation giant like Pixar or Disney Animation also has forced local studios to collaborate on tentpole movies to ensure they get done on time and budget. Netflix’s SpongeBob SquarePants film Saving Bikini Bottom: The Sandy Cheeks Movie involved three Ontario studios joining forces, with Sinking Ship Entertainment and Pipeline Studios sharing the full CG animation and Spin VFX completing the live-action VFX parts.

“Uncertain times sometimes make for really interesting creative challenges,” says Matt Bishop, a partner and producer at Toronto-based Sinking Ship. “We have such a great digital infrastructure in the province that we can all share files, we can all work and collaborate.”

Ontario Film commissioner Justin Cutler applauds the teamwork on the SpongeBob spinoff as one of the biggest animation projects to be completed in the province. “That’s evidence most companies are looking for high quality and cost-effective places to do that business,” he tells THR. 

Elsewhere, boutique animation studio Stellar Boar is turning scripts into screen content in St. John’s, Newfoundland, as that province ramps up its output to compete with Toronto and Vancouver. “A big part of working in this industry is the ability to adapt stylistically to whatever you’re given,” says Stellar Boar CEO Curtis Rioux. “That breeds creativity and interesting decision-making.” 

And nothing says quality better than the National Film Board of Canada, whose shortform animation work has earned 78 Oscar nominations and 12 wins (its most recent win in the category was for Torill Kove’s The Danish Poet in 2006). Marc Bertrand, a producer in the NFB’s French Animation Studio, says despite all the activity within Canada’s animation sector, the true potential of the industry has yet to be truly tapped.

“What is sellable is usually series and features,” he says. “But we want to explore uniqueness, experimenting with different storytelling, different techniques, pushing the boundaries — and then share the films with Canadian producers and the world.” 

This story first appeared in the Feb. 7 issue of The Hollywood Reporter magazine. Click here to subscribe.