Will Outsourcing Make Hollywood Great Again?

Movie fans! I got you covered this time round. My sources on the ground tell me that more animated feature films might be hitting theaters and home screens, thanks to a massive outsourcing trend in Hollywood. Data from Knowledge Source Intelligence shows that the animation outsourcing market is expected to reach a staggering $299 billion by 2029, which means a 9.35% compound annual growth rate from 2024.

Right now, your favorite Hollywood studios—Paramount Pictures, Netflix, Warner Bros.—are moving production to regions offering tax incentives, including Canada, Australia, parts of Europe, and Asia. Why? Because California’s current tax incentive program excludes animation.

Now, the animation industry may be just a small part of the highly competitive film market, but that doesn’t mean it’s any less high-stakes. Spending millions of dollars doesn’t always guarantee box-office success. And let’s be honest, casting the biggest actor in the world or having the most compelling screenplay won’t necessarily break even either. Not all movies make it; flops can put huge pressure on studios to recover those hefty losses. That’s why studios are leaning into sequels—movies that pose less financial risk because they come with a guaranteed audience.

But critics believe that audiences will eventually grow tired of these sequels, remakes, and rehashes. They’ll want something fresh, something they’ve never seen before on the silver screen. And this is where outsourcing steps in.

Outsourcing reduces production costs by up to 70%, which could encourage studios to take on riskier, more creative projects. These projects can bring out-of-the-box stories and fresh perspectives. A classic example is Avatar. The 2009 sci-fi epic, directed by James Cameron, took more than a decade to make because of its elaborate vision and the uncertainty over how studios would recoup their investment. When it was finally released, it became a box-office hit and is now regarded as the highest-grossing film of all time.

Here’s something you may not know: Avatar outsourced several design aspects to multiple studios to save time. For example, the production of a twin-rotor helicopter (the one used by RDA) was too large to handle in-house, so outsourced studios completed various elements of the vehicle. This allowed the production team to stay on schedule and on budget.

Of course, Cameron’s unique vision and story are the main reasons for its commercial and critical acclaim. But let’s not disregard the great business decisions, like outsourcing. These decisions were an intrinsic part of its success. Am I right, or am I right?