SUNG Lin Gun remembers the heyday of Singapore's animation sector, a time when Flash software was considered revolutionary and meant no more drawing cartoons with pencil and paper.

The company he founded, Peach Blossom Media, was a pioneer in the industry. In 2005, its Tomato Twins animated series, featuring super twins on a quest to stop crime, debuted on Nickelodeon, making it the first homegrown cartoon to air on a regional network.

In those days, there were more than 30 local animation studios operating in Singapore. The sector was bustling under the government's support and push for its creative industries. Polytechnics and private schools were rolling out interactive media and design courses to build a pipeline of talent. The Singapore Economic Development Board (EDB) wooed and offered subsidies to multinational heavyweights such as Double Negative and Lucasfilm to set up shop here.

The future was bright.

That was more than a decade ago.

Today, Peach Blossom Media is no longer active. The shell of a company that remains exists only to collect revenue from its shows still airing and DVDs still selling in various countries. Mr Sung has moved on to producing live-action feature films.

What led to its demise?

The global financial crisis was one factor, according to Mr Sung. It hit broadcasters who pulled back on buying animation content. But another reason left him even more peeved - the opening of Lucasfilm here. "That was one of the biggest things that really pissed me off. It was contradictory that at the same time that we were building the local animation industry, EDB brought in Lucasfilm to Singapore.

"They don't understand that animation is not like petrochemicals where they build plants. Animation is actually a suitcase business. The foreign companies come, open their suitcases, open their hands to receive taxpayers' money, and voilà! They set up a company. Once the funding runs out, they close the suitcase and go.

"The funding pumped into Lucasfilm was said to dwarf the funding that local companies were getting. As a result, you have this full-grown giant suddenly transplanted into the local ecosystem, competing for the same resources with the nascent local startups. We didn't have a chance to grow to a big-enough size to compete on a level playing field."

The rationale for the move, EDB had said, was to transfer technical know-how to local studios. Lucasfilm has also emphasised that its Singapore studio, which today employs about 350 staff in its "Sandcrawler" regional headquarters here, was not set up as an assembly line to do simpler work at lower costs. But Mr Sung doesn't buy it. "The real value-added work, the design and creative work, is generally done back in the US headquarters. The intellectual property (IP), trademarks, know-how, et cetera are kept at home," he argues.

Developing talent

In response, Greg Grusby, director of PR and communications at Lucasfilm's visual effects and animation arm Industrial Light and Magic says that for the past 13 years, Lucasfilm Animation Singapore has focused on developing talent across the artistic disciplines needed for animation work.

This includes developing its "Jedi Masters Programme", which he says closes the gap between the instruction offered by traditional digital media schools and the rigorous requirements of the visual effects and animation industries. "To date, hundreds of individuals have been trained in the programme, and many are currently employed at the studio."

An EDB spokesman also emphasised that partnerships with companies such as Lucasfilm and games companies like Ubisoft, Koei Tecmo and IGG have enabled Singaporeans to play on the world stage and work on Hollywood blockbusters and international best-selling game titles. Many have also gone on to start their own media companies.

Peach Blossom's Mr Sung admits that the undoing of his own studio also had to do with his ambition - he had expanded too quickly, fuelled by a winning streak of awards and distribution deals with regional networks. Peach Blossom ramped up its production line and found itself in a cash crunch when it could not secure distributors for completed content, yet needed more funds to continue its existing production work.

Lack of funds was another obstacle faced by several other animation firms. Scrawl Studios, for example, went into debt in 2012. It had been working on a few international TV animated series and had some back-end revenue share in the sale proceeds of the shows. Along the way, plans to bring in investors were foiled, so it turned to taking short-term bank loans to finance its ongoing projects.

Scrawl Studios: one of the Emerging Enterprise Award winners of 2008

Unfortunately, the projects failed to achieve their expected returns and payment did not come in quickly enough as TV networks were also facing competition from online platforms. To make matters worse, the government also changed its co-investment scheme at that time to a grant system with more stringent criteria, making it harder for productions to qualify as it now mandated more local spending and hiring.

As complaints grew louder of foreigners vying with locals for jobs, the studio started finding it harder to renew foreign work passes for its staff from Australia, Indonesia, Malaysia and the Philippines. Many had to leave, which made it even harder to complete the projects on hand.

Eventually, Scrawl Studios stopped all large-scale animation production from 2013 onwards, switching to service work such as corporate videos and government projects with faster turnaround time to pay off its debt. It is still paying off its loans.

Asked to comment on these problems in the industry, a spokesman from the Info-communications Media Development Authority (IMDA) replies: "We recognise the challenges faced by local animation studios and media companies. While the external environment is tough, we believe that the core of a media business' success lies in its content and storytelling.

"As such, IMDA's mandate has always been to support the creation of quality Singaporean content. Since the 2000s, the government has provided strong support to media and animation companies to drive digital media creation. IMDA has also been leading delegations and supporting broadcast and animation companies to market their works at overseas markets, such as Mipcom (an annual global trade show for entertainment content)."

Latest figures from the Singapore Department of Statistics and Ministry of Manpower show that in 2015, some 6,600 people were employed in the film & video and games sub-sectors in Singapore. The sub-sectors contributed about S$600 million to the economy in 2015, more than double the S$260 million contributed in 2009.

Compromise moves us along

Some firms have found ways to work with the government's rigorous processes by mitigating risk in their operations. One Animation, for example, was founded in 2008 with the help of state support, and even now still takes grants from IMDA for almost all of its projects. Its CEO Sashim Parmanand says: "I think the processes are rigorous because they have to check everything to ensure that the companies are here to stay and build the industry."

That some companies did not stick to the storyline became painfully obvious. The government had, between 2005 and 2010, poured S$27.5 million into two Singapore subsidiaries of Australian talent agency One North Entertainment (formerly known as RGM Media).

The companies, however, used the funds meant for producing global films for its own loan repayments. The episode ended with the director of the two firms jailed for forgery and the companies liquidated.

Last year, British visual effects company Double Negative abruptly exited, causing most of its Singapore workforce to be laid off. There was talk that its subsidies had been withdrawn; EDB neither confirmed nor denied it.

Ms Parmanand says that for starters, One Animation always pre-sells the show to a few broadcasters early, and does not start production until it has at least 70 per cent of the money in by way of contracts.

Still, all content creation, from dramas to games to cartoons, has inherent risks. Content is binary in nature - it does well, or it doesn't. Studios have to move on from projects that make deficits and keep creating content.

That is why Nickelodeon can do dozens of shows, but audiences only remember Spongebob Squarepants and Dora the Explorer. So too for Cartoon Network, The Powerpuff Girls and Ben 10. Warner Brothers, Harry Potter and its DC Comics cartoons. Sanrio and Hello Kitty. The content that succeeds helps to subsidise the flops.

Creating original content - one's own intellectual property - is much riskier than doing service work for clients, points out Ms Parmanand, but service work is a price-erosion game which can soon become unsustainable. "Creating your own IP takes a long time - up to three years just to get the story right. It's a long process and it's expensive, but you get a lot of creative freedom within your team, and the major difference (compared to service work) is that if you do it well, you own that IP. All of a sudden, it becomes an opportunity."

That's what happened for its cartoon Oddbods - an animated TV comedy series about how seven furry characters survive the perils of everyday life. Oddbods merchandise grins from the shelves in the One Animation office conference room where we speak. The series is broadcast on 25 networks in 105 countries worldwide. One Animation has also just released its DVD and sold its inflight entertainment broadcasting rights to SilkAir, thus monetising it across multiple revenue streams.

It comes down to educating one's partner, she says, which in this case is the government.

"A lot of communication needs to happen so that both parties understand each other's objectives and find an opportunity to compromise and work together for a better outcome. That takes a lot of work. IMDA wants companies here to be successful. And you need to prove that you have a watertight plan for anyone to give you money."

Becoming a "poisonous shrimp"

Last Monday marked a milestone in the short history of Singapore's animation industry, when local studio Tiny Island Productions and Thailand's Shellhut Entertainment announced a co-production memorandum of understanding (MOU) with WingsMedia, a subsidiary of China's second-largest media group, Shanghai Media Group. The deal, valued at about US$250 million, will be the biggest animation film cooperation in Asia, and the first ever China-Singapore-Thailand animation co-production. The joint venture will create 10 feature films to be rolled out every year for the next 12 years. The first one is expected to be released in 2020.

As much as this is good news for CEO and founder of Tiny Island Productions David Kwok, the state of the industry still worries him. The civil servant-turned-visual effects artist-turned entrepreneur says that nationally, Singapore needs to make up its mind now if this is a sector it wants to push or pull the plug on. While it sits on the fence, the schools continue to churn out graduates each year who cannot find jobs when they enter the workforce.

"I was an artist. Now as a business person, I begin to understand. Building the industry is like raising a child. The way to nurture the industry is not to give it everything it wants. You need careful planning strategies to nurture the companies and the talent," he notes.

Singapore needs to become a "poisonous shrimp" in the ecosystem, he says, using an analogy first used by the late Lee Kuan Yew. Despite its small size, the poisonous shrimp poses a threat to the big fish in the region. Yet, not only is the shrimp not eaten by any fish, it can even co-exist with them.

For this to happen, government agencies have to work together, he adds. Enterprise Singapore can help with business matching between overseas projects and local studios. The Workforce Development Agency can help with the training of talent. JTC can offer more low-cost digital media facilities similar to Pixel Studios at one-north. And the EDB could look at bringing in Korean MNCs so that local studios can learn from their savvy methods of monetising their IP.

The aim is to build up Singapore's know-how on licensing and merchandising, and develop Singapore into a hub of IP legal services, games companies, media owners, licensing and merchandising companies, and investors.

When it comes to taking on foreign-sourced production work, Daniel Tan, Nanyang Polytechnic's (NYP) School of Interactive & Digital Media director, also proposes hunting in packs. Animation companies in Singapore should come together to bid for overseas productions, combining their staff strength for large-scale productionswhich could require as many as 300 animators, he explains.

One Animation's Ms Parmanand has a similar idea - for firms here to share their knowledge and contacts in order to build up the industry together. This includes sharing deal terms negotiated with broadcasters, because studios often don't know what to ask for when striking a deal.

Is it practical? Yes, she replies. Would One Animation do it, knowing it may mar its competitive edge? Why not, she asks.

"I think if we were all selling water or butter or cheese, a relatively standardised product, I wouldn't, but there is so much variety among content," she adds, laying out different-flavoured Mentos candy on the table. "Broadcasters are going to choose the flavour and colour they like."

Collaboration among studios will help, she says - from combining manpower to take on bigger productions, to complementing one another's strengths and weaknesses in different areas of the production chain, and even selling one another's content instead of relying on major distributors like Entertainment One or Zodiac Entertainment.

Keeping the dream alive

Animation is a passion-driven industry, with people in the trade sometimes caring more for personal fulfilment and excellence than their pay cheques.

Phelia Cheng, a computer graphics artist at Japanese video game company Koei Tecmo Singapore, for example, stays behind after hours to perfect small details - details which game players will probably never even notice. She says that working in a big company means that the quality of the animation has to be in tip-top condition, which is stressful sometimes, but incredibly fulfilling when she sees the final product.

But the reality now is that there are not enough animation projects or jobs in Singapore, given the Republic's difficulty in competing with neighbouring countries like Thailand, Indonesia and Malaysia on costs.

Given this, Mr Tan from NYP hopes that his students will be open to taking alternative jobs in advertising agencies, publishers, corporate communication departments and government agencies.

NYP has been taking in about 90 animation students every year for the past decade. Of its graduates, more than 70 per cent enter fields where they can practise their trade, albeit in varied functions not limited to animation and gaming firms.

"There is no leakage, because they are still applying what they have learnt. This space will grow; there will be more demand in this space because the world is digitising and becoming more visually-oriented rather than text-based.

"Our students may come in with one mindset of wanting to work for Pixar and Disney, and we tell them: 'Yes, you can and we will train you to be of that level, but if you don't get a job there, it's not the end of the world'."

According to the Ministry of Education, in 2016, there were about 450 animation graduates from the autonomous universities, polytechnics, ITEs and arts institutions. About eight in 10 graduates from these programmes found employment within six months upon graduation, although the ministry has no data on which sectors they entered.

Ms Cheng says it helps that students are usually trained in schools to be 3D generalists who can handle pre-production work such as storyboarding, character modelling and rigging, and animation, as well as post-production work such as lighting and rendering. This equips them with a range of skills to "survive in the industry" despite the low demand for animators.

She adds that the demand for pure animators in Singapore is especially limited. "The prospects are bleak in Singapore, and the market has no room to hire the number of graduates each year. Smaller companies would still prefer 3D generalists."

Ms Cheng adds she is lucky to be employed by Koei Tecmo to do a job that she loves. There are other animators still waiting for their dream job opening while holding down a bread-and-butter job illustrating for commercial firms. The hunger to create something simmers restlessly in an industry that for now has no room for their craft.