case study
Assignment – Semester 2, 2018 Assignment – Semester 2, 2018 ACCT5022 CPA Accounting Capstone Page 1 Brown Bag In the mid-1990s Cathal Gaffney and Darragh O'Connell knew nothing about running a business. In fact, they didn't want to know anything about running a business. They had never outgrown a childhood fascination with comics and graphic novels and considered themselves artists working (infrequently) on the small Dublin animation circuit. By 2003, they were running Brown Bag Films, an award-winning, Oscar- nominated Irish animation powerhouse with a large and growing number of Irish and international clients for whom they produce television series, feature films, commercials and digital media. Brown Bag Films was typical of many Irish 'Celtic Tiger' era start-up success stories. It was lean, innovative and heavily reliant on highly skilled staff using state-of-the-art technology. It was also at a juncture where strategic decisions about the future of the company had to be addressed. Animation in Ireland The story of the animation industry in Ireland over the last twenty years is one of boom-to-bust-to new-beginnings. In 1992 Business and Finance Magazine reported that the Industrial Development Authority (IDA) 'reckoned that Ireland could become a major world animation centre. [Ireland was] ... to become the cartoon capital of Europe. Today the dream is over.’ Ten years later, two Irish films received nominations for the 2002 Academy Awards, both were short animated films produced by small, young, Irish companies. The 1970s saw a 'baby-boom' in Ireland; as birth rates reached, and surpassed, previous highs of the early 1950s, infant mortality rates dropped significantly. This new, young population was served by the first official state broadcasting agency, RTE, which had been established in the early 1960s. However, most of the animated content of children's television programming and on television advertising was Assignment – Semester 2, 2018 ACCT5022 CPA Accounting Capstone Page 2 produced by American companies (principally Disney) and home-produced animation was almost non-existent. As the global recession worsened in the early 1980s, the IDA ('a state agency whose prime focus was to get industries with the highest job content for Ireland') changed strategy. Their ten-year strategic plan directed that the agency: ... should focus on attracting industries that could achieve high output growth using the best technology available, while maximising their spending on Irish services and materials. In this way, the IDA would maximise the gains for the economy, both through jobs within the company and via the related service employment that would be created in consequence. Our judgement was that the most technologically advanced firms would be the most successful in the market place. We believed the jobs would follow that success. This marked a reversal of the ID A's traditional approach of attracting the most labour intensive industries, since labour was in abundant supply in Ireland. In the mid-1980s the IDA sought to attract large animation companies to Ireland and met with good initial levels of success, attracting three large American companies to set-up in Dublin: Sullivan Bluth (later Don Bluth Entertainment), Murakami Wolf Swenson (later Fred Wolf Films) and Emerald City. When it emerged that Bluth initially employed American and European animators in most of the skilled positions in the company and Irish animators were employed in- functional positions, Bluth and the IDA looked seriously at the provision of serious training opportunities for Irish animators. The result was a two-year animation course in Ballyfermot College of Further Education (BCFE), followed shortly afterwards by a course in Dun Laoighaire Institute of Art, Design and Technology. Assignment – Semester 2, 2018 ACCT5022 CPA Accounting Capstone Page 3 These three companies employed 530 staff by 1990. Three years later Emerald City had gone into liquidation, Don Bluth Entertainment closed and Fred Wolf Films laid off two thirds of its workforce; it too would later close its Irish operation. The biggest blow to the sector was the closing of the Bluth operation which resulted in 380 (over 70 per cent of the 'big three' animation companies) jobs being lost. By 1998 employment in the Irish animation sector had shrunk to 70 fulltime and 30 contract/freelance employees. At the time many reasons were given for the retreat and collapse of the US companies. The period of economic fallout in the aftermath of the first Gulf War and competitive pressures within the international animation industry contributed to a situation where locating in Ireland was no longer a viable option for companies in the sector. North America was the spiritual home of commercial animation and Dublin in the early 1990s offered little tangible ·strategic benefit in locating a production facility in Dublin. Ironically, the attraction of large American companies, and their subsequent withdrawal had sown the seeds of a healthy indigenous industry. When the foreign investment bubble burst, a community of young, talented film-makers remained behind. They were skilled creatives who had worked on large commercial productions for the big three animation houses. They had energy, experience and a drive to succeed on their own terms, but little money or business experience. Beginning Brown Bag Cathal Gaffney had an idea: the idea was a short animated film which would lampoon a classic of Irish language literature, Peig, an autobiographical account of island life at the start of the 20th century. Peig, was a staple of school curricula and was widely disliked by students forced to read the text. Assignment – Semester 2, 2018 ACCT5022 CPA Accounting Capstone Page 4 Darragh O'Connell was from Leixlip, a satellite town of Dublin in County Kildare which had mushroomed as a result of large-scale migration from rural areas in the late 1960s. His original interest in the field was encouraged by the emergence of a new wave of science fiction comics such as 2000 AD which began to be widely distributed in Ireland in the late 1970s. He began writing and drawing his own graphic sci-fi novels with distribution limited to a close group of friends. Gaffney's original interest was in the more sedate area of fine arts. He also grew up in an area which experienced population growth in the late 1960s; the Navan Road area of Dublin. They had both attended secondary school at a time when unemployment was a pressing reality for everyone in Ireland, the concept of return- emigration was inconceivable, and the value of employment was universally appreciated. Employment for visual artists is never assured, and the opportunity to train and work in a field they enjoyed was welcomed by both of them after they left school. Following stints at Bluth and BCFE, O'Connell and Gaffney met while unemployed and developed Gaffney's idea for the best part of a year. Eventually, they pitched the idea to the newly formed Independent Productions Unit (IPU) at RTE. RTE had created the IPU in response to the Broadcasting Authority (Amendment) Act 1993. It aimed 'to enhance the service to viewers by expanding the range and diversity of Irish-made programmes on our screens and to foster new sources of creativity and energy within the independent television production sector.' At the time the IPU were not interested in the idea of a short film, and instead commissioned a series of 7 x 3.5 minute short animated pieces based on the proposed concept. At this time, the partners were interested in bringing the Peig project to fruition and were not interested in developing a business. Animator friends were brought on board to assist in the production (a mixture of hand-drawn cell- animation and stop-motion models). The work was expensive, labour intensive and Assignment – Semester 2, 2018 ACCT5022 CPA Accounting Capstone Page 5 time-consuming. Although listed on the IPU's web-archive as a 'Young Peoples' television programme, the content was directed towards an Irish adult late-night TV market. When aired on RTE, the Peig series achieved critical acclaim (the Irish Times reviewing it as 'one of the best and funniest Irish productions in ages'). One of the more tangible benefits of the experience for the directors was the establishment of working roles: Gaffney as producer and O'Connell as director. Having completed their project, they discussed dividing their remaining assets. Gaffney soon secured a contract from a UK-based company to develop another project, once again asked O'Connell to come on board, and Brown Bag Films were officially established in 1994. Existing assets were invested in procuring expensive state-of-the art animation technology and training. Growing the enterprise At this initial stage the directors of Brown Bag were still very 'art-oriented' as opposed to having a business drive. Much of this was due to the fact that they were following their primary interest and expertise. Gaffney and O'Connell realised to continue to work in the field that they would have to grow their understanding of business. Following their initial small-scale success, capital was almost non-existent and no offers for work were forthcoming. The need to effectively market their services became paramount as business was quiet, perhaps as a result of a loss of faith in the Irish animation sector. Some business training was undertaken and a show-reel was developed and pitched at festivals and trade-fairs. With little work available in the television sector, Brown Bag pursued other markets and contracted animation work with CD-ROM production companies. In the mid-90s this field had a high-book worth to the company and helped alleviate many of their early financial difficulties. They also began to work on television commercials for Assignment – Semester 2, 2018 ACCT5022 CPA Accounting Capstone Page 6 advertising agencies which proved to be a highly lucrative field (see Appendix 1 for a list of key company milestones). Their client list included Aer Lingus, SmithKline Beecham, 11850, the Department of the Environment and Local Government, RTE, TG4 and Saudi Arabian State television. A major departure for the company in the late 1990s was securing the contract to coordinate the animation work for a major Warner Brothers production, The King & I, which involved utilising ground breaking virtual animation studio technology and resulted in a significant boost to the company's profile. Over the following years Brown Bag worked for and with a variety of production companies, mainly outside Ireland. A production/promotion momentum had begun for the company and the