Breaking: ‘The Tiny Chef Show’ Stop-Motion Studio Factory Transmedia Declares Bankruptcy
Chip 'n' Dale: Park Life Chip 'n' Dale: Park Life

French animation studio Xilam Animation has released its 2023 financials and while things were great last year, the company has had to readjust its ambitions for the near future due to a drop in demand for new kids’ content from U.S. streamers.

Xilam, which celebrates its 25th anniversary this year, is the producer of 2019’s Oscar-nominated feature I Lost My Body and Disney+’s animated series Chip ‘n’ Dale: Park Life, as well as dozens of other titles for global streamers and broadcasters such as Oggy and the Cockroaches and Mr. Magoo. The company is currently handling animation on Disney+’s The Doomies, previewed at Annecy 2022, and Zack Snyder’s Twilight of the Gods for Netflix.

As one of the few publicly-listed mid-size animation companies in Europe, Xilam has to file public financial statements (download 2023 full year financials as a PDF), and the data offers key insights into the downstream challenges currently faced by animation studios that rely on work from U.S. streaming services. Xilam’s filings describes 2024 as “a year of transition” due to U.S.-based streamers’ hesitance to greenlight new projects in the second half of last year.

Cartoon Brew spoke with Xilam CEO and chairman Marc du Pontavice about whether this is a trend that other studios are currently dealing with. He said:

Marc du Pontavice
Marc du Pontavice

Oh yes. The reduction has been quite severe for the past 12 months and very limited greenlights have been issued from the two main commissioning partners, Netflix and Disney. It’s all the more a problem as many mid-size studios have grown bigger over these last few years and currently find themselves too heavy from a lack of new commissions. Studios like Xilam will survive this downturn as we have a strong library with recurrent revenues, as well as good access to other commissioners, such as European television broadcasters. But for those who have grown on the sole basis of commissioning work for hire from the streamers, it’s going to be very difficult.

Du Pontavice says streamers are missing the mark with their original kids’ content because they aren’t giving new properties time to build a fanbase. It’s an opinion that is echoed by other leading industry pros, including Chris Nee (creator of Doc McStuffins and Ada Twist, Scientist).

According to du Pontavice:

Some streamers haven’t found a way to make hits with original material as they have too much expectation on the launch period. As opposed to adult-targeted content, it takes a very long time to build a kids or family hit. But I am not sure the algorithm can or wants to implement this rule of our business. As a consequence, the library titles are the ones that provide the core kids’ audience of the streamers, which is a shame as almost all of them have been generated on linear channels. As the streamers are taking such a big piece of the audience, I believe they have a responsibility to bear towards the creation of new content. Any new generation needs to grow with their own references. What to think of a world where kids grow with the same references as their parents?

The animation industry slowdown is playing out in slow motion and Xilam has been concerned about the situation since last year. The company warned shareholders last October (download PDF) that U.S. media companies were pulling back on animation:

With their business models under pressure, American streaming platforms are significantly reducing their investment in the kids’ animation segment. Today, they favor fewer investments, focusing on American brands with worldwide recognition.

In the same report, Xilam predicted a decline in 2024 sales and suspended its “Ambition 2026” plan to grow total operating income to €80 million by 2026 (up from €48.2 million in 2023). The announcement sent the company’s stock plummeting over 60% and its share price has yet to recover.

Last December, in response to the expected drop in sales this year and to “strengthen its shareholders’ equity and liquidity,” Xilam raised €3.7 million ($4 million) by issuing nearly a million new shares. According to the company, its remaining debt is now mainly self-liquidating and, therefore, secured by production in progress.

Asked about what other adjustments his studio will make to compensate for the shifting demands of streamers, du Pontavice explained:

We are reorienting our kids’ business towards European television. In addition, we are continuing to dig on the promising adult animation market that seems to resist the downturn. And finally, we are also putting a lot of effort towards feature films.

Pictured at top: Chip ‘n’ Dale: Park Life produced by Xilam for Disney+

Location:

Jamie Lang

Jamie Lang is the Editor-in-Chief of Cartoon Brew.