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Pixar’s meteoric rise from an initial $10m investment by Apple chief Steve Jobs to a $7.4bn takeover offer from Walt Disney on Tuesday highlighted the lucrative nature of the business of animation, says Joshua Chaffin.

However, as with any Hollywood genre, success has bred imitation, and that has raised concerns that the market may be nearing saturation. “Your kids may watch [a successful animated movie] dozens of times, or even a hundred times,” often dragging their parents to the movie theatre more than once, Steve Jobs said on Tuesday. “The opportunity for watching those films on TV, or in the back seat of your car, is huge.”

Disney said it may increase its animated movie output from the current average of around two movies a year between the two studios. If so, that could add to an increasingly crowded market.

“There’s a huge amount of animation being released this year and next year, even without any increase from Disney or Pixar,” says Dennis McAlpine, of McAlpine and Associates, a media investment firm.

Indeed, while there were once just a handful of animated releases each year, dominated by Disney, there were eight in 2005; there are 15 slated for this year; and 11 already pencilled in for 2007. That means such productions will be forced to compete for coveted release dates when their young fans are not in school.

Pixar’s forthcoming Cars, for example, which once might have enjoyed the entire summer to itself will now have to share a one-month stretch in late May and early June with at least two other animated productions, Over The Hedge and Charlotte’s Web.

The industry has been fuelled by the box office success of hits such as DreamWorks Animation’s Shrek 2, which generated $916m after its 2004 release.

At the same time, the barriers to entry have fallen. The pioneering technology that Pixar used to create Toy Story a decade ago is more affordable and widespread. Animation is routinely outsourced to India and other countries.

While animated films are laborious to make, taking as long as two years from beginning to end, they do not rely on petulant, high-priced stars, and can be reworked along the way, eliminating some box office risk. Traditionally, they also benefited from a robust DVD market.

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