Opportunity in disruption

Tamil Nadu is trying to catch lightning in a bottle. The AI boom that started in mid-2022 has disrupted the creative industry, making generation and manipulation of photos and videos much easier. The state govt aims to create employment in the sector before the dust settles.Tamil Nadu has a sizable animation and visual effects industry and a small but fast-growing gaming startup ecosystem. The govt aims to bring major VFX and gaming studios as anchor companies to create a multiplier effect and attract larger investments. For this, it came up with a dedicated animation, visual effects, gaming and comics, and extended reality (AVGC-XR) policy (see graphic). The plan is to, by 2030, capture 20% of the Indian AVGC market, 20% of the export market, and create more than two lakh jobs. Govt has offered financial incentives for firms of all sizes, from startups to large companies.With roots in Tamil cinema, Chennai has notable boutique visual effects studios and medium and small firms taking up award-winning projects for global studios and streaming giants, apart from the domestic industry. Abhishek Prasad, CTO and director at Prasad Group, says Chennai has been a film and post-production hub for decades and has a strong talent base. "What has not happened yet is translating that depth into scale. The ecosystem is quite fragmented with a mix of boutique studios, MSMEs and freelancers doing high-quality work, but very few operating at a global level. The biggest gap today is the absence of anchor players. You need a few global studios or large production hubs to set up a base. That creates a multiplier effect, as we have already seen happen in Hyderabad," he says."Access to high-end infrastructure has been a bottleneck for mid-sized studios and govt's efforts here can make a real difference. However, along with infrastructure, you need consistent production pipelines, co-productions, global contracts, and real work flowing into the ecosystem," adds Prasad.Tamil Nadu's policy focuses on long-term competitiveness, talent, infrastructure and innovation rather than quick-fix subsidies, says Ananay Jain, Partner, Grant Thornton Bharat, a consultancy. He says common facilities will lower entry barriers, especially for smaller firms. However, he cautions about AI risks to mid-tier studios involved in repetitive work. "Global studios depend heavily on Indian VFX houses because the quality-to-cost ratio here is hard to beat. Chennai has long been a powerhouse for outsourcing heavy VFX work, especially rotoscoping, paint, and matchmove, which are most exposed to AI. These tools now are efficient at delivering tasks, including matte extraction, edge detection and basic cleanups, which previously depended on massive teams of junior artists," says Jain. "AI is flattening margins and undercutting the labour cost advantage. Higher value work (advanced compositing, FX and simulations, environment creation, pipeline engineering and real-time virtual production) will remain, but only for studios that upgrade and have stronger skills and technology. Those who do not pivot risk contraction," Jain warns.But AI is also acting as an enabler in some cases. Sebastian Peter, head of global projects at US-based IT services and media company Aceolution, argues opportunities in media and entertainment are diminishing and industry participants need to change their mindset to recognise higher-margin work in non-entertainment sectors. He said AVGC-XR work increasingly serves photorealistic synthetic data generation for autonomous vehicles, robotics, XR devices, and machine learning systems for large tech firms, digital twins for manufacturing and enterprise clients. "It is more challenging than Hollywood VFX, as it does not allow creative licence" he says. Peter, who is also secretary of VEGAS, an industry body representing visual effects, animation and gaming in the state, says Tamil Nadu's policy incentives and emphasis on skilling, will help existing players grow and attract new global studios.Other industry experts TOI spoke to say that while AI disruption is real, studios will have time to pivot. However, they say the policy lacks sufficient measures to help existing small and medium players transition to higher-end projects. The policy largely ignores the AI risks and briefly mentions that "human creativity, emotion and cultural experience remain irreplaceable even as Al advances". Experts believe Tamil Nadu can catch up with some early movers such as Karnataka, Maharashtra and Telangana in some areas if the execution is right. Execution is key because the policy is large and ambitious. With inputs from Bijoy Bharathan