Jerusalem investor goes Hollywood, with animation

The next Hollywood animated blockbuster of Lion King caliber just may hail from Jerusalem, a city that until now, has not exactly been on the map of international filmmaking. That, at least, is the hope of Erel Margalit, managing partner …

The next Hollywood animated blockbuster of Lion King caliber just may hail from Jerusalem, a city that until now, has not exactly been on the map of international filmmaking.

That, at least, is the hope of Erel Margalit, managing partner of Jerusalem Venture Partners, one of Israel’s most successful venture capital funds. The multi-million dollar Jerusalem Animation Lab is at the forefront of Margalit’s transfer of focus from communication technology into content and media.

“Until now, Israelis have proved themselves as leaders in technology, and I believe that Israelis can be leaders in content as well,” Margalit told ISRAEL21c.

Israeli high technology companies make up 40 percent of the country’s annual industrial exports. The Animation Lab won’t be able to keep that pace but its target is market is estimated at $77 billion market and growing. The Lab plans to complete a short version of its first feature film by the end of the year, and complete the full-length movie by 2009.

Max Howard, the former Hollywood executive Margalit brought in to head the studio, won’t give away the storyline of the studio’s first film, but says the short six-to-eight minute clip will serve as Jerusalem’s calling card in Los Angeles, 7,600 miles away.

“We are going to make independent animated features that we hope to distribute with major studios,” Howard said.

New, cheaper animation technology is making it easier for small boutique studios like Animation Lab to break into what was once a closed market. The British independent film studio Aardman Animations Ltd. was behind this year’s Oscar-winning best animated film Wallace & Gromit in the Curse of the Were-Rabbit.

“You used to need very expensive software and computers that cost a quarter of a million dollars,” said Howard. “Today you can buy a good computer and software off the shelf and have someone start to animate for around $15,000.”

While Howard said he wouldn’t necessarily have chosen Jerusalem as the best location for the studio, he was intrigued by JVP’s technological background and its plans to invest in technologies that may alter the film distribution industry’s landscape.

The studio is setting its sights on mobile phones and interactive Internet as distribution methods and plans to add on-line gaming into the mix as well.

“Animation is in big need of another technology boost, and the next stage is distribution on different platforms that are more interactive, not just the broadcasting model,” Margalit said.

One of the first films to attempt to change the distribution rules was Bubble, made by Steven Soderbergh for just $1.6 million and simultaneously released in January on a high-definition television network and in the theater. It was distributed on DVD just four days later.

The film was financed by former Broadcast.com executives Mark Cuban and Todd Wagner. “Mark and I sat down and said ‘Can we find a way to survive in an industry that has not been good for equity investors,’” Wagner told CNET News. “This is the only way that real entrepreneurs have a chance to have a shot in an industry run by huge studios.”

Howard said he has been studying consumers’ entertainment choices, from watching films in theaters, on television, or on home computers, to playing spin-off games and talking about the movies in on-line chat rooms. Animation Lab, he said, will put up an interactive Web site that among other things, will show how the film is being made, creating the right balance “between buzz and not giving too much away.”

“Why not let the consumer choose” how they want to see a film, said Howard, who was an executive producer for Dreamworks SKG, the president of Warner Bros Entertainment Inc.’s feature animation department, and set up four animation studios for Walt Disney Co. “It will only make the existing market better. People will see movies they wouldn’t ordinarily see.”

A second reason why a studio in Israel will work, said Howard, is that nearly all the people speak English. “It’s a country whose entertainment sensibilities are Western, international. So they know what we are talking about when we say we are making a film for an international audience.”

The studio will be located just yards away from another Margalit initiative, The Performing Arts Center he established, in part, to showcase new media technologies.

The Performing Arts Center was established with Margalit’s money but the Animation Lab will be financed by his venture capital fund, which will to allot as much as $12 million to the project in the first stage and bring in another two international investment partners as well. Later, Margalit plans to set up an on-line gaming center next door to the studio and move the fund’s technology incubator, which focuses on media technologies, into the vicinity.

Animation Lab’s permanent abode, in an old building that used to belong to the Israeli mint, will be completed by the end of the year. Meanwhile, the team of about 25, which includes six Hollywood talents, will work in the JVP offices, alongside start-ups developing, among other things, ways to seamlessly integrate video advertising into video games.

“There are animators here who are incredibly talented,” said Howard, responsible for training the team. “But they were doing high-end 30-second television commercials and have never tried a full-length feature. The analogy is that of teaching a sprinter how to run a marathon.”

Bottom line, the business is all about telling a story, and Howard is hopeful that Israel, with its rich history, may inspire a film like Mulan, which was based on a Chinese legend.

“We are looking for true, good, refreshing stories,” said Howard.

For Margalit, setting up the studio in Jerusalem was just another step to completing his ambition of turning Israel’s capital into a global center of creativity that feeds on schools like the Bezalel Academy of Art and Design and the Sam Spiegel Film & Television School.

“Jerusalem is the only city in Israel in which old and new, art and advanced technology, artists and students are intertwined naturally,” Margalit said. “The enormous pool of talent and creativity among young Israelis will make its way to a media center. I have no doubt that they will know how to make feature-length animation movies better than anyone else in the world.”

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