The world of feature animation -- once thought to be the exclusive domain of Disney and DreamWorks -- is getting increasingly competitive, as studios left outside the gates of the toon kingdom are employing aggressive tactics to break in.  With the successful bow of "Dr. Seuss' Horton Hears a Who," Fox Animation reaffirms its place in the top tier, thanks to a string of hits from its Blue Sky CGI studio, capped by "Horton." 

By BEN FRITZ, PAMELA MCCLINTOCK and from Variety

Universal successfully courted former Fox toon topper Chris Meledandri, who oversaw development on "Horton" and the "Ice Age" franchise, by helping him establish his own independent family entertainment company. The studio's exclusive deal with Meledandri includes partial ownership of his production house, Illumination.

Though it has struggled with its two first releases, Sony recently put new execs atop its animation unit and claims to be re-committing to the space.

Coming off the success of "Happy Feet," Warner Bros. has thrown a multitude of projects into development and is hoping to become a destination for live-action filmmakers interested in toons, and for independent animation studios.

Disney is still the king, thanks more to Pixar than Disney Animation Studios. DreamWorks Animation produces two toons per year, distributed by Paramount, and now has two successful franchises in "Shrek" and "Madagascar."

And even though Meledandri is gone, Fox managed to successfully sell "Horton" without him, demonstrating it has built an animation presence with staying power.

Though the past couple of years have disproved the industry maxim that CGI toons are invulnerable at the B.O. -- see "Flushed Away," "Meet the Robinsons" or "Surf's Up" -- they still remain the industry's most reliable genre, especially in homevideo.

That's particularly important as the U.S. economy teeters on recession and Hollywood starts to worry about consumers cutting back on spending. Compared to most other forms of entertainment for a family, movies remain a bargain. In 2007, it cost an average of $141.20 for a family of four to buy themepark tickets and $94 for a baseball game, according to a report recently released by the Motion Picture Assn. of America. An afternoon at the movies? $27.52.

"These are precarious times. Anybody who is prudent would be taking a look at the family category," says National Assn. of Theater Owners John Fithian.

The recent surge of interest in digital 3-D has also fueled studios' investments in animation, since CGI toons are easier to adapt for digital 3-D projection and targeted at the young auds who love the technology.

DreamWorks Animation plans to make all its pics in 3-D, starting with 2009's "Monsters vs. Aliens." Other 3-D toons in production include Fox's "Ice Age: Dawn of the Dinosaurs" and Disney's re-release of "Toy Story."

On DVD, of course, animation is feeling the pinch as the whole industry slows down. DreamWorks Animation recently reported holiday returns for "Shrek the Third" that were well behind those of "Shrek 2." But toon DVD sales are softening from such a major high, insiders note, that they still represent major coin. Many parents will agree, after all, that animated films are a good value given how many times kids watch them.

Fox in particular has seen the benefits of a strong presence in the space lately, not only with "Horton's" boffo bow, but what many consider to 2007's biggest B.O. surprise: "Alvin and the Chipmunks."

"Many pundits rolled their eyes at us," recalls Fox Filmed Entertainment co-chair Tom Rothman. "The CGI-animation was just terrific. We don't mail it in just because it's a family film; we actually work harder."

People stopped rolling their eyes when "Alvin" turned into a runaway hit, ultimately grossing $204.1 million domestically, and more than $350 million worldwide.

The pic was made in part under the auspices of Fox Animation. The unit is exploring some work without outside animators and live action/toon hybrids, but is primarily devoted to "Horton" and "Ice Age's" New York-based maker Blue Sky, which Fox continues to fully own.

"We're very focused on Blue Sky and making sure they're provided with a pipeline," says Vanessa Morrison, who became prexy of Fox Animation last year after Meledandri left.

The relationship is somewhat akin to Disney's with Pixar. While John Lasseter's crew operates almost as an independent unit, Morrison and her L.A. team still develop most of Blue Sky's projects. The next one up is the summer's "Ice Age: Dawn of the Dinosaurs."