Wednesday, July 21, 2010

Low Overhead

Claudia Eller examines the secrets of Chris Meladandri's Illumination Entertainment.

... Meledandri's business plan ... differs from other studios'. He keeps overhead low by employing only 35 people at an office on an industrial block in Santa Monica. By contrast, DreamWorks and Pixar employ staffs of more than 2,000 and 1,200, respectively, who work at lavish, sprawling campuses.

"We believe that small is more efficient," said Meledandri, who contracted with an animation house in Paris to produce "Despicable Me" and other projects. Hands-on, Meledandri embedded his producing associates and key executives to manage the productions — and pays the salaries of some 200 people working on his movies — to maintain control.

With a production budget of $69 million, "Despicable Me" cost less than half of other major digitally animated films, in part because Illumination saves money by working with first-time directors and teaming experienced artists with younger, less costly talent. ...

Allow me to repeat an old story: When I was but a lad, a grizzled old animation director named Woolfgang Reitherman came into a Disney story room one day and said:

"Guys? We just can't go on this way. This last picture cost seven and a half million dollars. We've got to find a way to make them cheaper."

Seven and a half mill. To make The Rescuers (the first one.) The picture went on to make several bagloads of money, becoming the highest grossing animated film of its time. The Bureau of Labor statistics would have us believe that $7.5 million circa 1977 is equal to $27 million today, except I think that's crap, because the Consumer Price Index is way understated. My guesstimate would be closer to $40 million.

But think for a minute. What mainstream animated film now is being made for $40 million? (There's only one, and its title is Winnie the Pooh, with much of the work sub-contracted.)

The difference in the cost of cartoon-making, then to now, isn't just inflation or a more expensive technology. It's the mushrooming of studio bureaucracies and studio overheads. In 1977, there were two production people working in Disney's animation department, which was around 2% of total staff.

And today?

There are production assistants. Production coordinators. Production supervisors. Production managers. I don't walk through a facility anywhere that isn't thick with administrative personnel, all of them busily calling meetings, pushing data around, and building new empires.

But if you go back to the era of Woolie Reitherman, the Chris Meladandri model looks entirely normal. Nobody was making a huge salary then, or feathering his/her professional nest. Nobody was calling endless meetings. The cartoons just got made, haltingly and somewhat inefficiently, and cost $7.5 million.

Maybe I'm delusional, but I would submit that animated features could be made in Southern California for between $65 and $80 million. It would take planning, focus and some creative thinking, but it could be done without stress fractures or broken families.

Because if Woolfgang could do it in 1977, somebody else could do it now.

38 comments:

vfxsoldier said...

Delgo cost $40 million to make. It made $694,782.

Hoodwinked cost $15 million to make according to some estimates. It made a huge profit of $110 million worldwide.

But for some reason they can't release the sequel because it's caught up in legal mumbo jumbo. Why would they prevent a huge money maker like that from hitting the screens?

Look, if a film is made cheap and makes a ton of money, great. Try turning that into a production model, fail.

Anonymous said...

It's a great plan several have tried but didn't have the right product or distribution
This show had both

Alex Dudley said...

A model I always hoped in doing when I dreamed of running a studio.

I was amazed how Steamboy, an animated film in Japan with excellent animation, was at the time the nation's most expensive animated film, and it only cost around $30 mill.

Anonymous said...

I agree that there are too many data-pushing production people at animation studios. Talk about bloat. They have their big fancy offices and do practically nothing. But somehow they always keep their jobs but the talented artists get laid off.

Retarded.

Anonymous said...

Thanks for the idea Steve!!
Now I can make features and keep the overhead down.

Anonymous said...

None of the data pushing people I know have big fancy offices. They are in small offices and cubes just like everyone else.

Anonymous said...

Non-talent controlling talent. The same sad old story...

What would be great is if a bunch of artists and writers pooled their resources and created their own studio, IN AMERICA, and did the work, IN AMERICA. They'd keep a few bean-counters around to obtain loans and balance the books.

Hey, it could work...

Anonymous said...

For what it's worth, Jimmy Neutron cost $30 million to make right here in the United States. It earned $103 million worldwide at the box office.

Anonymous said...

None of the data pushing people I know have big fancy offices. They are in small offices and cubes just like everyone else.

Yes, your one personal experience trumps everyone else's.

Anonymous said...

But does the $69 million include the cost of marketing for the film? I doubt it does.

My understanding was that some of these budget numbers that you see for other big animated films, for example on websites like BoxOfficeMojo, are including their marketing costs also. So for example, they say Toy Story 3 had a cost of $200 million, but I think a big chunk of that went towards marketing of the film, perhaps even up to half of that.

So with that in mind, the ACTUAL budget comes closer ($100 million to $69 million) to what Despicable Me was done for. So Despicable Me was still done for less, but I don't think it was as amazingly cheap as it first seems.

That was my understanding at least. Is anyone else able to back this up?

Anonymous said...

When's the Pegboard getting updated? Retirees like me depend on it online.
It hasn't been updated since March. Sheesh!

Steve Hulett said...

I have spoken to the authorities about the on-line PB.

Remember, you can always drop by the office or get it by mail. And much of the Peg-Board shows up on this blog.

Anonymous said...

PR news release says:
low budget leads to nice profit.

Tax filing says
multiple expenses and complex deals lead to negative cost.

Welcome to show business.

Anonymous said...

---So For Example, They Say Toy Story 3 Had A Cost Of $200 Million, But I Think A Big Chunk Of That Went Towards Marketing Of The Film, Perhaps Even Up To Half Of That.---


They CAN'T be spending all that much on the crew at PIXAR.....since from what I hear from friends that know people that work there say that the crew is overworked and underpaid for their efforts....all in the name of "Aren't you LUCKY to be working here at Pixar (away from the Guild jurisdiction!)"

The "Grunts" or "Wrists" are being exploited up there as well.

It's the OLD Disney "technique" of keeping everyone down.

"Aren't you LUCKY to be working here!"
"Yes sir, yes sir, we'll do ANYthing you say sir."

Erin said...

As an unemployed Production Coordinator who's never had a fancy office, or even a regular office, I was beginning to think that Coordinator jobs were going the way of the dodo. Out here on the East Coast, Coordinators are the first to get axed when money is tight.

Your article really gives me hope for the future...

Anonymous said...

I'm sure Despicable Me 2 will end up costing a lot more both above and below the line.

Anonymous said...

Yeah I wonder how they saved all that money.

Did the director take a %50 pay cut?
What about the voice talent? the producer?

I'd say more likely desperate artists got worked to death with no OT or benefits and then all promptly got fired at the end of the movie.

Anonymous said...

"I'd say more likely desperate artists got worked to death with no OT or benefits and then all promptly got fired at the end of the movie"

"Whah-whah-whah...I chose a career that I knew was not stable and now have to live with the consequences"

Sometimes you ppl remind me a battered women, "But when he loves me it is so awesome that I can forgive/forget the bruises"

yahweh said...

Let's be clear: When a film's production cost is announced it DOES NOT include the marketing expenses. So if TS3 is reported to have cost 200mill then that is before marketing and prints. That is why the formula for a film to see profit is 3x production costs.
Why did TS3 cost 200mill and the crew is underpaid then maybe the price of tent-like Hawaiian shirts has gone up.
Sometimes production costs are inflated (to avoid a film from ever going into the black) and sometimes they're not all reported for whatever reasons.

meh! said...

Disney is bloated with managers. Andrew Millstein needs to get the pink slip. The studio would save a bundle right there.
And how about David Satan?, Is he still there?

Anonymous said...

If you think David Stainton is still at Disney, you're not a very valuable source of opinion. Way to be four years out of date.

Anonymous said...

"Whah-whah-whah...I chose a career that I knew was not stable and now have to live with the consequences"

Yes right, how dare we desire stable employment and fair slice of revenue from the hugely profitable product we create using our skilled labor. We should all just work for peanuts because "we love what we do" right?

You ignorant sloppy wet douche.

Anonymous said...

The cost of the production could be brought way down if there weren't so many management and grunt people and secretaries. The artists could be fairly paid as unionized, or a production could get away without paying union benefits. Too much emphasis is paid on getting THIS feature into THOSE theatres on some god-awful date coming up in the not-so-distant future. Thus the need for overworking the artists, making them feel jeopordized by the too many managers who dont know what to do with themselves. The crunching of data really needs to be done by fewer people. The artists need to get their asses out of the production in one piece, instead of being felt kicked out for doing a good job. And all artists who make it to the end and have their work printed on film had done a good job to get it there. Wild Wooley may have been beleagured by the numbers of the day (or he may have been awesomized by the fact that HIS company was spending so much cash on HIS film, who really knows...), but they (the numbers) hadn't gotten better on his watch or any thereafter. But the demand for more internal labor has gotten out of hand, as well as the technical need to complicate the wow-factor pumped into these movies that need something to boost the lack of story. Wow. I'm so impressed I am bored and forgot much of what I just saw. NEXT!

Anonymous said...

"I'd say more likely desperate artists got worked to death with no OT or benefits and then all promptly got fired at the end of the movie. "

The movie was made in France. They got unions and shit there.

(Also state health-care, generous unemployment, etc.)

I love how it's actually more cost-effective to hire workers in a socialist state than in the US.

Anonymous said...

You know.. I would LOVE to be on the Artist side of the biz....but Im stuck as a PA on the Production side. I wonder if I will EVER get a chance to work as an artist in the studio instead hitting brickwalls. Hmmm, Im dreaming I guess. Do dreams ever come true???

Anonymous said...

Are you any good?

Anonymous said...

OK, FROM THE ARTICLE:

Meledandri has taken much of what he learned at Fox — including the binding rule to get "a unified, clear view of what the story is" before starting production

THIS^^^, from my 9 years with the mouse, is what has killed Disney. Whole sequences (and films) are thrown away... not before they're worked on, but after they're through lighting... and companies have the gaul to pretend that the production is so expensive because of salaries. Disney isn't alone either: PIXAR pulls the same crap (Ratatouille anyone?). Honestly, if I had to point to one reason why DM was cheap, it's that it seems to have had a lack of in-production iteration (according to Meledandri).

pew said...

"If you think David Stainton is still at Disney, you're not a very valuable source of opinion. Way to be four years out of date."

and your opinion is more valuable because?!?...

Get your head out of your ass, at least for a second.

Mike said...

It's not the lowly PAs and secretaries that run up the budgets, Disney lays a huge overhead burden on their films for the privilege of being in house and on the lot (like a 33% mark-up). I'm guessing that DM was able to escape that fate with their deal with Universal.

Anonymous said...

and your opinion is more valuable because?!?...

...Because I'm informed with the goings-on of the industry. You don't seem to be.

staintonfan said...

"If you think David Stainton is still at Disney, you're not a very valuable source of opinion. Way to be four years out of date."

YOU ARE THE ONES OUT OF DATE... David Stainton STILL WORKS at Disney Animation...

Well, the Magic of Disney Animation at California Adventure...

You can see him (with his "David" nametag and all) helping guests find their ways into "Turtle Talk with Crush" (he's also in charge of sharpening the pencils and picking up the used sheets of paper at the animation academy).

Anonymous said...

"I love how it's actually more cost-effective to hire workers in a socialist state than in the US."

Pissed my pants reading this. Very funny. LA just sucks.

Anonymous said...

Under reagun and bush[1 &2], the U.S. became a corporate communist state. France, as a socialist state, is a step up.

Anonymous said...

A smooth production with few story problems, or optionally, with no willingness or budget to go back and fix story snafus will always impact the budget more than any number of extra employees.

Small teams are more efficient, but it's the production assistants, managers and coordinators that make large productions more efficient, allowing the production artists to concentrate on getting the shots down rather than all the tracking of assets or notes related to assets and shots.

One thing large studios like DW and Pixar offer are long term contracts and stability. Correct if me I'm wrong but I've heard DW's standard is a 5 year contract while while Pixar hires for the long haul. Overheads are much easier to manage when teams just roll off production and out the door as soon as they aren't needed anymore.

Anonymous said...

Unlike DW, (and Disney briefly in the '90's), Pixar has never offered contracts--for anyone (including executives and directors). According to SEC filings, Disney does have a contract with Ed Catmull and John Lasseter in regards to their work at Disney in Los Angeles but that's it.

yeah, like, yeah..... said...

The thing is,the mood of a studio is reflected on the screen.

If the artist are fretting about where their next source of income will come instead of the project in front of them, means they are not fully inmersed in the project. You're constantly checking the job posts to see where to apply next. That's the problem with short term contracts.

It's good to see DW offering long term employment.

Anonymous said...

**Under reagun and bush[1 &2], the U.S. became a corporate communist state. France, as a socialist state, is a step up.**

So I guess you see Obama as a step up.

Get out of the basement, dweeb, get a job, and say hi to the real world.

Anonymous said...

Yes. Our President Obama IS a step up! A big one. A REAL man, willing to confront t he mess bush & co. and the gNOp made of the country and the Constitution.

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