Tuesday, February 19, 2013

Tipping Point

Variety tells us:

... [In] the visual effects realm there was a "big four" of vfx companies: Industrial Light & Magic, Digital Domain, Rhythm & Hues Studios and Sony Pictures Imageworks. Two of those, DD and R&H, have gone bankrupt in the last six months and the other two are studio-owned, which doesn't assure their future but assures they won't miss payroll.

You could see DD and R&H as sort of a canary in the coal mine for the state of the vfx business. But I think the vfx business is the canary in the coal mine for the studios' movie business -- especially the tentpole business. ...

Financial stress is widespread and growing among vfx companies. A studio vfx exec recently told me of another vfx studio, not in the U.S., that had to be bailed out last summer. Days later a vfx exec at a California vfx shop told me of having to bail out a smaller subcontractor facility that ran out of cash before it could deliver.

A former topper of another "big" vfx studio, who is now out of the vfx business, called me to point the finger at the studios.

"They know what our margins are and they won't let us make any money," he said.

He cited one vfx-Oscar-nommed tentpole his company worked on with another "big" shop, saying the director made probably $50 million but neither vfx company made a penny of profit. Such imbalances seem common. ...

It's a truism of tax policy that if you want less of something, tax it, and if you want more of something, subsidize it. But there is already more vfx capacity than work. ...

Fourteen years ago, I sat in a conference room at the Disney Co. and helped negotiate a visual effects contract for a new Disney effects studio called "The Secret Lab" (named for the villain's secret lab in The Emperor's New Groove.) The whole time I was sitting there, I was thinking this:

"Why is Disney negotiating this deal for an effect studio inside an animation studio? Warners Digital Effects Studio went out of business because it cost them more than subbing the work out; Sony ImageWorks makes little to no money, so how does Disney expect to do it?

"I bet in two or three years they close the place, just the way Warners did."

I wasn't off by much. In three and a half years The Secret Lab was as extinct as the passenger pigeon. And Disney was (again) subbing its effects work out, even as the Disney Animation Studio -- now under the Secret Lab contract -- marched steadily on.

At the end of the nineties, it wasn't profitable for studios to be in the effects business. A decade and a half further on, it isn't profitable for any entity to be in the effects business. And it's certainly become miserable for lots of visual effects artists.

The rolling disaster is now becoming even more distorted with countries, provinces and states flinging dollars at visual effects work the way apes fling shit in a zoo. And it probably won't stop until the implosion of the current effects business model ("Do it at a loss.") is total and complete.

At that point, there is the slimmest of chances that effects crews will become part of the production crew, because that will be the only way that high-end CG artists will be able to make a living as they create the effects work on which studios and their "blockbusters" have come to depend.

Industry veteran Dave Rand shares his views with the former British Columbia Film Commissioner at this link: http://www.daverand.com/subsidies/


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