More Contractions

And they seem to be coming fifteen minutes apart.

Berkeley, Calif.-based VFX company Tippett Studios laid off 40 percent of its workforce Friday, the company's CEO and president Jules Roman confirmed to The Hollywood Reporter, with the possibility of more pink slips coming.

More than 50 visual effects designers were let go, leaving a staff of 100 full-timers still working at the studio, whose recent work is on display in such blockbuster films as Ted and Twilight: Breaking Dawn.

"We're hibernating, figuring out a way to reinvent and scale down because there's a lag in work obviously and there's such upheaval in the visual effects industry, period," Roman said. ...

Upheaval? Yeah, that's about right.

The industry still has increasing amounts of work, with every live action feature owning a little or a lot of visual effects; ditto for scripted t.v. shows that aren't in the three-camera sitcom category. But there are also big increases in the talent pool, with universities and specialized training facilities turning out tech directors and animators, designers and modelers at a hectic pace.

Supply, I believe, has caught up with demand.

And on the business side, it continues to be counterproductive for visual effects shops that sub-contract studio work (i.e., most of them) to low-ball bid one another to get work that will ultimately drive them bankrupt. So it's likely that the downsizing of the industry will continue awhile.

Of course, this kind of thing has never happened before.

... In both the automobile and the PC industry, the first 5-10 years witnessed a rapid rise in the number of firms and subsequently a rapid fall. ...

In both cases the industry went from infancy to just below 300 firms in about 12 years (271 auto firms in 1909 and 286 PC firms in 1987) and the industry ‘shakeout’ began to occur about 15 years after the initial growth spurt (around 1910 in the automobile industry and around 1989 in the PC industry).

In automobiles, by 1940 there were only a dozen firms left, a phenomena that appears to be happening in the PC industry, where just 5 firms share 50% of the global market. ...

So why should the visual effects industry be different?

Companies rise and and companies fall. It's a painful reality, but it was ever thus. In 1910, there were more than a hundred active and profitable movie companies creating product for nickelodeons; most had disappeared by the early 1920s. (Closer to our era, only the Disney Co. has held contracts with the Animation Guild from the Guild's founding in 1952 until today. Every other company is a relative newcomer.)

At some point (and I've no idea what that point is) the visual effects industry will gain a measure of equilibrium. In the meantime, we'll be passing through what economists call "creative destruction" ... and not liking it very much.