... [W]hen Lionsgate’s Ender’s Game opens in theaters, the visual effects community will be watching to see if the nontraditional model of a VFX house coming on board in a co-producer role—which lead VFX house Digital Domain did with Ender’s—is a model that can work for the struggling effects industry.
“It’s certainly a capital risk,” Ed Ulbrich, a producer on the film who recently stepped down as president of Digital Domain, warned, adding that a company needs to know it could handle deferred payment or a potential loss. “You need to have a plan to manage and offset [your investment]. If you can’t, you are betting the farm.” ...
Moderator Carl Rosendahl, an associate professor at Carnegie Mellon’s Entertainment Technology Center, pointed out that Gravity could not have been made without visual effects and asked Chris deFaria, president of digital production, animation and VFX at Warner Bros. Pictures — and a credited executive producer on Gravity—if there’s a back-end opportunity for VFX companies on movies such as this.
“Back end is based on risk,” deFaria responded. “It’s not a reward. It’s a negotiated position. It’s open to anyone who negotiates that, and we have entered into these agreements with companies that have assumed risk." ...
Discussing the wider problems in the VFX business, Ulbrich got applause when he asserted that the business has changed and what the group now does “is really digital production. The producers should plan equally [with live action production]. VFX is an old concept.
“There’s no such thing as post anymore,” he added. “We are suffering from tradition. It’s a giant cultural and mindset shift. But it’s also a time for opportunity.”
Ed Ulbrich is of course right. Making a movie on a set or making a movie in a black box is production. The question is, how are you going to pay for that production?
Studios will hire a hungry effects house to (essentially) co-produce their movie for a set fee if they can, because it's in their economic self interest to do so. (Who wants to share gross profits if they can avoid that? It's the same principle that applies to star actors and their profit participation. You want Brad Pitt or Sandra Bullock bad enough, you've got to cut them in on the action. If not, you cast a B-list actor or an up-and-comer like Jennifer Lawrence*)
So effects studios really have two choice here: They can continue with the old model of doing production for a price, or they can leverage themselves (buy themselves?) a stakeholder position on this or that feature.
But there is yet another model: Visual effects studios can develop and produce their own live-action or animated features and own the whole kit and kaboodle. Then all they have to do is talk a distributor into releasing the picture. This is the way Pixar and DreamWorks Animation did it in the not so long ago. And the way some other VFX studio might do it next year or next decade.
* I'm sure by this point Ms. Lawrence is getting gross point deals. But two years ago, not so much.