Tuesday, March 16, 2010

VFX companies continue to fall

[Update: 3/29/2013 See this article for a link of some of the companies that have gone out of business
Creative Cow VFX at a Crossroads 
and from Reddit
]

Last year we saw a few VFX companies close their doors (The Orphanage, Illusion Arts, Pacific Title, etc)

We're now seeing a few more, or in the case of Image Movers, a planned closing.

Image Movers
There are a number of ex-ILM people there and at 450 people it is not a small group.

Core Pictures I was in discussions of taking a project there a year or two ago.

It's always painful to see VFX companies close their doors, both from knowing artists and friends will be out of work and knowing how fragile the VFX eco system really is. Having owned and operated a VFX company myself (Dream Quest) it's tough to make it work financially. The pressure is always on from the studios and producers to work as cheap as possible yet VFX require specialized equipment and artists. It's also tough to have projects flow smoothly and keeping all artists busy. That means there will be times of no money so any budget you make will have to take that into account. It's not extra profit, it's covering expenses. With a small shop the owners can skip pay themselves for a certain period but for larger shops it can be impossible to cover the costs without some deep pockets.

Between the recession, out sourcing and short term fixes at higher levels, this is a bad time for VFX companies and artists.

Disney bought Image movers and now that new management is at Disney they want to get rid of Image Movers.
A large VFX company takes time and money to get going. It has a high operating cost. A studio or company has to be willing to accept that going in or there will be trouble. Disney did the same thing after they acquired Dream Quest and turned it into The Secret Lab. They closed it down after it was up and running.

Unfortunately outsiders rarely understand VFX and what it's about. Sure you need to make money to keep operating but some companies are looking for huge profits instantly. Studios and producers have this thinking that VFX are expensive because all these VFX companies are holding them hostage and making huge profits. Welcome to reality. VFX has not been a huge profit area.

Many studios had their own VFX departments in the golden age of movie making. Those were closed down when the studios sold off their backlots to make money in the short term. Star Wars and Close Encounters both required the productions to set up their own VFX groups from scratch. These were meant to only operate on these specific projects respectfully. With the success of Star Wars, George Lucas was able to keep ILM as such and could afford to set it up again in Northern California for his own projects. Apogee was the spinoff of some of the people from ILM. Many of the Close Encounters team went on to Buck Rogers and then on to Star Trek: The Motion Picture.

The studios always claim to have no money but it's not unusual for a studio to make million dollar changes to a production on a whim or creative impulse. In some case they're focused on the short term improvements and less on the long term. (See the Jay Leno issue the last few months) Sometimes the new group at a studio wants to make sure none of the projects of the previous group remain. They might not want a success that could have been created by the people they're replacing. This means in many cases they will cancel projects that are in development, even though the projects may be great and make a lot of money for the studio.

What many of us tend to think of as 'no brainer' decisions tend to be the hardest decisions to make for many businesses. I've seen this repeated time after time.

VFX have been making great strides the last few year and enabling filmmakers to create just about anything imaginable. Both the artist skill sets and the technology are making this possible. More people are trying to enter this field than ever before. The Visual Effects Society is getting larger and making improvements.
Just about every movie coming out has some VFX, no matter how small.

So the movie industry had the biggest year ever last year yet the studios are reluctant to produce anything beyond franchise tent-pole movies. The general public is going to the movies more in this recession but the banks are reluctant to loan any money to studios and filmmakers. The studios want not only more and bigger VFX but they also want them for 1/2 the price in 1/2 the time as the last project.

Welcome to VFX H*ll.

(I didn’t want to end this on a negative note. I still have high hopes for VFX and VFX artists but we’re certainly going through a rough patch here with a lot of conflicting forces at play. Lets hope for some good news soon.)

[Update: 9/12/2012 There have been a number of other vfx companies closed down since this was originally posted a couple of years ago. Just in the last 2 weeks alone we've seen the closure of Matte World, Fuel, Digital Domain's Florida facility and a restructure and sale of Digital Domain]

[Update: 2/16/2013 R&H, one the largest vsual effects companies in the US (who did Life of Pi and a number of other well known projects) has field for chapter 11 and laid off 200-300 people. (Who weren't paid) ]

[Update: 3/29/2013 See this article for a link of some of the companies that have gone out of business
Creative Cow VFX at a Crossroads
and from Reddit
]

Related:
Check the right side of the blog for lists of posts related to the industry under "VFX INDUSTRY - STATE OF THE INDUSTRY"

Pass Me A Nail - Problems of the vfx industry
Using the Nail - Possible solutions
VFX Business Models
Working directly for the studios
Visual Effects Service - The Big Picture

Bad Visual Effects Business practices
Oh, What a Mess We're In!

25 comments:

  1. I think William Goldman had the last word on this phenomenon: "Nobody knows anything" (refering to Hollywood).

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  2. An absolutely accurate assessment, unfortunately. I've run 11:11 for nearly ten years now and our last 18 months have been our worse. Doesn't help that Illusion Arts and Digital FilmWorks were a couple of our good clients and they are gone.

    I don't expect to keep the doors open much longer, at least as a "VFX Company." Time for a new business model (or a new business).

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  3. Visual Effects Online Town Hall
    Registration is open - totally free!
    Monday March 29th
    Amazing panel http://vfxtownhall.eventbrite.com

    Hope to see you there! (virtually, of course)

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  4. Hey guys!
    Scott,
    Thanks for bringing light to this issue. I ran a VFX Major for the Art Institute in Philadelphia. Those students loved their work and were always enthusiastic about creating. It's a shame to see this industry be effected by the economy. Especially since this industry is driving ticket sales in the box office. I too was a VFX artist before I became an educator. Truth is that I have a young daughter and need to provide a steady income and health insurance for her. Unfortunately, it was extremely difficult to do that as an artist. While I am a committed educator, I still miss the creativity and drive of the VFX world. I hope to see some of you at the town hall in two weeks. Scott Ross was my old boss at DD. It would be interesting to hear what he has to say.
    Cheers to all,
    Eve

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  5. I'm not surprised. Self respect is sadly lacking in most vfx companies/artists. We got into this industry because it was oh so cool.. blame Star Wars..

    The studios know this and exploit it. Most vfx houses are told to jump and they ask, 'how high'? This continues down the chain to vfx artists who are likewise exploited by the vfx houses.

    Vfx houses know there will be a million budding animators banging on the door that will sell their grandmother to work on a film and work for peanuts. Vfx companies are no different, the stakes are just higher. We're too afraid to tell the client to piss off when the situation warrants it.

    Plumbers have more self respect!

    Vfx is naive thinking that film making is a 'wonderful artistic collaborative effort'. Bullshit! It's not a democracy and never was. It's hard business that doesn't care about us one iota. The sooner we wake up to this, and grow a backbone the better!

    Compared to real big business, the vfx industry fails miserably. Without us who will make modern cinema? Who will create the worlds we create, who will bring creatures or magic to life.. NO ONE!

    We have what the film industry NEEDS and needs desperately and yet we're going out of business at an alarming rate. How does a goose that lays the golden egg go out of business? I dont get it!

    We also got carried away with computers and didn't sell the idea that ARTISTS create the work, not machines. But no, we became obsessed with tech to the point that the industry actively sold it to their clients at the expense of the artists. Flame this, Maya that.. blah blah..

    No wonder outfits like Illusion Arts go out of business. Too old school and what do those old fuddy duddies know about MEL scripting anyway?!

    Oh, and when you do speak up about these issue in this industry.. you are immediately shot down by your peers. No real tangible support on the ground, when you really need it. Just BS corporate speak and yes men with clip boards waffling techno garbage!

    We need to clean up our own house first, grow a pair, support each other and embrace ALL possible methods (new or old) of solving the visual problems presented to us.

    And can we please stop looping shots ad nauseam.. loop it 5 times and be done with it.. save yourselves some money!

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  6. "Oh, and when you do speak up about these issue in this industry.. you are immediately shot down by your peers. No real tangible support on the ground, when you really need it."

    That is the truth!

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  7. Well now's the time to step forward and help in whatever manner you feel will be useful. There have been a lot of discussions lately regarding VFX unions and trade organizations. The VES is certainly trying to help raise the respect level of VFX artists. I recommend anyone with a stake in this to be involved to help make it better. There have been a number of people volunteering for the VES to help make it better for all. There's plenty of options to add your support (VES, VFX union, etc). Be part of the solution, not just a member of the peanut gallery.

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  8. I agree with everything you said Scott.

    I didn't make the connection to The Secret Lab, but you're right. Same exact thing.

    The IMD thing sucks. So many people uprooted their lives to help start/build that company only to have the rug pulled out from under them.

    I thought when Lassiter and company took over Disney, things would be different. No such luck.

    If Jim Cameron or Weta were smart, they'd move on that company and the people PRONTO. Imagine the juggernaut WETA would be if they had a REAL foothold in the US. Although, strategically speaking it would be better for Disney to close it down than to sell it.

    I still can't help but think that this might be the result of a "Religious War". You know, hard core "animators" vs "motion capture".

    We'll probably never know....

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  9. I don't think it takes very much to really know why Disney closed IMD. Pixar. Disney Feature Animation. Why would they want 3 entities producing similar content on the books? Vfx facilities need more leverage with the production studios, otherwise, the abuse will continue.

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  10. I disagree with Anonymous. IMD does VERY different stuff from Pixar and Disney Feature Animation. IMD was doing character animation (usually HUMAN characters) driven by motion capture. Neither of the other entities did that kind of work. I think that as a studio they're doing themselves a disservice by cutting themselves out of a whole market share of films that will utilize synthespians.

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  11. Thanks for the insightful article, Scott. My support goes out to all effected by these closures and they should know that their creative talents will land them the next gig.

    As a technology provider to the VFX industry, I constantly see the big budget, VFX laden projects reinventing the wheel.

    It's great when they innovate and advance technology forward, but it is wasteful to not acknowledge and embrace what has been done before and invest millions in recreating it.

    Too much NIH by some in this industry.

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  12. I'm not sure what to make of Disney. Didn't Weta Digital produce their latest animated studio logo, the one we see at the beginning of films such as Alice in Wonderland, etc.? Yet Disney had already a digital animation department (prior to acquiring Pixar).

    Don't get me started on Warner Bros. VFX. Tim Burton's Mars Attacks! was their only product (IIRC) and then the facility was shut down. Now WB farms out much of their stuff to Soho (certainly, when I was working in the VFX world the majority of film work came from WB).

    Why aren't decent VFX guys sitting in the studios and advising senior studio management accordingly? It sure as heck doesn't seem to be the case at the moment!

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  13. The last thing the studios want to hear from are VFX people.

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  14. "The last thing the studios want to hear from are VFX people."

    In my experience that's mostly because they genuinely believe that the people doing the actual VFX work are just mindless drones. They aren't deliberately doing it, it's usually that they simply don't know any better.
    Without meaning to I once reduced a Producer to tears by asking them if they wanted to sit down while I showed them what VFX guys actually have to do. I wasn't being nasty, they were very interested. Their first response was at the end was "Why aren't you guys paid more?"
    Ah, me.

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  15. This was a producer? Sound like a great T-shirt slogan.

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  16. Yes! There is "Bring you Kids to Work Day" there should be "Shadow a VFX Artist for a Day". Then they'll really know :)

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  17. Winston SmithMarch 18, 2010

    The simple answer to VFX cries is to expand the service base. Offer live action filming as a base service or incorporate the request into the Production aspect.

    Now, I can't tell you how to do that, but it's the right direction to start in.

    Live action or plates can save a lot of computer efforts if effectively managed.

    Perhaps the VFX houses need more hybrid (Film/VFX) Directors and Producers.

    I'm in the industry and have balanced my career on both sides. For the most part neither side understands the other. (Another poster pointed this out, and its true.)

    The issue here is that the live action side has all the money and money = power.

    I have worked for 2 companies Scott has worked/owned. I have a tremendous amount of respect for him and I think this article was fantastic. I just discovered this blog and look forward to reading more.

    Thank you.

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  18. The real problem here is outsourcing. How can studios throw that many jobs overseas and not expect it to impact things over here?

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  19. Another aspect of the whole IMD closure which really stinks, is that Disney is reportedly still moving forward to make "Yellow Submarine 3D". They just don't want to make it at their own facility. I agree with many comments here - they're being very premature, and throwing away millions of dollars to shut it down, which reeks of spiteful politics from the new regime.

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  20. MIchael KaelinApril 23, 2010

    Scott, great article!

    I own and operate a small boutique facility in N. Hollywood for the last several years and have been a freelancer in the industry for more than fifteen. Things are as bad as I have ever seen.

    The main issues I believe at play here are:

    1) lack of CA legislature to provide competitive tax incentives to CA Film/VFX production.
    - Canada is booming as a result of offering very aggressive tax credits as high as 45%. Combined with a favorable currency exchange rate, no wonder everyone from LA now has a facility in Vancouver.
    - The CA legislature has been lobbied for years about this and has failed to act. Now that they have "taken action" to offer tax credits for productions in CA, it is woefully too little and way too late.

    But, it's not really about Canada. New Mexico, Michigan, Florida, Nevada and other states are all offering very aggressive film production tax credits to lure companies. Case in point, Sony choose to relocate their entire Feature Animation Group out to New Mexico.


    As a result, businesses and individuals are fleeing CA in droves in search of opportunity elsewhere.

    2) Hollywood doesn't have a monopoly on talent anymore and computers and software are a lot less expensive these days.

    - Business is apparently pretty good over in London, Australia and Asia. Friends and associates in those area have told me things are busy productions are moving forward.

    A lot of people are feeling the pain here in CA these days. I want to hold out hope the sun has not yet set on the VFX industry here in CA.

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  21. Instead of trying to get the California state legislature to create some sort of competitive film/vfx production subsidy (which is HIGHLY unlikely given the current budget problems in this state - the state is issuing IOU's to some people! http://money.cnn.com/2009/07/02/news/economy/California_IOUs/?postversion=2009070218) we should be talking about a dollar for dollar TAX on the actual foreign/external subsidy paid to the studio, production company, and/or vfx facility.

    For example, if a production company receives a 45% subsidy payment from Canada, then the State of California levies a 100% tax on the amount of that subsidy payment. This tax revenue can be put in the state general fund to help balance the state budget. Or it can be used to fund a financial assistance program for unemployed vfx workers.

    The positives:

    (1) This tax directly targets the companies that are benefiting from these subsidies.

    (2) There is nothing that a foreign country or another state could do about this tax since the tax is not directly levied on them in any way. What's Canada going to do, file a complaint with the WTO? HA! It's not an IMPORT tax on goods or services. It's simply a form of income tax.

    (3) This wouldn't cost the tax-payers of California anything. In fact, all the money would be coming from foreign countries and other states.

    (4) California state legislators should love this tax. It's all gravy. Easy to sell their constituents/voters.

    (5) Easy tax/law to explain and write. For example: "Any form of payment made to any media production company in the form of foreign and/or state tax subsidies, rebates, credits, etc. shall be taxed as income at the rate of 100%."

    (6) Doesn't seem to affect the unions in any negative way does it?

    (7) Helps to level the playing field. Of course, some foreign and other states can still compete on the basis of lower costs due to lower wages, lower standards of living, lower living expenses, exchange rates, etc. But at least they won't have the advantage of some outrageous tax subsidy.

    The negative:

    (1) California based production companies may move to other states to avoid this tax. Well, maybe. Some will. Others will just pay the tax and keep making movies. I can't see Michael Bay moving to Vancouver or New Mexico. LA has far better strip clubs.

    Some possible names for this tax:

    The California Foreign Film Production Subsidy Tax

    The California Runaway Film Production Tax

    The California You F*cked Us So We're F*cking You Right Back Tax

    More to come...

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  22. Hi, I'm a vfx artist working in London. Things are quite busy over here and companies are hiring massively. Having said that, the government have decided to put a cap on the number of visas on foreign nationals outside of the EU. We're lacking skilled and experienced people in the UK.

    Warner Bros have also bought Leavesden Studios for $100M and are keen on expanding their business in the UK having benefited from the Harry Potter franchise.

    Thanks Scott for your insight into the VFX industry. I'm an artist myself with over 10 years of experience dreaming of owning my boutique shop specializing in environments for films. I know it's a risky business but I'd like to give it a go here in London. Do you have any additional advices on how to prepare to start up?

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  23. I've actually been working on a piece on starting a vfx company. Hopefully will post in the next couple of weeks.

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  24. Hi Scott,

    I look forward to reading your next post.

    I have read the various posts here and appreciate the differing points of view on this issue.

    However, I believe instituting yet another tax on companies creates more reason for the business to leave the state. We can not force companies to do business here in CA and adding additional taxes will not help remedy this situation.

    Consider if you will, CA has the highest taxes in the country. Yet, we are in the worst financial shape of any state. Clearly, we have passed the point where raising taxes further will benefit the state. The Laffer Curve explains this economic dynamic and, the recent election showed the public is not interested in accepting any additional taxes at this time.

    We can however work to create a business friendly environment that attract businesses to WANT to do business in CA. With that they brings jobs and people that need everything from housing to a place to eat on a Saturday night. This ultimately is what stimulates the economy, the consumer demand for goods and services.

    From what I read in various trade and business journals, the LA entertainment industry is supposed to grow by 15,000 jobs in the coming year.

    Times have indeed been very difficult for a lot of people. However, I am still hopeful that our best days are still ahead of us and 2011 will be a very good year.

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  25. First, I'm not requesting additional taxes. I'm listing the impact of incentives and getting work.
    There's pros and cons to applying taxes in different ways for different purposes. In osme cases relatively small investments can make big payoffsm, just as in any business.

    Second, I'd be curious to see where you got those numbers from. We've lost more jobs than that in the last few years and I don't anticipate a large increase in film related jobs in Southern California in the coming year.

    Good references to those interested:

    Report on the impact of incentive programs elsewhere and what that has done to the Calif film industry.
    "If the state had maintained its former level of dominance, a total of 36,000 jobs would have been saved. The wages and output associated with these jobs would have totaled $2.4 billion and $4.2 billion, respectively."
    www.milkeninstitute.org/pdf/FilmFlight.pdf

    Web site with info on film incentives in different states and the world:
    http://www.entertainmentpartners.com/Content/ProductionIncentives/ProductionIncentives.aspx

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