Saturday, July 10, 2010

Globalization and VFX

Globalization and VFX

One of the issues facing VFX companies and artists is the issue of globalization. Given the tax incentives and cost of living variance around the world most film studios are looking beyond the borders to find a better price for doing film work, including visual effects.

This blog is read around the world. This article will have a California slant but I’m trying to as always document the current state of affairs in visual effects.

In the golden age of movie making most Hollywood films were shot in Los Angeles with some being done in New York. The studios were setup as film factories to be as efficient as possible. If you finished a film on Friday, you'd start another film on Monday. The stages, sets, back lots and rear projection allowed them to shoot a wide range of film settings within the confines of the studio lot. If you want New York in the 1890's you go to one block of the back lot. If you wanted a1940's Midwest town you'd make a left into that back lot street. Many 'locations' were within easy driving distance of the studios, which also had ranches and other outdoor areas where they could construct western towns or other special settings.

With films like Easy Rider studios started to reconsider what they needed. Many back lots were sold for short-term gains and more true location shooting was done. In some cases if a film could be shot at a lower price in a different location that made sense. In other cases it made sense to go to another location if that truly was the location in film.

When films like Star Wars and Close Encounters were filmed the majority of visual effects were done in Los Angeles. When ILM moved to northern California that spread the work a bit but still the majority of the big, Hollywood vfx work was done within California. VFX companies were on a relatively level playing field. The jobs were awarded based on ability, quality and costs.

As the digital age of visual effects got underway some countries and states started offering tax incentives that included vfx. The digital age enabled the use of computers and software to be setup anywhere. VFX artists can be brought in from anywhere else and setup with little effort. VFX artists can be trained in the basics locally. The internet allows images to be sent anywhere quickly for work to be done and reviewed anywhere else. The studios, always eager to save money on things that weren’t under their umbrella, were more than happy to start sending out work. In their view, vfx are a commodity that can be done anywhere.

At this point a number of countries offer tax incentives, rebates or even pre-investments in films in exchange for a certain amount of work to be done in that country. Various states also have tax incentives as well to try to get millions of dollars of production costs to come to their state. The details vary greatly and can be a smart or bad investment depending on the details.

From the various governments viewpoint (state and country) an incentive means that they can draw film production to their location. A film production can bring in millions of dollars to a given locale fairly quickly. A factory doesn’t have to be built over time before people can be employed and there usually aren’t a lot of ecology studies required. All the products, services and rentals that can be had are paid for by production (hotels, catering, car rentals, hardware stores, etc). The crew spends a fair bit of their money locally on things like restaurants, bars and leisure time activates. If a location is portrayed well it may mean extra tourists in the future. When long-term incentives are in place then an entire film studio infrastructure can be built in that location and crewmembers of all types can be developed, including visual effects artists. Many third party companies develop to service the motion picture industry at these locations.

Companies in Vancouver, London and similar locations are doing well since they don’t have to compete on a level playing field. With a 20% or more savings via the government it’s difficult for vfx companies in the U.S. to compete directly.

From the studio perspective their main aim is to do a film as cheaply as possible and still make it work. If the film is a major VFX tent pole movie with a lot of difficult or new vfx then they will pay top dollar to make it and to ensure it will be done on time and to the quality required. But this only applies to those shots and sequences they feel need to be done at expensive vfx companies. One step down from those types of shots (certainly simpler compositing and roto shots) or lower level vfx film and price becomes one of the highest priorities.

A Hollywood studios first choice is usually Vancouver simply because it’s in the same time zone, is just a 3 hour flight away and they all speak English there. Second choice would probably be London since it’s the next closest location, they speak English and studios executives and key personal enjoy the London life. Next would be Australia. (New Zealand with Weta is primarily on the big projects and not so much a cost saving measure). India, China and other locations are further down on the list if the studio executives and key personnel think they will have to go there. If they don’t have to personally travel there, then the studio is all for sending the work anywhere in the world.

Obviously some studios now have infrastructures setup in various locations and their choice will be dictated by their established suppliers. You’ll notice most editing and sound mixing still happens in the U.S. since the filmmakers and studios spend a fair bit of time involved directly in these activities. They’re also not at the same level of expense as vfx.

Some people think that the studios won’t go anywhere just based on price but it’s very dependent on the nature of the work. There was an article a few months ago where most of the studios were now sending out their subtitling work (as done on the DVD’s). The cost savings to the studio? $600. A $100 million dollar movie and they send out the subtitling to a different country to save $600. I’m not a studio accountant but I suspect there might be a few other budget items that would yield larger savings but since subtitling (and vfx) are done by third parties it’s an easy win for any studio person to make that decision.

Unfortunately the location that has the most to lose (and gain) from subsidies is California. They have done too little, too late. A large revenue stream for California (especially southern California) comes from movies. There are a lot of people employed in this business and they in turn spend their money locally on services and products.
Runaway product continues to suck out revenues from California and unfortunately most of the California legislation can’t get a simple grasp of the obvious. Motion pictures are one of the U.S.’s largest exports.

People (and politicians) assume since movies bring in huge revenue that everyone who works in movies are ‘gazillionairs’ to quote another internet forum. What they forget is the vast majority of people involved in movie making are making working wages. The median income for writers in the Writers Guild is $44,000 a year. Most VFX people make more than this but if it’s averaged over all vfx artists and dry spells it may not be as much as you think.

Some US companies are opening satellite companies in other countries that are able to offer a better price break. There are multiple arrangements. In some cases they simply outsource the work they feel can be outsourced such as Roto. In other cases they have a full working relationship where the foreign company does a fair bit of real work on the actual product. Some companies operate independent shops in different countries that can be leveraged, as the work requires it.

Part of the issue is what is to be gained for everyone involved. If the focus of the studios is purely on the cost factor, having a US based VFX company doesn't necessarily gain them much. They're willing to pay top dollar today for certain projects with a lot of R&D but what happens in a few years when those techniques and software are more readily available in off the shelf products? If your California vfx company has some specialty (water, fire, etc) what happens when that’s all in the next major update of a software package? Will you continue to get work? What happens when vfx production management elsewhere is brought up to the same level? Will the studios continue to be willing pay more to a U.S. company to act as an intermediate?

Will most of the work being done in the US move out of the country and the only thing remaining be the vfx company executives and accountants?

If you live in a country that is currently doing well (healthy vfx production) because of the incentives or reduced expenses what happens when that changes? At some point your government may reduce or eliminate the incentive. Another country may offer a higher incentive. The world and local economy may increase the cost of doing business such that the incentives aren’t enough or another location may end up being even a lower expense because of changing cost of living factors. The studios will quickly move to the lowest priced area that can provide them what they need. Can you and the company you work for compete on a level playing field if it had to? Is your company truly efficient? Does it have the talented artists and R&D people required?

If you live in California (or starting here) what can you do?

1. You can work at some of the larger companies such as ILM, DD, etc. These still get large projects but they still lay off massive amounts of people and still go through cycles of feast or famine work so there’s no guarantee of long-term employment even if you’re considered on staff.

2. Consider working at a small to mid-size shop that continues to maintain a reasonable balance of work. Many of these do all television work (which is usually done here or in Vancouver) or that at least do some television work to help balance the work.

3. Consider moving out of country to where the actual work is being done. This sounds like a simple fix to anyone who doesn’t consider the implications.

a. There are already people working there. Are there enough job openings to make it worth moving there?

b. How long is the project? Is this a permanent move or will you have to shuffle off again in few months to somewhere else?

c. Can you qualify to work elsewhere? Many countries require work visas and other paperwork. Some incentives require crewmembers to be living in the country for a given length of time. Just because there is technical and creative work elsewhere doesn’t mean you can just move there and start working.

d. Can you work at reduced wages if that’s the reason the work is located in that country? If you’re at a location that is getting work based mainly on the cost of living can you work there yourself at the reduced rate and feel comfortable? Does the local taxes and other issues reduced the income even further?

e. What happens if you have loved ones, family, house or other connections here? If you’re young and single it may be fun and exciting to move to another location. For those of us with families do we sell the house and uproot all family members (taking children out of school and away from their friends) to go work in another country? Do we leave the family for long periods of time? (6 months to a year or longer) Do we try to rent out the house and hope to return someday?

It’s a sad state of affairs when experienced vfx artists, with all of their creative and technical skills, are likened to migrant farm workers moving to where the work is. At least there’s a real reason farm workers move is because of locations of the crops and growing seasons. In the case of the vfx artist a cubicle is a cubicle, no matter where in the world it’s located. The only reason for moving is purely at the whim of the counties incentives and the studios.

Unfortunately I can’t offer any real solutions. The unions can’t prevent work from moving out of the country. The politicians seem to be the few who have much control over this so they’re the ones to contact. I know that there are some organizations trying to make this better. If you’re in a location doing well then enjoy it while you can. If you’re in California it’s likely you’ll have to do what you have to do. There are now some vfx supes that spend months shooting in one country and then do the post in another country and spend most of the year away from their families.

Will there be enough of a demand and balance that all the vfx companies and artists throughout the world can keep reasonably busy and can enjoy the fruits of their labor?

(Links added 7/12/10 based on VFX Soldier comment posting. See comments for my basic response at this time.  The links all make interesting reading and really get to the heart of the matter.)

VFX Soldier  VFX Subsidy War Grows Into Global Trade War

(If you're viewing this on a page with other posts then please click on the Comments link below to see the comments and responses)

Update 8-9-2010
Every week there seem to be new updates on state or country incentive programs.
Clint Eastwood makes UKFC plea - Entertainment News, Top News, Media - Variety

Here's a snippet:

Scottish-born producer Iain Smith, whose credits include "The A-Team," "Children of Men" and "Local Hero," expressed the need for the government to quickly form a plan or risk producers looking elsewhere to shoot films.

"While we have a fantastic infrastructure, we have to protect that as much as we can and in order to do that we have to compete against industries in other countries," said Smith. "There's no doubt we need to tighten purse strings but we need to be careful we don't asphyxiate the film industry in general."

But in an article written for Blighty's Observer newspaper on Sunday, culture secretary Jeremy Hunt hit back at critics.

"If we are going to face budget cuts I have a duty to ensure that taxpayers' money is spent where it gets the most bang for its buck," he said. "It is simply not acceptable in these times to fund an organization like the U.K. Film council where no fewer than eight of the top executives are paid more than £100,000 ($160,000)."

Hunt added: "Stopping money being spent on a film quango is not the same as stopping money being spent on film."



"This new credit will give New York post production services a much needed competitive edge," explains Rich Friedlander, co-founder of Brainstorm Digital. "We increasingly saw visual effects post work going to Canada thanks to their their Digital Animation or Visual Effects tax credit (DAVE). This new program will allow work that was filmed in New York to stay through its entire production cycle. It's a major move that will attract and keep top talent here in state."


  1. Scary, but a very good read. Thanks for writing this. It does make me pause when considering a career in vfx. But being young, this may be the only time I'm flexible enough to do it, according to your article.

    I'm interested to hear what others think of this, and how they are dealing with it.

  2. AnonymousJuly 11, 2010

    Just remember that at some point you'll have paid your dues and established your career in the VFX industry. At that point you won't be as young, and probably won't be as flexible. So you'll ultimately be faced with the uncomfortable choice of either leaving the industry you've worked so hard to become established in, or continuing working in ways that are less and less compatible with your maturing life.

  3. AnonymousJuly 12, 2010

    It's a trade war and it's going to be brutal for everyone.

  4. Here's VFXSoldier hot link for another take on Globalization and VFX:

    VFX Soldier Global blog post

    Personally I don't necessarily agree with the evaluations and conclusions but worth reading.

    I think the subsidies, for better or worse, have made more of an indirect impact than some of the studies would indicate. Look at the studios and shooting stages now in Vancouver and the increase in number of vfx companies there and elsewhere. And all of those investments impact other suppliers and services to them so it's a ripple effect.

    I also don't know of anyone who has gone to Weta specifically to save money.

    In any case subsidies are politically based. Doesn't matter how much logical or economic sense they might not make if politics are involved. Look at the farm, oil and other subsidies here in the US. There's more at work than a simple spread sheet.

    Subsides have now been around for awhile and I don't expect all countries and states to stop in the near future.

    As always I don't these postings to sound like doom and gloom but I do think it's important that newcomers understand a bit of the world perspective on the current state of affairs.

  5. AnonymousJuly 12, 2010

    I think it is a cop out to blame tax incentives. I am at a studio outside of north America and we are bailing out a north American vendor on a summer tentpole movie, i.e redoing their inferior work. We are more expensive. Our work is of superior quality. Bottom line. You need to increase the quality of your work if you want to compete.

  6. Just to be clear here - I'm not saying that there aren't great vfx companies and artists throughout the world. There are plenty. Nor am I saying that all U.S. based vfx companies are great and all of them produce great work.

    You'll notice in the post: "If the film is a major VFX tent pole movie with a lot of difficult or new vfx then they will pay top dollar to make it and to ensure it will be done on time and to the quality required." I don't claim that to be U.S, just that studios at that point are willing to pay more.

    In determining which vfx companies will be awarded work the studios will be reviewing a great many variables: quality, speed, reliability, flexibility, relationships and also costs. The exact weight of those variables will be very dependent on the project, studio and schedules.

    The studios will always want to get the best work at the lowest price (they always have). "Sharpen your pencils" was a common phrase even in the optical days.

    Out of the gate if you have a 20% incentive then you have a cost advantage even if everything else is equal with any other company, anywhere in the world. (assuming the others have 0% incentive)
    That will certainly play a role in the decision to use your company.

    The vfx producer at the studio get's the bids from the vfx companies and then has their spreadsheet setup to convert to U.S. dollars and to apply any incentives or other discounts. (And any additional cost factors because of distance, etc) That provides a bottom line comparison of the bids.

    In some cases the cost factor may be the overwhelming reason to award a show to a particular company. In other cases it may play a minor role in award the show to a particular vendor.

    And to take a step back, one of the reasons vfx companies get well established and are able to grow is because of costs and quality. A new startup company usually has to prove themselves by providing a unique talent or a lower price point; ideally both. The incentives in some areas have allowed vfx companies to flourish and grow that would have had a much more difficult time if there had been no incentives.

    Without incentives all vfx companies would have to compete purely on their quality and efficiently. With the incentives the results will skewed to some degree - large or small.

    It would be great if quality were always the overwhelming deciding factor no matter where you are but in todays global economy many issues need to be factored.

  7. If only the Governor of California had some experience in the film industry....

  8. First off, I think looking to the government for help is a fool's errand. Betting your personal future on the winds of politics is always a bad idea.

    You forgot to list in your options, "start your own VFX company". Sure that path may get you out of the film business, but there is still plenty of work to be had in TV commercials, trade show videos, web videos, etc. You just have to expand your customer base. Local ad agencies and production companies don't want to work with an out of town VFX house, let alone one in a foreign country.

    Think about it, the cost to entry of starting your own VFX company can be minimal due to the advancements in technology you mentioned. What do you really need? A computer, software packages, an office and a cell phone. That's it. It's unlikely that you will ever outsource yourself...

  9. Well at this point the governments control the good and the bad of the situation.

    Regarding setting up a VFX company - That's a blog posting I've already been working on so I'll try to get that up soon. it's not nearly as easy and clean as one woudl think.

  10. I can't help feel that the once young VFX industry is going through the same changes and upheaval that most any industry goes through and as with any other industry it's about finding intelligent ways to stay in the game.

    Although it's easy to point the finger at tax incentives as a draw card for VFX going off shore, there's many other factors to consider. Many Canadians moved to LA to work in the VFX industry a few decades ago as that's where the work was, now these experienced artists want to move home and make supporting the staffing needs at the VFX studios simpler.

    As already pointed out in a previous post of yours Scott, it's going to be up to the producers to make the smart decisions to go with the efficient, experienced, focused VFX supervisor ( and to some extent, VFX unit ) vs. what may seem a lower cost alternative that ultimately ends with lower quality work and/or being more expensive.

    There's two ways of looking at the effects work, as a vendor/client relationship and as part of the team in a VFX unit capacity. I really like the idea of building a VFX unit on a show. Not just a VFX supervisor but vfx artists ( senior, experienced and self sufficient ) are hired on during pre-production and pre-viz becomes the first stage of vfx work vs. a completely separate process. ( why re-invent the wheel! ) I'd say for %90 of films that have effects work in about %80 of the work could be tackled by this VFX unit ( if not more ). * footnote see below

    As I'm currently in the process of trying to "set up a company" ( in quotes, as it's more the concept of putting together the basis for a vfx unit ) this is not, as you pointed out, as simple as buying the software and hardware. What really needs to happen to support a more organic per show vfx unit is an open vfx pipeline and the ability to scale infrastructure to accommodate the ballooning data requirements of the project closer to delivery. Then there's the production staff, all the hardware and software in the world won't keep you organized.

    The open pipeline needs to be able to support all the stages of the production, provide access to the licenses required ( legal eagle's required to read license contract fine print to see if that's even possible ), communication between 'departments', etc. Where the infrastructure could mean sharing the data globally, and does that mean utilizing Amazon S3 technology etc. Or can we take advantage of cloud computing resources ( SideFX's HQueue )?

    I'm digressing, but my long winded point is that the traditional VFX system will break down, and hopefully what evolves is more than just a re-envisioning of a Henry Ford dream. With that said, you'll hopefully always have the option of working at a Chrysler or a Koenigsegg.

    * footnote, I find that having "departments" and specialists, although necessary as some scales, is detrimental to the flexibility of vfx execution. Having artists that can handle shots from beginning to end, who are able to self manage themselves, seems to be something of a minority these days. I miss reading about the ILM Rebel Group.

  11. Just a quick reply for now-

    One of the problems is the studios tend to be very narrow minded and avoid risk. Look at the current approach to making movies where the mandate is to do sequels or established IP. Original movies tend to be avoided and middle budget films are being avoided as well.

    For Close Encounters or Star Wars the studios were willing to pay for a VFX company to be setup just for the movie. A large part of that was there were no other viable options. It would be close to impossible to happen today since studio executives would be unlikely to take that risk unless the project was really unique and there was a major director/producer really, really pushing it.

    Studios put a lot more thought into the companies than they do the vfx supervisors.

    Studios are very worried about piracy and leaks. Anytime there's a leak the first place they look to is vfx. That means very secure sharing of resources.

    There's also the problem of setting up and scheduling. Before anyone is hired they've already set a too tight deliver schedule. Preproduction on many shows is now 2-3 months max. Yet they need to start the previs yesterday, let alone hiring and configuring a pipeline.

    It would be great to leverage the previs more in post but there are several issues at work here. Previs needs to be nimble and quick so the models and animation rigs won't be nearly as detailed and complex as they will need to be in post. The mindset of the previs artist and the animators doing the detailed work is different. They can be the same person but they have to adapt to the task at hand which can be difficult for some people.

    Keep in mind unless it's a virtual shot the live action will need to be shot. The number of changes from previs to post can be huge. All show dependent.

    Specialties vs generalists - Yes, I think it's good that people can do multiple tasks but when you have 1000+ shots being shoved through the pipeline in a very tight time schedule that can become a problem.
    (The rebel group had some mixed results as I recall). Finding good people equally skilled in multiple tasks is very hard. It may not be the most efficient process to have a gifted lighting artist spending their time rotoing a very complex shot. One of the other things an artist may get in a groove and just the number of similar types of shots on the show allows them to hone their focus more so that changing hats. A rebel group may work better on some types of shots or some sequences. As with anything it very much depends on the specific show and the crew.

    VFX will survive since media needs them but exactly how this plays out and how long it will take until it settles remains to be seen.

    If the studios can send a complex composite elsewhere and have it done all in for less than the cost one man day here in the states can you compete with that? Will the people crewing up your team be willing to work for the same wages paid as half way around the world? Can someone be paid at the lowest living wages while living elsewhere? Can they pay for their house, children's education, etc?

    In animation, technology reduced or eliminated some tasks (inking) The Far East now does the vast majority of 2D animation as far as I know. Simpsons and the rest of the high volume projects seem to be done elsewhere in terms of the animation while the writing, sound, etc is done here. There are still pockets of 2D animation here but not to the level it once was.

    Will VFX follow that same route? Much depends on what we all do now and what factors are at work. As long as it's capable of being done cheaper and there are other financial forces at work (incentives, etc) it will be in flux.

  12. FYI The link from your Twitter update says [sic]
    - should be

    - I assume this is not an unconscious slip of humor

    Regards -

    Austin Burbridge, Managing Editor, Cinema Minima for Movie Makers Worldwide

  13. The iPad spell corrector has a sense of humor.

  14. I think we have to be careful that we don't overrate the feature film vfx business, it is after all a very very niche market.

    Globally far more animations and visual effects are created for commercials and television work each year and there is plenty of money to be made in those markets, particularly commercials.

    In commercials in the leading global markets, the creative and innovative companies turn a profit even in downturns because they can set a market value for their work. However much of the feature vfx business has the 'begging bowl' mentality, grateful that the studios are even tossing them a bone. Features might get the kudos but commercials pay the bills.

    I think before we get notions of unionization etc we need feature vfx firms to set a fair value for their work. However until the studios publicly admit that their major tentpoles are vfx rather than star led, then I think this is a long way off yet.

    As I said, this is a niche business and too many firms are carving far too small niches for themselves. Firms and artists alike overspecialize, pigeonholing themselves. Sometimes I even wonder if the whole feature vfx industry has pigeonholed itself, blind to the numerous creative opportunities that exist outside the realm of the silver screen.

    The feature vfx business seems very much under the 'Hollywood spell'.

  15. Animation- aren't most animated TV shows done overseas these days? (i.e. most actual animation done outside the US)

    Obviously there is Pixar, Disney, Dreamworks, etc
    Those are very heavy with the team necessary for those types of projects but of course much lighter in terms of compositors, roto people, vfx supervisors and the others that work on traditional vfx work.
    Even Pixar is opening up a shop in Canada.

    Features vs television vs commercials-
    Yes those are all different markets and should be explored by any vfx company and vfx artists.
    If you totaled all the vfx employees in each of those categories I couldn't tell you what the results would be. I suspect there are more vfx feature artists (worldwide) than you might think.

    Features - The advantages of features are they tend to be large once they get to a certain threshold. (500-2000+ shots) so there is quite a bit of work in a normal year (it's not a normal year)
    That means you likely have one creative vision and you can target for the big screen.
    It also means you can do R&D and deal with things that take longer to do.
    You're also creating and building new models, etc.
    The discouraging thing about features is the vast majority of international films come from Hollywood and yet the actual product (including vfx is done elsewhere)

    Television- Now that you have things like the ScyFy (sp?) channel and some shows like Lost and 24 (those two are wrapped now so not sure how much other vfx shows are on normal TV) there is room for vfx for television. In years past there was limited work in vfx for television (i.e. Star Trek and Sabrina)
    There is profit to be made in vfx for television but I don't think it's huge by any means. Most vfx shows go to single vfx companies so how that translates to the number of companies/people doing vfx work I couldn't say.
    Television is also very time limited so the requirements is focused on quick turn around and less on things like specific R&D.

    As noted in the posting television works well for small to mid-level size companies.

    Commercials - Note that even commercials aren't necessarily local. A number of large spots are shot in South America or other places and at least some of the vfx work is done in London and other places.

    I don't tend to see a huge number of full vfx commercials on TV with the exception of motion graphics. (Even finding a good commercial these days is difficult) Once a commercial gets to a given threshold of cost and complexity, the location and where the post work is done becomes less of an issue. There is certainly work there but I couldn't quantify how much is done locally.

    Someone else had mentioned local spots but I've never seen a local spot with vfx (even here in L.A) except for a logo or poor vfx tacked on to a tacky spot.

    There's also music videos and other avenues that could be considered.

    But I wouldn't say that the number of vfx openings in these other areas (television, commercials) within the US are making up for the number of vfx jobs being lost to overseas.

    As always, I could be wrong.

    It would be good to get a survey to try to gain more insight on the actual numbers involved. The VES has done some in the past and will likely do more in the future but not all vfx artists and animators are part of the VES so the results would only apply to the VES membership and not to the whole business.


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