Monday, June 13, 2011

Pass me a nail

Pass me a nail

Every time someone even hears the word union and visual effects in the same sentence they always say "it will be the nail in the coffin for all visual effects in this the country”

Exactly what pamphlet or web page is this being copied from?

Look, if we all wish to solve the current situation we’re all going to have to be open minded and drop the unrelated and incorrect stereotypes.  This industry and its artists will have to explore all options open to it without predefined prejudice.

As you’ve no doubt already read the Visual Effects Society (VES) has stepped forward and announced it’s intention to put the spotlight on some of the issues facing the visual artists these days and explore solutions.  Link here and update here.

Now some people have said “What problems?” so let me highlight a few of those.
If you currently have steady employment for years at a time, get paid a decent wage, don’t ever work crazy hours, get paid overtime when you work over 40 hours and have health and pension benefits then consider yourself fortunate.

The VFX industry has gotten out of balance between the studios, vfx companies and the vfx workers.  Many vfx workers are not able to maintain a balanced life. Some of these problems are primarily U.S. centric and some are more global in nature.

To those who are fine with one location or another failing, let me make it clear – we’re all in this together. A failure anywhere will affect you.  And you may find yourself in the same situation sooner than you think.

Outsource in VFX is caused by two different issues – Political driven economic incentives such as tax and subsidizes or by lower wages based on a lower cost of living, all based on location.

This is primarily a U.S. issue but has an impact everywhere directly or indirectly. A few people get upset when I mention things like tax incentives.  Let me be very clear:  There are talented visual effects artists all over the world doing great work.   But prices do have an impact on where the work ultimately goes.

Update: Here's a pretty sobering insight of the impact on the California VFX community
Another update on state incentive programs: Film-industry subsidies 

The hope would be that most of the vfx community would be able to find reasonable work without having to constantly travel elsewhere to do so.

Anytime most people purchase something, whether an item or service, they have to make a choice.  What they want, what they need, what they can afford, value versus price, etc.  The studios are no different, especially when they're dealing with millions of dollars. The studios want to save money so they can get the project made and so they can make more money.

How much the savings matters depends on the particular project. They may have a big tent pole movie and have the money and desire to get the best possible visual effects anywhere in the world.  Or they may have a smaller movie with limited funds that they have to squeeze every dime to get the visual effects work they want. Even with the large tent pole film they will be likely to split up the work and send the wire removal and simpler composite shots to another company simply because they’re not as concerned about it and want to lower their costs.

The majority of visual effects heavy films are funded and produced by U.S. studios, so those of us in the U.S. tend to look at it as money going out of the country.

Visual effects is a very competitive business. Trying to do great work and keep the price down is a tough thing to do. Trying to be as efficient as possible, roll with the punches as the director and studio make changes and still hit the deadline and target budget with flawless work takes real skill.  There’s also a natural ebb and flow of amount of work that causes both vfx companies and workers to be without work for stretches of time.

Now into that mix comes an outside force of tax (and other) incentives provided by countries or states.  Suddenly the studios have a 20-40% off coupon to spend in a certain location.  You can have the exact same team, getting paid the exact same wages and have the exact same bid but one of those options is now a lot cheaper without the vfx company itself having to compromise or undercut itself.  The taxpayers in that area are picking up the bill. What business wouldn’t want to offer a reduced price to it’s customers knowing the government is picking up the tab?

The studios tend to look at visual effects as a commodity, which we know is not true but in the studios view it’s close enough that a large discount is certainly part of the equation. If you’re located in an area that has some type of incentive program you have a built in advantage. If you’re not located in an area with a real incentive program then you’re at a disadvantage that is out of your control.  The playing field for getting work is not a level playing field and it’s out of the control of anyone involved with visual effects.

Now for certain types of projects the incentives may not play much of a role.  The studio in those cases values other qualities more and is willing to pay for it.  That means they can go anywhere in the world.  But this only applies to a percentage of projects.

Subsidizes and incentives exist for other things such as produce or oil but in the case of motion pictures and television work there are very few clients so it’s not possible to simply make up the loss by selling to other clients.

Various forms of tax incentives have not necessarily been shown to be a wise investment for the general population in a given area.  Many states here in the U.S. have film incentives that change every year.  And so the studios simply do their next picture wherever they can get the best deal at that time and the state never builds up a structure that increases jobs and income in the long term.  Some countries have been doing it long enough they have been able to leverage it and expand their film production infrastructure and create an entire eco system.

The results of the incentives mean that a lot of work ends up flowing to areas with the best incentives at that time. That results in the loss of jobs in some areas (such as the U.S.) and the addition of jobs in other areas, all simply controlled by politics.

VFX companies in the U.S., especially smaller to mid-size companies, are hurting because there’s no way they can make a profit and lower their costs to compete with places with incentives.  Even some of the larger companies may be required to ‘buy’ a project by working at cost or even less than cost.  This is in the hopes of keeping the company afloat and keeping key people.  In some cases companies offer very low rates to get projects in exchange for a tiny piece of the potential profit.  But this requires deep enough pockets that the vfx company can cover all of the costs now and they are taking a risk that the project will be profitable enough to recover those costs.

VFX companies have been setting up more and more satellite vfx shops in countries with incentives.  The thinking being if you can’t beat them, join them.  This allows them to offer the same incentives as other companies located there and increases the competition in a given location. What will be the final balance of local work versus the amount of work done by their satellite companies? Will the U.S. based company just become a few business offices in the future?

Getting started in visual effects is also more difficult because some of the entry level jobs are now being farmed out to other countries. The smaller and midsize vfx shops also allowed artists to become familiar with a wide range of techniques but these size of shops are closing down more often.

A number of VFX artists in the U.S. now have to become migrant workers and leave their houses and possibly their families for months or more at a time simply to continue working.  Working long hours makes it tough enough doing visual effects. When you have to leave your spouse and children for months or have to pull them out of school creates a very difficult situation for all involved.
This in spite of the fact there is VFX work required for U.S. productions and in spite of the fact the VFX artists may be skilled and experienced.

What happens if incentives stop in the location you’re working?  It’s likely to happen at some point.  What will your company do? What will you do and how far and long will you have to travel to get work?  What will it mean to your family?

As with all the solutions I’ll be listing these are just some of the possible solutions or ideas.  These are not in any order and aren’t endorsements from me. Please post other solutions if you think you have them.  As usual I’m simply listing some ideas here for people to think about.

Ideally there would be no politically motivated incentives.  All vfx companies would be competing on a somewhat level playing field as most companies do.  How successful they are would be dependent on the quality of their product, their prices and how efficient management is.

Incentives have been in place for quite a while in some areas and are controlled by politics. You can show in a spreadsheet how they’re not working but logic and economic understanding have very little to do with politics. Neither the unions nor the VES can make incentives disappear and restore a more balanced business environment by themselves.

1. VFXSoldier feels these incentives are illegal.  If a world body declared these to be illegal that would be one possible way that the incentives stop.  Personally I don’t see this happening with all the other items on their agenda.

2. Politicians in the U.S. and/or California could increase tax incentives to counter other states or countries. The union could lobby for this but as in anything political it could be very expensive to try and not result in anything. And if it did, would it simply switch back in another couple of years?

3. Politicians in the areas offering incentives could decide to cancel the incentives.  Especially if a large portion of the public got tired of supporting these productions or didn’t see the value added.  Would the lobbyists win over the people in these cases?

There's also the possibility the U.S. could place an import tax or duty on vfx work done outside of the country. Not likely to happen.

The second reason for outsourcing is a lower price service due to a location with lower wages and lower cost of living.  Visual Effects is very labor intensive and by being able to tap into a lower wage for that labor, the cost of the work also drops.  The digital age has allowed high-speed transfer of images to and from anywhere in the world and some countries such as India and China have trained and able artists working in visual effects.  Over time these countries wages are likely to rise and other countries may take their places.  Once again there have been some high quality vfx from their countries so their wages are not a slight on the quality of their work.

The results are similar to outsourcing due to incentives.  VFX companies are setting up satellite companies in these countries as well in order to help bring down their own costs.

What will these companies and workers do when other countries are cheaper?

There are no simple solutions here.  There will always be more or less expensive places to live and work in the world.  This isn’t caused by a single legislation.

Unlike most other countries the U.S. does not have a government supported health program.  Since it is privatized and run by for profit companies it is very expensive.  The U.S. has a whole additional cost layer and that is health insurance companies, which makes a hefty profit. The medical costs here are some of the most expensive in the world and yet the care is not the best in the world according to many studies.   People in the U.S. are fine with paying taxes for public schools and public roads but the mention of trying to help sick people makes them jump to a socialism charge against the concept.  They would rather pay much more in health care costs and let the insurance companies decide what treatment they get rather than to rely in any way on the government.  Over half of the foreclosures in this country are due to not being able to pay medical bills.

How much health insurance coverage you have depends on the company you work for.  Since it’s not required you may not have any.   Many of the better vfx companies offer some health insurance but since most vfx workers are project to project it can be of limited value as a project winds down and they have to work elsewhere. As soon as they leave one company and go to work for another company, they have to qualify all over for health insurance.  This is usually a 3 month time period.  So if your project is 3 months or less you may never get health care coverage.  Even if it’s longer than 3 months you will lose it once you move to your next project elsewhere.

Some vfx companies use this health insurance situation to their advantage. If you finally get health insurance coverage from a company you’re less likely to switch to another company.  Even if you’re laid off for a time period you may think twice about switching companies and having to deal with the health care coverage issue again.

If you are required to be an independent contractor at a vfx company then you must buy individual health care coverage or have your own small loan out company be involved in health care coverage.  This is very expensive.

Some of those in VFX have stated that simply because we’re paid a good wage when we’re working we shouldn’t be provided company health coverage.  We should buy our own.  What other business in this country has that mindset?  Do you think all high-end professionals in other industries are told to cover their own costs?  Are the executives and CEO’s told that they have to pay their own and that only those who make a median amount or lower will be covered by the company?

For those in countries with health coverage, how are you taking the news that in some cases politicians are looking to privatize health care in your country?

There are likely a number of U.S. vfx workers who lack sufficient health care, especially in long periods between projects.

Those that have to buy their own have an additional cost burden they have to figure in when calculating their true income.

The type and coverage you get has to be considered when working for a company.  You have to update your doctor and others when your health coverage changes and a procedure or medication that may have been covered at your last employer may not with your new employer.

Health care insurance is increasing at the rate of 19-39% a year.  Your income is likely to be increasing 2-4% a year, if that.  How long do you think even with a ‘good wage’ you will be able to afford health insurance?  How long can small vfx companies help to cover health insurance for their employees?

Do you expect to remain employed by your current company until you retire? Do you expect them to always be in business?

Many companies and local governments have been focused on short term results so would tend to provide workers with more benefits rather than higher wages. Since the medical costs increased so rapidly this created an imbalance.  This is what happened to some of the state unions.  It wasn’t because their wages had been increasing, it was simply that the costs of the benefits accelerated at an accelerated rate.

1. The VES has worked with a health insurance company to try to get better rates.  That is available now. As with many things the VES continues to explore other options.

2. Union. One of the reasons unions/guilds exist for most film production workers is to provide health insurance specifically for the issues mentioned. When working from project to project these workers are covered by the same insurance and don’t have to re-qualify for every production company they work for.  They don’t have to worry if they’re on a one-day project today and next week on a 2- month project.  And the motion picture unions worked out an arrangement with the studios to help fund the insurance coverage.  Rather than getting a percentage of the profit of a film project directly, a certain percentage goes into the motion picture fund.

3. The vfx companies could group together to form some type of health coverage base that would cover vfx workers.  Instead of each and every company getting their own health care insurance based on a small number of workers, they could pool those funds to setup something to cover workers no matter which company they worked at.  How feasible this is I don’t know but would certainly make it more reasonable for workers to move from project to project as required.

This is another problem that some people don’t think is a problem.

If it were simply a matter of working a few extra hours the final week of a project it would be one thing but overtime has now become the norm for longer periods of productions. VFX are being pushed to be even more complex at the same time the post-production schedule is being reduced.  Since there is a very real and hard release date the typical approach is to work everyone more hours and days.

A vfx artists usually works more than the standard 40 hour work week at most vfx companies. 10-12 hours tends to be the standard at a number companies. (12 hours is another 50% of hours worked a day) This added time is less time to spend with your spouse and family.  If you’re single it’s less time you can spend with friends, going to concerts and other activities.  The more time you spend at work the more your entire life is consumed with work. Getting both some physical and mental rest from work is important. A worker who has sufficient rest is more productive.  As recent studies have show, more overtime work means more long-term health problems.

And now the amount of overtime has increased beyond this basic time and the final week of production.  In some cases the last few months of a project may require 6-7 day workweeks with work hours exceeding 80-100 hours. Workers may have to work over multiple holidays and finals deadline may constantly be shifting.

This is caused by a few of things.
1. Studios tend to schedule less time to do the prost-production, including vfx.  In some cases this is because they started the project later and still have a fixed release date. In other cases they hope to save money by reducing the post schedule. (less interest on the money, less overhead at vfx company, etc)
2. There’s no true hard date except for the release so directors and studios executives continue to make big and small changes up to the release date. These constantly changes make it difficult to schedule or plan.  It also means that there's a lot of extra time and work.
3. The vfx company is reluctant or unable to ramp up more workers to handle the additional work or changes. There’s an added cost to getting more workers (training, workstations, etc). The thin margins and changing delivery schedules makes it difficult to always anticipate the correct ramp up speed.  At larger shops this results in people being pulled from other shows to put out this emergency fire on this production.  Which in turn causes that other project to have scheduling problems and require more overtime and big shift of workers.  This turns into a state of constant crisis management rather than preplanning.

Workers are burnt out and become less productive.
The extra overtime is tough on the workers home life and health.
The number of mistakes and errors increases dramatically.
The cost to the vfx company skyrockets.  How much of that is passed on to the studios depends on the company and the situation.
The end of a project can become more of a recovery than a vacation.
In the end there is a much higher cost of doing the work and the quality usually suffers as a result.

Studios are spreading the work over more companies in an attempt to reduce glitches caused by changes and the limited time.
As long as it doesn’t affect the actual release date of a movie this will continue to be the new standard approach.

1. Ideally the studios would allocate sufficient time to do the job right.  Rather than relying on the linear time it took on the last project the studio should use the actual man time required and then calculate the required linear time if those were normal days.
2. The vfx companies should be realistic with themselves and the studios as to how much work they can get done in a certain period of time.
3. The vfx companies need to plan for a ramp up and monitor the situation before it gets out of control.
4. If post-production were treated a little more like production it's might be possible to reduce the number of changes and overtime. The studios could have a post person whose job it is to truly keep things moving and have hard schedules.  When shooting a film there is the 1st assistant director, the producer and the production manager (among others).  Part of their job is making sure everything that needs to get shot is actual shot in the given amount of time. There is a schedule for the number of shooting days and each sequence and set has a given number of days. The director and crew have to get so many setups a day in order to keep on schedule. The director is strongly encouraged to stay on schedule and adjustments are made if the time starts slipping. Pages in the scripts or sequences may be reduced or eliminated if they are slipping too far behind schedule.  Decisions have to be made and they have to move on.  A director gets the best take he/she can in the time available and then has to move on to the next shot. Almost none of this exists in post-production. Shooting can go over schedule but it’s based on the director and project and has to be fully approved.

There may be a schedule for locked sequences, vfx turnovers, vfx finals, etc but the only true hard date is when the film has to be completed to be printed or duplicated and shipped throughout the world. With the advent of digital, directors and executives have the opportunity to keep changing everything until the last possible moment. It’s great to have full creative freedom but as with the live action shoot, decisions have to be made as shots progress in order to work efficiently with limited time.  Right now it’s like trying to complete construction on a house while the floor plan is still being changed a day before it goes on the market.  It’s hard to set the pipes and lay the carpet if the floor plan isn’t locked down.

This is related to the overtime problem. 40-hour weeks are the standard workweek for most people. Salaries are usually based on this type of work week. Additional time above and beyond this is typically paid at a higher rate.  This is usually 1 ½ times for each hour between 8-12 hours and 2 times for hours after 12.  This in fact is mandated by law under most conditions in the U.S.  The added increase is to try to reasonably compensate the worker for the extra time and effort.  It also encourages a company to hire the correct number of people to do the work.  If it was the same rate there’d be no incentive for companies not to work their people 12 hours or more a day.

But a number of vfx workers are not paid overtime.  VFX supervisors, producers and even CG supervisors, dept managers and leads are frequently considered ‘managers’ and are therefore ‘salaried’ employees.   They are on a flat weekly rate which doesn’t change if they work 40 hours or 90 hours. Same holds true for many ‘independent contractors’ a vfx company may hire.  The more time someone with a flat rate works, the less they make per hour.  Even when these people work the same hours side by side with other employees, they may take home less pay since the other employees may be getting true overtime pay.

Anytime someone is paid on a flat there’s the incentive from management to get their money’s worth and work them long hours or 6-7 day work weeks.  The expected slow time at the start of the project never occurs.

It’s bad enough being burned out from long hours and long workweeks but it’s doubly difficult when you don’t get paid to do so.

Some vfx companies try to put as many people on as managers or independent contractors to avoid paying overtime.  This lowers their costs.

This will continue as long as it’s in management’s advantage.

1. Make sure in your deal memo you know how you’re being paid and how overtime is being handled.
2. When given the choice of jobs or companies, choose ones that pay overtime.
3. If you are being asked to work on a flat make sure to calculate the real rate based on real hours you expect to work, not what the company optimistically thinks.
4. If you’re asked to work as independent contractor please review the VES Independent contractor guidelines.  Few regular vfx workers truly fall in this category.  It’s also not your option or the company’s option.  It’s based on the IRS Classification.
5. The more people who work for a vfx company without overtime pay, the more likely you will see a lot of overtime work.  With no cost penalty there’s no incentive for the company to be smarter about scheduling or reducing overtime.
6. VFX companies could do the right thing and correctly classify people and avoid shortcuts or mismanagement.
7. The Union makes sure the overtime rates are clearly laid out and are enforced. They also make sure people are not improperly classified as independent contractors or other positions.  Just because you have to oversee people doesn’t mean you control the amount of hours you work. (Usually the excuse to make people salaried managers)

There are a number of real problems facing the vfx industry and artists. These aren’t all of them but tend to be the highest for most people I talk to.

Rather than building coffins, let’s start building a better industry now.  Pass me a nail.

Related post
Using the Nail

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