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Why is the VFX business failing at its moment of greatest success?

"Visual effects is Art, created in a laboratory, at gunpoint." - Ben Grossmann, VFX Oscar winner, Hugo (2012)

By Mark Christiansen | February 05, 2013

In less than 3 weeks, something like a billion viewers worldwide will look on as Life of Pi wins the award for Best Visual Effects at the 85th edition of the Academy Awards. I don't mean to ruin the surprise for you, but you don't need The Predictanator to tell you this award is a lead-pipe cinch, despite a strong field that includes the number three grossing film of all-time and what is certainly the best talking biped ever committed to 48 fps (and maybe even lower framerates).

2013 will mark the 37th year in which there has been an award given for Visual Effects, a category necessitated by those harbingers of the relationship between high technology and box office Star Wars and Close Encounters of the Third Kind, competitors for the 1977 statuette. And just yesterday, it emerged that Rhythm & Hues, creator with Ang Lee of Life of Pi and previous Oscar-winner for (otherwise flop) The Golden Compass "is in dire financial straits and will take an emergency $20 million capital infusion from three major Hollywood studios in order to keep its doors open through April," according to a story circulated by Reuters and now reverbarating throughout the twitterverse (one lively set of discussions is spearheaded by @vfxsolider, who has diligently provided "Commentary On The VFX Industry's March To The Bottom."

If you're even a bit outraged to hear all of this, you should be.

If you're even a bit outraged to hear all of this, you should be. Examine the list of top domestic (or if you prefer, the even starker worldwide) all-time box grosses. Go ahead, I'll wait.

As you work your way down the list, note that you have to get to number 11, The Lion King, before you find a film that is not predominantly a VFX or CG-driven feature. After that, The Passion of the Christ (rather mysteriously) holds position 21, and then guess how far down the list you have to go to find a cluster of actor and director-driven, non-VFX movies? Take a look.

Keep going, past 50. And keep trying to pretend that it's just a question of inflation adjustment. There were, after all way, way fewer things competing for attention with Gone with the Wind, it is, after all, losing its lead, and in any case Hollywood in 1939 may not yet have developed its habit of perpetual claims of victimhood amongst record-setting box-office receipts - although if it had, this would hardly come as a surprise.

If you're a young person contemplating a career in visual effects, it's worth at least asking why ...

If you're a young person contemplating a career in visual effects, it's worth at least asking why, if there's never been a better time for VFX in Hollywood, that it's never been a worse time for the companies (and thus the people) that create VFX for Hollywood feature films, and whether there's anything you can do to meaningfully change that situation, if only for yourself.

You might also ask some other questions, which don't initially seem directly related to the topic at hand:

  • What kind of person makes a great VFX artist, and in what ways, if any, is that personality type at odds with that of the most prosperous VFX clientele?
  • Is what is happening right now in VFX any different than what is happening to any number of industries in the early 21st century western hemisphere?
  • If the problem is one of cash-flow, is there negligence or poor business management on the part of the VFX companies, or is there simply not enough cash for them to survive?
  • Where does the downward pressure on compensation come from? Is it "off-shoring"?
  • What can be done to improve the situation for workers (and do a majority even want that medicine to be administered)?

These are weighly, signicant questions, not easily or glibly addressed, and you no doubt have others of your own. As I type this it's nearing 1 am, or as it is called at a VFX facility, "quitting time."

Yes, I jest, but only a little, and if these questions or others seem worth exploring here at PVC, please respond with your own thoughts and perhaps we'll make a little series out of it.

If not - well, don't say I didn't tell you so.

(Thumbnail image credit: Alex K Poimos via Creative Commons. Some rights reserved)

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IEBA: | February, 05, 2013

Unfortunately with world competition, tiny little houses around the world just rip the bottom from large, established houses with copious overhead (but the genuine ability to get things done) So the ability of the SFX houses to command the prices they need to survive & grow.

It’s ironic that that studios have to bail out the SFX houses, why not just pay them a decent wage for the work in the first place?

Rob: | February, 05, 2013

“If you’re even a bit outraged to hear all of this, you should be.” If I were to feel outrage, it would be at an article that provides no answers but only hyperbole.

Frankly I’m totally bored with the-sky-is-falling articles about this subject with no answers but only a thinly disguised opinion that something sinister is afoot. Did the heads of these VFX companies wake up with a severed horse head in their beds? If not then why would they not charge enough for their services to make a profit?

Yes, I can jest a little too, but the simple fact is you can’t loose money on every transaction and then make it up in volume.

mkochinski: | February, 05, 2013

As someone who’s been in that specific industry for 20 years, I can give some informed comment.  There is SOME inefficiency and waste in the usual production pipeline, but not as much as you might think. It costs money to run and effects house with employees in the hundreds, and studios NEED houses of that size to provide the effects for a big budget film.  Guys in their garage don’t cut it.

World competition isn’t really the problem.  If artists are cheaper in other countries, then why are all my friends and co-workers running around the globe chasing the jobs as they go?  They aren’t working cheaper, they’re just working somewhere else.

The answer is the tax subsidies that countries are giving to the studios.  Countries are paying studios 20 to 40% of the budget back to studios to lure the work there, under the assumption that they will get the money back in the economic boom that follows.

Except for the fact that these policies actually violate most of our trade agreements and artificially create a market where none existed before, while undermining the 100 year old market of Hollywood, it’s a great boon to the studios.  You can’t blame them for taking advantage, as long as no one is bothering to enforce our trade agreements.

But as Vancouver is discovering, despite benefitting from 20 years of subsidies, they’re actually losing more money than they’re getting.  And all the production houses there know once the tax subsidies are gone, the studios will move on to the next country.

11384eb: | February, 07, 2013

mkochinski is correct. I, too, have been a VFX professional for 20 years, having been part of the boon of desktop effects, and rode the rocky ride through various companies (many of which are no longer in business).

The problem is two fold: First, as Ben Grossman said, we are artists forced to work like technicians, in a field that is art driven, not mechanical. But from the beginning, we all acted like we were just thrilled to be working in “the movies”, and were willing to sell our souls just for the opportunity. What that told the studios is that they could play one artist against another, one company against another, to force prices as low as possible. We did this to ourselves by not realizing the value of what we were creating. But who would have been able to see that in the early 90’s? It’s truly unfortunate.

The more immediate issue is the lack of organization between facilities. The reason a VFX house can’t just charge what it should cost is that A) it’s art, and we are creating the impossible, so how do you put an accurate price on art? And B) if you put a price on it, some other house will just underbid you to get the job. And I’m not talking the little guys, I’m talking the big hitters, including DD, ILM, Sony and others. They are just as guilty as forcing the prices to the bottom as anybody.

You want a solution? Get all U.S. VFX houses together and form a trade association. Come to an agreement on pricing and hold to it. There really aren’t a lot of companies out of the U.S. and London that can do the level of work that a lot of these films require. Do you think any company in India or China could do Life of Pi? No way. But the power resides in the company owners, but only if they band together.

The issue these days is that each company wants to fight the fight on their own, but claim it will never happen to them as their fellow companies fall to ruins… until it becomes them.

And don’t look to the studios to help. They simply want their work for the cheapest price they can get. If the FX aren’t absolutely crucial to the story, they’ll take it to the cheap house. But they know that when it comes to the truly challenging work, they have to use us here. We just have to make them realize that their own greed is forcing us all out of business, and that’s only going to hurt their bottom line.

cjscollard: | February, 07, 2013

The visual effects industry, in my experience, has never been terribly profitable.  When I started in VFX, as an in-house producer, in 1995, nearly half the jobs we did were break-even or worse.  They ALL would have been worse had we been paid for the amount of work we actually did. Those were days of 80+-hour weeks, but we all did it, in the hope of achieving some recognition (which we got).  However, even then, we often found ourselves at the mercy of ad agencies and movie studios who were constantly low-balling us, usually by bidding us against other vendors who merely “had machines.”

I have also, many times since, worked as a client, where I have argued incessantly for going for quality, not merely bids, but have almost always been shot down by higher-ups.

Another issue which I run into constantly is the divided budgets of Production and Post-Production, especially on features and TV.  While on the best shows, VFX is an integral part of Production, and, in particular, pre-pro and principal photography, on most shows, VFX is relegated to post only—and usually to correct what was ignored/mishandled in the shooting.  I believe the “fix it in post” mentality has gone a long way toward seriously injuring (if not killing) many VFX studios. As my mentor once said to me, “We used to work in the magic department, now we work in the glue department.”

Film production is a game of hot-potato, and VFX usually loses. An example: a couple of years ago I worked on a high-profile show that was (of course) ‘Not a VFX movie”, but it quickly expanded from a couple of dozens to hundreds of shots—but the Production tried to hold the vendors to bids based on dozens.  Of course, the vendors had already geared/staffed-up for the agreed-upon work, so when the threat of “all or nothing” came up, late in the process, the vendors had to make that difficult, expensive choice. That choice becomes a crucial one because we, as an industry, have made a habit of undercutting each other, often to the point of bankruptcy.

I know there has been a LOT of attention paid to whether or not to unionize the industry, and I think that is an important one. However, a discussion that is missing, IMO, is one of fairness between film studios and VFX vendors.

Mark Christiansen: | February, 07, 2013

Thank you for these insightful comments. I wanted to quickly add that some of the topics raised in this thread are addressed by Scott Ross in a follow-up piece just published this morning (working hard for you this week - for once wink.

ekipflex: | February, 09, 2013

I’ve always thought, that the visual effects industry was quite profitable. So.. i’ve been living in an illusion? :(

suztv: | February, 10, 2013

I think that part of the problem and probably the biggest reason that studios, vfx houses etc are losing money overall is the tendency for the content to get pirated and redistributed.  It’s kind of hard to make money on a product if its out there for free - hence the problem with studios willing to pay higher VFX prices and VFX houses willing to pay wages that are commensurate with the skill level necessary.  I do think that some of the struggle is from off-shoring but not all of it.  I believe that most of the problem is from the piracy that is so prevalent.  Unless studios come up with a way to make money on shows and features that actually garners the lost income from piracy I do not see how the industry will survive. Perhaps beating the pirates at their own game will be the answer.  Offer the content for free on your site with advertising to support the cost of the movie or show and there will be less piracy as a result.  What’s the point in pirating something that is already free (or nearly free)?

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