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VFX Crossroads: Causes & Effects Of An Industry Crisis

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CreativeCOW presents VFX Crossroads: Causes & Effects Of An Industry Crisis -- TV & Movie Appreciation Editorial All rights reserved.

Let me tell you the story of a visual effects company that was iconic among its peers. It had worked on a long list of A list movies, kept a stable of talented artists, and was known for its superb technology. Then, one day, seemingly out of the blue, it closed its doors.

No, not Rhythm & Hues. I'm referring to Pacific Title & Art, founded in 1919, which began its life as a film-titling lab (The Jazz Singer to Gone With the Wind, Ben-Hur and onward) and later worked in digital visual effects, closed its doors in 2009 after 90 years of business.

The Jazz Singer was titled by Pacific Title & Art, founded in 1919, which closed its doors in 2009, after 90 years of business.
But the anecdote could have just as easily been about Digital Domain, Boss Films, Apogee or Cafe FX. Those are all companies on a list compiled by Phil Feiner, who was CEO of Pacific Title for 30 years. For him, Rhythm & Hues' demise was a painful reminder. "It's multiple deja vu for me," he says.

The exquisite irony of Rhythm & Hues declaring bankruptcy just before its work on Life of Pi won the venerable visual effects company an Oscar for Best Visual Effects defines a visual effects industry that finds itself at a crossroads. The blowback to Rhythm & Hues' bankruptcy – the 500-strong march on the evening of the Academy Awards, R&H VFX Supervisor Bill Westenhofer's attempt to call attention to the fact on national broadcast, and the blank green screen icon on many Facebook pages – is a reflection of frustration and anger among VFX artists.

Many of these frustrated artists are focused on outsourcing and subsidies as the culprits in wreaking havoc in the industry. While it's true that this has been a significant challenge to the VFX industry, its problems go much deeper and further back in time. The three original digital pioneers – Digital Productions, Omnibus, and Robert Abel Associates – went out of business within short order, leaving only the acronym DOA.

Of the four big VFX companies in the late 1970s – Boss Films, ILM, Dream Quest Images and Apogee – only one remains, and it's become a possession of a studio. "The whole business went poof," says Feiner.

Financial dysfunction in the VFX industry is rooted in its very beginnings, and the only way to truly understand what's going on in the VFX industry today is to go back to those pioneering years – when the industry was morphing from analog to digital – and find the crucial junctures that led the industry down a path to financial instability and ruin.

What we find is that VFX facilities have operated for years without standardized contracts and viable bidding practices. They have been and continue to be vulnerable to changes in technology and studio policy. And without any trade association, union or Guild, the VFX industry has not been able to stand together to effect change. (More on that in Part 2 of our series).

On Pi Day, a group of disgruntled VFX facility executives and artists met at a VFX Town Hall, held simultaneously in Hollywood, the San Francisco Bay Area, Austin, Vancouver and Wellington, NZ, to discuss the crisis. VFX artist Dave Rand reminded attendees that the VFX industry had its great artists, referring to Dennis Muren, ASC; its great technologists, referring to Jonathan Erland; but had yet to find its great business leaders.

Part 1 in this series on the VFX crossroads starts with the perennial problem of debt, and moves on to describe specific business practices and technology advancements that have turned the VFX industry from a playground for creative into a sweatshop and financial sinkhole.

But, as a quick glance of Feiner's list will show, Rhythm & Hues' end is just one in a long string of once-illustrious VFX houses that have closed their doors. What's going on? How can Oscar-winning work from a much-admired, long-standing company not protect it and its employees from bankruptcy? Why is the history of visual effects littered with defunct VFX houses that did often pioneering, stellar work?

This article is aimed at answering those questions, and the answers are complex. One hint: It's not just outsourcing, which has been much discussed in the press and online forums.

"Giant companies have gone out of business for many different reasons," says Bill Taylor, ASC, a pioneer in the VFX industry and former owner of Illusion Arts, which closed in 2009. To it, I add my own experiences closely covering the digital visual effects industry for nearly 25 years, including producing an all-day course on digital visual effects at UCLA Extension for five years, featuring presentations by top VFX supervisors.

Debt is the short answer of why VFX houses go bankrupt, and it's endemic in the industry. In fact, it's nearly impossible to run a visual effects facility in today's market without accruing debt. "Digital Domain and Rhythm & Hues were saddled with legacy debt," notes VFX pioneer Richard Edlund, ASC who was owner of Boss Film Studios and is now partner (with Helene Packer) of duMonde Visual Effects.

One of the enduring myths about the VFX industry is that because good VFX aren't cheap, everyone involved is making a lot of money. "Of course a huge number of dollars goes into VFX, but it is like the grocery business," says Taylor. "Three percent profit margins, 5 percent on a good day. The guys at the studios whose job it is to buy peas at the lowest possible cost have lost sight of the fact that there's a difference between margin and overhead."

The Visual Effects of "Battleship"
Ang Lee isn't the first (or last) director to state that visual effects are just too darned expensive. Famously, director Peter Berg said in an interview that the budget of his Razzie-nominated Battleship was high ($200M), because the money was all going to [VFX facility] ILM. "The truth of the matter is that it costs what it costs," says Edlund. "Believe me if we could do it cheaper, we would. When you want to create a tiger that is indistinguishable from a real tiger, this is a very, very difficult problem that requires rocket science to solve."

It would be tempting to assign all the blame for VFX companies going bankrupt simply to bad management; after all, most VFX company executives have "street MBAs," and some have made questionable purchases or financial decisions. Indeed, bad management decisions do play a role in bankruptcy. But many other factors have led the VFX industry to be perhaps the least profitable sector of the film industry.

Once a company does get into financial trouble, one of the pitfalls is what happens next. "Companies looking for backing find what appears to be a white knight," says Taylor. "Then the white knight comes in and loads a whole lot of debt onto the company and then folds it, in order to lose the debt in the bankruptcy. It's a form of money laundering and should be illegal but isn't. If someone has the time and money to sue for fraud and the wherewithal to proceed with it, they might prevail." Pacific Title, for example, was taken over by an investment group led by a private equity fund and a stage-venture capital firm, and Digital Domain's leadership was taken over by John Textor, a managing principal of Wyndcrest Holdings, a Florida-based private investment and acquisition firm.

Even if the "white knight" isn't a financial predator, he may be a complete stranger to the film/TV industry. How many people have wandered into the industry looking for glamor and profit, only to hightail it out when they realize both are in short supply?

In the early days of digital visual effects, more than one company went bankrupt over a pricey technology purchase. Edlund's Boss Film Studios is one such example. "I paid IBM about $1 million for a parallel processing computer that's probably not as fast and capable as my laptop today," he says. "But the thing is that nonetheless you have these debts that hamper your ability to get ahead."

Illusion Arts, which did digital matte paintings, was one of the early exceptions, relying from the beginning of their digital work on Richard Patterson's system of desktop Macs and inexpensive software like Photoshop and After Effects, a system that worked for the kind of work they did. "It helped that we were not trying to create animated creatures," says Taylor. "It also helped that we stuck to a very simple business model: no debt and no receivables."

The late Robert Abel of Robert Abel and Associates (RA&A); VES Chair/Prana Studios Senior Vice President of Visual Effects Jeffrey A. Okun; VFX pioneer Richard Edlund, ASC who was owner of Boss Film Studios.

Since those early days, however, the equation has flipped, with cheap technology as a turning point in the VFX industry. VES Chair/Prana Studios Senior Vice President of Visual Effects Jeffrey A. Okun characterizes the result as "the commoditization of visual effects." "The price of hardware and software dramatically dropped in the late 1990s and early 2000s, and a lot of facilities stopped using proprietary software and went to off-the-shelf software that they modified," he says. "Before, it was a minimum $100,000 investment for a workstation and software. Now it's $3,000."

Bill Taylor, ASC, a pioneer in the VFX industry and former owner of Illusion Arts, which closed in 2009; Phil Feiner, CEO of Pacific Title for 30 years; and Rhythm &Hues VFX Supervisor Bill Westenhofer

Cheap technology has been a hard blow for an industry equated with technology, not artistry. "Before, we needed people with specific talents," Taylor says. "A talented matte painter is a rare thing and you can't buy software to do that. When the basic issues of lighting and perspective, paint and color can be taken care of with computer modeling software, you still need a person with good artistic oversight, but you don't need a good individual matte painting artist. Many of these [digital] shots are not very good. The lighting and geometry are convincing but they still don't look real – just real enough for studio executives who see them to think that they didn't have to go to Illusion Arts or Matte World."

John Dykstra; Gray Marshall, former partner in Gray Matter and currently Visual Effects Supervisor at Rod & Cones VFX; Digital Domain co-founder Scott Ross

The same goes for greenscreen compositing. "Once upon a time only a handful of people in the world understood bluescreen photography," he said. "Then, all that knowledge got put in a box with the label Ultimatte, and when the Ultimatte patent expired and everyone could use it, compositing became commoditized. There's still a difference in believability between a very good composite and a just okay one, but only a few experts can appreciate it."

Once upon a time only a handful of people in the world understood bluescreen photography.

Even as portions of the VFX business became commoditized – rotoscoping and tracking for example – character work and other high-level jobs remain the domain of a handful of top VFX shops. But the more low-level, routine work was what kept VFX houses in the black. The really difficult work required significant investment in R&D, which made it unprofitable, but VFX executives figured to make up the difference with rotoscoping, tracking, and dirt clean-up. When the studios sent those jobs abroad, they inadvertently shaved away at the VFX house's already thin profit margins. What's left – a lopsided dependence on paying the bills with the hardest jobs – has been a big factor in forcing some studios to close their doors.

Nor is it a given that today's hard jobs will remain the domain of a handful of top shops. Once a VFX facility's R&D does the hard labor of making something possible, they deliver a paper on their work at SIGGRAPH, and little by little, what was secret sauce becomes an algorithm for sale. "Section by section, craft by craft, visual effects has become commoditized," Taylor concludes. "Some things have not yet become commoditized but maybe some day software will be sufficiently advanced so someone can buy a box and create the tiger in Life of Pi."

There's no tiger-in-a-box today but, as Taylor points out, future software may enable many more to produce a big cat that the studio executives deem "good enough."

Image credit Todd Vaziri, FXRant
Image credit Todd Vaziri, FXRant

With their thin profit margins, visual effects facilities often live from job-to-job. But when the work is spotty and the costs are fixed, that can lead to making decisions that aren't good business practices but seem necessary to survive.

Okun relates an anecdote from when he owned a sound company many years ago. "We'd cost out a job and know what it would cost us, and we'd bid it out," he says. "The studio would come back and say, such-and-such a company is willing to do it for 5 percent less. We'd huddle and say, we can afford to eat 5 percent, let's drop our price by 10 percent. You do that thinking you're going to get the job, but instead the studio goes to another company and asks them to beat that price. The studio ends up getting a good price. But you have to ask yourself, am I a good business owner if I'm cutting the price?"

Anecdotally, says Okun, he's hearing of visual effects companies who take jobs at a loss. "It's been explained to me that if my monthly expenses are $100,000 and we have no work lined up, that's a $100,000 loss," he says. "If a job comes along for $50,000, the thinking is that you only lose $50,000 and that's a win. Some companies take the job to lose less money to stay in business long enough to try to make a profit."

How many VFX houses are stealing from Peter to pay Paul? Impossible to judge, but it explains the rapidity with which some of them go out of business, seemingly thriving one day, until the surprise announcement of its demise.

The fact that the studios needed to bail out Rhythm & Hues (to the tune of $17 million in loans) to complete work on projects in house (Universal's R.I.P.D. and Fox's Percy Jackson: Sea of Monsters) implies that the studio had been tripped up by this survival strategy.

Percy Jackson & The Lightning Thief, courtesy Fox 2000
Percy Jackson & The Lightning Thief, courtesy Fox 2000

It all boils down, says Okun, to a bigger issue: flat bidding, or what Gray Marshall, former partner in Gray Matter and currently Visual Effects Supervisor at Rod & Cones VFX calls "the consensual lie." "It's almost impossible to properly bid based on a page in a script," Marshall says. "Even if they storyboard or do previs – which can help get you closer for the big ticket items – there are so many things that crop up unexpectedly."

What he's referring to are the inevitable change-orders. "They say the script is written three times – in pre-production, production and editing," says Marshall. "VFX are also written three times and things change radically in all three stages. But nobody wants to hear it's going to be more." He recounts the story of when he was visual effects supervisor on the movie 21. "In the script, we had a scene of an environment with a green screen out a large window," he says. "I thought it would probably be 60 greenscreen shots, but I was told by the people who handled the bidding process to lower it to 20. But nobody had informed the editor so, sure enough, the cut comes in and it's got 80 greenscreen shots."

Marshall calls the model of "per-shot bidding" ridiculous. "You never know how it's going to be blocked...and then you're held to the shot number," he says. "The bid can be a starting point, but everyone knows it's going to change."

"When do the iterations stop?" asks Okun. "A friend of mine told me they built a castle, the castle was approved and put into a shot, Then they wanted flags. Next, they wanted the drawbridge to open. Then somebody said, wouldn't it be great if there were a water wheel in the moat. Somebody needs to take responsibility for saying, we'll do that but it takes more time and more artists and costs more."

Titanic VFX
Oscar-winning Visual FX crew from Titanic reviewing 3D motion capture data with director James Cameron. From bottom left: Brett Gassaway, James Cameron, Daniel Ma and Robert Legato. Photo by Digital Domain.
Flat bidding means just that, and VFX company executives hesitate to ask to be paid for overages. "Nice people will allow you to do a change order, but they won't like it, even if it's reasonable," says Marshall. "You're made to feel that you're not a team player." In the highly competitive environment of VFX, nobody wants to be thought of as 'not a team player,' so most VFX houses simply take on the extra work and lose more of the profit. "If you keep going back for overages, even if it's not your fault, all that will be left is the idea that this VFX company was hard to work with," Okun says. "They tend to forget we didn't ask for those changes, but we accommodate them. But instead of being viewed as a collaborative force, we become a problem."

Marshall wants what he calls a Cost Plus mode. "I've always felt that you should do your best to estimate the amount of time you need and tell the client, this should take X number of days, here's our rate card and here is how much a man-day costs in this discipline," he says. "You get paid for the days you work. What's important is that the VFX tracks those and can turn to the client and say, you're only 30 percent of the way through you're work and you've burned through 50 percent of your budget. What do you want to do?"

Double Negative logo
Offshoring the profitable low-level work was one blow to the VFX industry, but tax subsidies in other states and countries has played an even bigger role in stressing the VFX industry in Hollywood to the breaking point. State and national governments lure feature film (and TV) productions with significant rebates if the production spends the majority of its money there; the subsidies extend to digital visual effects. In the U.S., says an article in The New York Times, productions get $1.5 billion through subsidy programs in 45 states throughout the country. London is another example of how subsidies built a more robust VFX infrastructure. "[London VFX facilities] realized the only way to get a piece of the VFX pie was to collaborate," says Digital Domain co-founder Scott Ross. "They put Sohonet into place and the British government offered great tax incentives to the motion picture studios and London takes off and becomes the No. 1 provider of VFX for Warner Bros."

What worked to build a local or regional industry is volatile, however. All the Harry Potter movies not only shot in the U.K. but kept London-based VFX facilities Double Negative, Motion Picture Company, Framestore and Cinesite Europe very busy, but now that the Harry Potter franchise is over, they're facing tough times.

"Harry Potter & The Half Blood Prince," before and after courtesy Warner Bros Pictures and Art of VFX

Likewise, Vancouver – famous for luring a good hunk of TV business, including VFX, from Hollywood – is now losing work to another Canadian province, Ontario, that's made its incentives more enticing.

Ross sees the process as eventually even encompassing places like India, where the studios currently offshore low-level work for the best price. "Indians are entrepreneurial," says Ross. "Right now there are one or two major shops. Pretty soon, somebody will leave and open his own shop and cut prices."

To try to keep ahold of the work, numerous U.S. VFX facilities have opened up satellite shops in Asia or in states where the rebates have made production particularly enticing. But that's another expense in an already cash-strapped budget, with no guarantee of returns.

At the recent VFX Town Hall meeting on Pi Day, the discussion of subsidies drew the most vitriol from attendees. VFX pioneer and Director/Visual Effects Supervisor Scott Squires, who touched on many of the issues discussed in this article, had a lot to say about why subsidies are bad for the VFX industry. "It's hard to compete against a government providing 50 percent discounts," he said. "Subsidies don't change the number of jobs but just move them. VFX companies have the expense of setting up satellite places and VFX professionals have to move around the world...and it changes every six months where the subsidies are."

Squires also noted the high price paid by taxpayers for film/TV subsidies. "Louisiana is making less than 16 cents for every dollar of subsidies, including the multiplier effect," he said. "They are not beneficial to the taxpayer. It's an industry based on a house of cards – when the subsidies go away, the industry will collapse. Film subsidies require constant feeding, not to set up an initial business." Someone in the audience called out, "Subsidies are kickbacks…just call them what they are."

Phil Feiner, CEO of Pacific Title for 30 years, has compiled a list of talented VFX houses that have closed their doors.

Over time, the studios have "solved" their visual effects problem by making it an in-house department. That harkens back to the days when photochemical opticals and special effects were studio divisions. "In the pre-digital era, every studio had a certain amount of effects in-house," says Taylor. "It does raise a question: if the studios thought that VFX houses were making so much money, why don't they all own one?"

At one point or another since the dawn of digital VFX, several have. "There was Warner Bros. Digital," Ross recalls. "And Disney has had The Secret Lab (formerly Dream Quest Images), Imager Movers Digital, Buena Vista Effects and now ILM. They've been in and out of the business more times than I've been to the bathroom. They have learned how it's a difficult business."


After examining the business underpinnings of the VFX industry, it's easy to understand why so many VFX houses have gone out of business. In more recent years, democratized (i.e., commoditized, cheaper) technology, outsourcing and subsidies have hastened the process. Unless the current state of affairs changes, many more VFX houses are destined to go out of business, sell out to bigger foreign-run companies, or dramatically downsize.

It's not just owners of VFX facilities who lose. Perhaps the biggest losers are the VFX artists who are over-worked and under-paid than ever before. The volatile nature of the business leaves many unexpectedly unemployed, sometimes without past pay and always without overtime and benefits.

No wonder that the call has arisen to protect VFX facilities with a trade association that can demand fairer business practices with the studios, and to protect VFX workers with a union or Guild.

Part 2 in our series takes a close look at the move towards these goals, including a historical view of past efforts.

With the importance of VFX to Hollywood tentpole movies, the VFX industry isn't going to go poof. But what will it look like in three years or five? Follow up with Part 2 to take a look at how the VFX industry imagines its future.

VFX Crossroads Pt. 2: Can The VFX Business Be Saved?

VFX Crossroads Pt. 2: Can The VFX Business Be Saved?

In VFX Crossroads, Part 1, we took a close look at how the seeds of the VFX industry's dysfunctional business model were planted in its earliest days. Although outsourcing and tax incentives/subsidies are the culprits most often cited in today's news, we saw that the financial picture for VFX houses is far more complex than that. Here in Part 2, we look at some of the solutions proposed by leading voices in the VFX industry, including a VFX facility trade associations, a union or guild, and ending subsidies. The question is, is it all too little too late?

Follow Debra Kaufman on Twitter @MobilizedDebra

Image from Life of Pi: Richard Parker reacts to the sudden appearance of a school of flying fish. Photo: 20th Century Fox ™ and © 2012 Twentieth Century Fox Film Corporation. All rights reserved.

Jeffrey A. Okun. Image from The Visual Effects Society

Richard Edlund. Image from

Bill Taylor, ASC. Image by Owen Roizman, ASC. ©A.M.P.A.S.

Gray Marshall. Image from Digital Artists Agency


Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by David Veeneman
Very nice article, Debra. It's awful to see such a brutal shakeout in the VFX industry, but it's probably inevitable. To quote the timeworn cliché, that's why they call it show business. Hopefully, analyses such as yours will help future VFX business leaders manage effectively.
@David Veeneman
by Debra Kaufman
Thanks, David. The reality behind this story has been brewing for years...I was sad to write it, but I felt it deserved a history. Who knows what the future holds.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Eric Swenson
I believe these are both closed:

-Bay Area:
Jex FX

Amalgamated Pixels
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Evan Jacobs
Debra is spot on regarding the downward spiral that happens when you fund your current project with the next project's start check. I co-owned a VFX company in Los Angeles called Vision Crew Unlimited from 1994-2002 and we certainly fell into this trap. It happens because you spend the largest portion of your budget at the end of the project. The crew is the largest and the hours the longest. But the clients are not going to make final payment until after you deliver. Unless you have a lot of cash on hand, you're inevitably going to have to dip into that big front-loaded payment from the next show. The cycle works until you have a gap between projects. Then it falls apart.
@Evan Jacob
by Debra Kaufman
Hello Evan: Sounds like we need to add Vision Crew Unlimited to our list of defunct VFX houses. THanks for adding your experiences here.
@Debra Kaufman
by Evan Jacobs
Luckily, at VCU we didn't declare bankruptcy when we closed up shop. We were able to wind down our operation in a pretty clean way. Everyone was paid, etc. At the time, I felt as though our competitors must be having a better time of it. After we closed, I found out that everyone was dealing with the same challenges.

That low net profit of the business everyone talks about is real and it's unforgiving. You've got to run a very tight ship to succeed for the long term. There are other industries with low margins but they tend to be much more predictable. VFX was described to me at one point as 'prototype work at volume pricing'.
@Evan Jacob
by Debra Kaufman
Prototype work at volume pricing...that about says it all, doesn't it?
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Kostas Petropoulos
Good article, Debra!
Creativity is the most important talent i think.


Link :
@Kostas Petropoulo
by Debra Kaufman
glad you liked it - I agree that creativity is the most important talent. So many creative people are losing out due to a broken business model...
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Bruce Green
As a film editor who has been part of this world since ILM was in Van Nuys and Vista-Vision was re-discovered I read this article with great sadness. I think we in the editorial community are caught between a rock and a hard place. When cutting a sequence for the first time I've been told not to worry about story boards and to do what ever works. We are usually not part of the discussion or the story board process. Maybe we should be? I have many friends in the VFX community and what you are all going through pains me. I will say for the worker bees among you. Organize, organize, organize. You need a union.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Joseph W. Bourke
Bruce -

Your industry experience shows me that it's a case of "twas ever thus". While I'm not in the west coast VFX industry, I've run into projects (mostly of the larger corporate variety) where storyboards were demanded, and I've run into projects where music was an afterthought.

My feeling is that no matter what development stage of our industry we're in, there are going to clients (and producers) who don't care how the project gets done as long as it's cheap, and those who know the correct process, and stick to it, no matter the cost. There are phases of the production process which many people would look at and have no idea why it might be necessary to the project's success (storyboards for example, custom music, or at least early-on music choice for pacing, site surveys...the list could go on). Sometimes it due to inexperience on the producers part, and sometimes it's a downright case of greed - "If I don't have to pay for storyboarding, that's more profit for me...".

I've never been in any unions in the graphic arts field - the ABC affiliate I was at for fourteen years was a non-union shop, but our sister station in Boston was union, and I always thanked my lucky stars that I was not limited to cross-training the way I would have been had I been at the union shop. I never would have learned camera work, audio production, directing, switcher operation, or many of the other skills that can become brick walled when you're in a union environment. That's just my experience, but I can see the need for unionization if the market becomes so cutthroat that you can't make a living wage.

I don't think this is evolution of any sort - I think it's just the clients and workplaces we happen to run into - at least I hope so.

Joe Bourke
Owner/Creative Director
Bourke Media
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Mike McGee
While I agree with about ninety percent of the analysis, I have to also say that much of the problem lies in one word. "Excess" what am I talking about you ask? Well how many of these companies had Starbucks style coffee lounges under there roofs? Why as soon they are making a little money do all the principles go out an buy $100K plus cars? Why does everyone suddenly need an assistant? I am constantly told, "well" ha ha ha "you don't understand that's just the way it works." "These producers expect this treatment." At some point you just have to say NO and you plan for your business to survive based on a long term strategy. Not on the whim of a studio. The unstated fact is 99% of producers have no loyalty to you. You will find some production designers, efx coordinators and few directors that are loyal and thats it. But in the end the producers over rule them. Producers are always going to go for the best deal.

Another thought. Why is everyone creating the digital backlot in 3D when many shots can done more cost effectively with miniatures or matte paintings? Or why are artists creating bipedal humanoid creatures like (Zombies) for example as 3D elements instead of using make up efx and green screen?

Final thought a don't teach people to do what you specialize in. The globalization of visual efx and for that matter all e/fx disciplines did not have to happen. There is a rampant problem, which is, out of work efx artists are selling off a valuable knowledge base that will never come back to these shores. They are teaching themselves out of a job. Not only teaching. Just the other night I over heard some Effects coordinator extolling the virtues of going to China and setting up shop there. Bragging to everyone at the table that the chinese saps would do all the work and he will rake in the money all he had to do was supervise. It's happening right now because he said he had the green light from his producer. He was leaving that very night for China. The idea here is to eat for a life time not for a day.

The efx universe is a microcosm of America's basic problem. Everyone is busy making hay while the sun is shining while everyone else in the world is making umbrellas. Then when it starts to rain we are the ones left soaking wet and nobody is offering us an umbrella.

By the way I didn't see Foundation Imaging on the list.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by michael johnson
Just a thought. As creatives we should be focused on "creating" more work in different ways. Focusing on waiting for a payday or an incentive is counter intuitive to the creative process. Don't wait for your ship build it!
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Thomas Smet
I studied VFX many years ago in San Francisco. Never had a chance to work with the amazing talent in the biz but it will always be my first creative love. I am now a web designer/developer having moved on to what I felt was a somewhat more stable industry. If such a thing exists for creatives anymore.

My heart is just crushed to hear of everything going on in the VFX industry and just hope all my friends still there find some life boat to cling onto.

Thank you Debra for such an amazing article. Not only was it informative but very touching for me. Right now I feel just about as bad as I did when Shake died.

I really hope the industry can rebuild itself.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Neil Sadwelkar
Debra, very well written piece. And for once, no significant mention of 'low-cost' offshoring to India and other places. In fact 'India' appears only 6 times on this page, with 2 appearances as Indiana Jones.

VFX houses in India are feeling the heat too, and most of them haven't learnt one thing from the US experience. They commit the same follies of debt and financial 'creativity' that makes companies go belly-up eventually.

As an aside, doing VFX in India, is cheaper not because artists are being paid less, but because of the skewed US$ to India Rupee exchange rate that distorts reality.

By a very rough estimate, a $ 10 note fetches as much in the US as a Rs 100 note fetches in India. Yet, the exchange rate is $1=Rs 55. So Indian artists 'appear' to be underpaid. (hope the math is right)

I believe there is an opportunity beckoning for good VFX artists in India. Its a better market than the US at the moment. Call it 'reverse out-sourcing' if you will, but it can be explored. And you may not even have to step out of the US.

Neil Sadwelkar
twitter: fcpguru
FCP Editor, Edit systems consultant
Mumbai India
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Joseph W. Bourke
Interestingly enough, as a moderator on another COW forum, I had a chance to converse with an up and coming motion graphics designer in Mumbai about the industry there. He stated that now that the industry there is becoming more mature, there are rumblings of unionization rippling through the workforce. Interesting stuff...

Joe Bourke
Owner/Creative Director
Bourke Media
#Carl DiOrio
by Debra Kaufman
Thanks so much, Carl - you & I go way back, so you remember a lot of the stuff in the article. HOpe you're doing well. Best, Debra
#Jim Oblak
by Debra Kaufman
Hello Jim - I am NOT ignoring you - I reached out to Carl and he put his two cents in (agreeing entirely with you!)- I've been at NVIDIA's GPU Conference but have been thinking a LOT about this as well as talking to numerous people. When I have a longer stretch (I'm on deadline now), I will give you a longer response. I really get what you're saying and it has given me a lot to think about. Stay tuned. Best, Debra
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Carl DiOrio
Kudos on a crazy good article, Debra!
A little more ranting about PDI
by Jim Oblak
Why is Blue Sky on this list of "closed" VFX houses if they are currently hiring? ( )

It is silly to state that something is "closed" because it is just a subsidiary. If Blue Sky is closed, then its parent ( 20th Century Fox Film Corp ) must be "closed" as well. It is a subsidiary of News Corp.

PDI's imaginary "closing" was not the result of a VFX industry in crisis. PDI is an example of what went right. VFX houses need to couple themselves with the IP owners. Profit is made from exhibition and merchandising of this IP, not from being a disposable VFX contractor.

PDI (as "Pacific Data Images LLC", not as "Dreamworks") is still registering patents.

Read an SEC filing. Pacific Data Images, Inc. and Pacific Data Images L.L.C. still exist as subsidiaries of Dreamworks and their big old PDI sign sits at 1800 Seaport Blvd, Redwood City, CA 94063. They are certainly not closed. They were not bought by Dreamworks in a state of bankruptcy or failure. Dreamworks acquired a healthy company and grew it further. PDI remains somewhat of a success story in the industry.
#Pierre Jasmin
by Debra Kaufman
Yes, thanks for adding Giant Killer Robots to the list and we will also make the correction to Mass Illusion. Thanks for all the input to help make this list better.
#Bill Schultz
by Debra Kaufman
Ah yes, Meteor Studios. Forgot that one, and I guess so did Phil Feiner. We'll add that one.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Duncan Macdonald
I feel for any inventive company. Many years ago I formed the belief that there must be a parallel universe. Whenever I came up with a new (and potentially profitable) invention someone else would copy it (not what they claim)and my invention would quickly become unprofitable and unable to stand the cost of all the equipment I bought to develop it.

VFX is no different than any other business faced with high start up cost and low profitability. The life of Pi only existed because someone decreed it could. The effects that made the movie so intriguing for me could only exist because it was possible, not practical.

There is a very large difference between practical (can be done profitably) and possible (given enough computing power and an endless pit of money it can be done).

I just wish those in the industry responsible for raising the funds to produce VFX intensive movies could pass on their knowledge of how to fund film to the people more devoted to developing VFX rather than creating profitable VFX.

Have I spoken in criticism? I certainly hope not for my intention is to awaken those who buy hugely expensive technology to create unprofitable VFX to the indisputable fact that at the end of their creation comes a lull that has to paid for out of their last creation.

If you went broke by devising expensive effects that need hugely expensive equipment, repeating the same mistakes will not fix them, just make you an expert at going broke.

The key?
Don't let producers determine your budget whilst demanding you come up with the near impossible. Sure some of us will be out of work if we band together and refuse to go broke just for box office results but none of will go bankrupt for millions of dollars and put the whole industry into bad repute.

The industry is overloaded with to many people trying to sell to much expensive technology to to few buyers able to afford it. Let history be your teacher.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Cris Daniels
Sorry to say it but these days, "good enough" means if compositing can be outsourced to a VFX company in India for $10/hr, it will be. Good enough IS good enough, if it looks good. Nobody can afford perfect, except for the highest budget productions, and they dont want to pay, which is the crux of the problem. To a large degree its a fallacy that you every truly done with creating/editing/tweaking, the challenge is knowing when to stop (or when you are hired, knowing when you can say "its done"). That gray area is of course where the money is lost, "can you just tweak this?", "please change that color (I know I already said it was good last week)". Up against this dynamic, short of overcharging, how can you win? Blame the cheap studios, producers and directors calling for perfection at Walmart prices. They KNOW the dysfunction of the status quo, but seem to not care a bit. At this point everyone knows another VFX house will pop up to fill the void, and eventually be given the knockout punch, only for yet ANOTHER to come replace that one.... Quite a cycle, but it just keeps happening regardless of how ludicrous it seems.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Bill Schultz
The unceremonious shutdown of Meteor Studios was a pretty painful experience for many a VFX worker.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Arthur Vincie
Unions are not perfect. But they are a good solution to the problem of unscrupulous producers who would prefer to grind every drop of blood out of their workers. Most of the benefits that people take for granted today (defined work hours, overtime, weekends, minimum wage) have been the result of unions fighting against the prevailing "corporate whine" of the day.


Arthur Vincie
Director, "Found In Time"
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Pierre Jasmin
* Maybe Giant Killer Robots should be listed

* Also typo correction, it's Mass Illusion (MI without an "s" that went belly up - well the owner Cinergi),
FYI: The Mass Illusions with an 's' I guess was a post-bankrupcy liquidation legal entity sort of thing used for contractor/ payroll purposes to complete some projects, was not meant to be a permanent entity.

Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Carl Rosendahl
PDI lives on! Regardless of whether DreamWorks has kept the name active or not (which they have BTW), being a part of a larger company is far from being shuttered. DWA didn't acquire PDI to shut down the competition, they bought it to build up their ability to create original animated feature films.

Our vision for PDI from the early 1980's was to someday make our own features, and we knew even back then that we would need a studio partner to do that. Ultimately being a part of that studio was a very natural step in PDI's growth.

The PDI part of DWA made Antz, all the Shreks, and all the Madagascars. DWA's model has wisely evolved to distribute production across their facilities, so the distinction of what gets made where is forever gone. PDI being tightly integrated into DWA isn't the same as being shuttered, it's just a natural part of its evolution.
External reference
by Jim Oblak
In 2012, well beyond the alleged closing of PDI in "2002 and Prior" of this COW article, the LA Times reported "PDI currently has 526 employees and will add another 200 workers over the next three years".
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Jayne Feiner
Pacific Title failed due to greed and arrogance, not out sourcing, subsidies, or any of the other issues we are facing today. Pacific Title was a union shop and all of the artists were covered under the non affiliate agreement. At the time of receivership, the members of locals associated with PT did get some of their severance, although it was a fraction, they were the only group of employees to receive any monies after failure.
RE: PDI not closed
by Jim Oblak
The silly reasoning that put PDI on that list of "closed" houses should include Pixar as well.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Ryan Simonar
I think this article is great, especially for someone who is young in their career such as myself. I wasn't fully aware of this underside of the industry and it is definitely concerning. Can't wait to read part 2.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Barbara Karnes
I've been doing video editing and Photoshop compositing for decades. This article was extremely well written, informative, and enlightening. I thank you Debra Kaufman for taking the time to share such rich details with us. Quiet actions like this one are often the seeds from which a movement of transition is born. Your articled has edited the perception of our 2D reality, and allowed us to envision a 3D, VFX nexus composited upon the current paradigm of film industry giants, layering infinite possibility upon their green smoke screen of power by means of a collaborative collective. Let us storyboard our future as one energy, one voice, one group of VFXperts.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Kim Davidson
Not sure which "Side Effects" Phil was thinking of that closed it's doors. The one in Toronto simply changed it's name (years ago) to Spin VFX as there is also a Side Effects Software (aka sidefx) in Toronto.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Christopher Lowden
I am sure that I read the same sort of article about 7 years ago on this website, but for the editing world. It is just simply economically logical that this is happening. Yes, machines are much cheaper, which means there are more of them and therefore more people that can use them. Once there was a flame artist, now there is an army of nuke techs. This is the 'vulgarisation' of the know how and it is a completely normal economic cycle. You don't need an mba to know that.
Also, take a quick look at the quality of vfx work in student film and I wonder how I will be earning a wage in the coming years. As vfx is particularily labour intensive, it will go the same way as 2d animation went, outsourcing all the graft to cheap countries.
But don't let a guy like me, in France, the most subsidized film industry in the world that has seen virtually all of the post houses close their doors in recent years, tell you all this, Douglas Trumble explains it very succinctly in his FXGUIDETV video interview. He has seen the industry come and go numerous times before.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Pedro Ricardo
I remember an article in Cinefex years ago that predicted this fall precisely if things didn't change. I think it was about the time BOSS went bankrupt. The article is almost identical, except it was predicting all of this.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Mark Bridgeman
Free insight offered at face value - Like many industries, VFX are fun for the practitioner to do, so like photography and music and custom car building and fine woodworking and (a multitude of other crafts) , the market devolves to a few superstars who have a substantial gift making a bundle while the bulk of the talent scrapes by. They call it "work" for a reason.
#Ed Lazor
by Debra Kaufman
Hi Ed: I have a disclaimer at the top of the list that most BUT NOT ALL of the companies went bankrupt. The fact of the matter is that PDI does not exist any more, as it was bought and subsumed by Dreamworks. I don't think it's an insult at all to have it on the list. I would like it to be remembered for the pioneering, incredibly creative company that it was. Debra
@Debra Kaufman
by Jim Oblak
Dreamworks, Disney, and Fox buy companies like PDI, ILM, Pixar, and Blue Sky ...but they maintain them as individual subsidiaries that they can sell off again, if necessary. It is much more difficult to sell off one of these companies if they have truly been "subsumed" into the greater organization.

You should really visit PDI before calling them non-existent or closed.

While most of the article is well done, I'm hoping part 2 of this article demonstrates a greater understanding of the industry... or at least adds Pixar and ILM to your list of "closed" VFX houses.
by Debra Kaufman
Yes a couple of the companies on the list were primarily post houses - but they still contributed significantly to the VFX industry, hence their inclusion...
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Scott McGregor
If you think a union is the answer you are out of your mind. That will drive all of the business out of the country. Wake up, look at the big picture.
Creativity is profitable but technicians are becoming a commodity. Industries change. That's reality. I've seen most of the movies that come out today. They are garbage, with awesome special effects. I think it's the creativity void that's killing everything.
Just sayin.

Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Ed Lazor
Please make the following correction. Pacific Data Images (PDI) should not be on a list of bankrupt or closed VFX Houses. This error is an insult to how well the company was run as PDI.

PDI was purchased in whole by Dreamworks SKG in May 2001. Many still refer to the company as Dreamworks/PDI (or Dreamworks Animation North in Redwood Shores, CA). Twelve years later I continue to stay in contact with a large group of friends making films there.

Thanks for correcting this error,
Ed Lazor
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by lanre sarumi
All this talk about "trade association" or union is absolutely not the solution. All it leads to is artificial high price support. The net result will be large VFX houses dominating all productions and the small folks that can't make union dues or other conditions get squeezed out. What are we left with? Fat cat VFX houses doing average work but sitting pretty thanks to their union. Meanwhile talented artists in small companies are forced to seek employment elsewhere because they can't get a job in the big VFX houses.

It's funny how people shout their support for capitalism and free market to the point where they lose their voice but the minute free market visits them at their doorstep they shamelessly run for protection under some trade union or government regulation. Even worse, they find 499 other friends and stage a protest.

I've been around a long time and I've seen the bellyaching come from everywhere. Not too long ago it was the Colorist bemoaning the dramatic drop in price for coloring equipment and thus the commoditization of their beloved industry.

The lesson others should learn from this VFX fiasco is that if you leave your survival in the hands of a handful of companies/studios your days are numbered. Go check out the graveyards of companies that died violent deaths at the hand of Walmart.

So what can VFX house do? For one, unlike all other companies beholden to a few masters, the VFX companies are in a strong position to take their future in their own hands. The country is littered with private equity/ investment money that would finance a full production. Show them that you can be more honest than the studios when it comes to accounting (a pretty easy task). Show them that you did Life of Pi, Titanic, Avatar etc. Hire award winning directors, actors and crew. Low and behold, when the sun rises the next day you will immediately be in competition with your former masters.

When those former masters come calling for VFX work, you tell them you are busy but if they are willing to pay your full rate + overages you can slot them in. They pass on you and go to the next VFX house but wait, they are a studio as well. They move unto the next one, they are not a studio yet but they are so busy doing all the work the others have passed on, their rates are pretty high.

The beholder becomes the beholden.
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Igor Ridanovic
The list of now defunct companies also includes traditional post facilities. For example VFX work was not a core mission for Unitel or POP, but it would be interesting to analyze how forces that Debra describes brought these more diversified companies to their demise.
HD and D-cinema Consultant
Re: VFX Crossroads: Causes & Effects Of An Industry Crisis
by Joseph Owens
"In more recent years, democratized (i.e., commoditized, cheaper) technology, outsourcing and subsidies have hastened the process."

Thank you. I would also argue that the word "democratized" has been co-opted, as this is not a democracy at all, but an economic dictatorship, and the more correct word should be "popularized", but not in a good way. More lIke a "Lowest Common Denominator" way.

"It's not just owners of VFX facilities who lose."

Eventually, everyone will -- the viewing population becomes a little more savvy with every new iteration, and while we are thankful for more efficient tools, 'good enough' never is, not for long. Soon, bargain basement VFX won't be convincing, and the net that should have been full of fish will come up empty.


"I always pass on free advice -- its never of any use to me" Oscar Wilde.

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