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Scott Ross on Globalization and Other Thoughts

In the first part of this piece, Scott discussed his view of the Visual Effects Society and unions. Here he takes a smart look at the way our industry is expanding worldwide and what that means to each of us. It's ironic that the U.S. government doesn't subsidize visual effects — at least not in this country. But they do abroad. Go figure. I wrote an article on VFX in Macedonia and discovered that our State Department was funding the development of a media park and helping them build a communications infrastructure … so that their VFX companies could be more competitive with ours. Go figure. Not fair, in my opinion. But I digress. Here's Scott.


Scott Ross:

Given various governments' willingness to sponsor the VFX industry through subsidies, the relatively low cost of entry for new VFX companies, and the Hollywood motion picture studios' pressure to lower the cost of below-the-line production, the globalization of VFX has truly taken hold.

With globalization in full swing, the industry seems to have been divided into two types of skill sets. The super-high-end character animation and VFX continue to be produced by facilities in English-speaking countries (the U.S., Great Britain, Australia, New Zealand and Canada). These are the effects that drive the marketing of the current tentpole films. It seems that the major motion picture studios award these large effects contracts to the likes of ILM, SPI, D Neg, Digital Domain, R&H, Weta and MPC. Unfortunately, because of the fear of having to cover the massive overhead that these studios carry, these VFX studios are scared to death of upsetting the only six or so clients they have, the major U.S. motion picture studios.

Given the ongoing cost pressure by the Studios, these large VFX houses are constantly looking for ways to lower their costs. Each large VFX house is in a competitive bidding situation, and the studio clients take advantage of cross-bidding among them. Each VFX company lowers its price, even though they don’t really know what it will cost to produce the effects asked for. This practice, along with the fear of pissing off a major director or one of the major studios, often drives VFX studios to lose money on their work.

Then there is the other tier of work: the less glamorous work like roto, match-moves, simple compositing, animation effects and the like that seem to be awarded to the lowest bidders. At present, in order for a facility to compete in this world its work needs to be produced by low-cost labor. Today, much of this work is moving to third-world countries or to government-subsidized efforts.

All of the above is the result of the motion picture studios' efforts to reduce costs, and understandably so. I have not noticed, however, that movie star salaries or participations decreased over the years.

Turning Things Around
Most of us are aware of the direction our industry is moving. And because it continues to get worse, there is, understandably, discussion about how this might turn around. Peter's blog here is but one example.  The VES … well, let them continue doing what they do, though they've shown that they cannot be effective regarding a turnaround. Lately there has been a great deal of conversation around unions and organizing the VFX labor pool. However, the reception for the union proposals seem to be lukewarm. The union organization process is daunting and, from my point of view, it seems that it could exacerbate the downward spiral of the industry

A VFX union under the auspices of either the IATSE or the IBEW would, even if very successful, by its very nature only address workers in the US. The union would have to get enough cards signed showing interest from workers in individual companies. In the case of VFX, that would be a gargantuan effort, if even possible. Assuming employees of a given company decided to vote yes on being represented by a Union, what would that do?

Well, the Union would then negotiate a contract with that company governing the ways in which that specific company would compensate its employees. Sounds great, but… having run both union (ILM) and non-union companies (Digital Domain), I can safely say that a union shop is more expensive to run than a non-union one. So the additional costs of running a union shop will be borne by whom? Remember, the client — the motion picture studio — is constantly applying pressure to lower costs. Remember, the visual effects facility has little wiggle room because it has only small margins at best. And finally, international companies without union contracts, subsidized by their governments or located in countries with very inexpensive labor pools, will offer motion picture studios even more attractive alternatives

The next argument I hear is always an interesting one. Great artistry always wins. China/India doesn’t have the skilled artisans. We do things better and more economically. Well, yes … for now. It’s only a matter of time before those statements no longer hold water. Don’t believe your own hype. Talent has no borders. Creativity is not an American birthright. The world is becoming smaller, cultures are blending, technology democratizes art

Is there a solution? If the VES has been unsuccessful and unions make matters worse, is there any hope?

One of the key issues is to understand that the VFX industry is a global one. While today’s concerns might be varied depending upon one’s geographical location, we must recognize that any solution needs to be a global solution. I believe the core issue that influences all other issues is that VFX facilities are not paid appropriately. If there were indeed profit margins, many of the issues such as benefits, work week, residuals, work environment and relocation could be fairly addressed. Additionally, contracts, payment schedules, control of the whims of directors and producers, change orders, and turnaround time all need to be collectively agreed upon by both clients and vendors alike. And finally, the issues regarding tax incentives and subsidies need to be brought to light and the governments that support those subsidies need to be educated and lobbied to understand the long-term effect those programs have on the industry as a whole and the particular segment within their borders.

The first step in executing the above is the formation of an international trade association. And so here we are again, full cycle yet 20-plus years later. Let’s hope that the powers that be are less paranoid today than back in the 80s. The time has come to organize.

P.S.  Since writing this article, I have once again failed to get the owners and CEOs of the major VFX companies interested in forming a trade association. For the life of me, I cannot fathom their reluctance. Maybe their lack of movement is fear-based — afraid that if they stand up and try to change the industry, their clients will take their business elsewhere. So, if fear is the collective reason for not forming a trade association, maybe fear is a reason that they will. To those ends, I am supporting the formation of a VFX union effort. If the leaders of the industry are not prepared to usher in change, maybe a union will change their minds.


I want to thank Scott for taking the time to share his insightful views on our industry. You can agree with him or disagree with him, but you need to think about what he's said.

Our next look will be at one of the people who is deeply involved in the globalization process, Jenny Fulle, who is a founder and VFX Supervisor at The Creative-Cartel, a production company specializing in assembling teams tailored specifically for the visual effects and animation needs of individual productions. After that I'm working on getting VES Chair Jeff Okun to give us his view of the VFX situation and VES. Wish me luck. This is a complex situation, and I feel we need to look at it from several angles.

-P-

4 Comments

Categories: Blog, VFX
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  • http://www.facebook.com/jessehperry Jesse Perry

    These are certainly times of struggle for change, and it will probably require greater struggles before it begins to get better. Keep fighting the good fight, Scott. There are good people behind you, and more will come as their fear give way to the realization that nothing good will come until they TAKE control.

  • caleb

    Hi Peter! thanks for these. And thank you, Scott, for your insights. I have a question, however. I work in Vancouver, and I’m curious what the down-side of the incentives is. It was incentives in Canada which started the digital production industry in the first place – allowing Side Effects, Softimage, Alias, Discreet Logic, and others to develop the software while maintaining a viable business. As an artist who worked in L.A. for 15 years, and had to leave – not due to problems specific to the VFX industry, but due to corruption and the collapse of the American economy in general – I know from direct and experience of both markets that the incentives not only allow artists in Canada to survive (and continue to thrive) despite the failure in the U.S. but that artists in Canada are treated better than the best treatment in the U.S. in the prime of that market (between ’95-’05). All I see is the upside, and I don’t believe the hardships in the US market has as much to do with the incentives elsewhere as with the general malaise in the US. Can you explain the counter argument to me, please? I am sincere, and mean no offence. I hear a lot of finger-pointing, and deflection of responsibility away from the American problems which go beyond external competition from governments investing in the industry, but have heard no real rationale backing it up. I will appreciate your informed (and esteemed) perspectives. Thanks

    • Peter Plantec

      The downside…at least one…IMHO is that once a country or state starts providing incentives in VFX to lure studios, they have to keep providing them because the minute they stop, prices rapidly escalate and the business goes to the next cheapest jurisdiction. There is also a cascade affect. Once a country offers an incentive deal, other countries have to as well to stay in the game. Vancouver is an interesting example where much of the local economy is dependent on incentive backed VFX and Film studios..

  • Eddie

    Living in Taiwan I can tell you folks that indeed US studios and talents are jumping ship at an increasing rate. Maybe its the Obama gun grab, or the lack of subsidization, there is clearly a sense of fear regarding US VFX competitiveness against cheaper and increasingly more and more sophisticated talent pool abroad. When I used to work for Square (now Square ENIX) people command ridiculous salaries and no questions asked. Now American artists will have to wake up to the ugly truth of globalization and cheap labor deprivation – although started by greedy heads of studios, but artists need to be humbled by the rising numbers of new artists around the globe.