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Ending the VFX Crisis: What Has to Happen

UPDATE: 4/17. The past two articles have garnered an unexpectedly large number of important, articulate responses from industry people. There is as much — or more — useful information in these comments as in the original blog. I ask you to look through them after reading the blog itself. You will find some agreement and plenty of disagreement with my assertions. It's all food for thought, and I highly encourage you to read them.


As I keep digging deeper into the VFX crisis, it's becoming almost fractal. I try to stay neutral, and it's getting easier as I learn more. Taking sides in this issue will not lead to a solution. It seems all of us play a part. All sides are partly responsible. Getting the studios' side of the story can be difficult, but I'm making headway. They do have some points. Let's take a look at some things I've learned recently.

The Treadmill
I've discovered a bad business practice that I'm calling the VFX treadmill. If a house like Rhythm & Hues got on this treadmill, that would partially explain why, when progressive and multiple delays happened, they could not simply shut down operations and preserve capital.

Think of it like robbing Peter to pay Paul. Let's say, for whatever reason, you go over budget on a project, but you have to deliver, so you use some money from another project. You figure you're going to pay it back when new work comes in. You just assume that new work will come because it's all set up and promised. But it is delayed much more than you anticipated.

Over time, you get stretched on Project A and have to complete it with some funding from project B, which has now started. Now, you don't have quite enough money to complete project B so you have to “borrow” some from projects C and D. And you complete Project B, but now you are a little short on the other smaller projects, so you have to either skimp on them or eat into overhead or borrow from yet another project or three. You can see how over years or decades this can build into a nasty treadmill that you can't easily jump off.

If you see it happening at your house, I advise finding the off button ASAP. On a positive note, from what I've been told, the stronger houses work very hard to avoid the treadmill syndrome. They are finding strength in working lean and staying on budget and keeping their projects straight.

And one more small aside: avoid having too many layers of management. It gets very costly and slows down critical VFX decision processes and reduces flexibility. When you have great artists working for you, you can operate effectively with less hands-on management and more trust.

Stop Blaming the Studios for Everything
This leads me to something that many of you won't like. But I think it's pretty valid. The studios are not the total bad guys that many of you believe them to be. Granted they can be bastards at times, but blaming them just makes you a victim.

Remember, the studios create this business. They have their own risks and worries and, as we saw with Dreamworks, losses as well. By the way, I'm learning that they do pay for extensions and delays when it's in your contract and they cause them. So I was wrong about that.

I am convinced beyond a shadow of a doubt that the studios do not want VFX houses going under. They want strong, reliable houses nearby — especially in their own time zone. They often know when a job is being underbid and will not go with that vendor. They want the house to charge enough so they can deliver good work and stay reliably afloat. It is not in any studio's best interest to simply go with the lowest bidder, with all of the  associated risks. They are far more interested in how reliable the house is, how easy they are to work with, and how good their output is.

This whole crisis keeps coming down to unsound business practices on both sides. I'm not going to pretend that I know what all of the “good business practices” should be. That is a job for the experts, and I don't mean just leaders of this industry. I mean experts at setting up sound business practices for specific industries. They exist. I talked with one who doesn't know our industry very well but, looking at it critically, he had a lot to say about things that could be organized better.

Let's Work with the Studios
Here's a simple little clue for working well with studios so they think about your house when they have work to hand out.

I've gotten this obvious but often neglected little tip from two successful houses, and it has been reinforced by studio people. The studio side VFX sup you will be working with is almost for sure going to be a decent human. (If you get a toxic VFX sup, then run. If you don't know who they are, most everyone else does, so ask.) Client-side sups love working with house people who are pleasant, reasonable and flexible. Nothing makes their day better than knowing they can trust the house sup to stay on top of things. They love house sups that can take the ball and run with it — who get invested in the project with enthusiasm. And they like to see the work getting done, and done well. That's not much to ask, from my POV. It's a lot of work, but that's what we're here for. Amazing work is what this industry is all about. So negotiate well, contract intelligently, do the work within the your proper budget, and be fun to work with.

We All Need to Take Responsibility
Seriously, we all have to stop angling to place blame. There is plenty to go around on all sides. If we want to save this industry, everybody has to take responsibility. I think you might detect a theme here.

Underbidding has got to stop. Only bid for shots you know you can handle, and at a reasonable estimate of what it will really cost, plus overhead and profit. If the studio changes scope on the shot, or if they ask for an unreasonable amount of fine-tuning, go in for a change-of-scope contract amendment. The studios know you are not in the business to fund their movies. They may object, but you have to stick to sound business practices. Do not lose money. Do not sign contracts that will force you to lose money. That is the ultimate bad business practice. (Seriously, it's been done.)

Stop with the Boycott Talk
I keep hearing in emails and on Facebook from people trying to organize boycotts against VFX films. I call bullshit on that. It is probably the dumbest thing you guys have come up with. You are the people who make great VFX films because you love watching them. They are exciting. This work has been done by you and your friends and mine. Everybody puts their hearts and souls into it. The work deserves to be seen. Let's not boycott ourselves. Do the opposite. Show your power by getting everybody to go to VFX movies.

I think the above talk grew out of the belief that we're approaching a “tipping point,” but let's really think about which direction we want to tip. If we have different factions tipping in different directions, there will be no movement at all. If we tip in the wrong direction (as above) it will hurt all of us. Nothing is as simple as it seems. All sides need to take responsibility and the solution will involve everybody making some changes in how they do work, and learning new, better ways to do business.

A Joint Effort Toward a Workable Solution
Remember, we have good people out there walking the streets, and they don't deserve it. Most of them are very hard-working, talented and skilled people. They give their hearts and souls to create great shots. They create motion-picture elements we all want to see — the ones that make an ordinary movie into a blockbuster.

Let's find a way to all work together. That means studio people of consequence sitting down with representatives of the VFX houses and workers' representatives.

It is critically important that any such a meeting should be moderated by a person respected on all sides. He or she should be someone who can bring people together, not polarize them. Someone who is willing to fairly look at all sides in this crisis and isn't intimidated by aggressive representatives from each faction.

We also need a another neutral person with highly respected business acumen to be there to offer advice to all sides on good business practices. Together, we can hammer out sound basic practices and contracting guidelines that make sense and offer needed protections all round. This can form the basis of a more stable industry, something we all — VFX houses, studios and workers — need desperately.

I honestly wish you all the best and please, for your own sake, be smart. Get other points of view. This industry has grand potential to yield prosperity for all concerned. But only if we all pitch in and start running it right.

-P-

45 Comments

Categories: Blog, Business, VFX
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  • Anonymous

    Your attitude is what is needed in this matter as well as politics, economics and other issues. You are looking for actual solutions instead of looking for something to attack.

    I salute you!

    • Peter Plantec

      Damn after all the earlier criticism I needed this kind of post…thanx Speak2. I think a lot of us know in our hearts that this could be a GREAT industry, full of exciting developments and breakthroughs. I know the studios depend on us and do not want to see us fail. If we all could better understand what studios want and need and are willing to pay for. If all of us would be willing to build Houses that are solid, lean, and efficient — houses that put out top, competitive work. I KNOW that we can capture the lions share of the work because America can be competitive on the merits without all these calls for supports. Most of the world would admit that we invented this industry, we are the best at it. They are catching up rapidly…that only means we have to be more inventive and amazing than we already are. I believe in this industry as a global entity, but I also believe in American ingenuity and competitive spirit. Let’s stop whining and dig in. In the mean time I’ll do everything I can think of to try to effect the change process in a positive direction.

  • CollinK PalatiaMPG

    These are wise words. I’m certianly behind this kind of open and honest discussion throughout the industry.

    • Peter Plantec

      Phew…Collin…a person I haven’t offended today! Thank you. I honestly appreciate your support. I agree of course. I feel communication across factions in this industry is the only way we can get it running properly.

  • jk

    This message brought to you by .

    • Peter Plantec

      JK…bullshit. You’d like to think that because you want to blame the studios…a few weeks ago somebody was saying it was all about one or two particular houses and anti-studio.

      True, do I know a lot of people at the Studios and they all know I’m an equal opportunity offender. They read this blog too, and know I tell it like I see it and I don’t give a damn who I offend. It’s a dirty job but somebody has to do it. I wish somebody from the Studios would sign in as “Studio Person” and verify what I just said. So JK quit feeling sorry for yourself and blaming. Everybody has reason to be pissed off because much this industry runs like 1950 Ford that hasn’t had any maintenance since 1952.

  • Miro

    What about the outsourcing to other countries?

    • Peter Plantec

      Tell me your opinions. Outsourcing to Houses 6-12 hours different timezones has it’s own problems. Outsourcing to Houses 12 thousand miles away has big management problems. Local US houses have an appeal to the Studios. Why not leverage that by being competitive through good management and efficient operation? Studios will pay more for houses that they like. My blogs have been pretty clear on what they’re looking for.

  • reader

    Union. At least then you have a structure for industry wide negotiation.

    • Peter Plantec

      reader, clearly you have not thought this through or read my earlier posts on why a union could easily make the situation worse…most likely wood and almost no chance of making it better. instead of polarizing we need to find a way to work together. I don’t have all the answers yet, but many of us are working on it. The Studios have to cooperate and so do the Houses and the Artists are the ones who will benefit in the end.

      • reader

        Nice assumptions on your part.

        Just because I disagree with you doesn’t make me “wrong” or your posts “right”. A union isn’t intrinsically polarizing, but merely a set of people who organize to use collective bargaining to achieve a goal, or set of goals, by working together with “a company” – or in this case an overall industry.
        Instead of throwing the option out the window, it could be the very answer to developing a system that provides stability in quality and compensation between Studios, Houses and the Artists.

        • Peter Plantec

          I will buy this. Very well stated. It needs to be explored. I’ve had bad experiences with unions, and good. But I worry that a union will put pressure in the wrong places at a bad time. The artists do need representation of some kind and VES is not in that business. I appreciate you restating your thoughts. I retread your original post and it is reasonable…my response was a bit knee jerk. Clearly you are a thinking person.

  • Dan Supko

    These big FX feature films are more profitable than ever before, so why not try to evolve the FX Houses a little bit towards a profit sharing structure?

    As most everyone knows, Robert Downey Jr. made $50 million from the Avengers because he agreed to take a percentage of the film gross over a bigger initial paycheck. I’m sure he still got a lot of up-front money, but that percentage agreement was HUGE.

    Since the Avengers had their amazing box office run, the questions that I keep asking myself are:
    Didn’t Digital Domain work on that film? And if so, then why were they going bankrupt? And why were they sold to a foreign firm under bankruptcy for around $30 million to the Chinese?
    Of course, the big answer must be that they were mis managed and probably had too many people on the payroll to survive any lapse in income.

    Then I ask myself “Disney grossed over $1 Billion, so why couldn’t Disney or Marvel pay that little $30 million and then they could own Digital Domain and they would have a reliable and excellent facility and staff here in the US that could work full time on their movies alone?” No more of this confusion and mis-communications that can occur when dealing with 12 different vendors.

    The only answer I can give myself to that question is that the studios simply don’t want to keep a staff in place that will be requiring decent US wages, benefits, etc.

    So, if these studios are unwilling to pay people steadily (full-time), then it seems to make sense to seek a revenue flow that FX houses will see come in on a regular basis.

    If an FX house such as a Digital Domain worked on The Incredible Hulk, Iron Man 1 and 2, Thor, and The Avengers, and they were entitled to lets say a half of a percent of net profits from box office and home video, then they would at least have a constant revenue stream instead of asking for the most they can get up front.

    After a few years and a dozen or so big films are completed, the revenue stream would likely just keep growing, at least to a certain point.

    If a FX house could get to a point where residuals were at $1 million plus per year, that would at least cover a big portion of facility costs like rent and equipment.

    I dunno, just a thought.

    • Peter Plantec

      Dan as I’ve said over and over again, we can’t take a one sided view and make an progress. Just to take one example. Houses that worked on the Avengers made a fine profit on that film. It provided a lot of work for a lot of people, probably a thousand or more in VFX alone. I don’t give a damn about Robert Downy’s take and neither should you. It’s comparing apples and submarines. I feel you view of how the studios think is mostly wrong. I am trying to figure a way to get the studio people to sit down and have a conversation realistically stating their position. It’s not easy. I think they may be intimidated. You need to know what they’re really concerned about. Investing in a failed VFX House is IMHO not the smartest investment unless you have a plan. Clearly it’s not something the Studios want to do and I don’t blame them. Look at Warner Digital for just one example of a Studio trying to run a VFX house. They have different concerns.

      • dan

        I was just trying to maybe propose the idea of Visual FX houses getting involved in some back end profit sharing. Anyone working in the Crafts on a motion picture should be interested in what Robert Downey is doing to find a way to make $50 million dollars when others are having trouble even landing a starring role in the first place. He’s obviously a shrewd guy, so why not take interest in his deals? It might help.

        It seems like you’ve created a forum here for your thoughts that on the surface seems somewhat open to ideas and collaboration, but you really just have your strong philosophy as to how to go about “saving the business”, but unless your willing to listen to others, you’ll just be turning everyone of your possible allies off from your message.

        The people that you are looking to be paid from are business minded people. They are not film makers. You need to propose solid concepts to them that make sense to their fiscal minds and their accountants.

        Now, in slow economic times, these studio heads want to make films as cheap as they can, so it goes to reason that if you agree to a division of compensation (most up front, with residuals on the back end) and share some of the risks that the studio shares, then both parties will be more interested in their films being successful. And maybe the studios will start to view the FX houses more as partners than simply vendors.

        Creating a union could help, I guess, but typically unions transform hard working employees into lazier versions of themselves, and their pension systems are just basically a Ponzi scheme. And the unions never find you work. You still have to find your gigs. Unions could only serve to help in the area of safety and overtime regulations, etc.

        So, the idea of more of a profit sharing concept appeals to me. One payment is great, but residuals last a lot longer, especially if the film greatly breaks expectations, and if you believe in yourself and your talents, you should always feel as though your work will break expectations.

        Whew.

        • Peter Plantec

          I stand properly chastised. That’s not the impression I wanted to leave. I do get a bit pushy at times….thanks for cutting me down a peg or two.

          I agree with the concept of residuals for VFX houses to help,them reap rewards on their efforts that would help sustain them in dry times. I support your idea of profit sharing as a potential source of continuity funds to help stabilize the industry. I don’t see it happening. But is a good idea…the devil would be in the details.

          • Dan Supko

            It takes a great man to admit he’s wrong, at least part of the time, Peter, and you are that. I respect you, and that’s why I have been following your posts. Maybe your “set in your ways” a bit, but that just comes from being around a long time. I understand. You have earned the right to be biased one way or the other.

            I meant nothing but to add maybe a different avenue for your thinking. I want you to succeed. I want to succeed. I love these FX driven films and TV shows, and want to see them continue, and to see the Artists succeed.

            I do sound work. Sound Editing, Designing, Mixing, you name it.

            And the FX driven films offer the biggest source of income, challenge, and excitement for sound guys. But until the film is shot, edited, and the FX somewhat finalized, I have nothing to work with.

            I need a picture, and you need great sound. Let’s work together.

            I need the picture more than you need my sound, at least when an idea is in it’s infancy.

            The image comes first. The sound follows. The story and dialogue are always king, and everything else serves those masters, but without an image, there is no motion picture.

            So I rely on you and your colleagues to keep coming up with the best quality product you can. And hopefully these solutions that you, and I, and the other posters here can create will lead us into a future of collaboration, cooperation, teamwork, and prosperity.

            Live long and prosper.

          • Peter Plantec

            I appreciate your input Dan.

  • Vfx artist

    Your article is a utopia. It’s garbage. You seem
    To operate in a vacuum of best case scenarios!
    If its so easy to be lean and not underbid why don’t you start a Vfx shop?
    I understand you are trying to help but your articles are removed from the day to day work.

    • Peter Plantec

      VFX Artist, I feel your position is a bit naive. I’ve been around VFX and animation since the very beginning. I will admit I too am still naive in some respects but not nearly as much as you imply. I never said it was easy, This is a tough business, but my view is not removed from the day to day…I’m just demanding more. The day to day has got to change.

    • backskipper

      good point: demonstrate by example otherwise its all-talk.

  • http://www.facebook.com/profile.php?id=563517377 George Merkert

    After a sufficient number of VFX companies go out of business the remaining ones will have enough leverage with the studios to implement the good business practices you recommend, Peter.

    • Peter Plantec

      Agree George. But I also think we need to start now and we need to get the studios involved. It’s their future too. It is very inconvenient for Studios to work purely with foreign Houses.

    • reader

      By “leverage”, might you mean “collective bargaining”?

  • http://twitter.com/CraigMacon Craig Macon

    I will grant that houses are at fault because bad business practices of underbidding. I will also agree that I fail to see any gains in a boycott.

    However the views about studios wanting/caring about local facilities I think are erroneous. Studios don’t care where the work is done. It is just an extension of the mentality of buying something on the internet. Find the best deal. Find out how you can get the most amount of product for your dollar. They could care less about the well being of the FX house or its employees.

    I encourage all FX artists to look into joining a union even if only for purposes of health benefits and retirement options. BUT, unions only benefit negotiations with the FX house management and the artists, they have no bearing on the dealings between the house and the producers. Unions are for the employees not for the business and they will not keep the business from failing. It isn’t their purpose.

    I know studios will rile at the idea of giving up points to FX houses. Why should they? Especially when can go offshore for cheap labor or subsidies? Why give up anything if there are other options? What kind of business sense is that?

    But the truth is underbidding and “change orders” for free or “flat bids” needs to stop. You only get what you can afford. And if you need more than you can afford, then you have to trade points as the added labor would amount to an investment in the production. And any producer knows “last money is big money” and always negotiates higher returns…meaning net points are not a negotiating means due to the history of dishonest accounting practices the studios have utilized.

    I have no solutions to offer. Only the very real warning that it will be a rough road.

    • Peter Plantec

      Craig, I appreciate you’re using your name. I probably could not disagree with you more. I’ve had very long conversations with people at the studio whom I’ve known for many years and whom I trust. I know for a fact that studios pay much more for work done in LA and that they do it because of the convenience and the fact that it’s with a house the like and trust. I also know that they are very worried about American houses going under. I also know for a fact that VFX houses that have bitten the dust or been bought out in receivership have had horrible business practices from padding the management, people not working efficiently…charging days to do what they should do in hours, and lots of bad internal policies that waste money through bad management. This happens at the biggest houses. I’ve also seen that some projects that are top heavy with management are the most poorly managed. I’ve seen people charging to projects they weren’t actually working on. There are solutions, but it’s going to take some serious knuckling down on all sides. It’s going to take contracts with more sanity and intelligence. A lot of this failure stuff is a shaking out of the industry. As I’ve said there is enough blame on all sides.

    • Peter Plantec

      Wait…I’m wrong below…I do agree with parts of what you’re saying. I like the idea of points to VFX houses…I agree that change orders etc are a cause of loss. I believe, and it’s a good business practice that whoever causes the delays etc, pays for them. This provides great incentive to avoid delays. It occurs to me that VES or some new VFX Artist organization could develop group health insurance. Our people need coverage that carries on with them from place to place.

  • PhillyPhil

    It’s the way of the World, People get paid Millions of dollar’s if they can hit or catch a ball, Actors get paid Millions for standing in front of a camera saying a few lines, the professionals who create the final product used to make a decent living and in my opinion did most of the hard long tedious work. Now thanks to all the newer cheaper gadgets anyone can buy a DSLR camera and computer then go out and compete with Hollywood and legitimate production house’s, Just look at some of the bad content on U-tube and that’s fine if you have a full time job and just do this in your spare time but now it is watering down this whole industry, the less the networks have to pay for content means the less people will put into creating content just to stay in business, now I know a lot of wannabes we jump in and comment this is a good thing it and puts creative tools into the hands of everyone but think about that as we see more reality shows, terrible full length movies and mini series that could not rival Planet 9 from outer space.

    • Peter Plantec

      Philly, I can’t agree with you on all this. Comparing the crap often seen on youtube with professional VFX work is not valid IMHO. Sure more and more talented people are able to compete in VFX because of the lower start up costs, but is this wrong? I don’t think so. We’re talking a leveling of the playing field…which I feel is usually a good thing.

  • Robert Wheeler

    Seems to me that the VFX houses may have a case for DUMPING against the
    studios and the foreign houses providing the “bargain basement” competition
    that is helping fuel the price war causing such stress on the domestic industry.

    The Chinese have limitations on the showing of content not produced in China
    or not having China involved in the financial & production aspects of a film –
    that’s their law… granted the society there is not capitalistic – but they sure
    seem to be interested in the CAPITAL$$$! By being creative in the application
    of existing import/export legislation and legal recourse those companies that
    are well managed and that make intelligent business decisions SHOULD have
    a more level playing field and the opportunity to exercise their creative talent
    on film rather than contemplate to use it on a picket line.

    • PhillyPhi

      Robert I have a friend who is in the “Building Major Studios Business” for the lack of a better term, any way he informed me that China is hiring his company to build 6 major studios there, this comes as a surprise because China likes to do everything themselves? that is after they steal the Idea’s and technology from the US or some other countrie.

      • Peter Plantec

        Philly, I don’t see a problem with this. Six major studios means lots of VFX work…some may come this way. Much will stay in china employing Chinese VFx houses. Good, they need to eat too. They learn our technology, and the innovate. So what. If they’re busy with Chinese work, they won’t be soliciting US work so aggressively. Any time MORE VFX work is produced the global community benefits.

    • Peter Plantec

      I always like the idea of a level playing field. But China is a Capitalist society and I have been living off of income I drive in China for years. I bought into China’s Internet years ago. So it can go both ways. Certainly many Americans are living off Chinese investments. But that’s not the point. I did not know that China had limitations on showing movies not produces at least partly in China. Thanks for educating me. I’ll have to check that out.

  • Rod Edwards/media producer

    Again we are witnessing the need for an industry to compromise in order to survive. Flexibility is a neccessity for continued growth, especially when global competition presents an added dilemna to the equation. Outsourcing overseas is the equivalent of underbidding, neither of which is a guarantee of quality of product or more bang for a buck. As far as unionizing, really? Is that the REAL answer? Ask the auto industry, home builders and Hostess employees how good their union was for them, what assurances they had by being members and where are Hostess employees now? VFX companies or any production company for that matter has to be in a constant state of reassement, not biting off more than they can chew, bidding based on value to a project and what the market will bear, in essence sound business practices. As a company grows every dollar spent on hiring and equiment purchases should be well thought out for what it brings now and in the future. As a principle in a small minority owned production company this has become our mantra for survival, we hire freelancers whenever possible as we are in constant competition from many directions. I applaud the writing of this article as real proof of an old proverb…the only thing that’s constant is change.

    • Peter Plantec

      Rod, extremely articulate response…I understand what you’re saying and I agree with you. Thanks for telling I t like you see it. Some people get pissed when we do that, but somebody has too. This is not a popularity contest. It’s all way too important.

  • Ivan DeWolf

    One significant problem is avoiding the treadmill to start off with. In the first 2 years running my VFX company, I got screwed by 2 clients (paid %50, too scared to take them to court, and too busy on the next project to have time for it) and had a bad business partner that blew threw our money and left us pretty deeply in debt. That put us on the treadmill for the next decade, struggling to recover from a rough opening, never really getting ahead. I realized I was on the treadmill, I had financial advice to give up and just go work as an employee, but I was determined- what else would you do in that position? I’m not someone who simply gives up….

    as far as blaming the studios goes, you may hear me complain about inequalities in the industry, but I have to agree- the studios didn’t hand a raw deal to the facilities, this system was evolved over decades by the actions of the studios and the facilities; both are to blame for the state of the industry. I do hope that you are correct, and that the studios would like to see the facilities able to thrive, because I think there are ways to restructure the system, but it will only happen if the studio sees the benefits….

    • Peter Plantec

      I appreciate this insightful input Ivan. Very nicely stated. I feel your pain. I’m familiar with your work and know you are a talented fellow and it saddens me that you had to go through this. It has to be disheartening. Lets hope and work towards better things ahead.

  • 20yr VFX Prod

    Peter – I really appreciate that someone is trying to discuss both sides of the equation, so thank you. But having produced and bid for a very long time in this industry, there are some holes in your article.

    Treadmill: The treadmill effect gets exacerbated by the lean times, or the gaps between projects. This is where every VFX house struggles to keep their talent in place. If I try to ramp up and down between projects, then I am essentially lying to the clients about the quality I can offer – because I have no control over the crew I can muster. And should I not be able to regain the talent I relied on last time, then I will most certainly pay more to finish a contract. It is more cost effective to just pay for the team to wait in most cases. But without the guarantee of work, you will soon have to “take what you can to pay the bills.” This leads to the underbidding etc …

    Blaming the Studios: It is nearly impossible not to blame the studios, because they make the rules we have all had to play by – they stipulate how they want to spend their money. The core problem that has been on the rise for over a decade is that either the studios do not know how to budget for VFX – or they don’t care to budget it correctly. Which is worse? Not realizing that you are asking a VFX house to bid The Avengers for 3/4 the obvious cost – or purposefully undercutting the quote knowing that the house will eat it? The studios are doing one if not both of these consistently.

    What is currently accelerating the problem is the extinction of Studio Side VFX Sups and Producers – people who can speak to the initial required budget and defend the facilities when the film goes a new direction (requiring overages). The studios have abandoned these representatives for a very basic reason; it eliminates the cost of crew on their end and the VFX houses, hoping to guarantee work by pleasing the studios, ask for less than may be required. It has been YEARS since I have seen a bid from a house that actually expects any profit. They are all bidding to keep the lights on and the talent in place. So what happens when a studio nestled on the hills of Burbank calls the house directly and dictates the terms as; the obvious $2M VFX show “only has a ballpark of $1M”, the VFX house will need to supply any on-set crew, and that the studio requires a 45% tax credit from the house’s Vancouver office?? The person running that house has two options; say no and try to survive in the bleak vfx market (and possibly go out of business) OR say yes, take the show at an obvious loss, but hope to find something to supplement in the bleak vfx market (and possibly go out of business).

    Some VFX Houses may be run by monkeys and are destined to fail, but the lion’s share of blame falls at the feet of the people that make them dance.

    The bid structure you describe is extinct. That is how I used to bid in the 90’s – cost plus overhead and a modest profit, with terms regarding delays and overages. If I try to sell a bid like that today, I get no work. No studio accepts those bids any more. The bids I am expected to deliver now are cost plus HALF overhead, 5% contingency for overages and some form of promise regarding the tax credit – either “offering it up-front” or guaranteeing the back end percentage (basically promising to pay the difference). The response I got on the last show I tried to overage for extra labor was “We all signed on to do whatever it takes to finish the show.” I pushed for the overage and I have never gotten work from them again.

    Bidding only benefits the studios. It is a game to get a valuable item for less than it is worth. The best shows I have ever bid and produced were when the client told me up-front what they had to spend and I was able to manage the money accurately. And the truly great client acknowledges when the show is going over and accepts a reasonable overage.

    A workable solution?
    Studio – Bring independent Sups and Producers back into the projects.
    Studio – Listen to these representatives and budget for their plan.
    Studio – If you have cost over-runs on projects, look to the Director or Supervisors – these are the people that create the overages, not the houses.
    Studio – Stop bidding. Offer realistic flat budgets to houses. This way you can get the quality you require and they can decide to say yes or no. No one is “getting rich” in VFX any more.
    Studio – Write a check, get the work and walk away. Stop chasing the VFX subsidies game. Make it the VFX house’s responsibility.

    Houses – Stop taking shows you cannot afford. Bid accurately – both in cost AND TIME.

    Houses – Treat the client’s budget and schedule as all the money and time you will get. Stop hoping for overages and extensions.
    Houses – IF an overage comes up, bid reasonably. This is not your chance to “make up the profit.” This is why studios feel like they are paying too much.

    Houses – Manage your own economy. If YOU need to pursue tax subsidies to meet the client’s budget constraints to make a profit, so be it.
    Houses – Stand by the quality of your work. Studios should not have to worry if YOUR crew in Canada, China, India, Manila, etc can handle the work. This is your headache, not theirs.

    My 2 cents … bring on the hate.

    • Peter Plantec

      I’ve enjyed reading this. Clearly you know what you’re talking about. I’m learning here, but I don’t agree with you completely. I know studios won’t accept a CPFF contract, but that is just one of the poor business practices out there that may need to change. I want to get people on all sides working together to architect new (or old) and better ways. We need an authoritative meeting of minds.

      Studios often want things tied up in nice little pre-priced packages but they are buying dreams and the Houses have given them their dreams too easily. Dreams do not come in nice little packages…they are amorphous. How do you price that in advance…insane. This business is not easy and houses that are just hanging on are no longer doing it for the love of it. If this business doesn’t make good financial sense then why struggle for years for very little reward? I don’t see the point. Perhaps I should.

      That said, I really like nearly all of of what you’ve said and agree…there is good thinking here especially in your suggestions. Thank you very much for taking the time for this articulate chunk of useful info.

      • 20yr VFX Prod

        Thank you for taking the time to read my ramblings.
        I would love to see a meeting of the minds, but what incentive is there for the studios to compromise? Currently they still have the ability to make us all jump on command. Have you spoken with anyone from the studios that would be willing to change this dynamic? VFX Studio VPs operate on the same fear of losing their jobs as well – and part of the mandate from above them is to make more money (by spending less).

        The funny thing about the studios is that they will do a film for $X this year, and then next year do a sequel to that film with virtually the same VFX – but ask for the budget to be 25% less than before! OR even with more VFX at the same price as the first film. But the punch-line is that the VFX house that did the work cannot say no to the reduced price – at the risk of losing their stake in the franchise (cough-cough, Iron Man). It is a game of chicken and the studios are winning hands down.

        It may not make financial sense, but the VFX Houses do love the work. As your article pointed out, we all enjoy seeing our awesome fx on screen – sometimes mystifying our brethren with how we did it (like competing magicians). So part of the reason we all come back, despite the crappy bid and schedule, is the fact that making that magic is fun.

        At the heart of most of the comments I read from artists is “why can’t we just get to do our job?” None of them want to have to worry about keeping the VFX house open as long as they can keep making cool fx. And as I said above, no one is getting rich in this industry anymore, we all just want to be able to put a roof over our head and feed the kids. The disconnect is that the VFX side keep arguing the aesthetic of world-class work and the studios only care that it costs less and the product makes money. Olympus Has Fallen 2 anyone?

        Let me know when you have the forum, I’ll be the guy at the head of the line.

        • Peter Plantec

          Bravo. You would make an articulate and reasonable spokes person. I think everybody is willing to sit down, even some folks at the studios. One problem I see is that no one at the studios or houses wants to go on record with an opinion.

          At the studios few people have final authority to speak for them and they seem to dislike taking a clear stand on issues. I’ve spoken with studio people who asked to remain anonymous, who say that they feel it would be in the studio’s beast interest to clearly articulate the studio’s policies and positions on the many issues being discussed. The problem keeps going back to who has the authority to speak,for the studios…and who is willing. It’s a tangled web…not easy to understand or deal with.

  • Peter Plantec

    It’s interesting that the anonymous VFXLaw hasn’t commented here. Clearly he’s a fan and reads this blog. He about about it regularly. Perhaps he’s commented under a different alias. I think we each serve a purpose. I appreciate the tweets.

    • Peter Plantec

      That was me. Very strange way it posted. It should read “he tweets about it regularly.”

  • Peter Plantec

    It’s interesting that the anonymous VFXLaw hasn’t commented here. Clearly he’s a fan and reads this blog. He tweets about about it regularly. I suspect he’s commented under a different alias. I think we each serve a purpose. I appreciate the tweets Law.

  • http://twitter.com/daverandcom Dave Rand

    Is has and will always come down to one main factor: LEVERAGE. if you enter any business relationship and surrender most of it to the other party you’ll end up broke and bankrupt every time. We’ve seen enough off that. The studios will only sit down and talk when there is respect. There will only be respect when there is a balance. This is the main reason we need a trade association and a union. I believe the imbalance has stunted everyone’s growth especially the studios, as it’s allowed them to effectively destroy their best asset while hiding behind the illusion of their profits, and the illusion that they are turning out a truly great product. WE… could be doing so much better…and that is my message.

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