State of the VFX industry article for Geek Speak TV

Last June, Geek Speak TV asked me to write something on the current mess of the vfx industry:

Film Visual Effects: Hollywood Gets Billions, Professionals Get Pink Slips

While Life of Pi was competing for and winning the Oscar for Best Visual Effects, the over 650 people who made it happen at Rhythm and Hues Studios in Southern California and Vancouver were told the company wouldn’t make payroll and would be filing bankruptcy, ultimately laying off about 500 people and owing over 10 Million Dollars in back pay to them.

How does this happen at the peak of a companies’ quality of work?

How does an Iron Man 3 make over a Billion Dollars of this writing, yet many of the people who worked on it, don’t get pensions, health benefits, or even overtime (we wont even mention credits)?

The flashpoint of R&H’s bankruptcy at Oscar time, combined with a pretty obvious snubbing by the Academy (really, cut off 2 time Academy Award winner Bill Westenhofer mid speech when he might have said something to support the industry?) lit a fire under professionals, perhaps for the first time ever. People in the industry seemed to actually get mad and want to do something about it. Media actually picked up on this, and you might have read some articles about the Visual Effects industry being in trouble.

You might still be wondering what it’s all about.

Welcome to the fatally flawed world of the Visual Effects business model, where the studios make Billions on the sweat and abuse of artists, technicians and support staff, because it is in their simple business interests to, the visual effects vendors have given away all their power in a race to the bottom, and the artists have pissed away their respect.

Why should you care as the audience? Well one reason is because the studios care more about the costs than the quality, and the quality is going down as visual effects companies go down. And we’ll get to a more insidious reason to care later.

In the early 90s, visual effects and animation where lauded as the next great job market. Stories of wildly inflated salaries went around, magazines and newspapers ran articles about how amazing visual effects technology and computers were, and how soon everything would be done in an SGI.

Remember SGI? Yeah, that should tell you about predictions.

We believed that crap as workers; we thought there would be some never ending salary ladder, we were young, healthy, single, and thought the gravy train would never end. Who cares if we worked a bunch of OT we didn’t get paid for. We loved what we were doing, even if the next schedule to finish a film was a lot shorter than the last one for more work. Unions? Those were for people who were overpaid to not do more than the minimum of job requirements we thought, and besides no one in the film industry was really interested in organizing us, because everyone else in film thought we were going to take away all their jobs doing practical set building, camera work and acting.

All that greenscreen in Phantom Menace really proved you don’t need sets or camera work right?

So we threw away our clout, our respect and in a lot of ways, our future, with an every person for themselves attitude even though we saw things eroding even 20 years ago. We started with great benefits at Rhythm and Hues, way better than most places, and watched them disappear over time while the amount we were working was increasing, but not the amount we were getting paid to do it. And certainly not in comparison to the amount the movies we were making made in box office.

Visual effects vendors saw the squeeze coming in every bid. The requirements went up every job, and the length of time to do them went down. If you succeeded doing 600 shots in 12 weeks, the sequel had you doing 900 harder shots in 9 the next year. Places that offered benefits stopped. Staff jobs with permanency between jobs turned into the hire and fire of temp workers. Overtime pay was skirted, or work was just moved to places where they didn’t have to pay it.

Visual effects companies were too busy slashing their own throats with underbidding to set up any reasonable standards for bidding work, charging enough for it, and having the time to do it. Essentially the companies have 6 clients. And those clients get away with murder, because they can. Who else are you going to get work from? And when labor costs still seem too high, because you’re being squeezed so hard, or haven’t really considered alternatives or told you have to open up shop in a place with government subsidies, you send the work out of California, or out of the country.

And as bad as things might get in the US, artists are really taken advantage of in places like India and China. The producers in the US subscribe to an “out of sight, out of mind” idea, as long as the work comes back OK and in budget and that leads to problems. Rhythm and Hues is now owned by a company that does all their work out of India, and has said they will only be doing management out of the Southern California office. Those jobs wont be coming back.

Profit participation you say? Studios really want to share risks, not profits. A trade organization for visual effects companies? I guess they were too busy competing with each other to consider what just about every other industry does to standardize and at least set some minimums to survive and promote themselves.

The movie studios report to their shareholders and no one else. They want the best they can get cheap, regardless of what it does to the vendor. To them, there will always be another vendor to get work from. They may be right. There aren’t many big facilities; those are getting crushed left and right now if they’re not actually owned by a studio. But there are still medium and little ones and people willing to start them. Studios will break up a big movie into a lot of pieces and parcel them out to medium and little places that can all fight each other to get enough pieces to keep going. You play every company against the weakest. Against the visual effects studio prepared to pay the least. So not everything is great, it was cheap!

And currently, a great way lately for a studio to help finance a film is to chase government subsidies. Essentially, the government of a place writes a check to the studio based on the percentage of the budget of a film “spent” in a location. That money doesn’t go back into the local economy, and it doesn’t even go to the vendors in that location. It goes to the multinational studios. Every independent audit of film subsidies says they cost the governments way more than they provide in taxes back. So visual effects companies are sometimes required to have an office doing work in a location to get a film job from a studio. Big London subsidies damaged work in Los Angeles, until Vancouver’s subsidies started attacking London’s, which lasted until companies started flocking from Vancouver to Montreal’s better deal. For now.

This is part of the “race to the bottom” you’ll hear talked about.

Now not only are you losing as a film watching audience, but worse, you’re losing as a taxpayer. Your tax money could be paying the studios’ profits. Let that one sink in. It’s a bigger reason to care about this than the films themselves.

Visual effects companies can’t fight against the subsidies, because that would put them directly opposed to their clients in the studios. So they fold like a house of cards, chase those subsidies around the world, and generally bow to the whims of all of their clients.

The visual effects companies, squeezed more and more each year run in a constant cycle of near failure with each job. The companies underbid, underbid, underbid, until they are actually losing on each job. Each place gets onto the treadmill of “cash flow” where the future deposits on work are paying the current work’s payroll. Then it’s only a matter of time before death. So, you can be at the peak of your creative powers, win an Oscar in fact, and be out of business in all but name.

In bankruptcy, the studios gave Rhythm and Hues a “bridge loan” to help R&H finish the movies they were currently working on for their respective studios, but paying back that money is a priority even over paying back owed wages to employees. So by the end, the studios got their effects finished, at a huge discount, leaving the smoking wreckage of an effects company behind them.

The business model is completely broken. There are no easy solutions, and a lot of blame to go around. Now we’re all scrounging around for directions, solutions and in many cases, jobs.

Either something will happen this year to improve conditions for companies and artists of companies now, setting the stage for global improvements, or the whole thing will implode and the vacuum will be filled by poorly treated and taken advantage of Indian and Chinese artists, and a great amount of knowledge will be lost as people flee the field entirely.

The question now is, will that fire continue and will professionals do something about the industry? Or will it just go out? It’s been almost 3 months since the Oscars. Time is ticking away.