Visual effects pros analyze changing business

Visual effects pros analyze changing business – Special Report

Carolyn Giardina

The feature effects business has always been volatile. Another case in point Kodak announced last month that it would shutter its Cinesite Hollywood visual effects operation this coming June.

Instead, Cinesite Hollywood (www.cinesite.com) will focus on digital imaging services business, while Cinesite (Europe) Ltd. in London will provide visual effects.

That news came on the heels of The Mill’s recent decision to withdraw from the feature effects arena in order to concentrate on its core commercial business, and the unraveling of Centropolis Effects, which was accepting bids on its assets at press time.

All of these companies are well known as providers of high-profile visual effects. Kodak’s Cinesite Hollywood had lent its talents to such high profile films as X-Men, Mission: Impossible II and Rood to Perdition. The Mill (www.mill.co.uk) won an Academy Award for the visual effects on Gladiator, and Centropolis has worked on Godzilla, The Patriot and Independence Day. So it’s no surprise that the Cinesite announcement sparked much dialogue in Hollywood about the visual effects business model.

Most sources for this story say they believe, in general, that the large and boutique size effects houses have the best chance of survival, and mid-size companies are the most vulnerable. Most say the dropping costs of technology will play a supporting role in the reshaping of the business. But most said the recipe for success still comes back to business basics.

“In Hollywood, Cinesite has done amazing work, but in the US, visual effects will always be a highly-volatile market where it’s tough to sustain a profitable business model,” says Eric Rodli, president of Kodak’s Entertainment Imaging division, in a released statement “We need to concentrate our efforts and our investments in markets where we have a long-term sustainable business model with attractive rates of return–and where we can achieve a leadership position. Longform digital film mastering offers that opportunity here in Hollywood; London provides great potential to build on Cinesite’s award-winning work in special effects.”

The Mill’s decision was to focus on maintaining its leadership position in the commercial business. In fact, London-headquartered The Mill opened a New York office roughly a year ago. CEO Robin Shenfield explains that advertising is more steady than the feature market, which is “never reliably busy all the time.”

But Shenfield identifies a far larger factor that is changing the business. “Visual effects is the only aspect of feature production that requires continuous, fixed overhead,” he says, noting that all other aspects are set up more in a per project manner. “Technology costs dropping and talent working per project all lends itself to a business model that is also becoming more fluid.”

Shenfield says he is aware of two upcoming feature productions that are building their visual effects infrastructure specifically for a project, like the production of The Lord of the Rings, which set up Wellington, New Zealand VFX house Weta.

Cinesite Hollywood president Ruth Scovill believes that the international markets, particularly in Europe and Asia, will continue to impact the US market with their advantageous tax break and less expensive talent costs. She predicts that this will particularly affect the medium sized facilities. “You will not find an ILM in Singapore,” she says. “And you will not save that much [by going overseas] on smaller jobs.”

Tim Miller, president and creative director of Blur Studio (www.blur.com), a small Santa Monica-based studio that recently did some effects shots for Bullet Proof Monk, suggests that as time goes on. productions may hire the large houses for the “money shots” that often require custom software, and the bulk of the shots in a film will go to smaller shops, which charge lower prices for tasks such as wire removal. He notes that the availability of lower-cost tools will enable small effects houses to compete.

Miller acknowledges that there are problems with today’s business climate. He admits, “When we do [feature effects], we generally lose money.” But he says it is work that the employees enjoy, and the bulk of the company’s work is in other profitable areas, such as rides and games. Miller emphasizes the importance of treating employees well, and is proud of the extremely low turnover at Blur. Miller sums up that his recipe for success is ultimately to “do good work, treat the artists fairly and don’t be greedy.”

Michael Taylor, VP of digital operations and technology at Digital Domain (www.digitaldomaincom). notes that DD and Rhythm & Hues are among the few large independent houses that still concentrate solely on visual effects. Like Miller, he notes that the cost of technology is dropping, but talent rates are going up. To be profitable, he says, you need to charge reasonable prices and not gouge clients.

Some companies will under bid in an effort to earn a given job, but Taylor believes that those entities will eventually close.

Scovill estimates that 150 to 200 jobs will be affected by the closure of the Hollywood unit, and says that much recruiting is happening around Los Angeles. Sony Pictures Imageworks, was already recruiting from Cinesite; SIGGRAPH/LA recently hosted ‘a recruiting event in Los Angeles; and Digital Domain and Rhythm & Hues have held job fairs.

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