Are Co-Productions The Answer?

With the closure of Digital Domain Florida it seems the experiment of creating their own IP has ended for now. DD is continuing with it’s co-production deal with Ender’s Game:

We also used the visual effects business to launch a coproduction business, where we’re now a 37.5% owner of the significant film property — really, originally a book property called Ender’s Game.

Are co-productions the answer for VFX companies? Well this isn’t the first time a VFX company has engaged in a co-production deal. Rhythm did it with Yogi Bear and Cafe FX did it with Pan’s Labyrinth.

Former DD CEO John Textor was asked to handicap the numbers for Enders:

If the film does $60 million at the domestic box office, dare I say a number that low, that is beyond abject failure for a film anticipated like this, we would have total proceeds, that when combined with our initial outlay of $18 million, we’d lose about $6.8 million.

If the film does domestic box office of $80 million, we’d have total proceeds that would come in from these various sources of an amount that is just less than that $18 million, and so we’d lose about $1 million. Now an $80 million domestic box office still, in my opinion, for a property as powerful as this still falls into the category of abject failure.

If it does $115 million domestic box office — still pretty disappointed. We’d make about $9.5 million. At $150 million of domestic box office – disappointed, but healthy– we’d make about $22.5 million. At $200 million of domestic box office, we’d make $36 million. At $250 million we’d make $43 million. Both of those numbers I wouldn’t say are on the high-end like this, but obviously we’d be very happy.

Soldier On.

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39 Responses to Are Co-Productions The Answer?

  1. Co-productions sound *great*!

    However, the same studios making cutthroat deals aren’t jumping at the chance to give VFX facilities a cut of profits, even for deeper discounts than before.

    I know I look at Alvin and the Chipmunks grosses and think of what R&H getting 1% would do for everyone. But that door was clearly closed to us.

    Believe me, facilities would *love* to co-produce. But that’s not a choice companies get to make,

    • VFX Soldier says:

      Maybe facilities could ask studios to be a part of their co-bankruptcy? ;)

      • ukVFX says:

        You may laugh, but that’s pretty much *exactly* what has happened with Beijing Galloping Horse and Relliance Media Works buying DDPI. BGH and RMW, both creditors and production partners of DDMG, have swapped their debt for outright ownership of DDPI, allowing the facility to walk away from the eye-watering amount of money that it owes.

        So it looks like the Chinese and the Indians *are* going to take it all in the end, even if they have to buy it up one piece at a time…

  2. Anon says:

    How do you make a small fortune in VFX?

    Start with a large one.

  3. Brian, I heard that R+H got percentages from DVD sales of Alvin. Did I hear wrong? That’s still a reasonable model. I would say it’s *better* than the current offerings out there.

    • Oh, I *wish* we got a cut of DVD sales, merch, *anything* on Alvin.

      In fact, we don’t even get any guarantees we’ll work on the next film if there is one. We bid just like it’s a new project against other bids.

      (Our “investments in Yogi and Hop have yet to show a return, btw. Gotta love Hollywood accounting!)

      • Well that sucks, plain and simple. Damned shame.

      • Hollywood accounting may be the death of us all

      • Paul says:

        Hollywood accounting is why, A-list actors insisted on first dollar gross deals. If you think VFX produces magic, you should see what a studio accountant can conjure up.

        A case in point: Winston Groom, author of the Forrest Gump book(s) had a back-end deal and received $0. The studio wanted to produce a sequel, I think based on an second book Groom had written. Ever the clever, Groom replied that he couldn’t in good conscience allow his book/character to be used for a second financially unsuccessful venture.

    • 839spi says:

      The rest of the unionized film crew receives partial funding for their health and pension benefits from the residuals on sales of dvds. The vfx artists who made the images that sell those dvds get zip.

  4. Steve London says:

    I think Framestore in UK had some kind of co-production deal on ‘The Tale of Despereaux’ which sadly tanked.

    Co-productions have great potential and for VFX-led projects they make some sense. But they are a gamble for the VFX house. If the investment is large, you have an awful lot riding on that one project.

    Studios can produce 10-20 films every year and if just a couple of them are hits, they’re fine. A VFX house might produce just one film, ever.

  5. Dave Rand says:

    SKYLINE

    Worldwide: $66,821,036
    Production Budget: $10 million

    Skyline: Rotten Tomatoes score 16 (rotten)
    Jeff Hueser of FxGuide did a great podcast on this one here

    http://www.fxguide.com/fxpodcasts/Skyline/

    Maybe there’s a clue here. Now I’m not sure of the Strauss Bros actual take of all this but I can’t see where they lost. Shooting it in their own apartment, using very creative devices on set like 110 outlets and simple spot lights and other make shift equipment, they fed it to their own small vfx crew and made it look like a whole lot more than anything approaching this budget.

    It was the VFX that sold seats in the theatre.

    I’ve worked on several shows for an A list director doing this now. A true genius in production. Writers in one room, vfx in another, editors in their own suites, sound in theirs, all feeding off one network and sending the content to a state of the art mixing room. Imagine planing from the writing stage of a show as a cg supervisor about the visual effects to be had. No subsidies, located in the heart of expensive hollywood. The director sits up stairs and is the final say in all things creative. One voice, always available for consult immediately. The topper …it’s all the best talent in their respective fields, highly paid and all union (except for VFX). I’m not sure if he wants his name on VFX soldier because quite frankly I don’t trust many of the anonymous ghosts that haunt these pages. If you contact me directly I’d gladly discuss it with you once I know who you are. I’d love it if Jeff would do a interview. I think they may be open to something like that.

    There’s no bidding, bidding is bullshit and killing us. One smoke screen after another is put in our faces so we don’t wake up to the true culprit. The greatest movie making trick of all time and we keep falling for it. Anyone in the real business world should be laughing their asses off at us. The rest of production abandoned this shell game ages ago.

    Once you’ve worked this way no other way makes sense at all. It’s why I write about it from every angle I know how.

    I’m no film making expert but this has simply been my experience.

  6. Ankit Shah says:

    As per boxofficemojo.com Alvin and Chipmunks 1 was made at a production budget of $60 million, and it grossed $361,336,633 worldwide. Wonder how much did the vfx studio who did all the hard work got.

  7. anon says:

    So…
    - If you just do the vfx, you don’t make money because film studios won’t pay enough
    - if you co-produce, the film studios do some fancy accounting and you still don’t make money
    - if you try and produce it yourself, you need a lot of money in advance, which causes some visual effects companies to try stuff like an IPO, which can lead to a company failing.

    So maybe the answer is doing smaller productions ($10-20 million) financed by yourself, which allows you to distribute the films with much smaller film studios that are more likely to share the profits?

  8. @hollywood accounting:
    i heard a speach of scott ross (think it was at fmx) where he said that digital domain had an output deal on titanic. but they never say a dollar from the movie. because the accounting made it a movie without any profit.
    crazy!

  9. Paul says:

    Why isn’t James Cameron diving in?! With his hundreds of millions at the bank he could just buy DD as easily as I buy my coffee, which just got pricier btw.

  10. Dave Rand says:

    Vancouver DD 50k in the bank, may not make payroll without judges decision on quick sale http://ca.reuters.com/article/entertainmentNews/idCABRE88B1GA20120912

    • 839spi says:

      “Digital Domain’s legal team said the schedule was driven by the need to keep potential blockbusters on carefully planned release dates.”The studios are freaking out,” Feinstein, the company’s attorney, told the court.”

      Maybe the studios will realize vfx artists have some value to them now? Or just wishful thinking?

      • anon says:

        Are they really freaking out? Or are they just saying that so they get their way? I think the only thing that will really freak them out is complete disaster, and a movie or two actually miss their release date.

      • yeah, pretty sure it’s just leverage. freaking out would be nice but don’t hold your breath.

      • Steve London says:

        Wait, the studios are freaking out that the company they hired because of their low bid is now in financial trouble? Who could have seen that coming? I guess they will just have to pay lots more to get another company to rescue their half-done projects.

        I guess for their next movies they’ll try a completely different strategy. What, lowest bid wins again? Oh ok.

    • Paul says:

      so DD 50k and Textor +1000k?

  11. Bill Wilgate says:

    Is everyone forgetting Digital Domain and Second Hand Lions, They were a co-producer back then and did some vfx work on it as well, it wasn’t a huge success but it did pretty good from what I remember.

  12. anon says:

    City officials have refused to say whether they knew Digital Domain took two mortgages against the property.

    This article has some illuminating comments. Check the mortgage, there’s the Cayman Island angle. They waste no time do they?

    http://www.palmbeachpost.com/news/news/local-education/digital-domains-private-school-suspends-downtown-c/nR89b/

  13. Scott Ross says:

    co productions are not THE answer, though if handled correctly could be part of the answer. The critical issues are… does anyone in your organization truly understand the complexities ( and it is VERY complex) of the movie biz. From contracts, to profit definitions, to cash flow, to script development, to marketing, to ACTUALLY producing…. it is a very complicated process and just because you worked on 50 films as a VFX supplier, it doesn’t mean you have the skills and core competence to produce….. just sayin”.

    • jonavark says:

      On the other hand. Watching what ‘producers’ actually do sometimes makes the job look as if it done much better. Only a few that I have ever worked with actually knew what they were doing. So no.. I don’t think ti is that impossible to contemplate co productions. It’s done every day by all kinds of people, capable and incapable. Not a black art by any stretch.

  14. […] year I posted about Digital Domain’s $17M investment to co-produce Ender’s Game where former CEO John […]

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