What’s with all these recent articles about VFX in California? Why now? Yesterday the Hollywood Reporter came out with the latest fatwa proclaiming “death to California!”:
With VFX businesses under pressure to do more with less — and with impossible-to-compete-with financial incentives being offered in various states and countries — the final two months of 2010 saw the closure of three notable California-based visual effects businesses: Asylum VFX, Café FX and ImageMovers Digital.
ImageMovers didn’t close because of a lack government subsidies, it closed because of an executive shuffle at Disney. Newspapers need to do more investigation as to why the others closed.
It’s The Business Model Stupid.
I previously wrote what Californian VFX shops are going through is no different than what other VFX shops go through. VFX CEOs should do some time on Shark Tank to see if a business model that depends on free government money would survive the first segment of the show.
It’s important to remember that it’s the studio producers that receive this money, not the VFX facility. So when $1 million worth of VFX work on Green Lantern is done at Imageworks New Mexico, the state government kicks in $250,000 to Warner Bros. The 80-90 peak capacity for that facility is a far cry from what it was supposed to be in 2007. You can’t expect talent just to pick up and move around like that, especially when many of them are underwater in their mortgages.
What’s surprising is it seems VFX CEOs all agreed a few months ago that the subsidy game is a bad idea:
Cheap labor was discussed along with tax incentives and both were dismissed as not long term solutions. Cheap labor does not stay cheap and tax incentives have been under attack in some places as not working and can change, as can value of currency between countries.
Yet no contention is made as to the legality of these subsidies in the first place. There is a very strong case to be made that such subsidies are actually international trade law violations.
Quantative Easing 2: Currency Boogaloo
I suspect that may be part of what is at work here. In November the US government announced Quantative Easing 2. Essentially the US is printing more money in a global currency war. This makes it more expensive for US studios to do work overseas by causing global currencies to rise. New Zealand and Canada currencies are hitting record highs against the US dollar.
Combine that with the fact that many outsource vendors are either turning in subpar quality work or unable to finish work altogether and you have the costly solution of fixing the work in California. Most artists would probably agree with the Hollywood Reporter that the quality of vfx work has taken a hit. I guess the studios are facing the music and stomping their feet mad about not getting some money from the state for the effort.
California Benefits Indirectly By Other Subsidies?
But is it really feasible for California to get into the subsidy game? The state seems to indirectly benefit from subsidies offered by other governments. The big 6 studios are based here and subsidies feed into their bottom line which they eventually pay taxes on to California.
Meanwhile, regardless of the commitment made by countries and their film subsidies, workers ultimately come back and spend their hard earned cash in California. For example, one of the Oscar winning supervisors at Weta recently bought a home in Los Angeles, not Wellington.
Hey Studios, Want To Save Some Money?
How about crewing VFX artists directly? When I work on a shot it goes through a series of people for approval: My lead, CG supervisor, Digital FX Supervisor, VFX Supervisor, Production side VFX Supervisor, Director, and Producer. Multiply that by 5 vendors and you increase the complexity and costs of what needs to get done. The funny thing is each link in the chain doesn’t really know what the final person wants.
If VFX artists worked directly for the studio productions they would have iterative control and would be able to give better directions to get things done. I’ve talked about this with former blogger VFX Law. What purpose do VFX facilities serve?