A few posts about the VFX business model and it’s peculiar volatility.
VFX Supervisor Scott Squires ponders possible alternatives:
The trouble is there are no other business is quite like VFX in regard to being a 3rd party company getting paid a fixed fee for very custom work with a locked deadline but unlimited changes and approvals.
ILM GM and Digital Domain Founder Scott Ross talks about the struggling VFX model and subsidies :
He bemoans the tax breaks that the Queen (in reality the UK government) gives to home-grown effects facilities. “It became impossible to bid against the big Soho houses,” he says. (As a side-note, the 20% tax subsidy has an expiration date of March 31, 2012, so things may not be so rosy in London next year.)
TAG Organizer Steve Kaplan reacts:
We have argued that signing an IATSE contract could be a cost savings measure to a visual effects studio. Having recently been shown that studios will find necessary funds to complete visual effects when necessary, a union contract with contributions for portable health and pension benefits may now also be a line item cost that vfx studios can add to help shore up profits, thus addressing Mr. Ross’ viability concerns.
The problems the VFX industry suffers from are not unique to California. The VFX bidding process has created a march to the bottom and in my opinion, this has been compounded not by cheap labor, but government-backed subsidies where US studios are paid a rebate by doing post-production work in a designated region. All this does is artificialize the price of VFX.
Yes, they have taken their toll on US VFX facilities, but they’ve also taken a toll on the very regions that offer them.
Take Australia for instance. I wrote in a post a few months ago that even though a 15% subsidy was offered for US runaway production, the larger subsidies offered by other countries combined with a record rise in the Australian currency has led to a hollowing out of the Aussie film industry:
It’s not rocket science to realise our incentives of 15 per cent are behind everyone else’s…
The rising dollar has hurt the industry…
As in the case of The Hobbit fiasco where the NZ government was leveraged into giving more money to WB because of a record rise in the NZ dollar, I said other regions would probably be forced to do the same. So what do ya know:
Australia’s struggling post-production sector has received a boost from the Federal Government, which plans to double the level of the post, digital and visual effects (PDV) offset to 30 per cent.
“The high Australian dollar is dramatically impacting the competitiveness of Australian post-production companies for large scale work on offshore productions,”
Now eyes are on the UK to see if there will not only be an extension, but a competitive raise in the film subsidy for vfx work in that region next March. All this is happening while California, which offers no subsidy for big productions, witnesses WB pay 20% extra to complete the vfx for Green Lantern in Los Angeles.
One of the reasons I started this blog was to provide evidence against a fearful and cynical narrative that it’s so easy to send your job away to some cheap location. Anecdotally speaking, I can tell you I and many of my colleagues are offered a significantly larger raise to do VFX work in other countries.
The question that I still wonder is this: At some point a subsidized region isn’t going to be able to keep throwing money at the US studios. Then what? Many of these vfx markets were built on top of these film subsidies and yet they are only expected to get larger.
Only time will tell as it’s all a component that has played a role in the everlasting volatility in the peculiar VFX business model.