Obama Speech Touches On VFX Issues

Tonight’s State of the Union speech by US President Barack Obama was the final one before the 2012 elections in November. The President touched upon a very big issue effecting the US VFX industry: Subsidies.

The President has ordered the creation of a Trade Enforcement Unit tasked to essentially pick up the pace on trade violations by countries competing with the US:

It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized.

You can read the whole speech here.

If you read my blog often, I regularly argue that most VFX work goes to places where US Studios can obtain rebates from state and international governments.

Generally speaking, let’s say if a group of VFX facilities based in London, Canada, and California competitively bid about the same price for a project, you can expect the US Studio to choose London or Canada because their government offers money directly as a percentage of the amount of work done in their location.

If it sounds like a bribe well it actually is and it’s illegal under rules set forth by the WTO. Global free trade agreements between countries are meant to liberalize economies toward market capitalism. These subsidies are driven by command economics and it is up to each country to challenge violations through the WTO.

Cynically speaking, this speech by The President could all be rhetoric however given that it is an election year and the jobless rate is high, now might be the most prudent time to challenge such subsidies.

So what should be done now? Well I’d pay attention to how this Trade Enforcement Unit develops and see what new mechanism they place to resolve trade issues. This is an issue that unites VFX workers and facility owners so perhaps this might be a good spearhead to start something much larger. Scott Ross has been trying to lobby for a creation of a trade association and perhaps this might be a worthy endeavor for those motivated in making California more evenly matched when it comes to fair pricing.

The worst thing that could happen is nothing and the status quo continues. However what if something did happen? Well then a potential challenge could eliminate the subsidies and return California VFX to a more competitive position.

Soldier On.

27 Responses to Obama Speech Touches On VFX Issues

  1. Paul Mica says:

    Thanks for posting this vfxsoldier! I just might be able to go home? Holding breath! 🙂

  2. Dave Rand says:

    I was hoping you’d caught that. He still needs to punish some of those bullshit bankers but he just secured my vote. I’m all for the globalization of VFX, we just need some balance. I want my Canadian, British, Yugoslavian, Australian, Kiwi, Chinese, Indian and all international friends to flourish along side each other. It all helps reverse the race to the bottom as VFX is headed for more than just entertainment. Education and communication markets are opening up as imagery crosses all cultures and languages.

    Now if we can only get the more channels of distribution, more independent productions and theaters and loosen the grip of those that are even strangling themselves as they scramble to control the uncontrollable and the inevitable.

    • VFX Soldier says:

      I’m all for anyone anywhere to do VFX. If India can do it faster,better, and cheaper than more power to them. I actually think the subsidies hinder other locations from making the films they want to make because they are so busy trying to attract contract work from the US Studios. Out of all the locations you mentioned, India has been the only one to really go off and make their own VFX driven films… and they don’t get subsidies.

      • Dave Rand says:

        There was also Day Watch and Night Watch out of Russia made for only 4.2 million. Fox Searchlight bought the rights for 2 million. I was surprised to find it they only made $1,502,188 and $450,897 ..maybe the subtitles were not appealing… I thought the movies were above average and had some pretty cool gags.

  3. David Breaux says:

    If you’re a US VFX worker I’d write the White house explaining our situation….!!!!!

  4. dveight says:

    What about the US subsidies that effect the rest of the world? Will they get rid of those?

    Probably not.

    Hypocrites.

    • VFX Soldier says:

      Do a search on my blog for various states that offer subsidies like Michigan, New Mexico, and Florida. I’ve consistently railed and have been against them. In fact one of my very first post was against the New Mexico subsidies.

      The truth is those subsidy programs in New Mexico and Michigan were failing. New Mexico’s was capped and Michigan’s was almost eliminated. In fact Michigan’s own governor met with Canadian officials to lobby a mutual end to the subsidies… its all a race to the bottom.

      • Beaker says:

        I could be wrong but I believe what dveight is refering to is the US has lots of subsidies for non-vfx industries which the WTO has ruled against us and we continue to ignore. Two good examples are Cotton subsidies undercut the Brazillian farmers and Boeing subsidies to prevent Airbus from winning some jobs. Though every country has their sacred cows and are a hipocrit about one industry or another which they hold so dear.

        To be frank, no one in Washington really cares about the vfx industry. Cotton, Airplanes and Farming effect hundreds of millions of people and companies who have lobbyists. We are less then 50k people in the US. How many lobbyists does the vfx industry have? My guess, none, so I wouldn’t get your hopes up anytime soon.

      • VFX Soldier says:

        “To be frank, no one in Washington really cares about the vfx industry”

        With all due respect that just is not true. Look at the Lucasfilm/Pixar collusion case. That investigation was initiated by the Department of Justice which has now led to a huge class action lawsuit.

        However I can understand the cynicism. In the face of all of this most vfx artists don’t really know or want to know. We’re being complacent. We prefer signing and posting facebook statue objections to SOPA and PIPA: It’s all armchair activism.

        This is harder. All I can do and post on the issue.

  5. Scott Ross says:

    I am excited by competition. I have always been a tough competitor. When I was the GM of ILM, I fought hard for ILM and oftentimes won. When I was CEO of Digital Domain, I fought hard for DD, and oftentimes won as well. I relish a good challenge as long as the rules of the game are equitable for all.

    The international VFX playing field needs to be level. The rules need to be fair. Subsidies are not fair.

    To win, at both ILM and DD, took great artists/a great team/great technology and smarts. To win at leveling the VFX playing field will take an International Trade Association with resources.

    To date, not one company/facility has raised their voice in favour of such.

    When will we remove our heads from the sand?

    • rfk says:

      Scott, wouldn’t you have to pay your artists overtime at DD before you could claim the high road here?

      • stjohn says:

        Don’t be a threadjacking tool. DD has always paid artists for overtime, except in the beginning when some artists didn’t bill for hours they worked on shows to which they weren’t assigned in order to skew the evaluation of certain software and methods in their own favor. But that wasn’t Scott’s doing, and he wasn’t aware of it. In the very, very beginning (1994, probably around the time your parents first let you out to play unescorted), artists got ‘comp days’ in lieu of overtime pay, which was the accepted practice at the time. You show me an artist who says they didn’t get overtime at DD from 1996 on, and I’ll show you a liar and a poser. Nobody had it easy there, but nobody worked for free.

      • rfk says:

        Hi stjohn. Just ask Scott how much he paid guys to do endless tests for his Dwayne Johnson reincarnation script ideas.

      • Scott Ross says:

        @rfk…. the only person that I ever asked to do tests on INSTANT KARMA was Andy Johns…. they weren’t endless, and he volunteered, and DD paid him, and things turned out really well for Andy after all.

    • fizz says:

      What incentive would non-US facilities have to join an international trade association that has a stated aim of eliminating non-US subsidies? What likelihood is there of a facility like ILM joining such an organisation given that they currently enjoy a direct 25% rebate (not to the production company mind you) from the Singaporean gov on *all* their spend in that country? Or DD and Pixar in Canada?

      • VFX Soldier says:

        I’ve mentioned this before that the global trade organization probably won’t work as so many facilities have differing needs. Some love subsidies, some hate them.

        But Scott question for you: Many facility owners have said that they don’t receive the rebate money in Canada, the US Studios do. The facilities still have to flip the cost of infrastructure, overheard, and moving artists there. So it actually costs them more money to go up there. Is this how you understand the situation?

        The only feasible reason I can see Imageworks, DD, Rhythm and others to go up there is if their intention is to get involved in co-productions with the studios. That way they can indeed claim the Canadian rebate for a part of their investment.

      • Scott Ross says:

        How I understand it is…. the studio says I need the budget to be $9….
        The VFX studio bids the work in LA and the cost is $9 so the bid is for $10.
        The VFX studio bids the work in BC and the cost is $9 so the bid is $10
        But if the work takes place in BC, the studio receives a 25% rebate so now the work costs the studio $7.50, even though the work is bid $10.

        The good news for the studio is they get $10 work for $7.50
        The good news for the VFX facility is they get the work.
        The bad news for the VFX facility is….. they get the work, which after change orders,redos, bad management etc., …. They get the shaft.

  6. Dave Rand says:

    dveight I am not familiar with the foreign industries that the US has subsidized to bring the business to our shores with incentive programs. Please enlighten me. I’m serious I actually don’t know but would like to know.

    Scott I agree, I did hear from the one of the guys at local 839 that there was one owner of a shop that did respond and wanted to know who else was on board. Maybe it was a call initiated by them in the light of your idea..do you know who that was?

    If the shops would organize it really leaves few alternatives, but leverage is my mantra and I learned a lot about that from my Uncle watching him place a piece of wood under a hammer to extract a nail half way hammered in that had bent. The claw could not reach it, but simply placing a piece of wood under the claw gave it some the strength it would never have had…..and more recently from Steve Huelett’s talks.

    A level playing field is important to creativity. Creativity does not respond well to a need to satisfy basal needs while you move your family from one incentive to another or from on short term gig to another, or from one collapsed shop to another.

    How can you have a brand name when 90% of your talent is in turnover mode? How is that even truly profitable to the studios? Are they not cutting off the very grey matter that they are hiring? The most valuable software component, the real source of the brilliantly profitable visual fx are the minds of the artists creating them. We don’t function well when our basal needs for security and a foundation are not met or in flux.

    • fizz says:

      “How can you have a brand name when 90% of your talent is in turnover mode? … We don’t function well when our basal needs for security and a foundation are not met or in flux.”

      But right now it works well enough for the VFX vendors. Why would a non-US VFX vendor in a territory that has tax breaks/subsidies want to upset the status quo on the promise of an unproven notion that a settled indigenous workforce is going to be more productive than the one they already have? And they would have to be *very* productive to keep the vendor competitive in the new world of the “level playing field”.

      A brand name is just that: a name. The production comapany only cares if you can deliver the work on time, within budget and to the required standard and in that order. As far as they are concerned your “brand name” is only the quality of the reputation you have established for being able to do those things. The studio could care less about how you get to that end result. Within the VFX industry itself what does a brand mean to anyone? It might be a guarantee of top-level projects, ILM or Weta perhaps, and it might be a reputation for a decent working environment, but how can a VFX vendor ever guarantee a continuous stream of work that would ensure longevity of employment? Even ILM goes through layoffs.

      • Dave Rand says:

        Massive expansion and contraction of the workforce is not an optimal environment for anything creative, it’s simply one of the new fluxuating answers answer to the razor thin margins the shops operate under due to their lack of leverage. The leverage, organization, and “capitalism” of the studios have forced these answers along with “socialism” for the shops to survive. I believe that’s apparent to anyone who’d been in the business for over 15yrs. It was not always this way. I blame the bidding process as I’ve stated repeatedly, and I’ve been on the staff of 5 well know shops that fell due to that process. It’s another enforcement child of the leverage the studios worked so hard to gain. Bidding is from construction and meant to go with a blueprint and not a whim. You’ll notice the studios do not have 90% of their talent coming and going, nor do most successful creative ventures on this planet…brand name is not the only thing..it’s everything in the creative world–from advertizing to vfx, from publishing to galleries, from computer design to auto design. Form Cirque du Sole to the Boston Red socks. You name it and it’s got a name brand. I believe the average shop would prefer to keep a trained staff far larger than they do today., it’ not easy accumulating and training talent for them either.

      • fizz says:

        “Massive expansion and contraction of the workforce is not an optimal environment for anything creative, it’s simply one of the new fluxuating answers answer to the razor thin margins the shops operate under due to their lack of leverage.”

        That’s exactly how everyone else on a movie works; production ramps up, Art Dept. etc hire a bunch of freelance folks who all get laid off as soon as production wraps. VFX facilities running permanent payrolls has always been the anomaly in the industry. VFX is the *only* part of the biz where that’s even possible. Sure, it may have been more common in the past, but that’s in the days when an outfit like ILM had less than 300 staff.

  7. Scott Ross says:

    I do know… but I am not at liberty to say as that person asked me to keep it confidential. BTW, did anyone hear the VES townhall last night? Thoughts?

  8. […] verified when I asked Former ILM General Manager and Digital Domain Founder Scott Ross about them. Here is what he said: How I understand it is…. the studio says I need the budget to be […]

  9. […] Obama’s Speech Touches On VFX Issues […]

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  11. Yannick says:

    Soldier, love you blog, love your passion. But I have to say I think I will be onboard when America gets its own affairs in order first before giving a lesson on moral.

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