Is VFX Really A Global Industry?

The Animation Guild’s Steve Hulett had a post about an animator in Pakistan who now works in London doing VFX:

As the vet explained it, animation wages in China and India are rising, while salaries in Southern California have been flat (or declining) for a decade. Even so, artists like Khan go where the opportunities and best money are, which remains — despite the negative growth — California.

The common message I hear from VFX workers is “it’s all going away.” The belief is market economics and technology have made access to the VFX easier for global players and has essentially commoditized the industry. It can be done anywhere by anyone, the only thing that matters is price.

However I deeply question the global industry argument. I believe visual effects is a key component of the US domestic film industry that relies heavily on agglomeration. When US domestic studio productions go to other locations for VFX work, they do so for the comparative advantage provided by rent seeking: subsidies. VFX is not a global industry, it is an agglomerated industry.

What Is A Global Industry?

I had to ask myself that question. What the hell is a global industry? To me it’s an industry where I can plant myself almost anywere in the world and work for that industry.

The medical industry is a global industry. Everyone everywhere needs a doctor. Not so much in the VFX industry. You basically have less than 10 locations to choose from. A few of them like India, exist for their low labor costs. But we haven’t seen this large amount of work go there. VFX companies have been there for 10 years and while the quality has been stagnant, costs are rapidly rising.

For the other locations, most of the work is subsidized by local governments to lure projects by the big 6 US domestic film studios all located in the Los Angeles area: Disney, Sony Pictures, Warner Bros., Fox, Paramount, and Universal.

The only place that stands alone is California. While it’s labor costs are not low, it exists without the need of subsidies. The reason why the work continues to be done here is because of agglomeration.


Why is the financial services industry located in New York? Why is the entertainment industry located in Los Angeles? The reason why is because of agglomeration: In the VFX industry companies need to be located closely near each other so they can get work and quickly scale and acquire a large talent pool of workers. There was a UCLA study on VFX agglomeration.

Economist Paul Krugman won the Nobel Prize in economics for his research in agglomeration. There are a lot of findings by economists on this subject that actually go against what I call “Flat Earth thinking”.

I think many readers subscribe to the “world is flat” idea by Thomas Friedman. With technology now making it easier to remotely collaborate, it would serve as a substitute for face-to-face collaboration and allow productions to have a global workforce where labor is cheaper.

Surprisingly, economists who research agglomeration have found that “labor cost-savings are not relevant in driving the decision to outsource“. Furthermore, the idea that remote collaboration tools will serve as a substitute for face-to-face interaction and lessen the need for an agglomerated industry is also not true according to economists. They argue that it actually is a compliment:

Telecommunications improvements can increase the returns to urban residents relative to hinterland residents because urban dwellers have more contacts overall, but these improvements can also decrease the relative returns to urban residents because they are less likely to use the phone conditional upon having a contact.x

While California is the only major VFX market that exists without subsidies, we have yet to see the other markets like Singapore, New Zealand, Austrailia, UK, and Canada expose itself to true subsidy-free market conditions.

Will they be able to sustain themselves without them? Only time will tell but I find hypocrisy in those in who champion their success as globalization and market economics yet at the same time are heavily dependent on government subsidization: a relic of command economics.

Soldier On.


41 Responses to Is VFX Really A Global Industry?

  1. skaplan839 says:

    While I’ll not argue that entertainment subsidies are the cause of vfx work crossing boarders, I still believe that the industry is global.

    Entertainment media such as television shows, print ads, video games and movies are found across the globe. I’ve always contended that any major metropolitan area can support its own visual effects industry to feed the need of its own entertainment media. So, a visual effects artist can be gainfully employed in most larger cities in the world.

    What is distorting the globalization discussion is the entertainment subsidies and the demand from the conglomerates that a visual effects studio, when bidding on their latest high-profile feature project, have a location in an area that can provide the tax incentive money back to the producer. As you mention, this forces vfx studios to fling work to areas that have suckered their local population to paying Hollywood for the privilege of having waves of vfx artists from across the globe reside in their corner of the world for one project at a time.

    I agree wholeheartedly with the notion that when the subsidies disappear, for whatever reason, the landscape of where the work is done and where vfx artists will be living will be much different than what we see today. However, I belief that visual effects work will still be done globally since there will still be work to do.

    • andreas jablonka says:

      I disagree a bit to the global scheme. Not everywhere is a good place for Vfx. You talk about new Zealand? There is weta of course but what else? Sauce is a small Auckland based Vfx house and that’s it.
      You have montreal, Vancouver and Toronto. That’s it for Canada. It’s clearly not global but the idea us correct that vfx can be done at any of these centers.

      • skaplan839 says:

        You’re missing my point, Andreas. Take New Zealand for example. Don’t they have vfx needs for their own local media?

        I think you mean for feature work .. which I’ve already stated will most likely make a resurgence in Los Angeles if you remove subsidies.

      • andreas jablonka says:

        As i said sauce is doing all tv work. Not much industry. Features would no doubt return. Not denying that.

      • lernie says:

        It’s relative, really. NZ is not a ‘good’ place for VFX only because on one end the industry is small, and on the other there is a constant mass of graduating ‘media’ students that saturate the field. The situation is made worse because of dodgy ‘free-labour internships’ which fuel an illusion of demand for vfx artists; it isn’t really there.

        Btw, Sauce and Weta aren’t the only major places to work for in NZ. You have Huhu, Oktobor, Toybox, Flux, to name a few, and not to mention TV stations. But they aren’t big enough, or not enough of them for locals.

      • VFX Soldier says:

        Do those smaller vfx houses in nz do feature file work? If not then I believe they don’t get subsidies. Nz only awards them for feature film work.

        If thats true the irony here is local vfx houses that do vfx for local tv lose. The workers who get laid off at weta lose also. Even if they want to stay in nz, they can’t work at the smaller places as their “subsidized rate” is too high.

  2. I’m not not so sure of Steve’s note that “any major metropolitan area can support its own visual effects industry to feed the need of its own entertainment media.”

    Yes, there is a certain amount of ‘local’ entertainment needs but check local tv commercials, even in LA. You’re unlikely to see anything that resembles real visual effects. If you’re located in a city that is the media hub of your country then yes, there will a certain amount of work.

    However much beyond commercials and local corporate types of projects, most of the large projects (films, television) will be done at the one or two hubs for the country. The amount of production that originates in Hollywood studios dwarfs most other countries, states or cities. And while there may be some visual effects work that can be sustained in different areas worldwide, most of those aren’t large so the opportunities and likelihood of getting work may be less.

    • skaplan839 says:

      Couldn’t that be summed up by saying something like “There will be more work to do in a feature fill than for Wally’s Hardware Store commercial”?

      And to that, I’d have to agree. However, Wally’s store will still want vfx work, which will employ someone. My point is more about how vfx work is becoming more prevalent across entertainment as a whole. I won’t argue that should subsidies be removed from the picture, a large mass of the work would come back to Los Angeles. Soldier’s agglomeration argument sounds valid to me.

      I still contend that the work is global because the need is global.

      • Wally’s store doesn’t want or need vfx. Sure there can be an occasional project but that does not make an industry in that location. The number of projects and job opening are tiny in some of these places.

        That applies to just about everything. You could find fashion modeling in just about every city as well but i wouldn’t expect any of them to be very large with the exception of major fashion centers.

        I think the issue is not can and will vfx be done anywhere in the world. You can do some yourself even if you live on a tiny island in the middle of nowhere. The question is more is there a locally sustainable visual effects industry anywhere/everywhere globally? I think at that point it’s very much of an exponential curve. Small city in the middle of Iowa – 1 vfx person (who likely also runs the camera and does the editing), St Louis – 3 vfx people, LA – thousands of vfx workers. (these are just made up numbers figures)

        What will be actual market size at all locations when the subsidies go away? Are there enough commercials, television, motion graphics and feature work in that local location to employ a relatively large number of people? Will producers from elsewhere still come to that location when the subsidies stop? For some places, such as London, that will likely happen since they have built up a talent base and infrastructures. But even there I suspect the volume of work will be lower if everything else is equal.

      • skaplan839 says:

        All good points, and you’re backing up what I said. Cities like St. Louis and MiddleOfIowaBurg, while not being large vfx hubs, will need their own artists to complete the work.

        One of my dear old friends used to have a shop in Dayton. He did advertising, print ads, etc. He ran a modest business and eventually made his way to Los Angeles to work on features. If he had stayed, could he have survived? I imagine so.

        “For some places, such as London, that will likely happen since they have built up a talent base and infrastructures. But even there I suspect the volume of work will be lower if everything else is equal.”

        I have to think that London, for all its talented artists, will suffer immensely if/when the UK subsidy is pulled. The BBC is an incredible producer, but the UK native film industry doesn’t come near what Hollywood feeds that city. Next to Vancouver, I shudder to think what will happen to the artists living there. At least it may give Stripinis the excuse to come home.

  3. Paul says:

    You have high-end vfx being done in every major cities all around the globe for their own market but also beyond, Paris Berlin Seoul etc. That said vfx attached to blockbusters always come to mind as being from LA or SF California for sure but that doesn’t encompass the entire vfx industry.

  4. r21gh219hga says:

    Bit off-topic, but…

    I find that people who argue for outsourcing and telecommuting are mostly business people focusing on driving the cost of vfx down and don’t really understand how the work gets done.

    They seem to think that offices, dailies, parties and equipment are expendable costs that can be cut to save money. What they don’t realize is that the 800lb gorilla in VFX work is *iterations*.

    Every time you show your work to a supervisor or a client and they don’t say “final”, you have a whole ‘nother round of changes that need to work their way all the way through the pipe before you can show that work again. This is incredibly time-consuming and wasteful.

    Getting a first pass of a shot can be labor-intensive, but often is a day or less per stage. It’s the addressing of notes, making changes and re-balancing all your previous changes to suit the new ones that takes the overwhelming majority of time and cost.

    There is ONLY ONE WAY to drive this cost down.

    You need to have artists and supervisors that work well together, are comfortable communicating and are invested in the work they’re doing. You need GOOD, COMPETENT people that are confident and comfortable with the tools and the pipeline they’re using and the team of people they work with.

    There is no other way to drive those costs down, and by trying you’re actually taking steps backwards.

    Why? Because, we’re not building widgets. There is no ‘right’ answer to this work, it’s 99% subjective and based on opinion.

    Let me belabour this point:

    The “goal” of VFX is NOT to produce shots.

    The “goal” of VFX is to MAKE THE CLIENT SAY YES.

    End of story.

    At this point of the discussion, business people usually say: “Yeah but it gets done anyway. No matter how short the schedule, or how underpaid and overworked the artists, it still gets done.”

    That’s because you’re using the wrong yardstick to measure success. If you’re down to the wire, with a stressed out crew facing tight deadlines, corners will start getting cut, quality will go down, and people will walk away bitter, disillusioned and burned out. The shots will still be blessed by the supervisor and the director, but not because they like them, because they need them done.

    You can probably see how this is a slippery slope, right? The minute that schedules and budgets start dictating an artistic process, you might as well just have movies get made by producers and accountants instead of directors.

    We’re not assembling 747s or iphones. This is a collaborative, creative product we’re making that depends on a lot of highly specialized people to work together. You need to draw the line somewhere between treating it like a work of art and treating it like an assembly line. That line is way, way, WAY too far right now.

    If you truly understand the process, you’ll realize that doing business this way throws the baby out with the bathwater, so to speak.

    When the senior, veteran artists start leaving the industry because they’ve been pushed past their breaking point, the whole thing will come crashing down.

    In a time when VFX should be at it’s peak, most of my colleagues are questioning whether the industry will still exist in 5, 10 years. That’s not good.

    Anyway, I’m almost certainly preaching to the choir and I apologize for the rant.

      • r21gh219hga says:

        Right, good post.

        I guess I just wanted to try and hammer home that there’s a broad misunderstanding about what we actually do.

        The really unfortunate thing is that it’s extremely seductive to look at our business and say, “oh man, you could totally do this so much cheaper! Those nerds, they just don’t know anything about management! Thank god I got that MBA, otherwise I wouldn’t be able to have such stunningly clever insights! Really earned that huge salary today.”

        It’s a major pet-peeve of mine.

        And honestly, I think the fact that so much of the discussions we have amongst ourselves center around ethics and treating workers fairly is a red herring. What we should be doing is trying to show that by fighting the free-market by depressing salaries and creating a VFX Diaspora, they’re making bad business decisions that will affect their bottom line profoundly in the long-term.

        I honestly believe that the people that make these decisions don’t do so out of greed or malice, they do it out of genuine ignorance.

      • skaplan839 says:

        To that I’d disagree. I think you hit the nail on the head with your assessment, but feel they make these decisions based on the finances. Ignorant view of finances, but thats because the only number they look at is BO returns.

        Quality is dropping and people are burning out and the producers don’t give a shit. The VFX shops do, but its not up to them, as you pointed out.

        Unionizing is the only way vfx artists can set boundaries against the stupidity. The red herring is thinking that you can use logic to get producers to change their behavior.

      • jona says:

        Mr. Kaplan. With respect to unions. If the work doesn’t stop at our shores and the unions do.. how does that work? Doesn’t eventually just push work elsewhere?

      • VFX Soldier says:

        So should we get rid of overtime laws because they stop at our shores? It’s always been possible to go to Tijuana to do vfx work. It’s a fallacy to believe other locations have infinite scalability.

      • skaplan839 says:

        Did that answer your question, Jona? “The Union” is you .. and the rest of the vfx artists, standing in unison and setting equitable standards and practices. I think you’re leaning to the cost argument, which I’m glad to parry once again if that’s your angle.

      • jona says:

        Actually .. no. Neither of you answered my question. And VFXSoldier returned a predictable terse response assuming that, in asking a question, I was condemning the idea of a union. Getting pretty damn sick of that actually. Seems a pattern response. And it gets us nowhere.

        So.. if you can EXPLAIN how a union is going to keep work here and NOT force it out of the country please.. do that. Don’t preach to me about unions for crying out loud.. I know what a union is. I am asking a simple , mechanical question.


        How does a union guarantee that in the end, there aren’t actually fewer working vfx artists here in the US?

        I have been asking that question for 4 months and I have yet to get an answer.

      • Marcus says:

        I don’t see how a union of our size can *directly* force work to stay here… but you seem to assume that spreading unionization will lead to more VFX work leaving the US. But this isn’t the UAW or some public sector unions who developed enough leverage to largely sit on amazingly expensive contracts negotiated during years of giant growth.

        Being in TAG, it’s not a buffet of unreasonable benefits and union reps patrolling the floors looking for contract violations.
        The benefits *are* much better than what I got at other shops, but certainly on par with what you’d absolutely expect in any other high-tech job. The huge deal though is, that these benefits would be portable… that’s what I really care about.

        This stuff doesn’t kill jobs. Actually, I would argue that it makes way more efficient workers since you don’t have to constantly worry about how you’ll keep your family insured at a non-third-world level, how you’ll consistently keep saving for retirement, or how payroll is going to try to screw you this week.

        In my opinion, the real alternative is that the VFX industry will suffer a growing brain-drain. And while cheap button pushers can indeed get the job done, I’d say from experience having to clean that kind of work up, that this will cost the companies a hell of a lot more than continuing to “race to the bottom”.

      • skaplan839 says:

        As long as you bring up predictable and “getting sick of” responses, your question fits that bill quite nicely. The answer has been given time and again, but I’ll gladly review it one more time for your sake.

        Voting to have the union represent you as your bargaining agent with your employer gives you the voice to help create a contract that can set any sort of conditions and standards. The IATSE has a nice set that they’ll suggest you include, but by no means hold you to. The VFX contract will be similar in some respects to the Basic Agreement and its variations, but have some unique qualities pertaining to visual effects.

        To that end, you can certainly attempt to put language in the contract that restricts the employer from sending work overseas. My local had such language in their contract for one cycle. Why only one? Because it was proposed at the last minute and when the producers wouldn’t agree to it, the local went out on strike over it. The first one lasted a few weeks. As the producers were caught off guard, they were forced to agree to the language. Three years later, they were prepared. That strike lasted much longer and ended with 839 agreeing to remove the language.

        So, can a union stop work from going overseas? Yes .. if you have the leverage. Will a vfx contract be able to do that? Not by my estimation.

        As I mentioned previously, I suspect you’re angling to the cost argument which goes something like “Since the IA will be trying to get Health and Pension into a vfx contract, and that costs the vfx studio, won’t the contract therefore force the vfx studio to seek ways to remain profitable which now means shipping work to subsidized areas?” If I got that wrong, please correct me.

        To that I answer: No. You don’t know what the contract will carry as far as costs, because there isn’t a contract in place. Contracts are organic and the costs aren’t set in stone. I wrote a bit about the cost fallacy argument in this post. Feel free to review it and then email me so we can meet. I’d love to meet and continue this conversation. I’ll even sponsor a lunch for it.

      • jona says:

        Thanks Steve.. I am not asking because I believe the opposite to be true. I am asking it because I want a solid answer. And I think before anything is cast in stone it is the union’s responsibility to provide some promises as to how it would really work out. The current situation is repulsive exploitation by producers and large multinational corporations.

        I understand that we can ‘attempt’ to put language in a contract that prohibits our employers from sending work overseas but.. do we proceed with the assumption that it will in fact happen? With every major house signing on? . In fact, I can’t see why anyone, anywhere would sign such a contract in light of the state of things. While their competition and most importantly the productions themselves are moving offshore. If I am wrong about this I am anxious to be corrected but simple logic keeps getting in the way. They’re already moving and staffing facilities overseas. So.. the suggestion that a US union can reverse that is troubling to me.

        In fact, because unions everywhere are exclusive entities, meaning they decide who is in and who is out, the possibility that most freelance workers and those not already working for one of the big houses would be prohibited from gaining employment is real. So add that to the costs complications and the end effect is less jobs, yes?

        Because the work exodus has been underway for some time now.. I understand this is a complex issue and some action has to be taken even if it won’t yield the results it would have had it been done 15 years ago.

        I appreciate the feedback. It has been hard to get answers because just posing the question has most responders assailing me as anti-union. The truth is.. I need answers before I commit to any single action.

      • jona says:

        SKaplan said:

        “Will a vfx contract be able to do that? Not by my estimation.”

        I guess I am looking at the situation as a whole. Separating the working conditions from the outsourcing is your approach then? One step at a time?


    • andreas jablonka says:

      Take Steve up on that offer! The man knows a kickass pizza place and you can argue freely! Worth your time !

      • jona says:

        andreas… points to you for a great sense of humor everywhere you post. !

        I am just one little guy. It would be a waste of Steve’s time feeding me pizza!

  5. David Rand says:

    I once was asked to bid some shots.

    I replied that I don’t have a stash of funds to pay for the project when my bids were stomped on.

    I proposed instead we do the work right in the middle of Hollywood. Twenty artists did a show on a cost plus basis as the director walked around amongst us like we were the set.

    We rarely got passed version 3 or 4

    We rarely worked long hours.

    We all made 3k/week or over, trackers included.

    We came in a 1/3 the lowest bid … and it was from subsidized Montreal –they were going to put 100 artists on it. That shop has since gone bankrupt twice.

    We did three more projects the same way, then the director built his own facility and included the writers, editors, vfx, sound, and screening all under one roof with his office upstairs.

    It’s highly profitable and all union.

    Ever since then I have a hard time being a lead or any level of supervision as it all seems so foolish and frustrating. Removing the director from the real set and scattering the talent around the globe in an effort to lower costs actually raises them and lowers quality.

    The emperor is not wearing any clothes.

  6. billyshakes1492 says:

    Captain America was not made in the US….

  7. Pssst says:

    There is another way to be an independent VFX artist anywhere in the world. Tell Hollywood Studios with their subsidized distribution deals and the Oscar academy taste makers to go jump and make computer games instead.​george_miller_new_script_q1​wYu1EFjLM0cyZa4s97fI

  8. Pssst says:

    We’re the top post house in Saigon with a cool relaxed Hollywood vibe. We’re involved with feature films, television commercials and TV series. World class commercials are being made here with the local branches of ad agencies such as Saatchi & Saatchi, BBDO, Olgilvy & Mathers etc.
    As the economy in Hollywood has died along with much of the U.S., south Asia is booming. Artist continue to move here to make and save money while enjoying this great city for all its restaurants, cafes and clubs. Skyscrapers are popping up everywhere. English is widely spoken within the production community and Americans along with the American dollar are welcomed with a smile. While it might take a decade to become the top dog elsewhere, here, you’ll be a superstar in now time at all. Living expenses are very cheap.
    [via 2pop]

  9. […] the numbers certainly don’t lie and I argue the reason we are seeing growth is agglomeration. There is a huge talent base in California and that provides VFX and animation businesses the […]

  10. Pssst says:

    Foxconn: American multinational corporate capitalism and Chinese state sponsored anti-unionism – the new benchmark for the globalized worker?

  11. Two organizations listed in the Foxconn article from Pssst are worth checking out:

  12. […] what makes the VFX industry in California unique and it’s ability to weather the storm is agglomeration. There is a huge talent pool that is based close to not only the big 6 studios, but a thriving […]

  13. Pssst says:
    As the U.S. struggles to avoid a double-dip recession, emerging economies are racing to take advantage of the American market. Indian companies are now expanding their workforces in the US – where unempoyment is on the rise. US workers are now willing to work for less.

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