VFX Soldier Radio Interview

Local NPR affiliate KPCC 89.3 asked if I could do an interview concerning the recent push by LA Mayor Eric Garcetti and his appointed film czar Tom Sherak to institute larger subsidies in California:

Hollywood ‘nomads’ question need for film tax credits

Thanks to Take Two host Alex Cohen for inviting me on.

Soldier On.

31 Responses to VFX Soldier Radio Interview

  1. Dave Rand says:

    Nice Job. Thanks for having the courage to stand up for us. The perception of fear, real or imagined, is a great indication that we need this leverage.

  2. Michael says:

    I’m seeing the article but was there a radio interview we can listen too, or did I misread the heading?

  3. ando says:

    Im trying to understand your perspective better…reading and listening. I am american and have worked in LA (vfx), but currently do not. Without getting into the ethical/sustainable debate on subsidies: it seems to me using “owning property” or “costs building up” as reasons not to travel the world and get paid well to do it……….is very very weak. This industry is not owned by the States or CA. If other countries or states find ways to be competitive, then so be it. If they are unethical or illegal, then hopefully you stick to addressing those issues. Nearly everyone I know has a family and property and most are doing great (including the UK/Canada/NYC/South Pacific). Its a massive pain, yes, but not impossible. Its the state of the industry and it doesnt appear to be changing. It was like this well before 35% subsidies. Currency fluctuation was the previous ‘subsidy’. Lets attempt to drop the whole ‘entitlement’ aspect that many see with some of your material and perhaps focus on less subjective issues. I wish you all the best in your efforts in terms of subsidies. It seems a logical and righteous fight and I also appreciate your time in that matter.

    • vfxmafia says:

      Ando…

      I can address your question.I am an American (former LA VFX vet) now working in Vancouver. I am getting well paid and work at a fantastic shop. I just had my first doctors visit in socialized medicine….and love it very much.

      However…..I still have my bags packed by the door (despite having a 3 year work permit)…..the market is unstable. And there are NO solid VFX hubs…..(despite Van and London)

      Take at look at the film industry in New Zealand and the decimated hole in Los Angeles……..

      If it can happen in LA it can damn well collapse in London and Van……lets face it….we all see the axe over our heads. What needs to happen is to stablize the market and normalize the bidding process. We need to stop under bidding and we need to establish long term VFX hubs that last more than 3 year contracts…

      if subsidies were stopped it would stop the bubble and stablize the market.(and all of our lives)

      I love working in Vancouver…..(despite some Van companies) ….a vet VFX guy can be happy up here. but will it last? and the answer is…… I don’t know. And trying to plan a financial future you need to have long term prosepects…

      Another myth is if Subsidys left Van and London would fail….Im not so sure….I think the talent in London and Now Van is very mobil…..if a permanent VFX hub showed up…..it would be an oaisis for VFX artists wanting to stablize their future….

      • ando says:

        Hey Mafia,
        couldnt agree more about all of this. thanks for that. Im not sure any vfx artist could argue with wanting a stable industry. I dont take exception with anything you said here. My issue at present is how the argument is being framed by this blog. And judging from the many comments and people i chat with, Im not the only one. If this blog and Mr. Ley’s intentions are purely to benefit California, thats entirely fair. But the blog/and he should say as much. Its a global industry with incredibly talented international artists, whether long-time vets of LA (like me) want to admit it or not. The industry does not ‘belong’ in LA, it belongs wherever a company can be competitive. This blog is drenched with entitlement…and that is my issue. If we are going to attack this thing as a global community, we need to actually admit that there is in fact a global community. And perhaps vfx soldier has and i missed it…fair enough. But judging from the radio interview, not much has changed since the inception of this blog. (my 2 cents)

      • vfxmafia says:

        Ando,

        There won’t be any Jingoism from me anymore. Its been a hard wake up call for most Americans. (At least for me it was)

        I share no love lost for California. (for los angeles in particular). The houses are over priced…the air is polluted…and I hope i never have to spend another minute commuting on that stinking 10 freeway.

        Bottom line is other cities have costs of living that are comparable….and California spends more money on the LAPD than it does VFX artists……(and talk about a corrupt state). At times i felt i lived in the wild wild west tv show.

        Now that US vfx workers are starting to migrate…they are realizing that they are not the only ones anymore with veteran experience.

        You are also right about people with LA houses. Despite the american creedo declaired by GW “Every American should own a house”. It simply isn’t true. Houses are invesments. If the market changes you sell it and move on. My Dad was in the military and moving was well a way of life when we were growing up.

        The bottom line is it was a hard wake up call that if i still wanted to make a Six figure salary….I would have to follow wear the industry lead me. All Industry’s are subject to economic changes….my biggest mistake was not becoming a doctor.

        I just hope where ever we have to move to next…..lets hope it turns into a permanent long term VFX hub where people can take control of their lives and manage their own work place.

    • Earl Grey says:

      @ando – I’ve lived in Los Angeles for nearly 15 years now, with a string of VFX jobs making up most of my career. The big question I have as VFX artists jump from country to country is retirement saving.
      .
      For me, retirement saving has been simpler because I’ve been lucky to have steady work and have only lived in one country. I rely on this country’s tax-advantaged savings options (Roth IRA, SEP-IRA, I-Bonds, and one traditional IRA). I also have 40 quarters of earned credit in the Social Security system.
      .
      If an artist constantly moves from New Zealand to Canada to the United Kingdom to Singapore to the United States…that represents a lot of different retirement systems. How do these artists save for their retirement?

      • Hollywood Reporter says:

        This articles nicely outlines the differences (and similarities) between the US and Canada retirement systems. Even temporary residents paying taxes in Canada accrue or can take advantage of retirement savings opportunities.

        http://www.investopedia.com/articles/retirement/11/difference-retiring-canada-america.asp

        And since you still need to file income taxes in the US for the rest of your life (no matter which country you move to), you can often take advantage of US tax retirement opportunities to offset any tax obligation you may have to Uncle Sam.

      • Anonymous says:

        @EarlGrey
        I’ve moved from the UK to Australia. I was able to roll over my private pension scheme from one country to the other with no penalty.
        In the UK I will be also able to qualify for state social security payments when I reach retirement age ( proportionally to what I paid into the system ). Independently of the private pension I paid into, and independently of the country I will be living in when I retire. I am European which means I can apply for my contributions in one countries system to be transfered over to another within the EU. I can also claim a refund of my contributions.
        In both countries I was able to do tax advantaged savings, as the money paid into pension was before tax and will only be taxed once, at an advantaged rate ( 20%), once I reach retirement age.
        I would also suggest that if you’re doing pension rollovers to time your roll over to a moment where the currency rate is in your favor. You *might* if you time it well, stand to make some money if you wait until a time when a given currency is up and another is down, to do the roll over.
        I would also suggest distributing savings through several countries – savings yields vary significantly. The current UK savings interest in extremely low, whereas the Australian savings yield is quite high. Once you have bank accounts in several territories and countries, calculating this becomes second nature quickly.
        I do not know about other countries ( other than the fact that Singapore have an incredibly low tax rate ), but I would suggest doing your due diligence. From my experience, it’s been an extraordinarily simple process.

      • HellOnHamilton says:

        I’ve managed to pass retirement savings between Canada/US without much issue. As for other countries I couldn’t tell you, but there’s no problem continuing a retirement plan from Canada; just speak to an accountant that’s versed in cross-border accounting.

    • scott squires says:

      A few clarifications. Pre-subsidies were in fact very different. And while there some shooting locations due to currency fluctuations (such asCanada) it was no where near as rampant as it is now. The numbers clearly show the impact of subsidies on the film industry. And even with currency fluctuations there was very little vfx movement. Some was done in London, some was done in US, etc.

      With subsidies the future of the vfx industry and vfx pros is in the hands of politicians. When politicians any where in the world change the subsidies, as they do, then work will move. Do wish for politicians to control where you should live month by month?

      Subsidies have caused a mass distortion in terms of selecting companies based on quality or efficiencies. Because those items drop lower the more the subsidies influence the selection process. And that once again applies to the global picture.

      People seem to be easily confused and think that this is an LA only issue and the only point of it is to bring all work to LA. No, this impact everyone. NZ, UK, Canada, etc. They’ve all seen the work move. Vancouver live action is seeing work go to Montreal. UK shops are setting up branches in Montreal. Why in the world would companies be spending hundreds of thousands of dollars setting up branches in other countries? Once again you didn’t see this happen due to currency fluctuations.

      The work will not all come back to LA even if this happens. There are now places around the world but it will then be up to each company to actually compete. Right now one of the reason vfx companies (and workers) have so little leverage in the film industry is because of the subsidies. In order to compete the subsidies have almost required companies to underbid. Hard to make progress when the rug is quickly moving from one place to another due to politicians and lobbying efforts. Even vfx companies in the UK are losing money. The vfx industry is in very bad shape all over the world and the subsidies have actually encouraged more competition which is causing a death spiral.

      • vfxmafia says:

        Scott,

        There are some minor inaccuracies that i wanted get your opinion on……….

        1) someone is making money.

        WETA, ILM, and DNEG are swamped with work for the next 3-5 years. If they are continuing to operate….there has to be profit margin on some of this. With artists getting better…AND taking pay cuts….workflows getting more efficient….and subsidy money rising……I see some companies making money. How hard could it be to show profit with %80 UK subsidies for indie movies (based on the new EU figures)…

        ILM HAS to be profitable…..

        It would be interesting to see the books on some of these companies. The film business is known for “breaking even” on productions or actually “operating at a loss” while certain higher ups get huge pay checks and bonuses. its actually hard to prove where the money is going.

        With the Academy bake off coming soon….i guarantee everyone dressed in a tux is making at least 4 x the average production artists salary. (or at least in my tax bracket)

        2) There is some stability……

        The subsidy money does come with clauses (Like BC makes you stay 5 years or give the money back). Your seeing some companies are booked for the next 3-5 years….due to Star wars, Avatar, and all the comic book movies (and the subsidy money from that)

        Also cinesync and virtual desktops…..are operated by most companies now. You can have a sup and even the server in another city and the render farm in a 3rd city….pipelines have conformed to subsidy globalization. Hopping from country to country is becoming easier…..

        Something that is not talked about on this blog is the timelines associated with Subsidies…..Subsidies aren’t going away. In the UK and Canada they are locked into the federal budget for the next 5 years…..(that is called stability)……nothing is coming back to Los Angeles unless CVD ruling happens (even then it will take 1-2 years to kick in)…..

      • scott squires says:

        I’ve covered this in a few of blog posts.

        >1) someone is making money.
        Yes, the studios. Also the brokers that handle the tax credits and resell them. The companies that buy the tax credits from the brokers.

        Subsidy money does not go to the vfx companies, it goes to the studios. Even in the rare case the money does officially go to a company the studios require all of that money to be handed over to them. Studios now have in their contracts what the subsidy money they expect to get fro the government and if for some reason that falls short (i.e. the company has to do work in another area) then the vfx company has to pay the difference so the studio makes back the same amount they had expected from the subsidies!

        A few things:
        Some company books are public. vfxsoldier recently posted links to a few of the UK companies. Double Negative had a loss of 8 million pounds as I recall in 2012. Take a look at the numbers. People tend to forget just how expensive labor and all the rest is. Just because there is a lot of money being paid does not mean it’s profit. That’s the confusion directors and producers have. Look at the DD statements since they’re a public company and you’ll see losses as well. Even when there are profits they are minimal.

        Don’t confuse the film business where there can be high IP profits and all the number shuffling that happens to vfx where it’s a service business.

        vfx as a service business only makes what it makes on the service, irregardless of how well the film does and how much profit it might rake in. Now since there is a lot of competition for the vfx work no company can have huge markups. If a company has a high bid the studios have many others to choose from. That’s why you see even large companies underbidding because it is so competitive. Keep in mind the subsidies have made the competition even worse. First you have the the need to try to match the subsidy elsewhere. The studios say, hey we’re getting 30% in x and your company only offers 25%, you’ll have to make up the difference for us to even consider you. Also the subsidies have encouraged more companies to sprout up in areas with the subsidies. Look at the UK as an example. Look at vancouver. It probably had 1-2 vfx companies pre subsidies. Now every company from California and a couple from the UK are there. So now you have even more competition. Without the subsides there would likely not be as many large vfx companies competing for work.
        The Strause brothers may reward themselves well but most companies do not have flexibility to charge what they want. If a place down the street offers to do the work for $2 million less, then it’s difficult to ask for even larger amount.

        Studios may have to compete in the film space but they’re smart enough to work it out. Many times they shift release dates to optimize their return. And there’s no limit to their returns/profits. And you’ll notice there are only so many studios. The same 6 majors have been the 6 major studios for the last 50+ years by and large. And they control their own pipeline (which projects to do, how many projects, etc) They’re not fighting over scraps of fixed pay service work like the vfx companies.

        >ILM has to be making money.
        Sometimes. Most of the time. But I was there and it wasn’t always very profitable.

        Consider the fact that most stand alone vfx companies, at least in features, are long gone. Orphanage, CafeFX, R&H, Illusion Arts, Matte World, etc.
        Most of the ones currently standing have deep pockets behind them. Either a very wealthy person (George Lucas Peter Jackson or in the case of some vfx companies an unknown millionaire) or you have a much larger corporation.
        The stand along companies were not making money or the amount of profits would fluctuate such that a single bad year would put you in the hole.

        With deep pockets you can survive a bad year if necessary. Heck you can survive for a long time with no profits. It’s all depended on who’s backing it and why. Many rich people have things like race horses or sponsor race cars and other things. They put money into multiple houses and yachts, not as investments but because they can. They pay out money because they’ve got more than they know what to do with. And these types of things can be hobbies. If the founder of Facebook or Google decided it would be hip to own a vfx company they could buy/create one and fund it for a long, long time without worrying about it.

        A large corporation can look at vfx company as a elite feather in their cap or as prestige. Or the corporation may have multiple inter-related companies such as a lab, DI color suites, sound, 3D conversion and vfx companies. These types promise studios they can give them a x% discount on vfx if they bring their whole project to their other companies. The markup can be much better in other areas such that they’re still making a big profit overall even if their vfx company is losing money (and underbidding/destroying other vfx companies)

        My dad’s company made farm equipment and the CEO wanted to get rid of a particular item they made because it wasn’t making much money. But as my dad pointed out to him that one part was the reason they could sell all the other items at a large profit. Lose the one part and you’ll lose the rest of the work.

        And of course there are in some odd cases where taxes and investments may in fact make it more profitable to take a loss on a given company so you can get certain write-offs.

        Note that if a vfx company is not stand alone then it doesn’t necessarily have to make a profit. George Lucas and Peter Jackson had vfx companies because they wanted them for their own projects. They were never looked at as investments. Some large corporations view them the same way. That means they’re not like most regular businesses. Most business require a full business plan and the only reason they continue is if they’re making enough money to keep their investors happy. This would not be happening if we were pumbers. No million or company would jump into plumbing services because they liked it unless they thought it was good investment. And this non-business approach to vfx business is one of the issues creating some of the biggest problems.

        Keep in mind at any point a rich individual or corporation can grow tired of the vfx industry or may decide it’s no longer worth the losses. And with that they can try to sell the company or simply close it on a moments notice.

        Disney owns ILM now. Disney makes a lot of money from some of their companies and businesses. It would be easy enough for a bean counter to look at the numbers and say for the same amount we put into ILM we could invest in many other opportunities and make much more money. Or management may say as long as we’re making money on the Star Wars/marvel franchises indirectly linked to ILM, we don’t mind losing some money there. Time will tell.

        DD was bought out by a rich company/owner in China as well as India. And of course they’re hang to make sure payroll is met so they’re likely digging into their pockets but they made the investment because they felt it was important to the future. With the movie biz now in China starting to explode they’re making an investment they hope will pay off and because they thought they could gain technology and knowledge to bootstrap their own develops back in China and India.

        Look at Amazon. It’s still not making profits last I looked. Their executives are paid huge salaries but as long as Wall Street is willing to pay into it on the chance of a big uptick it will continue. They sell many books and items at a loss. Obviously that’s good for the consumer but any competitors of Amazon have major problems with that strategy. The entire internet bubble was based not on true earnings but potential future revenue streams and that bubble burst when the reality set in that you can’t run companies for years without profits.

      • scott squires says:

        >2) There is some stability……
        The stability you see is more of an illusion than you might think.

        Each and every film that happens is reviewed for where it will go. Will Star Wars vfx be done in US? UK? China? What about the Star Wars film after that one? Avatar- What if NZ did pony up what the studios demanded? What if to get a foothold in China they have to do x% there?

        Are you living and working in the exact spot where that work is going to be done this year? How about next year? 5 years from now?

        What if you work for one of the many vfx companies that is underbidding and losing money year after year? What if you’re there when someone pulls the plug?

        This is the confusion politicians have. These are not long term factories they’re setting up which would be running for the next 20 years. Each and every film has the opportunity to be done at another company or location these days. And that location may be very influenced by subsidies at that particular time. Those decisions depend on a few executives at the studios and politicians around the world. Politicians and studio executives come and go on a whim. Many studios execs now lasting just 2-3 years. Is 3 years now considered a stable career?

        Subsidies – Even if your location offers subsidies that’s no guarantee of stability. Many contracts or bills can be over turned by other forces at anytime. If an opposing group/politican/billioare decides they’re against it they may spare nothing to eliminate or reduce it or a legal system could declare flaws.
        Also keep in mind the subsidies are only good if you offer the very highest amount of any out there. That’s not the case and is never the case for long. So even if you have a 5 year subsidy package all it takes is for another location to offer a higher amount or better terms to render your subsidy and your stability useless.
        if CVDs do happen then it will render vfx subsidies useless for US productions.

        And don’t think it’s a simple matter for the studios to skirt the requirements. The people who illegally important honey into the US are now serving a few years of prison time in addition to huge fines, even though they setup a complex scheme to avoid tariffs. How many studio executives are going to be willing to risk years of prison time for the studio? Would you for 2-3 year of work?

        Also the CVD clock starts ticking when the paperwork is filed. Lets suppose it’s filed in June of this year (obviously I have no idea when or even if it might happen) and it takes a year or more for approval. If approved, the terms of the CVD apply to every product/service since the paperwork was filed. So the studios could find that they have to apy tens of millions of dollars they didn’t count on. So if you were a studio executive and knew that the work you were getting subsidies for now might end up coming back at full price, would you think twice about it? if it was sure profit film then likely you would. If the vfx subsidies is the only thing allowing the film to be made? Maybe not.

        >Hopping from country to country is becoming easier…..
        For who? It’s certain easier or the studios. Is it easier for the vfx companies to continue to pay for branches around the world at every new place that offers a subsidy? Is it easier for the workers to move from place to place? Is moving every few months or every couple of years really stability?

      • hector says:

        “Subsidy money does not go to the vfx companies, it goes to the studios. Even in the rare case the money does officially go to a company the studios require all of that money to be handed over to them.”
        so why then the companies are so in a rush for subsidies locations?

      • scott squires says:

        >so why then the companies are so in a rush for subsidies locations?

        The studios tell a vfx company if you don’t have a branch in x (subsidized location), we will not even ask for a bid from you.
        When there are a limited number of clients, they hold the leverage, especially when your competition is willing to jump on it.

        Vancouver would not be what it is today if the vfx companies did not agree to set up branches there.

        From a studio standpoint they can say they get $5 million in subsidies (or whatever) so that means for the studio to get the subsidies the vfx company has to be in that location with at least some local workers (in theory at least).

        Even if a vfx company elsewhere meets that budget, the studios usually still go with the subsidized location. The reason is because they can sue those government subsidies to get loans and upfront money. In some areas the studios can trade in their ‘tax credits’ for cash through brokers. So now they have cash i nthe bank (earning interest) instead of having to borrow it all (paying credit) and it means the local citizens are funding a sizable portion of the film. Less risk with no downside for the studios themselves as long as they can get the politicians and vfx companies to agree to help fund studio movies with no backup deal.

      • hector says:

        Thanks Scott..that make sense.

  4. polyphemus says:

    Retirement? Working in multiple countries and trying to navigate the system. What you think you’ll be doing shots when you are 60 years old?

    I’d say most VFX people will burn out and drop out by their late 30’s and early 40’s for a “Plan B” career that isn’t as upside down.

    The guy who fixed my HVAC system the other day used to work at ILM , now he has his own HVAC servicing company in Marin and makes way more money now than he ever did and can set his own hours.

    It’s scary how many of my co-workers are working on Plan-B’s, there is no faith in the future of the industry.

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