Comcast Acquires DreamWorks Animation

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Are people still reading this thing? Well, It’s been a year since I’ve posted on this blog and after the end of the ADAPT effort I took a long hiatus. As disappointed as I was, the post-VFX life has been great. New opportunities, I got a home, and even fooled a wonderful woman to spend the rest of her life with me. Maybe I’ll write about it some time if you’re bored.

Anyways, I figured I’d come back if there was something interesting to write about and this week there was some big news:

DreamWorks Animation has been acquired by Comcast.

The Animation Guild’s Steve Hulett and Cartoon Brew’s Amid Amidi gave their thoughts on the situation.

In my view this is terrible news for DWA as we know it.

Everyone has always known that at some point DreamWorks would have to continue without Katzenberg but who would replace him and garner similar success? This was a CEO who heavily invested his time and belief in DWA products while also being a world player: He commanded the presence of Presidents and Prime Ministers.

Under JK, DreamWorks achieved what every VFX facility would consider the gold standard: A profitable stand-alone studio that owns intellectual property and produces high quality animated films with it’s own digital production unit. However what we’ve witnessed is that isn’t enough for Wall Street’s insatiable appetite for monster profits.

For a short time, it seemed everything was going to be okay with Hasbro potentially buying DWA but instead Comcast, which already has an animation division with Chris Meledandri’s Illumination Entertainment, has agreed to purchase DWA for $4 billion. This is a huge success for Katzenberg and he deserves it. However for the employees at DWA it’s a vastly different story because Comcast will subscribe to Mellandri’s feature animation production model and not the production model of Katzenberg.

The End-to-End Production Model

In my view, Katzenberg generally subscribes to a relatively successful production model in feature film CG-animation that is shared by John Lasseter at Disney and Pixar: I’d call it the “end-to-end” animation model where from the storyboard to the final comp the whole production pipeline is generally housed under one roof. The employees are treated very well with good salaries, generally longer term contracts and with some having union benefits. The management team can clearly see what works and what doesn’t and adjust accordingly. The problem is adjustments can be like turning a huge ship which can lead to overflowing budgets if you’re not looking ahead.

The Outsourcing Production Model

Another model is the traditional outsourcing model that many of you love to talk about. This is where pre-production is done by animation veterans in the US and sent to CG productions facilities in Asia like India and China where labor costs are very low. This blog has documented the results. Rhythm and Hues which went through bankruptcy a few years ago was a pioneer in being one of the first VFX facilities to send work to low labor costs locations in Asia like India. Digital Domain emerged from bankruptcy to be purchased by Indian and Chinese companies. Years later there has yet to be a satellite production office in Asia. Most recently Sony Pictures Imageworks closed their India office and the Sony hack revealed internal memos which basically validated my prediction.

It’s worth mentioning that when I worked for DreamWorks they started a division in India. I remember JK saying that they would produce their first film completely in India called “Monkeys in Mumbai”. It never happened. DreamWorks opened another production partnership in China called Oriental DreamWorks but the main reason for this isn’t for low labor costs (in fact from what I’ve been told not much work gets done there. edit: I meant working on US features, ODW is working on content for Chinese audiences), the strategy here is to have DreamWorks films designated as co-productions to allow easy access to that market.

The Subsidized Production Model

So the final model is the one that I believe Comcast will subscribe to: The subsidized production model. This is the model that Comcast will adopt from it’s leading animation producer Chris Meledandri. It’s the same model former Imageworks exec Bob Osher adopted and one that many other VFX facilities have been forced to adopt: Move your production to locations where the government offers huge amounts of free taxpayer money.

Imageworks along with many VFX facilities have moved their productions to British Columbia where the government pays producers 60% of the salaries of employees who are residents. Chris Meledandri benefitted heavily from subsidies in Connecticut where taxpayers there have paid millions of BlueSky production costs. Meledandri’s productions in France under Illumination Entertainment have received huge taxpayer subsidies there. He’s admitted that without those subsidies he would have not been able to make successful animated films.

So is there a possibility of DreamWorks moving production to subsidized locations like France?

Well it kind of already is except it’s in French-Canada where Montreal-based Mikros Animation is making Captain Underpants. I believe Meledandri and Comcast will become quickly attracted to this prospect and probably purchase a vendor in a subsidized location like Canada and make it something like DreamWorks Canada and you’ll see a very quick bleed to either move or replace employees to get that free government cheese.

So what does this all mean for an employee at the Glendale campus?

Ironically one of my post-vfx career experiences was dealing with a similar situation. After I left VFX I went to work for one of the top consulting firms Booz & Co. for about two years. It was great but then the company was acquired for a billion dollars by the 32-billion dollar accounting firm PwC. Immediately what happened was an abrupt and noticeable exodus of executive talent within Booz. A buy-and-hold period of a year is established to prepare for the integration into the larger company where retention bonuses and all kinds of positive assurances are given to current employees to make sure they complete work on current projects. Then day zero (or ground zero) arrives and everything you were told turns out to be not true. People get fired left and right and people who have absolutely no idea of what they’re doing or know who you are are making decisions where you are left wondering if you’re next.

I moved on to greener pastures but in my view I see the exact same thing happening at DreamWorks. The first bad sign is Katzenberg leaving. That gives Comcast no resistance to do what it intends to do no matter how stupid or costly it is. I know the Kool-Aid can be very potent at DWA and if I were you I would be completely skeptical of any terms of transition directed at any of you. A buy-and-hold period of about a year has been established so you have between now and “ground zero day” to pack your parachute. If ground zero day arrives and your safe great, if not, at least you are prepared. Given the landscape of VFX and CG animation production these days you might want to begin looking at the option to move to Canada, New Zealand, or the UK if you are interested in pursuing a career in VFX and animation. I’ve already heard about various senior DWA colleagues who have moved to Canada. If you’re interested in learning on how to transition out of the industry, check out this podcast I did a few months ago.

A few years ago we demonstrated in front of DWA when President Obama gave a speech there. We hoped to bring light to our effort to mitigate the effect of subsidies in the industry and the permanent cycle of worker displacement. Unfortunately we just didn’t have gas in the tank. I really felt we could have prevented what is about to happen but we couldn’t convince enough of you to support us. I wish you all the best. If it’s possible all I ask is that you kindly forward me the recipe to my favorite DreamWorks commisary dish: Firecracker Chicken.

Oh. and don’t forget to Soldier On.

23 Responses to Comcast Acquires DreamWorks Animation

  1. Timber says:

    You sell a house, it’s best not to drive by later and see what color they’ve painted it.

  2. nedwilson1 says:

    VFXSolder – Welcome Back!

    Always nice to read your blog, insightful commentary on the industry is helpful at any time!

  3. JeffLin says:

    I concur with nedwilson1.

    Thank you!

    • Jackadullboy says:

      Likewise, thoughtful and intelligent analysis ( and, I suspect, prescient). I’ve been missing the commentary lately.

  4. Dreamworker1 says:

    Your points are logical and have precedent. From my vantage point it seemed that JK was the primary reason the artists were treated so well. He had interest in the welfare of the artists and the muscle to make it happen. The Dreamworks IP is safe, but without the patronage and protection of JK, I’m concerned the artists are not.

    • Earl Grey says:

      From my vantage point it seemed that JK was the primary reason the artists were treated so well.

      The 839 contracts didn’t hurt, either. I hope the majority of employees got vested in the defined-benefit pension plan.

    • vfxmafia says:

      @dreamworker1
      Do you think Jeffrey K cares about you or any of the other people he is about to layoff……? Should have protested when you had the forum to do so…..

      • VFX Soldier says:

        In my opinion I feel Katzenberg is someone who did genuinely care about his employees. There are obvious caveats but I’ll write more about this when time permits.

  5. Steve says:

    I want to preface this by saying I have never stepped foot in a feature studio so I may not know what I’m talking about here. However, I kind of have to respectfully disagree in some aspects here. There is no doubt there will be trimming of the fat on the feature side once Meledandri steps in. But having an in-house (end-end production model) team would be beneficial for Meledandri. I think Illumination would continue down it’s current path and Dreamworks will continue down the same path minus a good number of people. The reason I don’t think he’ll do so much outsourcing is the R&D that Dreamworks has to make their feature films so technologically amazing especially when it comes down to tackling certain problems that may present itself when doing a feature (i.e: Rapunzel’s hair in Tangled or Clothes starting from Shrek and still continuing now) My assumption is that a lot of these advancements was jump started by houses like Disney, Dreamworks, or Pixar that had a need to accomplish a specific task on a feature that now helps outside vendors to use similar tech to achieve the same thing. What was it that John Lasseter said? Art drive’s tech and tech drive’s art? Something like that. Is it worth it to kick them to the curb so Meledandri can outsource? I’m not quite sure he’ll do that. I’m not sure relying on over-the-counter software will solve all problems to developing new features. All in all, I think this deal is a good thing for Dreamworks in various aspects of the company as well as lowering cost of the feature studio. I’m probably naive in saying this, but DWA hires top talent who does their job very well. The problem, I don’t think, is in the talent pool. There might be too many cooks in the kitchen weighing in how something should be prepared and money is being blown because no one is putting the hand brakes on it. Meledandri makes great films and if he is involved, hopefully, he’ll outweigh various opinions that would otherwise waste money or steer a ship in the wrong direction.

    • VFX Soldier says:

      Yes, technological advances were key drivers for Pixar, Disney (Rapunzel was a Disney production), and DreamWorks but others have quickly caught up.

      In my personal experience, I’ve found technology at companies like DreamWorks a bit cumbersome and behind the times: Many tools are legacy based and trying to change that at such a big company is very difficult. It also requires keeping the owners of those tools onboard in case fixes needed to be made.

      Companies like Animal Logic and Imageworks are vendor-based VFX companies that are sort of forced to be on the bleeding edge and updating their technology constantly to win bids. For companies like Disney, Pixar, and DreamWorks that have longer runways for production and substantial profits, the urge to update tools to the latest and greatest isn’t as pressing an issue as with VFX vendors.

  6. Brandon Boogaloo says:

    Isn’t Meladandri’s whole way of doing things being on the cheap? This is kind of a disaster scenario for the artists right?

    • Steve says:

      Well, the article says this:

      “He’s admitted that without those subsidies he would have not been able to make successful animated films.”

      Is he about being on the cheap side of production or he didn’t have the means? Now he has all the tools in front of him.

      • VFX Soldier says:

        Illumination (Macguff) along with Sony (Imageworks), Warner Bros (Animal Logic), and Fox (BlueSky) all have had the tools and the talent. The difference is these companies have been able to lower the costs of productions by utilizing free government money.

        Before this post, British Columbia offered to pay 58.4% of resident salaries. They’ve cut the program by about 4.4% because it costs $500M last year. While that’s small, the problem for the artists is you are at the mercy of a politicians decision on how much free taxpayer money they are willing to offer. If the program ends, artists will simply be forced to move to the next location offering subsidies.

        This is what this blog has dubbed “the permanent cycle of displacement.”

      • Brandon Boogaloo says:

        So you are saying this is just going to be a matter of the Comcast beast floating the bill for however long they can balance out profits? What the estimated life of this operation? Place your bets below, lol.

  7. Josh Evans says:

    Welcome back, I’ve certainly missed your insight! I agree completely, it’s too early for full on panic among Dreamworks staff but the smart ones are already applying elsewhere…

  8. LSP says:

    Hey Soldier! I’d like to echo the sentiment – a very warm “welcome back”! Your input has been missed, thanks for your insights and glad to hear you’ve been keeping well after leaving VFX.

    Thanks for linking to the podcast, too – it was interesting to hear, there are a lot of parallels with your struggle with ADAPT and our push to unionise VFX in the UK right now. And cheers for the shout-out to us at the end!

  9. Brandon Boogaloo says:

    Whatever happened to that Eric Kohler from Hydraulx? He said he was addicted and went into rehab. Addicted to what, VFX?

  10. John says:

    As a Jr. Level my sector of the industry is hit the hardest. Previously, all grunt jobs (Roto, Match Moving, Stereo Conversion) was done by Jr. Levels. Now all that work is sent out to Canada, India, and China. Not to mention, while most Mid to Sr. Level Artists can move to Canada, Australia, etc. Jr.s don’t have that option. No company would relocate someone who can be easily replaced by a Canadian citizen. Not to mention, when work becomes scarce the industry cannibalizes itself and Sr. Levels take Mid Level jobs, Mid Levels take Jr. Level jobs. I’ve witnessed this first hand, Mid and Senior level artists well into their late 30s taking internships with 22 year olds. I myself have had to take on a few odd jobs in Assistant Editing, Graphic Design, Quality Assurance and even a few internships to get by. I’m not sure whose spot I’m taking, but the effects of these subsidies are spilling over into other industries not just VFX.

  11. vfxmafia says:

    Time For An American BREXIT? END NAFTA…

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