A way forward for the VFX industry

VFX: Is now the time to rethink this billion-dollar industry?

Currently in downtown LA, in a renovated top floor, there is a movement to discuss and perhaps evolve film VFX production, in other words to re-invent the business model of how film’s visual effects are made. This is not a side discussion, it has started at studio level, with Oscar-winning visual effects supervisors and senior studio production executives. It is not a fight or a protest, it is simply a business based discussion that could be framed as “there has to be a better way”… and answered with a model transposed from outside the film industry. It is as simple as it is radical, but it requires a whole new approach to filmmaking much more reflective approach one might call ‘visual development’.

The problems facing the visual effects industry are serious and complex, as seen by the number of companies failing on razor thin margins to maintain their businesses and are either closing, or consolidating. From extremely high profile companies such as Rhythm & Hues at the very point of winning a VFX Oscar, or Digital Domain restructuring, to companies that are less well known such as Look Effects closing. Between 2003 and 2013, 21 visual effects companies closed or filed for bankruptcy, yet of the 50 highest grossing films of all time, 49 are what one might call ‘effects films’.

The model is being advocated by Ben Grossmann and the team at MAGNOPUS, but they are quick to point out this is not a solution that is centered around their company alone. They would like to advocate the change, but they hope other companies will adopt, embrace and use the new approach. They may be the advocates, but VFX is a collaborative sport and they seek broad discussion and involvement.

What is the new streamlined and potentially long term business model? It owes much to manufacturing production outside the VFX industry, to understand it one needs to summarize the problems facing the industry.

Inventing the future

While companies do large amounts of visual effects work that is repetitive and well understood, there is a significant body of work that involves inventing new techniques and processes. One hallmark of visual effects is the notion of producing something no one has seen before. While effects can be deployed just based on cost savings (for example removing signs digitally in a street, instead of manually during filming), VFX are often used in spectacle. The effects may be invisible or extremely obvious to the shot, but many award winning effects are classified as such due to their originality. While most companies prepare quotes as accurately as possible, it is often hard to bid a look that has yet to have been developed. How long will it take to produce a new creature that is ‘unlike anything anyone has seen’? How long will it take to make an ocean react in a new and magical way to that creature? This research component can be reframed as a risk component, given that the visual effects company will unlikely be given an explicit R&D budget, it must factor in a component of research costs to the overall bid. In a real sense the VFX company assumes that on a bid of size X, there will be enough value in the bid to cover this unknown amount of research and development.

While this approach could work with healthy margins, the competition in visual effects is so great that it is unlikely there is much scope for padding the bid. There is also another unexpected side effect from the producer’s point of view. Unlike other departments such as set construction or wardrobe, the VFX bid becomes an opaque large number. It is not broken down on hours and materials. The producer must accept the bid without fully understanding the internal numbers that generated the master figure. They are not invited to see a line by line costing, since the VFX house believes R&D along with many other ‘normal’ non-shot related costs would be rejected by a client. These other costs include archiving, system admin functions, networking costs and training, to name a few.


What is Visual Effects anyway?

Following on from the point above, a producer is both unable to see the line by line item costs of a very large part of their budget. They also assume perhaps that the visual effects are the digital equivalent of the previous physical effects, but now done in the computer. The problem with this view is that the visual effects budget covers much more than any special effects budget ever did.

If we assume a period action cop drama, set in some early part of the 20th century in an urban environment as a mythical example, then what is effects and what is actually modern filmmaking?

For example, if there is a complex scene where there is a gun fight for example, the line item of Visual Effects might cover:

– gun flashes – replacing traditional physical effects for reasons of safety

but also it might include:

– removing modern signs, set extensions etc which might have been art department previously.

…and this is not an isolated example.

It might cover a wide shot of the city, replacing traditional glass matte painting effects

…but it might also include:

– wardrobe fixes (costume)

– fly away hairs on the leading lady and digital tattoo removal (hair and makeup)

– adjustment of street lighting (lighting department)

– camera shake removal and slight reframing (camera department)

– combining of two takes into one (editorial)

– falling shot dead guys (stunt department)

– crowds scattering in the background (casting, 1st AD, costume, etc)

– sky replacement (color and lab timing)

– etc etc

In the one VFX category which will run to tens of millions of dollars on a Hollywood film there are actually multiple departments being serviced, of course one of them is effects, but the move to increased budget size has not lead to greater control and influence by the visual effects team. It has lead to less understanding of the financial breakdowns of modern feature film production. In an absence of knowledge, facing an opaque VFX bid, the producer can only seek to lower the overall bid. If VFX represents a vast percentage of the budget and companies will aggressively bid, the role of the producer is to seek to lower one of their largest single line items.



Pre-purchase evaluation of visual effects is not possible, the VFX are effectively an intangible service at the time of awarding work. Visual effects companies bid based on the script or bidding materials, and while they may do a test, there is enormous variability, inseparability and intangible servicing of the directorial vision. The lack of a tangible product to judge and compare between is a problem for producers and VFX suppliers alike. This intangibility means producers are forced to judge on a range of quality indicators which are secondary to the final product and bundle the work into a unit that competes much more heavily on price than if the final product could be viewed, tested and evaluated before committing.

For VFX suppliers the intangible product issue increases risk, as they struggle to produce what is wanted, or even learn (divine somehow) what is meant by various notes often handed down second or third hand from the source (director or studio to production supervisor to company supervisor to artist). Not being able to meet expectations has a unique problem in the visual effects business. Given producers can not gauge the final result, they can be heavily influenced in awarding work based on how well they were serviced by this firm on a previous project. As the film industry is dominated by only seven studios, VFX suppliers are mindful of the need to meet the unknown expectations of the director and the studio, or risk losing the next project. With a very limited number of buyers and a very large amount of suppliers, the intangible nature of effects makes it hard for suppliers to dictate when the client has moved past a reasonable level of revisions, and additional fees should be charged as overages. Trying to charge overages too soon may seem unreasonable to a buyer who has yet to see anything matching their expectations, and who will be asking for bids on other work, even as this project is still in production (post-production). For example, R&H’s three largest customers, Warner Bros., 20th Century Fox, and Universal Studios, represent approximately 97% of the company’s gross revenues over the last three years according to court documents that were released.

‘Fixed’ bidding

Strictly speaking, VFX work is not normally actually a full fixed bid, in fact “the Studios have frequently said they don’t Fixed Bid, and technically they’re right,” explains Grossmann. “They get a bid, and then they approve overages after a process of natural resistance.  So to their defense, they almost always change the final cost of the work to match the scope as it changes, but what they’re really trying to do is contain it to a ‘budget figure’ through horse-trading”.

The term is actually in part a vendor issue, VFX providers are often not being fully transparent about where the costs are coming from (either through inability to quantify, or from an unwillingness to share that information – see below.)

If one is to look at the bid from the studio’s perspective, then the studio should be saying “things have changed, tell me how that impacts us.” And the vendor embarks “on a slow, complex process of trying to figure out “what’s different about the assumptions and projected work involved with the change, and what money has been wasted so far on things that no longer apply.”  Both of those are hard enough, but are made harder by the reality that they probably don’t even know how many man-hours actually went into wasted work, and also probably don’t have a clear vision for how much work will be required in the new direction,” explains Grossman.  Usually the process of “figuring this out with even a 75% confidence takes longer than the vendor producer has to return the ‘change order’ and so a collective ‘ballpark guess’ materializes, and is probably negotiated and agreed to,” adds Grossmann.

VFX work is, of course, funded by the studios who commission the work. While it is the artists who do the work, it is the VFX facility that both manages the pipeline, often times the greatest aspect of the company’s IP, and they also manage the financial bidding, quoting, producing and billing of the work. For many years the preferred model has been a fixed or at least rigid quote, meaning that the work is not hourly or materials plus costs, but bid out on the basis of either a script, storyboard, treatment or previsualization of the film or parts of it. Unlike almost every other part of the film making process, the VFX company or facility is only paid on delivered work, and like only the director and the producer – they are not paid if the work shifts in schedule, is delayed or work cancelled after an agreement has been reached.

The analogy of a house construction is often cited. The VFX studio agrees to build the house using the land provided, for a fixed bid, but suffers adversely if the building is delayed, ground preparations reveal more work is needed, or if the rough design of the house changes. This last point is very complex to appreciate. How can a bid not be open to creative changes? The answer lies in that fact that the bid is asked to assume the ‘blue print’ is roughly, not exactly, what is required and that given the process is both fluid and creative – ‘some changes are inevitable’.

Digital Problems

The problems facing visual effects companies are also digitally embedded. While less frequently discussed, the move to digital visual effects, and the age of rapid high speed digital file transfers has lead to a reduction in barriers to entry. It is possible as happened on the Oscar winning Hugo, where Pixomondo did a large amount of visual effects. As fxguide documented at the time, the workflow the company used allowed a shot to be worked on continuously around the world. One extreme example cited in the fxguide story was a shot turned over in New York from editorial to Pixomondo. An EDL would be sent to their LA office, where material was pulled and put onto the servers. The Beijing office would then start matchmoving the shot in their morning, and Shanghai would do modeling adjustments needed on the base geometry based on the onset LIDAR scans. By the time they were complete, the European offices would be coming on-line and the Berlin, Frankfurt or Stuttgart offices would contribute based on the skills needed (Berlin – effects animation, Frankfurt – character animation or Stuttgart for compositing). Later that day the London office would pick up the work and put it together into a shot or hand it onto Toronto. When it was done, the Los Angeles office would be ready for reviews and possible inclusion in the ‘days’ work to be shown to the client.

The same technology that allows one company to move a shot around the world, allows multiple companies to outsource or distribute work based on skills and going rates.

Digital visual effects, compared to traditional special effects, are also seen as being nearly infinitely flexible and thus able to be revised over and over again. If there are only two miniature models built for a practical explosion then to do a third take is clearly more cost and time. If the second revision of a digital explosion simulation is not right, it is almost always assumed it will be re-rendered or re-simulated until the correct creative output is agreed upon. The hard costs of equipment electricity, staff costs, air-conditioning on vast render farms, rent, and even depreciation are not seen in the same way as a crumbled miniature model on the sound stage floor.

Grossmann adds: “In physical explosions, it’s rare for a director to direct the nuanced details of an explosion and the way it moves because ‘It’s real.’  In digital production, because you CAN, and because ‘what’s real’ becomes a subjective debate, a director can transform ‘What he wants’ into ‘what’s real’ for the purposes of keeping the work going until time runs out.”

This situation is one of the VFX industry’s major time sinks and a real budgetary problem. Almost every VFX facility ends up with some of this on almost every show, of course, some directors are more notorious than others.

“The ‘what’s looks real’ vs. ‘what I want’ is huge,” says Grossmann. “Heck, a lot of the time we do things practically just because of that mental commitment that comes from the director when he shoots something practical.  ‘What I want’ becomes ‘That’s what I got and I’m prepared to live with it’ as a subconscious acceptance in the director’s head.”

Artist issues

Artists work extremely long hours without job certainty, often without benefits or even permanent employment. A visual effects artist working in feature films in particular is likely to be an ‘independent contractor’, working as a global digital gypsy moving from project to project far away from the glamor of what one might call ‘Hollywood’. While there has been some movement on solving the illegality of such staff ‘re-classifications’ in some countries – it is far from solved globally.

There are many reasons for the problems and there is unlikely to be any silver bullet that will immediately or fully solve the problem, but it is clear a new solution should be explored.

While taking nothing away from the corporate structural problems, there are business problems that have been also discussed. Some of these include:

– complexity of bidding and shifting shots

– fixed bids vs issues of overages

– creative goals that shift and are ill-defined at the outset of filming

– shorter deadlines without scope for R&D

– the high cost of versions or revisions in zeroing in on a final shot (look)

Possible Solutions (or are they?):

Various solutions have been suggested for solving this, some solutions rely on increased subsidies such as the $330 million recently signed off by California Governor Jerry Brown, to match subsidies in Vancouver BC or Montreal in Quebec. Still other solutions seek to abolish or minimize the impact of these subsides, with import tariffs much in the way other industries have sought to adjust government endorsed trade imbalances – see below.

Equity in the VFX films: ‘gaining points on the backend’

Another often mooted suggestion is VFX companies seeking equity in the films they help make, or ‘blue sky back end points.’ The theory being that the firm would then at least share in the great rewards that blockbusters deliver. Unfortunately the track record here has been not good:

• Sin City 2 : Prime Focus (~$19M investment) – film did make make top 5 on its opening weekend

Ender’s Game : Digital Domain (~$18M invested) – film only did $61 million US gross domestically

• Pan’s Labyrinth : CafeFX

• Yogi Bear, Hop, Seventh Son and The Golden Compass : Rhythm & Hues – none of these were huge B.O. hits

• Rush : Double Negative – film only managed $27 million gross domestic US

ILM is believed to have investment in Rango – significantly, that is a fully animated film with a domestic gross of $123M US. As will be discussed below, animation might be considered very different from live action VFX.

Thus far, an equity solution has not proven to work for a VFX studio, and it is worth noting that these equity considerations are not gifts, they are given in place of other payments, thus even if they were returning the investment made, they would represent a major cashflow delay from completion to payment. In effect, the VFX company is financing or bankrolling the film, in the same way a bank would on a loan. At its core this requires deep pools of capital, and the ability to spread that risk over a portfolio of committed projects.  That’s the heart of all Hollywood film financing, and it is something VFX houses have rarely had, if ever.

Trade tariffs

While trade limitations would ‘level’ the playing field, “tax credits and subsidies have made the issues of the VFX industry really hard to ‘see.’ They really prevent global “apples to apples” comparisons, explains Grossman. “Companies in tax incentives areas might be significantly less efficient at doing a certain type of work, but be significantly more profitable because of the incentives. And what’s more challenging is the “soft-money” component:  Even though I might get the work done cheaper in China on the bottom line, the decision might be made to send the work to a tax Incentive area because I can sell the tax credits in advance for 80% face value and use that capital to pay for production costs.”

Trade tariffs, if imposed, would certainly result in counter-moves by the studios to mitigate their exposure. Simply having tariffs wouldn’t make the “end of the day” picture any more clear for the people trying to make viable vendor financial models. This issue speaks most strongly to the movement of visual effects work around the globe, and the unsustainable nature of an industry in any one country if built on subsidies. Once the subsidies are lost or bettered then it is reasonable to expect the work to move to follow the better economic model. There is little research to suggest that a temporary substantial subsidy will enable a growth industry after the loss of the incentive.

Why would the loss of an economic incentive or advantage not logically be a disincentive to produce work in a region. If an incentive is assumed to attract work, logically the reverse must also be true, given the technology involved and lack of barriers to global entry/global work location.

However no matter what happens with tariffs there will always be currency, cultural and political reasons why work will not be able to be produced internationally and there the issue does not address many of the other structural problems. It may be a great issue to address but alone it will not make VFX a more profitable business, it can only remove market aberration.


Much like trade tariffs above, the case can be made that organized labor would be able to better service and protect the needs of a group or workforce, through collective bargaining and by removing the marginalization of any one individual who has tangible labor issues. But just above, this will not solve the structural problems of the industry, it may address fairer working conditions or more standardization but it will be geographically confined as most if not all unions who work for specific labor conditions do so inside the national labor laws of their home country. Unions may align internationally but it is much rarer to have labor disputes in one country spill to organized labor negations in a second country, it is possible but for sensible reasons of charter and membership, unions tend to be nationally bound. This is not to deny that there are many issues in the VFX industry and the USA in particular that might be immensely helped by unionization, health care benefits for example is one important such issue.

Trade organization

A third possible solution that is not mutually exclusive is the formation of a trade organization which will advocate a more balanced relationship between suppliers and the studios. A trade organization can take many forms, some resemble unions at a company level, others lose alliances with little in the way of explicit power to negotiate for concrete change. Such a trade organization may also face the issue of national boundaries such as when the VES, a nominally international body came out in favor of Californian subsidies against the interests, it could be argued, of its non-Californian members not only in places such as London, Canada, New Zealand etc but also their inter-state members in places such as New York etc.

Given the large number of potential suppliers and the ‘buyers’ market of limited major studios, it is unlikely that many of the structure issues involved in bidding, revisions, margins and sustainability could be solved entirely by any trade organization.

Again the problem is complex and any of the three solutions listed above – unions, trade organizations, tariffs and perhaps even equity – could all contribute to improved health in the effects business, but there is a very different approach: a radical change in the business model.


The New Industrial manufacturing Model:

VFX Visual Development

How is it that some animation companies have prospered while their VFX cousins have done so poorly? Clearly there are patchy issues in animation – Dreamworks Animation has had a run of films that have been lackluster, while at the same time Disney Animation along with Pixar have prospered. But on balance the CG animation industry is thought to be in better shape than VFX overall.

The concept may seem radical at first, but if you bear with it, the new system will seem almost obvious.

The fact is that filmmaking has been moving to more of a manufacturing production model anyway. Effects are now common place and yet as visual effects artists, there is a seemingly automatic rejection of considering our work as being something that can be done inside such a model and still be creative. But what if that is not true, effects are extremely complex but so much more of the gamut of effects leans to evolution than complete invention. Once could argue, the hardest thing left in VFX today is making a profit. If we assume then a manufacturing model would work, what would need to change?

The easiest answer is think of a creative large scale manufacturer of high tech good. Let’s pick Apple Inc.

Apple is an intensive manufacturing company, yet still a creative company. As we saw last week, the company innovates, it is stylish, it is profitable and it uses a manufacturing model for doing business.  Apple ‘makes’ things, but it uses other companies to do it, but it owns design, prototyping and quality control. It does this by solving the creative problems and then getting companies to make X million of say this new prototyped product. It does not contact a bunch of outside companies and ask them to bid on some new type of phone or watch that no one quite knows how it will look yet! It does not ask for ballparks to make an iPhone device that is amazing and incredible and will sell millions but no one can even accurate draw yet. It makes a phone, or it makes a computer, and it solves design details. It gets bids and contracts to meet those specifications  and Apple works closely with outside component suppliers:  (graphics chips, CPUs, SSDs, etc.)  to inform their internal R&D.

You can only hold suppliers to detailed specifications if you have solved the design details, sure a problem may come up, or a part may change, but then this would be solved by Apple’s engineers and designs with the supplier. The supplier would not be expected to just redesign the next iMac until Johnny Ives liked it, or until Tim Cook had run out of time before the launch date and thus had to ship it as it was. Apple investigates problems well before, way before – anyone sees a final production Apple product. And critically it knows exactly what to expect, the costing and process are not opaque to Apple. Apple knows how the darn thing works, it has manufacturing PhDs on staff, it does not just hope the next product will connect with audiences, it operates to be successful, and works with its suppliers.

Interestingly, Apple, who through its suppliers employs hundreds of thousands of people, managed to have 95% of their supplier’s employees work less than Apple’s allowed maximum 60-hour workweek (the average was 50 hours). Would that be true of 95% of VFX workers on major Hollywood films? Yes, many of those Apple suppliers are in China (349 suppliers), after all, Apple manufactures consumer electronics, but 139 are in Japan, 60 in the USA, and 42 suppliers in Europe. Not that there is a direct 1:1 comparison to be drawn between consumer electronics and visual effects, but some of the parallels are interesting.

How different would VFX be if, when bidding work, a VFX house was given an example of the final look to match and work to, recommendations on how this should be done, the details thought out of how it will work in practice and no ‘but it could all be different depending on the shoot’. What if one could bid the actual number of shots, and the actual complexity of them, using whatever pipelines you have in-house but with a very clear example of exactly what is wanted?

Unfortunately, it is not that simple. For a studio to do that, for a movie to be produced in this way, the VFX line item on the budget would not be opaque to the producers. For this to work, the VFX house – like the Apple supplier in real world manufacturing – would need to discuss actual costs per unit, and justify detailed costings. Not that this is unprecedented, the camera department do a budget with the rental company that the producer can review down to the tripod. The wardrobe costs are not packaged as a ‘deal’, the lighting budget often includes lighting gear, staff and even the burn times on the lamps. But the upside is, if you ask for an additional Softsun 100K light, the producers pay the $1500 fee and they don’t expect to get three additional lights just in case the director changes his or her mind. The lighting department also itemize their crew costs and their overtime costs. This is not just a union issue, although in some markets the union does actively help enforce such issues, it is more a product of setting up the project in pre-production and committing to what is wanted, while allowing the producer to decide that in fact they will have no Softsun lights and if that decision is wrong, the gaffer will not produce four anyway based on ‘fat’ or wiggle room in their department’s budget. 

This also means that each manufacturer for Apple, or each gaffer truck, gets to compete on a level playing field. The desired result is known and the budget is itemized, broken down and transparent.

The new model introduces a more advanced visual development team around the studio VFX supervisor and or director. “Importantly, it’s a team that they’re paying for, so there’s no conflict of interest.  The producers can weigh in about the expected total budget that the film can support, and the creative can explore in any direction they want to, within the limited set by their producer, not by a VFX vendor,” explains Grossman. This new entity would develop projects on a development budget and determine if the look is desirable and cost effective for the plot and target audience for the film, before principal photography.

Once visual development is done and agreed on – the actual work can be bid. Say three VFX houses might be invited to bid and they would be working on “here is what you should build, here is what you should do digitally, and here is how much we think it should cost (they know as they just did the shots to hero finals before bidding)…plus here are the assets, here are some production tools or scripts we developed during the visual development process, this is what we want, this is not a vague idea of what we want, this is what we want and this is how long it took with our people, tell us how long it would take at your facility, in this timeframe with this context? The bids back would be itemized and transparent, showing labor costs, hours and all fees explicitly.  And most importantly, in conjunction with reels & resumes of previous work, this can be used to clearly identify where one vendor is more efficient than another at a certain type of work. No VFX vendors are equal,” explains Grossmann.

Why would this not work for VFX?

There could be many reasons, but let’s examine a few from the points above:

1. We need R&D to work out how to do these things and wiggle room to solve the creative problems

In this new manufacturing VFX process, this is solved either by the new form of pre-production/previs/design prototyping, or it is separately bid before the main bid is agreed to and signed off on. There is nothing wrong with a design company building rapid prototypes and proof of concepts that a third company will execute. Specialization such as this is common in manufacturing, but more importantly with previs we are already half way there, the sequencing is just not right, previs happens does happen but it is not aimed at solving or even costing final sequences. Previs currently serves a different purpose. “It has to answer two different production questions, ‘What do we need to tell the story?’ and ‘What do we have to build for for our shoot?’

“I would say that it also sometimes involves a third question,” adds Grossmann, ‘What does the VFX company have to build?’ but I feel like frequently that’s where previs falls apart and what needs to get built in post is not what was previs’d.  Sometimes it’s exactly the same, a lot of times it’s not.” If your previs has no objective of making a blueprint for large scale production, it is hardly surprising it can only be marginally helpful in this regard.

Normally R&D, complex asset look development and creative changes have to be partially hidden in pre-shot costs. Yes, it is true a studio bid will contain ‘asset builds as a line item, “But in practice, this money isn’t really going to cover the R&D that’s actually going to happen,” says Grossmann. “It’s going to spill over into the shot costs, so that’s where a decent amount of it gets ‘tucked away’. Because if your R&D budget gets trimmed, you’re going to try to make up for it by trimming from your shot costs. That is also partially the reason why shots are packaged. To unpackage them a VFX company needs to:

• not fatten the per shot costs to cover inevitable changes

• not hide unsexy costs like archiving and asset development

• expose labour costs, and

• not have fixed bids.

2. Time. No studio will spend the time to do this

Actually while studios are relatively cost adverse,- some of this is already done anyway. Surely one could argue that a highly developed Comic-con teaser reel is very close to this model, with the exception that the bids are not tightly linked to the teaser and the VFX quote is not broken down or open. With hundreds of millions on the line, studios have already indicated that they want to see what the film will be like earlier not later.

In this model the VFX visual development  phase would resemble script writing. Projects would be look designed before being green lit. Once the film is green lit and funded then time is money and it is a race to get the film made and cash outlays recouped as fast as possible. But before the film is green lit, this would help decide what should be green lit, how much it will cost, and how long it should take. It would be development money which is already being spent, and often on projects that are not then green lit and filmed.  Let’s not forget films can kick around the studios for years before being green lit. Time is only short once the film is fully funded.

3. Big effects shops will never go for it

That could be true. This model may not work for the rarefied space occupied by Weta or ILM, – after all at this level the VFX houses are hardly guns for hire, they are more of ‘digital production companies’ (ILM + Star Wars / Weta + The Hobbit) but for every say MPC who perhaps might not be interested, there are a dozen of other smaller companies who would welcome no doubt a low risk bid and work schedule. This model would also allow for specialization. If you break down the effects before the film is green lit, you can farm out specialist shots to specialist companies. At the moment there is risk in this, if the shots change a lot then the very specialty that was quoted for, may not make the filmed sequence, but in a more tightly bid system it would, and if the shots were cancelled, there would be a cancellation policy. The work is no longer a rough guess, it would be a refined bid.

4. It does not fix subsidies

It does not. If a government wants to pay for an industry, it can normally distort the free market with heavy subsidies. Just like subsidies to film principal photography in Canada and double Vancouver for New York. If the subsidies are there, companies will work to take advantage of them.

But it does make it more transparent where the subsidy is having an impact and where it’s not.   And it might provide some relief to people that aren’t in tax incentive areas because you don’t have to be doing “the whole show” in order to be doing an important part.  For example, says Grossmann, “the studios I’ve spoken to have indicated that they’re willing to forgo the rebate in order to work with a smaller team of people close to the director, or specialized in a specific style or technique, or in development, because the savings wouldn’t amount to that much.  It’s the volume shot production where they really need that rebate to kick in.”

5. Producers don’t understand VFX

It may be true that most producers might pull up on the details of spectral rendering or sub surface scattering or complex motion capture face rig editing. But they can understand labor, electricity, capital costs and much more, and “’VFX People” or ‘Digital Production Artists’ are surprisingly similar to their ‘Production’ counterparts,” jokes Grossman. And do senior film producers need to understand SSS algorithms any more than they understand the contents of hairspray or the reason this light needs 3 phase and this other one does not? Is it not enough that they see what these lighting packages do…and this is the cost of that? Producers, -real producers-, are wizards at spreadsheets and budgets, as much as we pretend our craft is ultra high tech beyond mere mortals, the basics are the same as any of the other crafts. Few producers understand why the LED spectral profile of the cheap lights are not going to work, they just hire good professionals who say that the cheap LEDs will not produce the right look, and who are willing to shoot tests to verify that if asked. Could we not do the same?

If a producer understood that re-doing a shot was $50,000 not because we just say so but because they can see the Deadline equipment summary on screen that shows the X hours of animators, computer rental, disk space, electricity = $52,450 (and here are the rates that went into that equation), don’t we think they would feel better about the $50,000? If you can not break down a number it seems arbitrary. No producer is just told that the shoot is $250,000 a day, they get to see where the money is going and use their professional judgement if that is going to make the best use of their budget in bringing the film to the screen. Maybe that $50,000 will make all the difference or maybe half as much and an extra stunt scene would be more effective? But at the moment the figure is just $50,000 and the only way to reduce it is to ask, beg or demand a discount.

6. It will cost more to prepare than it does now

Actually at the moment with the schedule of a film – when fully green lit – as crazy as it is, most of the start of a film is taken up with putting out fires and tying together information. If you have been involved in film production meetings as a VFX person before filming, it is answering questions, trying to collect and find out what is happening and when, and finally trying to understand what is wanted. There is little time to suggest ways to save money, or suggest ways to work more effectively, partly as it can take too long to go away and answer how long and difficult a VFX solution would be. The challenge for VFX is the pre-production phase is that there are normally just two VFX representatives in the room, a supervisor and a producer, and it is hard for them to come up with numbers quickly for a complex challenge, that usually gets done’later’.

“When I’m at my most effective for the overall budget,” says Grossmann, “is when I can look at a situation and say ‘how much is that gonna cost you to build/shoot practically?’ when I can in my head know how much time it would cost to do it digitally. The easy example is when you’re on set and they ask you if you need to hang a green screen in this new area the camera is suddenly seeing, or if you can roto it.  I know how much our set day costs per minute, and I know how much VFX artists cost per day, and when the gaffer and grip come tell me it’s going to take 20 minutes to hang a green, I can translate that into man days of roto and say ‘we need to do this’ or ‘forget-about-it, we’ll roto. Let’s shoot.'”

It is crazy and the dominant thought can be ‘we’ll fix it later’…some VFX producers have commented to fxguide that there is no time in a typical eight to sixteen weeks of pre-production to do much more than hire coordinators, sort out computers, offices, get concept art, and responding to every other department.

“It becomes a receiving department rather than a pro-active department that goes out and works out how to save the producer money,” explains Grossmann. “There is no time to say “here are the assets you’ll need, here is how they will look, here is how to assemble them.” The VFX team in preproduction are left saying “well yeah sure we could probably do that and here is the least destructive way to do that”.

And then once the film has been shot, after the imagery is committed to, people will work out exactly how to make a shot work, even if that is perhaps not the best shot or the best approach. This can translate into re-shoots, and it most often means unexpected and most often unfunded, overages or re-dos for VFX vendors.

This new plan involving visual VFX development would allow producers to see that maybe an idea on paper was not working on screen and fix it in the script, not in post.

As VFX can solve so much and do so much should it not be given a chance to work its magic before principal photography? The idea of ‘visual development’ before a film is green lit could save not only money but perhaps help a film be made better. Producers need to see the raw material costs, labor costs with transparency. VFX houses need exact bids and work like a manufacturing supplier.

For non VFX producers the question must be “where does the money come from in this new structure?” Grossmann says it happens every time.  “They love the concept, they agree with it, it feels very traditional, but it’s new.  So they ask how money flows in this system”.  

Grossmann says the team has tested the idea of making VFX an extension of other departments in Prep.  “So in one case, we were billing through the Locations department budget for concepts to further locations they were considering, and for previz that we did to show both on-screen visuals and logistics planning.  We’ve also billed through the Art Department for development work that was just beyond the scope of their capabilities, and because of our capability and proximity, evolved into using the VFX team to do design work and planning that wouldn’t even involve VFX in the final implementation.  It’s very cool to see the barriers between the departments come down like that.  I can already see where these departments will have their own “VFX capable people” in the future”.

It’s easy to say that there should be a separate visual development budget much in the same way there’s a story development budget.  But the question that’s come up that’s harder to answer is “I get that logically it makes sense to spend money up front in order to save money on the backend, but making that happen will not be easy.

7. The director will hate it

That is possible, but it was the director who created the look and style, so for some once they are on set it would be very helpful to know what they were doing. It would be helpful to be filming to their vision a reality, and not filming with the only the hope that this will turn out well. In the past some directors liked detailed storyboards, some did not, but for those that did, it can mean they can focus on the acting and the performances and not on the complexity of guessing how things might work technically.

“So far, with directors, the summary I hear is ‘You mean I get an Art Department with full VFX capabilities early enough on the project that I can spend time with them experimenting on the film, even on things that might not become VFX in the end?’  What would I not like about that?,” says Grossmann, from first hand experience pitching the concept to a range of senior experienced directors.

Directors can now rely on their own judgement – made at a time when there was time, and not in the middle of a midnight shoot on location in the cold with a vast army of people wanting answers and the move on to the next setup.

8. Money = labour 

It has been pointed out by more than one key industry expert that the elephant in the room for this discussion is that Labor costs are the most significant part of the VFX expense.  People say 70% of the costs are directly spent on labor, fxguide knows of projects where Labour accounted for 80% or more.  But ultimately this approach and all approaches are really about trying to use labor more efficiently in order to reduce costs while producing great films.

The reality is that any artist reading this can attest to major wastes of their time on shows.  fxguide hears about it constantly. People worked for months on something that got cut, or spent months more wandering the desert in search of creative on a sequence.  Or waited weeks for feedback, etc.  And all that amounts to artists wasting their time (which they don’t like regardless if they’re getting paid for it or not) and time costs money. Big money.

Because it’s such a big part of the “financial problem”, studios have sought to leverage market share to drive labor rates down, or keep them low.  Obviously then, the easy way to try to have an impact on your budgets is to negotiate down the rates on the major item that accounts for 75% of your total cost.  What’s harder is making that labor more efficient by giving them faster computers and resources and pipeline efficiency.  And even harder still, by giving them clear direction and fast feedback.  That’s a key part of this visual development approach.

Note that Time & Materials isn’t always good, and Flat Bids or “per unit costs” aren’t always bad.  

There is no one solution to everything, and that is true here too.

Time and Materials can be tricky unless the labor and resources are tightly managed, “so you know exactly what people are doing, what they’re working on, and what they’re using to do it” explains Grossmann.  In addition, knowing one’s overhead ‘exactly’ is critical to determine the edges or ‘fringe” costs in a time and materials model.  “We’re notoriously bad at that in VFX.  Plus, Fringe costs get “attacked” right away in a negotiation, so it’s hard to defend high fringe costs for a specific service you’re providing, if your overhead is being calculated inclusive of a much broader array of services”.

Flat Bidding isn’t so bad if one is competing head-to-head with other companies where the objective and comparison metrics are clearly defined.  “This lets a company that’s “more efficient” reap the financial benefits of having lower internal costs than the “market price.”  But it’s terrible when the scope of the work is vague or the objective tends to change drastically”.

Because all of these various scenarios are playing out within the structure of a “VFX Vendor”, it’s not easy to switch financial models depending on the scenario.  But each movie can have both scenarios.  “In essence they all kind of lump together to create a “risk portfolio” and once you do that, you can’t target changes in specific costs or shots, or sequences without jeopardizing the stability of the whole financial system. In essence what we propose is to take these different types of scenarios and assign them to different types of teams or vendors, under the appropriate financial models”.

Will this work?

It already is, or starting to – several films have already tried and liked it.  As we write this MAGNOPUS is finishing an impressive special project short film for Director Martin Martin Scorsese, which they budgeted and then executed in a time and materials model, and took that approach with some of their vendors, where appropriate. They also did some flat weekly cost for a specified crew size at the vendor. All of it was an experiment to see fo the company to see what the challenges would appear with each approach. Ben Grossmann and the team at MAGNOPUS have been working with a set of Hollywood studios to implement this actual model. And they are starting on another time-and-materials project for a major VFX movie right now, which is very much a “development” project, and thus it lends itself well to billing actuals on labor plus fringe and equipment rentals.


The talent team at MAGNOPUS runs deep, Alex Henning and Rodrigo Teixeira are partners in the company and have been key to developing the ideas in this article and applying them to the company’s test projects. Craig Barron (formerly of Matte World Digital, & Oscar winner for Benjamin Button) is also a key creative; Magdalena Wolf, member of the Producer’s Guild, has brought a VFX producer’s perspective to the discussion, and there are many other senior artists on full time staff and working to explore the concept.

While MAGNOPUS is well placed to be a design effects company, they are highly trained and well resourced, they also know that for this to work, there has to be a set of companies working this way and an even bigger set of VFX vendors who are willing to be transparent and work with studios this way. Not every studio wants to convert to working this way, but nor has there been a lack of real interest in moving to a model with more transparency and real visual VFX development.

MAGNOPUS is also not just a VFX design company, they are servicing a range of clients outside the film industry will ‘VFX skills and VFX style services’, but they are also working hard to be the ‘VFX visual development evangelists’ to the industry. The team have worked both sides of the fence, supervisor and supplier, they know all the top studio production executives and many extremely influential directors. In other words, if anyone can pull it off these guys can, but from visiting their new loft production offices in downtown LA, they don’t even want that many projects, their game plan is wider and more complex than just this one role.

As for the VFX community many top specialist VFX houses have already heard the pitch and are considering it. The merits are clear but the downside of not changing is even more pronounced. If we are to grow, or even survive the current situation things need to change and perhaps this is the solution.

For the artists there are two sorts of work, the highly specialized teams that work with the director before the film is made, with all the advantages of not sharing their attention and needing to move fast and accurately. The second group is a focused group who are aiming to do exceptional work to an accurate brief, but without an open ended outcome.

VFX houses need to be willing to be transparent. Nothing is going to be given for free. If a studio commits to this model, they must be allowed to actually ‘produce’ and that means line by line cost explanations.

It will require some adjustment, programs such as ftrack or Shotgun will need to help and provide an efficient translation between productivity and cost (i.e. virtual time cards that are literally tracking labor to tasks)  plus resource costing:  so a producer can be answered immediately when they say “I know how much a 2×4 piece of lumber costs, but what does this render hour cost?” And critically the teams will need to very quickly access this information, often in real-time from on set or in pre-production.


For our money, here at fxguide, this is one of the most comprehensive and thought provoking ideas we have heard and it deserves wide scale industry discussion. It is possible to flood the debate with the sins of the past, and the injustices of the present, but we need to also be able to debate the merits of this possible future. No one, least of all fxguide, is walking away from the problems we have experienced, but we ask your input on what we can do to make it better for the next generation of artists. We owe ourselves and them a considered nuanced discussion, there is no silver bullet, but structural change may help.

Note: Mike Seymour will be chairing a panel at Siggraph Asia this Wednesday morning looking at the business issues in Asia. If you are in China at Siggraph please come by the Asian Expansion Panel Wednesday 9.30am

Experiences in Asian Expansion

Mike Seymour
FX Guide

Jan Heinze
COO / Executive Producer,

Christopher Bremble

Founder and CEO,
Base Media Group LTD / Base FX

Shuzo Shiota

Polygon Pictures

Prashant Buyyala

Head of Animations Studio,
Oriental Dreamworks

19 thoughts on “A way forward for the VFX industry”

  1. That’s a really comprehensive article. I hope something comes out of this process. A lot of it sounds like good, common sense, so I’ll be interested to see the wider reaction?

    One thing that will be a problem though, is the streak of (I hate to say) masochism and competition among some people (at all levels) to do more for less. Longer hours, shorter schedules and lower budgets have become a bit of a badge of honor for some and even worse, normal to others.

    1. I agree, but that’s a common problem in most industries, you can’t relieve stress for the over achiever that will work 60 hours a week willingly (unless you literally deny that worker from that behavior), but solutions can be made to better the average work environment and profitability in a VFX industry with the terrible need of a standardized business model.

  2. Thanks for this detailed article Mike.

    My opinion is that there are 2 basic business rules :

    – your customer don’t know anything about the technical details so the only way out is to be 100% transparent on what costs what. When changes are requested, be capable to show the customer the trade-offs, and explain. I faced this myself in the past and when you explain the trade-offs and the nuts and bolts to the customer, usually the discussion is calm and very productive.
    If you pay a company to do something and everything is opaque, you’re not going to accept overruns of any sort. You’re afraid you’re being ripped off so you play the bad cop and try to squeeze your contractor.

    – if there are 7 customers and dozens of suppliers, there is negotiation asymmetry and suppliers need to team up.

    Those 2 issues alone explain probably 50% of the industry problems, and there are only 2 solutions for that : industry trade association + proper accounting, up to other industries standards.
    I don’t think much more can be said on those 2 issues.

    For project management practices, it’s a little bit like software development : you can push codes on the go and it will cost X, or you can code and design unit tests and it will cost 2X.
    Thing is, option 1 will grow exponentially, while option 2 will grow linearly, because you’re taking the time to contain complexity.

    What you’re saying about taking more time in pre-production, and share more information between involved companies is very relevant.

  3. Bravo Mike Seymour. This is a very thorough and thought provoking piece focused on the very essence of the issues facing the VFX industry. Thank you and the whole team at FX Guide!

  4. Well… I’ve read several articles since bad time began.

    I’m currently a VFX graduate student in one of the Art college in US, which said to be well-known in VFX field in the country! However… it turns me down. Teachers teach so little and students learn so little. Every professor is labeled to be veteran once in the industry, but from my point of view the qualification of many of them is questionable. They talk less than a quarter of the class hours about the course they’re supposed to teach and could rarely solve problems students have encountered in a right way. And once again, it happens in one of the college which ranks highly in VFX in this country!

    I totally agree all you’ve mentioned in this article. But what I feel confused is that how do we develop this increasingly complicating industry by such poor education?? by those poorly trained workforce?? We’ve blamed the government, the production company, the budget model, the world competition and and and so forth. But never take a look at ourselves. Do you know how those employees in Apple were trained in their college? How do we compare with them?

    Anyway from my very naive point of view, the VFX industry started by exploring the unknown world by a group of engineers, and now it handles largely to the imaginative artists which is good. But the definition of VFX doesn’t change, we’re still trying to achieve unprecedented effects, trying to make things that have never be shown on the big screen. However now the team is mainly run by artists who have much less knowledge of the foundation principles. Things become tough for sure. I think we do need welcome more engineer, however the fact is that few engineering students are interested in this industry and artists don’t wanna learn more than their duty, which, in my opinion, limits our industry a lot.

  5. Fantastic article, thanks Mike! Hope this gets people talking.

    This approach makes a lot of sense, but it won’t fix the industry. First off, I wanted to bring up the fact that a lot of companies that seem to have more stable business models are already doing this in one form or another. Weta is the first that comes to mind. When the production company and pipeline is tied to the VFX supplier, and has a vested interested in how efficiently the VFX are executed, the whole pipeline is more coordinated and smoother. Other companies like Mirada, Sony Imageworks, and ILM all seem to have similar models of extensive pre-production to get the R&D out early. I’ll admit I have no knowledge of their financials, but I have to assume that’s working for them. It’s no coincidence, though, that those companies all have A-List directors or production companies behind them that have the bottom line in mind.

    The apple model is an interesting comparison, but VFX is too fluid and forgiving to work in the same way. Read any article on this site and you’ll see that production companies and directors are changing things until the last possible moment, regardless of whether there was extensive work done in pre-production or post-vis. When apple launches a new phone, there are zero questions marks about cost and schedule it’s a physical object that has hard and fast costs involved. VFX are pieces of art, whose costs are based on what someone guesses a director will want 6-18 months from when they make their bid.

    This seems like a model that strives for greater efficiency in production, but frankly ignores the realities of how dire the situation is for companies and workers. You brought up the example of an explosion at the beginning of the article that this solution doesn’t address yet. An explosion probably wouldn’t get extensive look dev, so a director still has the potential to pixel-f**k it endlessly. But I’m curious to know how MAGNOPUS is actually handling this pipeline. How is this all that different from pre-vis and traditional look dev? Is the in-house team basically handing over completed assets? If so, that’s great, but it may not be as useful as it seems, since a lot of that work will have to tweaked to fit into the VFX companies’ proprietary pipelines- which are essentially the one edge they have on each other that keeps the work balanced. Transparency here doesn’t account for the fact that there will always be a moving target for the VFX company to hit. In fact, I worry that this supposed transparency make make the problem worse. With more insight into the budgets, and more of a contribution to the process, studios will be able to say “hey, we gave you all those assets and that great pipeline, so you should charge us less, even though we’re going to demand the same number of iterations on a given shot.”

    Frankly, it strikes me that the only model that would work is to have a trade group, a union, and tariffs, all coupled together. I know that sounds like a serious overhaul of the industry, but it doesn’t seem like anything else will really work.

    I think that the idea of a trade organization shouldn’t be ruled out so quickly, because the problem with the VFX companies is that they simply aren’t making enough money to be sustainable. They need additional income to stay solvent. They need to reevaluate the industry as a whole, and set better price points for their work. Everyone is in a race to the bottom, which is too sweet of a deal for the studios. And not just the major studios, this is a problem for the whole film/tv/commercial industry. The only way they can all stay afloat is if they have some collective bargaining power. Artists should think hard about that too, because the companies pass the burdens onto the workers. The workers have to be okay with it, because if the companies fold, they’re out of work. We talk about the national boundaries being an issue with a trade organization, but there frankly aren’t that many VFX companies that this would be too logistically difficult. And a rising tide will lift all boats- even smaller companies not participating wouldn’t be forced to operate on such thin margins then.

    The globalization model that all the companies rely on now seems to be a double-edged sword. It’s no secret that productions where the creative team is in-house and immediately available benefit greatly from that access. Splitting up the work to different vendors may make for shorter post schedules, but it isn’t necessarily saving money in the long term. It’s the same for having a 24 hour global pipeline like Pixomondo’s on Hugo. Yes, having a 24 hour team working keeps things moving faster, and yes you might be saving money by outsourcing to cheaper labor markets, but you’re also losing money through the network and hardware costs, and the communications costs. Whenever a chain of communication has to happen between several branches, you’re playing telephone. On top of that, you’re playing telephone with different language barriers, and the original intent is absolutely getting muddied in the process, and that means more iterations, and more costs. Having the lion’s share of the work under one roof can be extremely helpful (again, look at Weta, ILM, Imageworks). That’s true of the smaller vendors too, the more work they can do on a project, the easier the pipeline is to manage. These are all things that the whole industry should think long and hard about. If studios and directors want more control, they should think about keeping things local- having everyone in the same room is huge. Having the whole team in the same room during a spotting session, or a review session, can save endless headaches. Artists should keep it in mind too, because international issues with unions could be simplified if fewer countries are involved in the negotiations process. And I’m not trying to hurt the workers in countries like China and India, but their labor laws, wages, and union situation (or lack thereof) aren’t going to change any time soon. A union solution makes sense if you pair it with tariffs. Not to mention that this industry has a real problem with jobs for newcomers. Starting at the bottom is virtually impossible in a western nation now.

    When it comes to profit shaing, the studios aren’t dummies- the only reason VFX companies were allowed to invest in the films listed above was because the studios knew that they would be VFX-intensive projects with slim margins on their earnings. I’m not trying to knock those movies, but none of them really had great commercial potential, and the studios knew it. I don’t know the details on those deals, but my assumption would be that the companies were invited to participate when the studios realized they had a dud on their hands and it was too late to shut the project down. It can’t be that they’re “allowed” to invest in the film, because then they’re shouldering all the risk and all the upfront costs, which is simply too sweet of a deal for the studios. Not to mention that this model really only works for film, and ignores the VFX work done on television and commercials.

    Finally, I want to bring up the fact that if workers and studios really want the best deal, they should cut out the vendors all together. That’s obviously not going to happen for so many reasons, but if the workers worked directly for the studio, they would have a much easier time unionizing. Virtually every job on a studio production is unionized- from craft services to the lot couriers to the security guards. I have worked on the production side and the post side for a long time, and I think many of your readers would be interested to know that a grip with no college education can make $500/day, transpo drivers make a minimum of $400/day. How many VFX artists with college educations and even masters degrees can say that? Studios would be happier because they would have complete control over their budgets and the whole process. Right now they have a great deal with the vendors that allows them to pay the absolute least they have to get a job done. But by owning the whole post pipeline, they would have complete control of the process, and therefore keep the costs to the minimums they want. Workers could unionize. And directors would be happy because the whole pipeline would be under one roof, making it easier for them to oversee everything. The smaller companies handling small films, tv, and commercials could still work in their niches, but ad studio-based VFX team would make the most sense for major films, and even for some TV shows, when the studio owns the show.

    1. I also wanted to make it clear, I’m definitely not saying that transpo workers and grips don’t deserve that money, they absolutely do. They’re critical members of a production, and they work incredibly hard. I’m just saying that VFX artists work really hard too, and would benefit greatly from having some of the same protections and benefits that other film workers do.

  6. Great article Mike. And Ben is certainly one of the smartest and most talented guys in the biz that I know. But I think there’s one very important solution to the VFX business model that was overlooked.

    I’ve been in the biz for over twenty years now and I’ve been with several companies, large and small (Cinesite, Manex, PDI South), that have come and gone without warning. The common problem with all of these companies was that they treated their client, the entertainment industry, like it was a stable business.

    This isn’t like making an iphone where one company is taking its time to develop and produce a piece of equipment that everyone wants.

    This is a business made up of countless companies working with insane schedules and individuals with very different ideas on what everyone wants. What’s more, at any point, a single actor, Brad Pitt, can trip over a curb, twist his ankle, and production grinds to a halt for two months. Or a studio replaces a director and eveything has to be rebuilt from scratch (The Hobbit). Shows get cancelled because of ratings or financial problems, writer’s strikes, studio politics, location issues, floods. Just watch “Lost in La Mancha”.

    For a VFX company that is living month to month (like Rhythm and Hues), it’s an insane balancing act.

    The studios that have stood the test of time have developed one of two strategies. Either you distance yourself from being a service provider and develop your own content and IP (like Pixar & PDI) or learn from the early days of the studio system.

    The early days of the studio system looked much like all the big VFX companies which are folding on a dialy basis. They would build huge sound stages, buy expensive equipment, hire employees (actors, directors, tech) and keep them on staff year round to produce movies. The problem was, when they weren’t producing movies, they were wasting money.

    Over the years, it made sense to just rent the equipment, studio space, and staff the people you needed on a project basis. The VFX industry has slowly started to learn this over the past ten years.

    I’ve worked with several companies who have done this well. Hammerhead is a fairly small company at its core, but when they took on “Riddick” they simply housed the production at Universal Studios, rented the equipment, and hired up 40 or so artists for the job. After the show was done, it all went away. We used the same strategy when I was VFX Sup at New Deal Studios.

    The biggest challenge with this system is resource management. Specifically, talented individuals who you can count on in a moment’s notice. I’ve worked with Zoic for the past ten years and they do this very well. They have a huge database of names they rely on to staff any project virtually overnight.

    As for R&D, look again to the studio system. They rely mostly on vendors to create new technology. New cameras, lights, editorial software is developed by other companies. The same goes for VFX companies. Extensive in-house development is being replaced by off-the-shelf software from Autodesk, Foundry, and Shotgun. The added benefit of using these programs is that artists don’t have to spend an extensive amount of time learning custom tools.

    As for the rest of the problems with the industry, tax incentives are not the solution. It’s simply a race to the bottom. Someone will always be there to outbid you. A tariff sounds like a good solution against outsourcing, but how to enforce a tariff on digital media? I’m sure the evolution of the internet will have an answer to that one soon.

    In the meantime, one of the biggest problems I see in the VFX industry right now is the assumption among artists that “they’ll never be better than us”, referring to overseas artists in third world countries. Its arrogant to assume that we’re the only talented individuals out there when literally millions of artists are being trained up right now. I’m old enough to remember that “Made in China” used to be a joke before foreign companies nearly wiped out our auto industry.

    You want to know what the future holds and the solutions? Look to history.

    1. (Robert and I continued part of this conversation on Facebook, so some might be missing, but I thought I’d try to bring it back here, reposted below.)

      These are all good points Robert, and we’ve given those exact ones some thought and tested them out on various jobs while experimenting with different approaches.

      Software incompatibility is an issue, and what we’ve done so far is try to align our pipeline during visual develop with a target vendor, if one exists. For example, we’ve been switching between Maya and Max and various plugins, if we already know the work is going somewhere specific. We do a quick assessment of what they’re using and what works best for them, and then adjust how we’re doing things to suit.
      If we don’t yet know where it’s going (as we often don’t) then we try to stay “middle of the road” and make sure that we’re doing work that exports to standard conventions properly. While it’s preferable to have visual reference than not, we still aim to provide files that can be picked up and taken over without too much hassle. So far, it’s worked out quite well. In some cases, we’ve been able to say “Here’s the approved look, here’s the tools we used to create it, here’s what we learned, here’s some things we optimized, here’s some future opportunities for efficiency you can pursue, here’s how long each shot takes in each task, and here’s the things the director is most likely to want to play with on a shot by shot basis.”

      You did point out in your earlier post that most people are using off the shelf tools now, which makes it easier to interchange. A lot of the things that tend to be custom now, are tools for efficiency. Pipeline tools. Management tools. And we’re working with Shotgun to develop workflows that can be deployed to any vendor that uses Shotgun AND ingest / export tools that can plug into facilities that don’t use Shotgun, or something like it. It’s come a long way in the last few years, but there’s still a lot of upcoming features to make this all really work. Integrated time tracking on shot tasks, moving things between facilities and converting them, there’s an endless list of opportunity that would let the industry develop financial standards, not dissimilar from what the AICP has, for example.

      Regarding the “old studio system” of having equipment and facilities on site, we’ve run into a frosty reception there. So far, studios have had very limited interest in making any of the capital expenditures required to support even a modest “vfx type” team. We have absolutely seen exceptions to this, but not on any significant scale. Some studios have tried providing infrastructure (SPE on 2012, etc.) but it hasn’t quite worked out in the long haul because people don’t quite know what to do with it when the project is over, so it tends to go away, or fall apart. It’s worth pointing out that ALL the studios are going through cost cutting and staff reduction. We’ve been told point-blank that project costs are ok, but anything thats an infrastructure investment, or goes across multiple projects, or becomes a “department” or involves scaling up any existing department at the studio, is a non-starter.

      In the tests we’ve done on site with studios so far, we’ve needed to bring in rental equipment (farm, workstations, licenses, support equipment, etc.) They don’t mind putting labor on payroll if it’s well managed, but rental rates for that equipment is not as good a deal as ownership after between 3 to 8 months depending on the gear. That being the case, the requirements of this kind of development team, or even an in-house vfx team, exceed what’s normally available to easily rent (then you need to have someone to set it up and support the artists. For this reason, we’ve started providing custom gear and expertise to do this on a weekly/daily rental cost that’s reasonable, just to make the approach possible. In fact, it works exactly like a production services company providing grip equipment or a 1st AC charging a weekly for his own FI+Z. It’s a standard formula.

      You point out Cloud rendering, and correctly so. I am less optimistic about the “few more years” outlook, but agree that this will be a game changer in the future. We’ve met with smart people from Google, among other cloud providers, to discuss how to make this work financially. While we’ve tested it, and used it on jobs, it is ineffective from a cost perspective as to be not worth considering except in an emergency right now. I’ll skip posting all the formulas and details to not derail this thread, but it’s fairly simple math, and I encourage everyone to do it and see if it works for them. I think you’ll be surprised at the results, if you look at it with a calculator in front of you, instead of a press release.
      Presently, in looking at the cost changes trend, we do not see this hitting a tipping point soon, (and frankly if ever, for a baseline, rather than just spikes) BUT we’re continuing to work on that side of it because it may enable other useful things, like people working remotely from a cloud-based server that deploys workstations and licenses adjacent to cloud storage and render capacity. We absolutely see an critical role for cloud computing in the future, but unfortunately at present, anyone saying they can work from home with the “power of thousands of computers at their fingertips” is independently wealthy, or hasn’t actually done it.

      Speaking of working from home, that has it’s own set of challenges, that can make it a less than ideal solution in some cases, BUT certainly things can be going that way for some things. I do not see this as an ideal solution for an “industry-wide” approach presently. We work with a few artists working from home, and vendors around the world, and I see the value of proximity for a lot of things. The more spatially and temporally-distant everyone is, the hard it becomes to collaborate. Not impossible, but again, there’s a tipping point financially where you say “is this worth it?” And that’s something we’re keeping a close eye on, and testing on projects regularly.

      Tariffs probably requires a dedicated thread unto itself. But the notion of tariffs as a solution to a subsidy problem is “California-centric” and outside of the scope of our particular approach, which tried to be more industry-wide. It’s possible that US tariffs or CVDs could reduce the tax credits and subsidies around the US and the World as they become less-effective, but that would have a net negative impact globally on artist rates and vendor health in the industry. We’re not taking a position on this issue, just making the observation that though we happen to be a California company with offices in downtown LA, talent is global now, and so is “Hollywood.”

      1. Ben, I appreciate the work that’s going into all of this and it’s great to see people looking for real solutions.

        When I’ve talked about this article with colleagues the overwhelming response I hear is something along the lines of: “Sure, we’d all love visual development, concepts and designs to be signed off prior to the bid but we’ve asked before and it just doesn’t happen – ideas change, filming is an adaptive process, by the end you’ll just end up re-doing that work anyway”. I personally don’t necessarily agree with this, I see value in trying to reach for this anyway, but it’s never-the-less the response I hear.

        In addition to this a further question would be, why doesn’t this just become an extension of the current system? Say for example that Magnopus grabs up a couple of these contracts and is doing visual development, how long is it before this brings in large facility competition? It seems to me that the next logical step would seem to be the big VFX facilities to move into this front end of visual development and just drive the process down the line (on separate contracts perhaps). The benefit I suppose is still there – you know more of what you’re bidding on – but the change to smaller houses isn’t really much here, is it?

        I find this all very interesting, working in China I’m seeing this methodology actually be embraced by the market here already. VFX Supervisors on the studio side are rare so what’s happening seems to be studios are employing VFX facilities to develop concept for their films – they’re skipping the supervisor setup and going for deeper integration. What you end up with is VFX facilities integrated into production art departments (or vice-versa) during development stage of films. Higher quality facilities are developing the concepts, outlining the pipeline, and then shipping it off to vendors who usually do lesser quality.

        So sure you see the manufacturing process at work here but the impact this has on who actually does the final work is, as some others here have pointed out, not necessarily the result desired.

  7. Can I just express my deep thanks for the level of the comments on this story. Agree or disagree, clearly people are raising good points but doing so in a constructive way. I really am sincere in how much we appreciate that and how much respect we have for you guys. It would be easy to jump in with witty or silly comments but given the huge number of reads on this article already and the amount of considered comments – … well ‘thanks’ hardly seems enough to say. Anyway these are serious times and we really appreciate the thought that you guys have put into your comments… so thanks.

  8. Good comments all,

    However, you have written this article with the assumption that its a new and dynamic process not tried by anyone else. We all know and recognise the problems within the industry and that research is spot on, we all face the same issues from TV up. But there is nothing revolutionary about requesting a development budget to research method before quoting on the bulk of the shots. We have tried to follow this method for a long time with little success apart from on one series. Guess what, we won an RTS award and that show won the BAFTA for best drama in the UK on a smaller budget than its competitors. You are preaching what we already know, as talented as MAGNOPUS are this will not change our industry.

    For instance, why have Ftrack and Shotgun never focused on a billing module for their tools? Its low on the radar as hours are rarely turned into a billable amount. Dont get me started on tools that create work for a fee and have no way of actually billing the client. We’re forced to agree rates or lose the work, thats the bare bones of it. Any other sensible manufacturing industry bills the time to R&D and develop into the product, then bill for the product. So what is the real reason for our broken model?

    The article neglects the fact that the majority of Apples parts are manufactured where its much cheaper on labour. Working conditions are poor but they need the contracts. Why? Because Apple own the product and the IP, the workers are little more than service providers. This world economic model is mirrored perfectly in Films worldwide and is now passing over into TV. Wealth is far outstripping income and the people on income are hardest hit. There is not a UK independent film made that doesn’t benefit from tax breaks on the way in (usually via EIS special vehicles) and country wide government backed tax incentives. The latter applies to studio films too. It encourages inward investment but at a price. People are being paid less to do the work, we do more hours, yet the relief on business being here is high. How is that a sustainable model? More of the cash is finding its way back to who own IP and the product. We’re not against this completely, as good product make economies tick but when all product owners, high net worth individuals and multinationals spend most of their time trying to find tax loopholes then its a wider issue than whether or not we get an R&D budget.

    We work in a saturated market which make it far easier for owners to pay what they want. Apart from those who have morals (what?) in the way they conduct business you dont stand a chance by adjusting our workflow/payment process. It works but there is not enough necessity for the controllers of wealth to change. They are doing just fine with short term gain vs long term stability. They will choose short term every time. We need to think bigger than accountants do. How?

    1. An organised labour movement worldwide –
    As you have mentioned is impossible and unprecedented in history. Really? How long can we get paid less for longer hours over time? We can stand up for our industry and we should. If we can organise a global economy we can organise a global protest. I say this as a businessman too because once you push service providers too far it will need a catastrophic event to change anything. For instance, the last time the labour movement triumphed over wealth was after the second world war when labour was needed to re build the economy. No one wants that again

    2. Own the content –
    As many have proved, we need to own the IP and reward ourselves. We do have skillsets some studios dont and its easier to get films out there digitally. Work on your ideas and reward those who work with you. This is where we can all work together to produce great content and is a really inspiring model.

    3. Shut up –
    If you don’t want to stand up for your industry or make something just accept the lower pay and get on with it. As i’ve stated, you wont change what is a global process by bleating on about a change in when we are allowed to bid and develop an idea or method. You may end up with option one on your hands eventually though.

  9. Really interesting post, thanks for sharing.

    I will admit, I’m still struggling to see where this would really improve conditions in the industry and empower and improve the overall experience of the VFX artist; or how this is much more than an evolutionary step forward in what we’re doing already.

    I’ve seen many projects where a different VFX studio did the initial visual development and the facility I worked for tried to deliver that product. Granted it may not have been as extensive as outlined here, but it is none-the-less a standard practice. Likewise, when we outsource work at one of the big facilities, we’re also doing something along the lines of this manufacturing approach, sharing assets and technology with third parties.

    This all feels, to me, more like a way to deal with structural inefficiencies than to really begin reshaping our industry and improving the lot of the workers within it. I’d love to see a follow up article that focuses purely on how a manufacturing model will improve conditions for artists.

    There are, to me, clearer issues and more revolutionary ways to shake-up this industry in ways that are beneficial to the worker. As food for thought on this article, see my post:

    Reinventing the CG Wheel Part 1: The Problem of the CEO

    1. Good points, Mr. or Ms. Coop! 🙂
      The reality here is that nothing revolutionary is being pitched here. And that was the point.
      A lot of little “evolutionary” changes, influenced by history, have a big impact.

      While on the surface the operational impact might not seem to be significant, what it attempts to build towards is a change in the business model, and how visual effects are “paid for and delivered” to create a positive change for everyone, not just one group. The mechanics of one group designing and one group executing, have been happening for years, but the economics of HOW they’re doing it haven’t changed and are most frequently different than what we’re talking about here. The shift to time-and-materials in development, and the resulting evolution towards transparency that can create a cost-plus economic system are probably the biggest thing. And they’re made possible by lots of little changes in other areas.

      By making a stronger connection between creative and financial responsibility in development, you reduce risk and can increase transparency in execution. The reason this is important is that it improves the financial condition of the visual effects vendors or artists working directly in this approach, while returning greater understanding and efficiency (i.e. lower total costs, shorter turnarounds, increased capability, more creative flexibility) to the production or studio, so that interests are aligned, and everyone benefits.

      I keep using that word transparency because that’s how the rest of the film industry works, and VFX doesn’t. Sure, we say “well, here’s your movie and it’s gonna cost about $10M bucks and will be about 9,000 artist days, and some stuff.” But when it comes to operational awareness that producers are used to having so they can make decisions, and take responsibility for them, we don’t generally provide it as an industry practice. In our testing, when we provide it, the conflict dissipates and suddenly people are more aligned.

      Strangely enough, what’s written is so familiar that many studios or productions have told me “Sure, that’s the way we did it on ” and funny enough, it wasn’t. I know because either I did that project, or I had a long post mortem with several different parties at several levels on both sides, who did. I like that’s it’s intuitive enough to be boring, but there are very few examples of visual effects movies that have really been done like this. Interestingly at some point, nearly every studio we talked to said “Oh you know what? This is almost exactly how we do our animation movies in our animation division. And it works really well.” Of course to that I wonder “Then, given that many of your big movies have a VFX usage rate between 50% and 90% of the total film, do you suppose maybe there are some lessons to be learned from animation?”

      The reason this article deferred too much concentration on the “Problem of the Artist” is that we hope to build to that conversation. The article is already long, and much on that topic was delayed to a future discussion for clarity. But our reasoning was this: If you can’t fix the financial structure and efficiency of the industry as a whole system, you don’t have much ability to fix any of the problems of the artists.

      And in fact, I think we all know in great detail what the problems of the artists are. Not just in the US, but in China, Canada, the UK, India, Germany. You name the crime, and it’s been documented thoroughly in the comments of numerous press releases, blogs, twitter accounts, and trade articles. And these horror stories are very real, and shameful. They’re bad in all of these countries in more-or-less equal measure.

      I myself started in this industry with a flat weekly rate of $800 as a roto/paint artist whether I was working 50hrs/week (the least I worked) or 132 hrs/week (the most I worked) and all of that, of course, was as a 1099 employee with no health care, who got screwed again every time taxes were due. Now I find myself frequently in the position of creating and defending large visual effects budgets and it is impossible to ignore the reality that in our calculations, and in our actuals, we see that ~80% of the costs are labor. So when I’m across the conference table from the executive producers, or even in some cases, the financiers of a film, or the head of a studio, getting screamed at (not an exaggeration) “The visual effects budget is too ****ing high, it’s the single largest ******** line item in the budget, and it needs to come down by at least 30 ***ing percent,” it’s a tough position. And a lot of times they’re right! I’ve actually been lectured about this by directors before too, but in a slightly more civilized tone. (Just don’t want you to think that producers are evil.) Unfortunately, there’s a very widespread perception that visual effects is rolling in dough.

      In reality what will happen if a solution isn’t forthcoming is that some poor VFX producer or supervisor might say “It costs what it costs, and we can’t do less.” And then someone else, possibly someone who is facing the reality of going bankrupt next month if they don’t get some cashflow going, possibly someone who hasn’t done a project that big before and is overconfident, possibly someone who plans on squeezing every last person who works for them by “just a little bit” is going to take that job, and do it at 30% less.
      The “little people” at the bottom of that kill chain are the roto/paint artists.

      Several of the things we mentioned; Unions, Trade Associations, etc, seek to address to conditions of these artists, and rightfully so. It is a wonderful thing that our industry can now develop and support a community of artists who can work in their home countries worldwide, because they bring such unique talent and perspectives. It is unfortunate that globalization makes it difficult to protect this new labor force across borders while this economic system stabilizes (or is buffeted by unnatural market forces such as subsidies and rebates.) It is also unfortunate that during this time, workers and families will be displaced as they are required to relocate to the most “economically feasible” regions.

      But to implement these countermeasures of protection for the artists, if they’re a reality, applies an upward pressure on the system without creating a vent at the top. Shareholders are the worst employer, and if you think that getting yelled at and fired by Scott Rudin is epic, wait until the shareholders see a movie slate underperform and cut the valuation of stocks, forcing thousands of layoffs, and the mandate that the sequel be made for “30% less.” And let’s not forget the audience, who are still going to expect 30% MORE slow-motion exploding dinosaurs.

      That’s why in all these little adjustments, at every level in the process, we’re trying to ask the question “isn’t there a better way of doing things that aligns the players in this system better so they’re not at conflict? Can we improve one player’s situation, without taking away from someone else?” And that goes from roto/paint right to the director. There’s a lot that’s been left out of this article, and will probably come up in future discussion, but there really is no “silver bullet.”

      Does the present system dissatisfy roto/paint artists? Certainly. Are VFX vendors hurting? I think that’s clear. But you’d also be surprised to know that directors aren’t exactly happy either. Nor are producers or studio executives. A true solution is going to require that everyone gets something a little better than what they had before, and as much as possible, without stealing it from the pocket of the other person at the table. That kind of collaboration doesn’t usually happen in a Revolution, but comes naturally in an Evolution.

    2. By the way, Animcoop, your two articles are very interesting and reflect some ideas we’ve been testing and modeling artist participation on. Can’t wait to see the next ones.

  10. The “way forward” for the VFX industry should be framed around the very real exploitation of those who create and sustain the VFX industry: VFX workers.

    VFX workers will eliminate their exploitation when they use the power of IASTE to force the Motion Picture Studios to treat VFX workers just like every other motion picture craft worker. VFX workers will not eliminate their exploitation by inserting more layers of middlemen, such as Magnumopus, into the VFX production process.

    Unlike other motion picture workers, VFX workers are not protected by the IASTE wage and health and welfare and pension agreements that the Motion Picture Studios are signatories to. Without IASTE contract protections, VFX workers are vulnerable to inevitable exploitation, as has been the situation since the dawn of modern VFX, with the 1975-77 Star Wars, a non-Union VFX movie that probably attracted many of today’s VFX artists to work in the world of non-union VFX.
    Are VFX workers entitled to 1.5 X wages after 40 hours of work per week, or after 8 hours per day? Are VFX workers entitled to 2X wages after 50 hours per week or 10 hours per day? Are VFX workers entitled to double time on the 6th day of work? Are VFX workers entitled to medical and dental plans paid by their employer? Are VFX workers entitled to a pension, when they’re too old to work? If VFX workers are not just like any other motion picture worker, then the answer is NO.

    Until VFX workers look up from their terminals, realize they are just like any other motion picture worker, entitled to the same wage and benefit rules, nothing will change, and VFX workers will continue to be pimped as child labor.

    Today, Motion Picture Studios budget their VFX movies knowing that VFX Studios provide a mechanism for the Motion Picture Studios, as signatories to the IASTE labor agreements, to employ non-union VFX workers. If VFX workers were IATSE Union workers, Motion Picture Studios would pay the VFX Studios the increased costs, but only because the profits from VFX movies justify the increased costs of VFX Union workers.

    The motion picture business is a project driven business. Motion picture workers have always been migrant workers. When the project is finished, the worker moves on to the next project. The employer of the workers may or may not stay in business, a “problem” that should not concern the worker. An IATSE Union motion picture worker’s health and pension benefits are paid into a protected Pension fund that travels with the migrant worker.

    The “way forward” for the VFX worker is to organize within a Union structure, not to be burdened with yet another enforcer for the motion picture studios, such as Magnumopus.

    The way forward is to embrace the reality that for better or worse, the VFX workers is no different from any other motion picture worker, and should be compensated under the same terms and conditions.
    If you look at the history of Hollywood unions, you’ll see it was a very difficult struggle, with many saying it never could or should happen.

    When the dust settled, the Union motion picture worker was infinitely better off. The Union motion picture worker IS infinitely better off than the non-Union, exploited motion picture worker.

  11. Another important factor is the resources, market and growth distributing not balanced in a global environment. The industry is almost saturated in North America, but it is lacking in most parts of Europe and Asia

  12. Hello, I have read your blog. Yes, It’s very important information given to you. now its rethink part because of its a billion-dollar industry. People will understand this.

Comments are closed.