Tuesday, August 20, 2013

Underbidding Visual Effects


Underbidding Visual Effects

One of the most problematic issues in the VFX industry, besides subsidies, is underbidding

This is where a company knowingly underbids what the company  estimates it will actually cost to do the proposed work.  It's also known as 'buying a project'.

This isn't done by just up and coming companies. Large, well established companies even in subsidized areas underbid frequently.

It doesn't take a financial wizard to see intentionally losing money on a project is not a good long term plan. In fact it's not even a good short term plan.

Why do companies underbid?

1. Subsidies
If a company in a location with no subsidies is bidding against a company located in an area with a subsidy (paid by a government) then they will likely have to underbid just to have a competitive bid to make up for the 20-60% difference. It's not like there's a 40-60% markup so that reduction has to come from the actual costs. Even companies in subsidized areas have to compete against other companies in more subsidized areas. That 20% subsidy looks good until you need to compete against a company with a 40% subsidy.

2. Competition 
Currently there are too many VFX companies for the amount of work available. If there weren't then most would be busy most of the time and would have no need to underbid. That's why the notion a lot of people have about starting a VFX company because they're not working, is flawed. And too many VFX companies in turn means that there are too many VFX professionals. Those considering a career in VFX should rethink because the odds are very much against you, despite what the for profit school ads may say.

3. Poor management
Many running VFX companies have no business training or background so will make these types of decisions based on a feeling of desperation. They'd rather be bailing water rather than considering fixing the leak. Rather than try to make decisions based on long term issues they are making rash decisions.

The thinking
Companies think they need to underbid the work to make sure they have work. They look at the dozens or hundreds of people at their company and the large cost that incurs. Larger companies can be burning through $1 million dollars a week in payroll costs alone. So the thinking is even if they lose a few million on the project it's better than losing even more by not doing so. The money offsets a large portion of the losses.

And underneath the decision to underbid is the notion that somehow they can make up for it. The crews can work a bit harder, they can be a bit more efficient and that things will go well on this one project to turn an underbid project into a break even project. That never happens. Directors do not stop changing or adding shots until someone with authority (the client) tells them they can't due to time or money. What ever budget and time allowed will be filled.

The hope is also that even though they are losing on this one they can make it up on the next one. That type of thinking can work in some industries where there are very big hits to offset some losses (films, products), but in visual effects there are no big hits. A company may be in the black on the next project but the tight margins in visual effects are hardly enough to fund that one project, impossible to make up for losses on one or more other projects. And that means any profits that might be made on the current project have already been spent on the previous project just to cover the losses.

And unlike some industries (contractors to the government) it's impossible to make up for the loss from underbidding with change orders and extras. Most vfx companies are reluctant to even submit valid change orders, the fear being if a client feels they were charged more than they expected, that company will never get work again from that client.

Impact of Underbidding

Company 
No company can continue to lose money indefinitely. While underbidding may seem like it's slowing the bankruptcy of the company, it is still going bankrupt. At some point the investors or the creditors will have enough and make radical changes or will simply close the company.

Some people think that's up to each company and if they wish to underbid where's the harm in it other than the company that goes out of business. But it certainly affects more than just the one company.

Workers
When a company goes out of business it likely will mean the workers will not only lose an employer, they will likely lose at least one pay period, possibly more. Any accrued health care, vacation or other benefits will be instantly gone.

Clients
When a company goes out of business because its been operating in the red it is likely do so at a very inopportune time such as the middle of a project or even worse on the major crunch period right before completion.

We've seen this scenario played out and affecting both workers and clients a few times just in the last year or so and it's a painful process for the workers.

Industry
When companies underbid it not only affects that company, it affects all other companies and the people who work for them. A company that underbids erodes good companies who are attempting to operate a visual effects company as a real business instead of a lemonade stand. A company that is bidding using actual numbers is now losing business not due to true competition but because a business is choosing to commit long term bankruptcy. A good company can only lose business for so long before they close.

And that's when other companies start jumping in with the same idea. Now instead of one desperate company, underbidding may be creating a half dozen companies that are getting anxious. Once they start doing the same thing, which some are, the quicker the race to the bottom happens not only for those companies but the entire industry.

Clients also get a very skewed sense of what the actual cost of doing visual effects is when companies underbid. Some clients will assume the company knows what's its doing and others will be aware but will feel compelled to take full advantage of the situation while they can. Money is a compelling substance and can cause loss of reasonable thinking on both sides.

What can be done
1. Don't underbid. Even Kansas arborists have a code of ethics that prevents them from learning other bids from clients and underbidding each other. No such ethics exists in the visual effects business. It's been said some companies have a 'we'll beat any bid' agreement with the studios. If managers can not operate a company morally then they should not be running a company.

2. Operate the company as a real business. Any idiot can run a business and lose money. When millions are at stake along with hundreds of workers, it can no longer be run by the seat of pants and wishful thinking.

3. If the company is unable to make money then the owners and investors should examine the problem and consider making improvements or they should consider closing or merging. Taking other companies down with you to bankruptcy is not a plan.

4. Lay off workers when there is no work for them. Keep a small group of key people to keep the company running between projects. The reality is film and other media work are project by project. The studios do not keep crews employed between projects. If the company is located near similar companies (real VFX hub) and the industry is healthy then the workers would likely be able to find other work as it shifts from project to project. It's when companies set up in a distant location or when the actions of a few make for an unhealthy industry that this becomes a problem. Now it may seem to be better employing the workers and get some funding but that is simply eroding the industry and its better to have workers make a short term change rather than trying to work long term in an unsustainable industry.

5. Have the visual effects companies form a trade association like other industries. Put aside petty, non-business issues and work together to stabilize the industry. Have a basic code of conduct and ethics for companies to abide by.


Individuals
The same problem of underbidding happens with individuals. Graduates and those starting out think they have to work for free simply because a company posts a job offer saying so on Craigslist. Too much competition makes them more than eager to work for nothing which in turn causes companies to consider lowering all wages. When companies start dropping experienced professionals to hire cheaper labor (another poor business plan) then what do the newer workers think will happen to them in a few years?

Some workers go out on their own with the intention of truly being independent contractors but these people almost always underbid as well. Frequently they charge less than they were making while working for a company. Some may choose the same rate but they fail to understand even the basics of business. When you're working for a company it costs the company more than simply your pay check.  Most of the time there are benefits, taxes or other costs that you may not be aware of these. These may be another 20-40% above your pay. As someone working for themselves now all taxes will need to be paid by you along with health insurance, your computer, software, etc. It starts adding up quickly. Vincent Laforet has written about the cost of doing business as an independent photographer. 

Summary
Place a value on what you do. Do not underbid. Consider the long term consequences. If both companies and individuals are only focused on being the cheapest above everything else, then the quality and the creativity will fail along with the business.


Related:

31 comments:

  1. Excellent article, as always, Scott. I have to say, though, that I expect that this is a self-resolving problem. You put your finger directly on the issue in paragraph 2 of the introduction: 'Currently there are too many VFX companies'. Further, given the disaster 2013 has been, I seriously doubt the studio workload is going to increase, exacerbating the whole situation.

    It's highly doubtful that VFX companies are going to close their doors through their own volition. The subsidies question is the crucial one -- as long as we have governments giving people an unfair advantage, the entire industry will suffer and companies will shrivel and die. We all need to survive long enough to see a healthier industry emerge. Not sure how long that will take, though.

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  2. Some companies have closed on their own. Illusion Arts, Matte World and others determined that the business aspect of their companies weren't working. Work was going elsewhere for various reasons and there wasn't enough work coming into continue the company in a meaningful manner. Most of these places were owner/operators so they were directly connected to the losses and knew what had to be done.

    It's the larger companies with investors or corporate investors with deep pockets that don't tend to recognize the problem. In some cases they realize it's a problem but they don't care, feeling that they have plenty of money to keep the company afloat or doing so for some indirect benefit (more work for another company owned by the corporation or as a tax write off or other financial reasoning to sabotage the industry)

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  3. Scott would you be able to explain where subsidies are bad ?
    I see it used for every single industry. Farmers still exists in USA and American cars still available because government has been helping.
    It seems to be a fair politic to me.
    Why would it be wrong for the film industry ?

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  4. Problems with subsidies:
    The Impact of Visual Effects Subsidies
    Visual Effects Tax Incentives / Subsidies
    Risk and subsidies

    In a nut shell most subsidies are bad because they allow politicians to use public funds to select which businesses to win or lose. Many are paid to very profitable companies such as oil corporations.
    In regard to the auto industry , they were given a loan which is now being paid back. This is much different than film subsidies. There is no investment and they will never be paid back.

    Because there are other subsidies does not mean that there's room for even more (film subsidies) nor done it make more sense.

    In the case of film subsidies it's not to help the citizens of the local area or a business in the subsidized area as many subsidies are. It's to essentially to bribe Hollywood to come to that area. The amount of money paid by the government does not get paid back nor does it provide the most useful form of stimulus to the local economy. The other problem is it disrupts an industry and causes one area to lose jobs as those jobs are simply moved across country or across the ocean. Some subsidies are used to get a new industry going (solar power, electric cars, etc) or to help establish a longer term business but the film industry is neither. Each film can choose a different location so it provides no long term permanence to the taxpayers in those areas.

    Some people talk about sending jobs overseas due to lower wages elsewhere (outsourcing) but in fact subsidies are financed by government expressly to do so (causing outsourcing) and not necessarily to the lowest cost area but the area that pays the most of their public funds. The big winners are the studios. The losers are those in the industry and the taxpayers in those areas.

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  5. I tend to agree with everything you are telling me but not with the conclusion.
    First, I don't think the studios are the big winners, we saw them dying or getting bankrupted even while taking advantage of subsidies.

    I am a french artist working in Vancouver, I've been moving from a country to another during my career and I consider it a chance.
    If Hollywood wasn't going to Vancouver or London, I think they would go to India or China and I am pretty sure this time artists from UK, France, California won't follow.
    Regarding the actual economical climate and paradigm, subsidies in Vancouver is saving the vfx industry not to fully move to low-wage country.

    Most of the big vfx houses are already matchmoving, rotoing, and sometime modeling, animating in Asia. People there are now qualified and even experienced, if subsidies don't help us to compete I'm afraid working on Shrek 10 or Transformers 15 will be a fantasy.

    Don't get me wrong, I'm not here to argue with you, we both want the best for a better tomorrow.
    I just can't help myself thinking that we need to make the best of the actual situation and not wasting energy on something already in place.

    I mean, does anybody on earth has the power to tell Indians or Chinese not to work for half my wage ?

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  6. "First, I don't think the studios are the big winners, we saw them dying or getting bankrupted even while taking advantage of subsidies."

    So if you won the lottery and you blew it all on gambling, people couldn't say you won a lot of money and should feel sorry for you?
    Studios get free money. Whether they make a hit or a dud is up to them and doesn't change the fact that they took public funds to do so.

    'If Hollywood wasn't going to Vancouver or London, I think they would go to India or China a..'
    '.. subsidies in Vancouver is saving the vfx industry not to fully move to low-wage country.'
    I think you're dreaming.
    I still don't get why people continue to say this type of stuff ad nauseum. You're making up your own bogeyman at this point just to try to feel better about subsidies. Even the Chinese company buying DD says that most of the vfx work in China is not very good. Will India and China someday be able to do the same exact quality level of ILM, Weta, etc? Maybe but they certainly aren't there yet.

    Subsidies aren't nearly as cheap as India or China. Even at 60% off you're still not down to the $1-2 an hour that some of these areas pay. Studios don't decide simply 'well we could get the same exact work done in india and China but we're willing to pay much more in even subsidized areas because $20 is close enough to $1"

    If subsidies did not exist the studios definitely would not be going to India or China. Because they need quality and low risk. Currently these aren't available in these areas to the degree that the studios would send over all their tentpole pictures. And once these areas can truly match the quality on their own and for the same risk as other areas, no subsidy will save you.

    And you know what? It's not the studios sending roto, matchmoving or other tasks to India and China, it's the vfx companies. We're doing it to ourselves. The companies and the people they send over are simply passing the keys off for short term gains. In 5 years they'll wonder what happened.

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  7. Thanks for answering Scott, I appreciate your effort even though my english isn't that good :)

    I am being the devil advocate to be sure I truly support a good cause.
    I'm not quite convinced as your ideas are as dreamy as mine, I mean, no mathematic here, we are both speculating on how will be the future.
    But you got some good point and you are a brilliant man working hard for the best.

    Almost all I read so far ( not from you, overall ) are people just protecting their habits, living in California, etc..
    This is an industry changing and "this green revolution we are all involved" looks too much as "no way I leave California for Vancouver".

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  8. ' people just protecting their habits, living in California, etc..'

    Most of the people in LA don't mind actual competition but it's when politicians decide to destroy an industry and an area that things become problematic. I dare say if someone offered your employer $100 to fire you for their own gain, you probably would not be quite so pleased with it. Nor would you likely to think that it was fair. But the person who took your job may not be so likely to see the problem or to acknowledge the problem. Nor would they be likely open to what the fired person had to say, even if it was just as a warning for their own future.

    There are only so many films and tv shows made a year. So there are only so many vfx jobs. And each time a location increases subsidies or starts subsidies, they cause a loss of jobs somewhere else. Currently those experiencing job loss are in California. But as you can see even in Vancouver there is job loss, at least for those in live action, because Toronto and Montreal now offer higher subsidies. Do you see how this works? You have no control over it. The companies have no control over it. Quality and business efficiency have no control over it. Jobs are moving not due to any logical reason or 'globalization' but simply because a politician was lobbied to do so.

    And that's what is actually happening now even if many in those subsidized areas refuse to consider it. And it will be happening to them in the future even if they fail to be able to connect the very clear and visible dots to the future.

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  9. Scott, I'm a student from Belgium majoring in VFX, I was wondering underbidding and subsidies fluctuations are only noticeable in America? or is it all around the world being exploited. technically i don't have to work as a VFX artist but i'd like to. and i have been wondering if there's a future in the business in 3 years.

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  10. No, these are not just a problem in America. There are companies in the UK and around the world that underbid. Subsidies affects everyone in vfx. Some UK companies have had to set up branches in Vancouver and now Montreal due to subsidies. Many companies worldwide are asking at least some of their workers or managers to travel to their branch offices and work. Some are being let go because there are higher subsidies elsewhere. And many are working only because they are getting high subsidies at the moment. As covered in another post that puts all of these places at risk. A company in Germany went out of business last week as I recall. So in summary, it's a global problem even if people don't want to admit it.

    The unfortunate truth is it's not a good time for most vfx artists. Many experienced people are leaving in droves because they can't find work or because they don't want to move every 6 months and the same issues are starting to affect other places. The work is diminishing relative to the number of workers and things will be getting worse.

    Anyone attempting to start now has to:
    1. Know the odds of what they're up against
    2. Be ready to be move with little option for settling down. (family, house, etc)
    3. Ready for decline in wages and even more overtime.
    4. Have a plan B job when it all collapses in the next 5-10 years.

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  11. Maybe in 5-10 years, we'll see that apart from western countries with tax incentive, all the studios are in China.
    And American people will discover that the world is beautiful out of the Us boundaries and Indians are damn good artists and deserve to create all the Dreamworks movies.

    I'm being sarcastic here but Scott, how can you be so self-confident about the future. And even though tomorrow will tell you were right, where is it bad ?

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  12. The future is now. Those film jobs leaving Vancouver are happening now due to subsidies. Those jobs that have left LA are because of subsidies. Those jobs shifting from London to Montreal are happening now. Studios and producers always want and will always want cheaper prices on everything and more for themselves. The human desires do not change and so that's one of the constants of the future. And politicians have not changed except they're much more willing to sell out than they once were.

    The studios will not say tomorrow - hey, we don't want or need subsidies. The politicians will not say tomorrow they don't want money from lobbyists. Maybe the people in those areas will realize what a waste they are and that sometimes happens, especially when people decide to stand up for themselves. No politician can guarantee their subsidies will always stay the same nor can they guarantee that all other places won't offer higher subsidies so that means the work relative to subsidies will always be changing until a low cost area gets to the point of eclipsing the subsidies in terms of not only cost but in terms of reasonable quality. And that is not today.

    This is not a slight on anybody in any part of the world. I've never said that there are not artists in other parts of the world.

    But what people are missing here is the studios themselves are gaming the system. This didn't happen a couple of decades ago. This didn't happen on it's own. It's not what grew naturally out of needs or desires or globalization. It grew out of companies paying governments to make it happen. This is no a US only issue. Only those in other subsidized areas think in those terms.

    So where does that leave those who actually enjoy doing visual effects? Are they all willing to be pawns and be forced to move throughout the world? Should we short circuit the whole thing and all of us simply move to China now and work for $2 an hour? But hey, it's a beautiful world and why worry about tomorrow. I'm sure the companies will be looking after all of us and our families. After all, most in vfx don't seem to be concerned about creating a healthy and stable industry so why start now. Just tell those who have lost their vfx jobs to suck it up because in 10 years China will be doing all the work, as it should be.

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  13. Hi Scott, I really love what you are doing here, but it seems you are severely underestimating the quality of work that is coming from the asian countries. at this rate even without subsidy, I can't see how VFX work won't end up in asia? Vancouver (image engine) and London (DN/FS/MPC/CS) are already self-sufficient and are no longer placeholders if the tide of talent going overseas don't stop. But other markets are. Have you seen baseFX in China? or the work from Prime focus india? or from Singapore's ILM? they are in my estimate at the level of mid level artists over there. what they lack is just the high end ppl like pipeline and RSL writers etc... the most important aspect is the engine has been churning for a while now, and there is no union to stem the leak. ILM is already partners with base and other places, there is DWA in Shanghai, they are very capable of taking the next step themselves. A major problem lies with the VFX houses taking their IP to these locales too. IF the studios keep squeezing the WETAs out there, more markets will open and more human resources will go there, the developing ones now will become Vancouver/London of tomorrow, then truly, FX production work will exit Cali for good. When subsidies stop, overseas markets will not go away, the problem is with the studios sqeezing the DDs and R&Hs.

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  14. Once agin - I'm not saying there is no great work in Asia or other locations. I'm saying that from a Studio's viewpoint they are not there today because everything does not align today. There is not enough great work to do everything there today. And as I say once they can the flood gates are open and most of the work from London, New Zealand, Vancouver, Montreal, etc. will soon shift to those areas in Asia. And most of those working in those other areas will be unemployed. Why would the studios go to where ever if they can get the work done cheaper in Asia or somewhere else at least of a reasonable quality? Would there be any value to have an office in London at that point? Will there still be any specialty work that needs to be done elsewhere? Will all vfx work in the future simply be done under Foxconn type of conditions? Will that do anything to help the creative quality? We've have not establish creative reason for vfx in Hollywood (or at least not been able to get that most basic ideas across to producers, studios and directors) nor have we put into place any worker protections. The studios and new studios (since the hollywood studios may be changing drastically) will simply steam roller into new territories. Will they move on into Vietnam or any other areas that may be cheaper?

    What happens when more and more work is done virtually on a stage? Are all the actors and directors going to be living and based in China? Because there is a link even if the studios do not think so. And will China's creative sensibilities be what the rest of the world is eager to see? Only time will tell but doing nothing is not an option unless people simply wish to be flotsam and tossed about.

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    1. We've have not establish creative reason for vfx in Hollywood (or at least not been able to get that most basic ideas across to producers, studios and directors) nor have we put into place any worker protections.

      well that's because they don't buy it. In their mind, you need the two VFX sups from Cali, a trustworthy international group of CG sups, and the rest can be flotsam. You give it time, and the creme will rise up in developing nations, slotting in all the positions for lesser and lesser compensation. It won't be foxconn, but the equilibrium wage at this rate will be quite shocking for the guys who worked on Jurassic Park.

      What happens when more and more work is done virtually on a stage? And will China's creative sensibilities be what the rest of the world is eager to see? Only time will tell but doing nothing is not an option unless people simply wish to be flotsam and tossed about.

      Actors won't move, they are a walking brand, they have more bargaining power. VFX studios need to do what ILM does and fight for a spot on the early credits (TF3). Eventually, people will want to see a movie because they can link that a tiger made by R&H is better than a tiger made by someone else. China's creative sensibilities will be moot because it is not China's creative sensibilities, given enough time for their paltry salaries, the sups and leads can afford to mold them into hollywood ones. I agree doing nothing is not an option, but the eyes on the prize is still a union/trade association IMHO. The subsidy route will just boil down to which country is willing to offer the most at the end of day. and can you link me to the vfxsoldier solution to the subsidy problem please? Great talking to you!

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  15. I agree the future is now.
    Dreamworks already have entire sequences made in India, Rango from ILM has been done in Singapore, most of the 3D TVshows for kids are already there since a long time.

    And this is not based on tax incentive but cheap labor from talented artists.
    So far, I see tax incentive as the only move which slow down the industry to be fully done in western countries.

    I don't think studios are rich, actually some artists/sup are.. And that's a good thing but where is the money then ?
    Well, no need to blame China or Vancouver..
    Actually, artists from California, you might see the money if you look at the windows.
    Fox, BuenaVista, etc... Those are the ones drawning under millions of dollars, forcing your employers to underbid.
    Isn't it their burden to give a fair chance to local and historical studios to work in a sane paradigm ?

    I don't mean to be aggressive Scott, but if they read your blog, they might be pretty happy to see you focusing on Tax Incentive while they are obviously the source of the problem.

    The point is not saving California vfx houses, the point is saving an industry by letting all employers making profit and paying their employees. And that's BuenaVista responsibility !

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  16. "I don't think studios are rich, actually some artists/sup are."
    Have you looked at their public profit listings? The heads of some of the studios are bringing in $30+ million a year. And many of their studio executives make 7 figures a year. But sure, I guess you might consider some supervisors and artists rich and the studios are not(?!)

    "Actually, artists from California, you might see the money if you look at the windows.
    Fox, BuenaVista, etc... Those are the ones drowning under millions of dollars, forcing your employers to underbid."
    You jut said they're not rich.

    'Isn't it their burden to give a fair chance to local and historical studios to work in a sane paradigm ?'
    Yes, and wouldn't it make sense for film subsidies to support their own local content?

    '..they might be pretty happy to see you focusing on Tax Incentive while they are obviously the source of the problem.'
    And the studios are pushing for the subsidies and accepting them. No issue there. If someone or some country offers millions of dollars are they going to tell their shareholders, no, we decided not to take it? The studios demands and the subsidies are one and the same issue. Cut off subsidies and then you have a real means of slowing it down. Subsidies are not slowing the flow of work to Asia. Studios are not happy paying $10 million when they could be paying a $1 million.

    'the point is saving an industry by letting all employers making profit and paying their employees. And that's BuenaVista responsibility !'

    No, because vfx is done by 3rd party companies (and not by employing vfx artistes directly) then it's not BuenaVista's problem if a company does not pay their workers or that a company's managers choose to underbid. Now if BuenaVista were smart they would be worried and they would try to take some steps themselves to stabilize the industry. But many of the executives have short term jobs so as long as they make their money they're not concerned about the future. Look at all the companies having work done in Bangladesh. Shouldn't it be their responsibility? Yes, but most are simply brushing it aside and looking for the next sweatshop intermediate company to handle the work. And that's where vfx is headed.

    Why should the studios care when the vfx companies and many vfx workers don't? The vfx companies could form a trade assoc. and have some leverage but instead they choose not to. Artists could speak up and unite but they refuse to do so. Why should a suit at the studio be concerned again?

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    1. keep up the good work educating and eventually the artists will see that a trade association on both sides (fx companies and the production studio)is the only way to go.

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  17. Have you looked at their public profit listings? The heads of some of the studios are bringing in $30+ million a year.
    People making money ( too much ) and company making money are two different things.
    If a company makes $30+ million a year, is it gross money or profit ? Once again two different things. I can receive millions of dollars if my costs are even higher, that doesn't mean I'm rich.


    You jut said they're not rich.
    I mean vfx houses doesn't seem to be rich. Studios like fox, buenavista, etc, are for sure and they are the problem in my opinion.

    Yes, and wouldn't it make sense for film subsidies to support their own local content?
    Yes, and that's what Vancouver, Toronto, London do.

    '..they might be pretty happy to see you focusing on Tax Incentive while they are obviously the source of the problem.'
    And the studios are pushing for the subsidies and accepting them. No issue there. If someone or some country offers millions of dollars are they going to tell their shareholders, no, we decided not to take it? The studios demands and the subsidies are one and the same issue. Cut off subsidies and then you have a real means of slowing it down. Subsidies are not slowing the flow of work to Asia. Studios are not happy paying $10 million when they could be paying a $1 million.

    Cut subsidies and Sony won't make a baby step to Vancouver but a bigger to India. They are already doing it and the process is getting faster and faster.
    That's my logic : if there is no tax incentive they will still go to the cheaper as you said yourself. Well we both know where it's cheaper after Canada..

    No, because vfx is done by 3rd party companies (and not by employing vfx artistes directly) then it's not BuenaVista's problem if a company does not pay their workers or that a company's managers choose to underbid. Now if BuenaVista were smart they would be worried and they would try to take some steps themselves to stabilize the industry. But many of the executives have short term jobs so as long as they make their money they're not concerned about the future. Look at all the companies having work done in Bangladesh. Shouldn't it be their responsibility? Yes, but most are simply brushing it aside and looking for the next sweatshop intermediate company to handle the work. And that's where vfx is headed.

    Ok this is where my opinion differs from yours. If you think BuenaVista is not responsible because their executives have short term contracts and you prefer to blame British Colombia over the system installed by BuenaVista. Then I can't argue with that logic.

    Why should the studios care when the vfx companies and many vfx workers don't? The vfx companies could form a trade assoc. and have some leverage but instead they choose not to. Artists could speak up and unite but they refuse to do so. Why should a suit at the studio be concerned again?

    Agree it is sad to see how careless are my employers. I don't want to blame my co-workers in fact. Even me, as involved as you can see ( even we can have different opinions :) ), I tend to look down and accept whatever the system offer me. MPC is dividing almost by 2 the wages in Vancouver lately. Well, I need to work, I still apply...
    The terror of unemployment is a powerful leverage on us...
    Same for the vfx houses, they are so afraid not to work, they underbid. We all do. But BuenaVista keep making more money every year.

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  18. 'Cut subsidies and Sony won't make a baby step to Vancouver but a bigger to India. They are already doing it and the process is getting faster and faster.'
    And the subsidies are not slowing down that process. They're merely providing a step and those in those subsidized areas think that is where they are going but it's only a temporary stop. And again the studios will go tomorrow to India, China, etc if they could do it now and the subsidies play no role in slowing that down.

    'If you think BuenaVista is not responsible because their executives have short term contracts and you prefer to blame British Colombia over the system installed by BuenaVista. Then I can't argue with that logic.'

    The studios and the subsidized areas are joined at the hip. I'm not blaming the workers there. BC is the way it is because the studios have pushed for it. They feed off of each other. And it's hard to make a toddler stop asking for candy if someone is dangling it in front of their face. The first step is to remove the candy from their face.

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  19. And the subsidies are not slowing down that process. They're merely providing a step and those in those subsidized areas think that is where they are going but it's only a temporary stop. And again the studios will go tomorrow to India, China, etc if they could do it now and the subsidies play no role in slowing that down.

    We can agree here, so vfx houses are going to foreign countries... Why ? Cheap labors.
    I tend to think that if the studios where paying normally the vfx houses, they might be willing to keep going locally and not move overseas. If you and your family is not really willing to go work in China, I'm sure my employer don't want to either. From that logic, even it could be cheaper somewhere else, is making enough money to stay where he is now.
    How to make more money ? Let's ask studios and their billions of dollars.


    The studios and the subsidized areas are joined at the hip. I'm not blaming the workers there. BC is the way it is because the studios have pushed for it. They feed off of each other. And it's hard to make a toddler stop asking for candy if someone is dangling it in front of their face. The first step is to remove the candy from their face.

    That is more an opinion than a fact. As I said above, if they had enough in their fridge already they wouldn't bother going in China for a candy.


    I don't understand you Scott.. I mean.. Let's imagine the world as you are willing to see it.

    Let's say subsidies is a big big issue.
    Let's say we find a way to forbid it all over the world.
    Let's say artists in China and India are as expensive as the ones in north America.
    So we are all equal and no unfair help..

    The studios are still playing that underbiding game forcing the vfx houses to accept a film even if they are not going to make money out of it but just try to survive.
    See, studios are still rich, no tax incentive, and vfx houses are barely breathing.
    Subsidies or not, the problem will still be here.

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  20. There are multiple problems in the vfx industry, not just one. There will not be a single solution that covers all of those problems. Stopping subsidies will not stop all the problems. Stopping underbidding will not stop all the problems.
    In the case of underbidding, a fair amount of the underbidding is caused because of the subsidies. They are a way for one company to try to compete with an even better subsidy elsewhere. If subsidies were eliminated that would certainly reduce the amount of underbidding.

    For vfx to stabilize requires a number of things. Most of what it requires is vfx with leverage.
    To do that vfx companies have to start acting like real businesses. The best fast track to do that and gain leverage is to form a trade association. Now you have the weight of a dozen or more large vfx companies. Right now you have a dozen companies infighting with each other and playing into the hands of the studios.

    The other thing that will likely need to happen is for another couple of large vfx companies to go under.
    That would hopefully wake the ones that are certainly sleeping at the moment and it would reduce the competition.

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  21. Agree that a trade association would be fantastic.

    You still never explained, but bring it as a truth, that eliminating subsidies would reduce subsidies.
    I want to believe it, but do you have exemple, or "mathematical" explanation ?

    Because to my opinion, and I know it is shared by many artists around me, subsidies actually help western countries to compete with cheap labor overseas. And that it mathematically explainable.

    I really support artists, as part of them, and companies and I want to support a leader ( could be you :) ). But so far you never explain and just bring your own truth. Since we disagree on subsidies, I need to be convinced if I'm wrong.

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  22. Most subsidies range from 20% to 60%. Now lets suppose your average vfx person makes $30+ an hour. Even at 60% that's more than $12 an hour. If I'm not mistaken $12 is much more per hour than most jobs in India and China.
    So that means, mathematically, that it is cheaper to do it in India and China. (Assuming we're simply viewing labor and vfx work as a simple commodity based on hourly wages)

    So that means "Western" wages cost more than India and China. And if the whole notion is based on price then the math has been solved. IF the quality and the risk for Avengers 2 is less in India and China, the studios would be there tomorrow. Your offer for $12 an hours won't enter their minds, let alone slow them down.
    Why in the world would you think they would hang out in 'western' countries if it's cheaper elsewhere? Especially since they themselves don't have to travel to these places. If you had to choose between the same exact product on the internet - one for$12 and one for $1 (no postage), which one would you choose?

    I'm not saying vfx is a commodity but that's certainly the way the studios try to look at it. So exactly how is it slowing down work going to India and China? Do you think all the studios have to do is go tomorrow to these places and get the work done with no worries? Do you seriously think the studios are going - "nah, we've saved enough money with the subsidies, we won't bother putting pressure on them to get to India and China".

    The subsidies aren't slowing down anything. All they're doing is providing a cheaper location until India and China are ready. Do the studios want to open their own vfx companies in India and China? No. Would they want to do so if they thought it would be cheaper? Obviously it's already cheaper now. The studio executives want to get their work done to the quality required for the project for the cheapest price and the lowest risk. Studios can actually start their own vfx companies if it's simply a matter of trying to lower costs but the risk is too high. Besides, vfx companies are more than willing and able to accept the risk, to underbid and to handle all of the hassle. A Hollywood executive would rather remain employed rather than having to deal with a company in the middle of India and telling their bosses why the $200 million dollar film won't make it's release date because there was a problem is not something that they would enjoy doing.

    I think you and your fellow workers are simply trying to justify subsidies to yourselves and try to view it as the lesser of the evils when it's not actually a choice. It's like people pirating software and coming up with reasons why it's a totally valid idea. (I'm spreading the word about your software, I only use it occasionally, I would have never bought it even though I'm using it, etc)

    I do know some of the reasons why companies have underbid is because of the subsidies. I'm in the offices of the studios and the vfx companies. I'm involved with some of these types of negotiations. I review bids. And that's why I speak about subsidies and underbidding. How is London with their 20-25% subsidy going to compete with Montreal at 50+ %? Once again, if this all comes down to money, which it does on many films and has a strong influence on almost all films, then they will have to do something 'drastic' such as underbidding.

    Eliminate subsidies and you eliminate a large reason for underbidding. It won't eliminate all underbidding but it will reduce it because at that point you have a much more level playing field. Now you've eliminated totally artificial market manipulation by governments playing with subsidies. And the vfx industry and location where the work is done can evolve accordingly. Will all or most of that work go to China and india? Possibly but at least the industry and workers won't be sucked dry and eliminated by politicians in the meantime.


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  23. Thanks you very much for this really long and really well described explanation Scott.
    You convinced me on many points, and I know I gave you hard time here :)

    I see problem with subsidies now, you are right especially since you see it yourself while biding on some projects.
    I also hope studios will give a fair chance to historical vfx houses to live and invest instead of surviving. Wherever they are.

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  24. Nice read,imho China and India are destroying industries,not only vfx.
    The thing is,there is nothing that will change that.

    You simply can't compete with people that work for free,take Prime Fuckus.

    About quality,software moves forwards,thing get easier to do,there is no need for reinvent the wheel on every movie.

    20 millions(maybe even less),FIRST ONE seriously done in Argentina.
    http://www.youtube.com/watch?v=WUHfUv9jmuY
    Approx salary U$1000 for each animator,U$2000 for lighters.

    So another way of fight can be to make something like vfxwages,its offline now,but the first step its information,people isn't happy to work for coins,the first step its to make them aware of his situation.

    Nobody can earn less,sorry for mi English

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  25. Become part of a union, IATSE most likely.

    Period.

    This way VFX artists wouldn't have to cannibilize each other.

    Period.

    Of course, there will problems such as runaway productions, subsidies etc. BUT, like virtually EVERY OTHER craft in the industry, unionization will UNITE VFX artists rather than cast them AGAINST one another.

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  26. Very nice information. I just love multimedia animation, rotoscoping, visual effects and vfx information. I am looking this kind of blog. Please keep updating..I am going to bookmark your blog.

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  27. AnonymousMay 10, 2014

    hi , master SCOTT . I'm Samad from benin . my english is poor . i'm very glad to know this site because i always dream to have contact with a great visual effects supervisor . i'm your fan and i dream to become like you . i would like to have a making of your work . for instance van helsing .

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  28. There are only so many films and tv shows made a year. So there are only so many vfx jobs. And each time a location increases subsidies or starts subsidies, they cause a loss of jobs somewhere else. Currently those experiencing job loss are in California. But as you can see even in Vancouver there is job loss, at least for those in live action, because Toronto and Montreal now offer higher subsidies. Do you see how this works? You have no control over it. The companies have no control over it. Quality and business efficiency have no control over it. Jobs are moving not due to any logical reason or 'globalization' but simply because a politician was lobbied to do so.
    http://www.recruitmentarea.com/

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