CR - you thought the special effects business was a good business. Read this from Animation Magazine.
Top 10 Hottest Issues in 1997.
#9 - Layoffs in Visual Effects Business
"With layoffs seemingly every other month in the special effeccts business comes the questions: Has the bubble burst? Is the industry's spurt now a sputter? The evidence points this way and 1998 could make the case. Lsat year, Disney let go 90 workers at its video-game facility; Rythm & Hues Studios, the effects design firm for the Mouse Hunt feature for DreamWorks among other projects, laid off 12 of its digital artists; and Boss Film Studios, one of Hollywoods most prominent special effects houses, found it couldn't afford to continue in business and closed down entirely. Digital Domain experienced layoffs and Warner Bros. Digital shut down while Blue Sky and VIFX merged."
I think this answers your contention rather clearly. There is no competitive advantage doing one-off special effects. It's pure production-for-hire fee work with no long term building up of assets like licensing, foreign rights, library assets, royalities. It also shows that the margins are very low because of the competition. Numerous shops can do 40 second effects, but very few can manage the production process required for 900 minutes of episodic or theatrical animation --that's what MFE did last year. It requires very different skills and tools and experience counts immensely. Being a proven player will get you business and allow you to dictate reasonably good terms. Digital Domain did the Titanic work and they're firing people. Also, the word is that Pacific Data Images is way over budget and over time on their attempt at long-form CGI animation --the movie for Dreamworks called Antz. Supposedly, it's getting close to problem stage.
I think this fully backs up the company's strategy and proven industry advantage --create, produce, make your projects profitable for all partners based on your efficient economics and own something of long-term value. Build it up over time.
This also answers Praxis concern over talent supply. It looks like one end of the business over-extended itself and there will probably be an increasing supply of experienced talent available to the bigger players, of which MFE is one. If Disney, Digital Domain and Warner are letting go, there must be plenty of smaller shops under heat too. |
