(Source: AnimationGuildBlog) Here’s the way the visual effects industry goes:

1) Big Fat Conglomerate puts most of the work on its new, $200 million effects-laden blockbuster out for bid.

2) Effects houses from far and wide bid on the project, busily low-balling one another.

3) BFC picks the cheapest price among the houses, gives a few high-end “money shots” to a prestigious effects studio in San Francisco, and hands off wire removal and other mundane chores to Mumbai, India (which is even cheaper!)

4) Management of Low-Ball Effx House discovers that it is seriously in the red doing the work and will have to look for suitors with money if it wants to keep its doors open. (As an interim measure, it cuts staff salaries and benefits) …

Versions of this scenario have been happening with metronomic regularity for years. Variety had an article yesterday regarding Digital Domain’s wrongful termination suit by it’s former president:

Digital Domain, the Venice, Calif.-based visual effects shop … is scheduled to be in court Wednesday for opening arguments in a wrongful termination suit by the company’s former prexy, Christian Bradley “Brad” Call.

Call alleges the company pressured him to falsify the company’s financials to attract investors …

…documents reveal that the company, founded in 1993 by Scott Ross, helmer James Cameron and creature wiz Stan Winston, has never turned a profit despite having a thriving commercials division for much of its existence to supplement its feature work …

But weep not for Digital Domain. Per the article, current management strongly implies that everything is really good now. (And if you believe that, then call me quick, because I’ve got some prime real estate out in Lancaster I’m willing to sell you.)

There’s a reason that the major entertainment companies got into the effects business and then (except for Sony) quickly got out again. The profit margins just weren’t there.

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