An Alternate Business Model for the VFX Industry

The current business model for visual effects companies is broken. Plenty of people are talking about ways to patch it up, but I thought I’d explore a more radical approach.

Perhaps the days of the big visual effects facility are over. The competitive edge they enjoyed from proprietary software has almost completely disappeared due to the commoditization of the tools; and access to large dedicated renderfarms is becoming less important with the availability of cloud computing. Additionally, the companies are saddled with an outdated business model that they are unwilling or unable to fix. A trade association can help with the last item, but is helpless against the first two.

Because of the march of technology, the workforce no longer needs to be trained for months on internal software before becoming useful. Thus, at best, they are more susceptible to layoffs, with the increasingly likely scenario being that they are hired job to job. The transient nature of the work, compounded by abuses arising from the facilities’ outdated business model, have made unionization a necessity.

So here is a possible new model that not only works with unions and a trade association, but relies on them as an important part of the process.

The ecosystem is built around a number of pieces.

  • The first piece is a large pool of labor, supported by a union (or many unions). The union makes sure the workforce is qualified, and provides benefits and collective bargaining for them. In addition to health and retirement benefits, the union can negotiate for residuals, hold fees, and other practices. The union can set standards for membership and provide additional training.
  • The second piece is a cadre of small, specialized companies. These can be as small as one person, or as big as necessary, though I imagine there would be a top sustainable size of less than 100. The companies would focus on what they do best. Those specialties could be art, technology, producing or any other unique skill or knowledge. Some of them would be made up of the best in the business, but there isn’t anything keeping anyone else from competing there either. These small companies would use the labor pool to expand as necessary for jobs that they take on – potentially growing to multiple hundreds of people quite quickly.
  • The third piece is a collection of suppliers of resources: facilities, equipment, services, etc. This is similar to what RFX was doing in the 80’s and 90’s. They would be able to rent or lease equipment and space to productions for the duration of a project. These companies could build a respectable business by allowing productions to effectively share the cost of ownership rather than having to carry the cost through down cycles. There would be fantastic opportunities for people to create meaningful and profitable companies around this. For example, a number of companies are working on cloud based infrastructures for production that comply with the demands of film production – this would be an ideal service to provide to everyone.
  • A trade organization would support the specialized companies and their suppliers. The organization would make sure there are standards and practices in place for all parties. It would oversee the development of bidding templates and standard contracts. These could include residuals and hold fees. It could also be the central coordinator for standardizing ways for data to be shared between different production teams (or work with other organizations’ committees to contribute to that).

Here are some of the benefits I see to this model.

  • The current capitalistic market will make sure that the work is awarded to the best value provider. Best value, by the way, is not the same as lowest price. There will be certain jobs that need the most experienced and clever people in their sector, and these people can demand top dollar for their services. There will be other jobs that don’t need that expertise, and there will be people to take that work for a lower price. It is, first and foremost, a meritocracy.
  • The model by its very nature is cost based rather than fixed bid. Studios could choose to set up their own facility for the duration of a production, they could hire one of the smaller shops to do it, or they could farm the job out to all the best teams. In any of those scenarios, they are either paying the crew directly or working from a standard bidding and contract template created by the trade organization.
  • Because the projects are cost based, the responsibility for reining in the director goes back to the studio or producer, where it belongs. If they want to let the director run free, then they need to pay.
  • Crews that work well together can operate as their own company and book themselves out as a unit. Smaller teams can be more agile. They can take projects outside of film production during slow times, or can use their down time to invest in creating original properties.
  • I can also see Supervisor driven companies emerging, not unlike the Director driven commercial production companies of the 80’s. Such a company would be a collection of highly creative supervisors and experienced producers who can demand a high fee for their services on projects.
  • Subsidies are a huge problem, and I’m very skeptical of the visual effects industry’s ability to impact that in any significant way. There are political and economic forces at play with way more resources available to them than the entire visual effects industry is worth. If subsidies are going to continue, I believe this model plays the game adequately. The supplier companies could make facilities and resources available in any location. The local production companies would hire from the labor pool, including bringing in people from other areas, to build up an eligible team locally. Ideally, though, the workers’ compensation would include per diems to offset the cost of moving to the location for the duration of the project. I’ll concede I’m not an expert on subsidies and there may be things I’m missing.

I’m looking forward to hearing people’s thoughts on this and would love to explore other ideas of how to rebuild the industry.

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