Global VFX: State of the Industry 2019

By DEBRA KAUFMAN

Though the last five to 10 years have been disruptive in the visual effects universe, the industry is currently quite robust. Movies, animation and video games rich with the latest stunning visual effects top box offices and sales charts worldwide. With the current golden age of television, and an explosion of new platforms from Amazon Prime Video to Hulu to Netflix, the need for content has mushroomed and, with it, the need for visual effects of all kinds. Furthermore, companies are exploring new technologies from virtual reality to 360-degree experiences and light-field capture, all of which require the expertise and knowledge base of the visual effects industry.

Although the work may be plentiful, some financial considerations can either help or hobble visual effect facilities. Several experts told VFX Voice that business margins are as thin as ever. Financial incentives have failed in some locations, but have become further entrenched in others. In places like the U.K., where incentives have been used to build a robust all-around film industry, as well as other places, incentives appear to be here to stay. Two things have arisen as a result: larger facilities have been establishing a presence in the cities where film/TV productions take place, and the number of must-be-there locations has grown. At the same time, many visual effects artists continue to go where the work is, essentially becoming nomadic as they move to different cities for different projects.

Those facilities built in India, China and elsewhere to take on wire removal and rotoscoping are also coming into their own, particularly in India where they are offering a full range of visual effects for homegrown movies – with the aspiration that they might be able to do more than rotoscoping for out-of-town productions shooting in their countries. As a company like Netflix produces more and more country-specific or regional movies, the global market may turn to facilities in India and China in the future.

Visual effects houses always have to stay on top of new technologies, which are also opportunities to gain market share in new entertainment arenas, such as virtual reality and augmented reality. In today’s market, just as the mid-budget movie has nearly been squeezed out of existence, mid-sized VFX houses are more challenged than ever to keep afloat. They can’t afford to build up to the scale of a bigger house, but they lack the agility of the mom-and-pop operation. Still, the minority of mid-sized facilities remain, balanced on that delicate position between the two extremes.

World War II allied soldiers face death from the sky in Christopher Nolan’s Dunkirk (2017) (Photo courtesy of Warner Bros. Pictures)

The ever-changing, gravity-defying dream world of Inception (2010). (Image courtesy of Warner Bros. Pictures)

LOOKING BACK

When the VES did its last in-depth survey of the visual effects industry in 2013, its “White Paper” portrayed the industry as being in a state of flux.

“In recent months, worldwide dialogue in the visual effects community has created a sense of urgency to address the complex pressures on artists and facilities dealing with issues of frayed business models, financial instability, and an increasingly ‘nomadic’ workforce operating without a secure vision of the future,” said the report, which surveyed “four complex, independent drivers” of change: government dynamics, including tax incentives; growing competition due to technology advances, expanding workforce and globalization; passion for the industry that leads to creation of unsustainable business models; and issues related to how the film industry is structured.

For many in the VFX industry, a painful moment that highlighted all of the above was the 2013 Academy Awards, when Life of Pi won numerous Oscars, including Best Achievement in Visual Effects, while Rhythm & Hues, the pioneering effects facility that provided most of the effects, was shutting its doors and declaring bankruptcy. “The globalization of our industry was really taking off and Southern California VFX people were feeling very misplaced,” notes visual effects producer and VES Chair Mike Chambers.

Black Panther uses kinetic energy absorbed in his vibranium suit to create an energy blast in Black Panther (2018). (Image courtesy of Marvel Studios and Method Studios)

The underwater kingdom of Atlantis comes to life in Aquaman (2018). (Image courtesy of Warner Bros. Pictures)

BOOMING BUSINESS

Data from research firm comScore reveals that North America broke box office records in 2017 – ticket sales in the U.S. and Canada earned $11.8 billion. The final tally for 2018 was $11.9 billion, good news for those who fear that streaming may be eroding movie theater activity. Global box office in 2018 was $42 billion, according to comScore. The 2018 summer North American box-office figures broke a record with a U.S. domestic total of $4.8 billion, suggesting box office and streaming are synergistic. All ten of the 10 highest grossing films in the U.S. were either VFX movies or computer-animated films. Many of the most popular streaming shows were also VFX heavy.

Although there is plenty of uncertainty regarding numerous factors affecting the VFX industry, business is booming for a variety of reasons. Jon Peddie Research Vice President/Software Analyst Kathleen Maher credits what she calls “the Netflix boom,” referring to the rise of streaming media. “There is so much more work and there are a lot of small productions,” she says. “In the period after Life of Pi, when all those companies went bust and people were losing their jobs, it forced an improvement in the industry.”

At Toronto’s Spin VFX, President/Executive Producer Neishaw Ali notes that she’s “seen a tremendous growth in the quality and complexity of visual effects, as well as constant innovation in photorealism. Because of our ability to view on demand whatever we want, wherever and whenever, and with content that appeals to all cultures, Spin VFX is responding to the increased demand by working on more complex creatures and building more exciting worlds.”

Australia’s Rising Sun Pictures’ Managing Director/Co-founder Tony Clark reports that “today’s market is buoyant, but definitely different than when we started. VFX is very much a mature market, having passed its point where demand outstripped supply,” he says. “It is now consolidating and optimizing as mature industries do. You can see this with the consolidation of vendors and the never-ending search for cost efficiencies as expectations rise faster than budgets.”

Mike Chambers, Visual Effects Producer and Chair, VES

“Maintaining business at a small independent house is very tough. The pressure to grow is intense, but once you get past 100 artists, it becomes a different ball game.”

—Mike Chambers, Visual Effects Producer

Kathleen Maher, Vice President/Software Analyst, Jon Peddie Research

“People have work. I’m not hearing about unionization so much. Also, sadly, labor movements all over the world are being undermined by companies and governments, but, again, people have work.”

—Kathleen Maher, Vice President/Software Analyst, Jon Peddie Research

Neishaw Ali, President/Executive Producer, Spin VFX

“[I’ve]seen a tremendous growth in the quality and complexity of visual effects, as well as constant innovation in photorealism. Because of our ability to view on demand whatever we want, wherever and whenever, and with content that appeals to all cultures, Spin VFX is responding to the increased demand by working on more complex creatures and building more exciting worlds.”

—Neishaw Ali, President/Executive Producer, Spin VFX

Tony Clark, Managing Director/Co-founder, Rising Sun Pictures

“Today’s market is buoyant, but definitely different than when we started. VFX is very much a mature market, having passed its point where demand outstripped supply. It is now consolidating and optimizing as mature industries do. You can see this with the consolidation of vendors and the never-ending search for cost efficiencies as expectations rise faster than budgets.”

—Tony Clark, Managing Director/Co-founder, Rising Sun Pictures

Ed Ulbrich, President/General Manager, Method Studios

“You have a whole new breed of client emerging. There’s a paradigm shift. It you look at the landscape of major studios, you have to include Netflix, Apple and Amazon. Now you’re seeing Paramount producing movies for Netflix, which has no legacy studio infrastructure to preserve. All these companies are tech companies first, so they own massive cloud infrastructure or partner with each other to provide services.”

—Ed Ulbrich, President/General Manager, Method Studios

Sue Lyster, Executive in Charge, ILM London

“[A.I.] will cut down on CPU and render time. We’re also investigating techniques to recognize and replace human faces in a semi-automated way, potentially a huge leap forward. Even with rotoscoping, you can ask the computer to hunt for humans and automatically rotoscope. It’s not production level yet, but pretty amazing.”

—Sue Lyster, Executive in Charge, ILM London

Ben Morris, Creative Director, ILM London

“We tri-sect the 24 hours of the globe, which brings challenges, but also benefits us to be able to distribute work among the global community.”

—Ben Morris, Creative Director, ILM London

Andrew Bly, Co-founder/Executive Producer, The Molecule

“[I]t is hard to run a mid-sized company. You’re not so small, so you can’t be as nimble with schedule changes as you used to be. But you’re not a big corporation where you have a plethora of resources to shuffle. It definitely has its challenges. It’s easier to form little companies to compete. And as people become more skilled and efficient, you can achieve certain tasks in a day that took a week five years ago,”

—Andrew Bly, Co-founder/Executive Producer, The Molecule

Artificial intelligence facial-capture helped detail Thanos’ facial features in Avengers: Infinity War (2018). (Image courtesy of Digital Domain)

Behind the scenes on First Man (2018). (Image courtesy Universal Pictures and DNEG)

INTERSECTING FORCES

Parsing out today’s market is complex, as the forces of globalization, tax incentives, technology and workflow interact, both in terms of the industry and individual productions. Added to that are new platforms – especially streaming services – that increase opportunity, but also destabilize traditional models. Whether it’s Netflix, Amazon, YouTube, video games, virtual reality, augmented reality, theme parks or mobile content, the huge influx of content from new players and new platforms is a big factor behind today’s robust VFX market. Netflix especially has played a role in creating high-end streaming content in numerous regional markets worldwide, boosting local production, post and VFX markets.

“You have a whole new breed of client emerging,” says Ed Ulbrich, Method Studios President and GM. “There’s a paradigm shift. If you look at the landscape of major studios, you have to include Netflix, Apple and Amazon. Now you’re seeing Paramount producing movies for Netflix, which has no legacy studio infrastructure to preserve. All these companies are tech companies first, so they own massive cloud infrastructure or partner with each other to provide services.” Ali reports that Spin VFX has worked with Amazon and Netflix, saying the relationships have been good. “They have strong production teams that work very collaboratively with vendors,” she says.

At ILM in London, Executive in Charge Sue Lyster notes that the company is doing features for streaming, most recently working on Netflix’s Bird Box. “We’ve also hired a team of TV executives to build up the episodic TV side of the business,” she says. ILM London Creative Director Ben Morris notes that “the world of streaming does to a degree change how we work. If you have 1,000 shots in a film and 12 months to deliver, you stack up a lot of crew towards the end of delivery,” he says. “In episodic TV, you deliver a certain number of shots per month. There is no mad dash at the end, and you might get fewer iterations.” Rising Sun Pictures’ Clark also notes how the customers are changing. “We’re simultaneously seeing multiple new outlets with the streaming players and their demand for incredibly high quality on those platforms,” he says. “There’s been a little work for Netflix, and we’re keen to explore more in that space. A key part of our strategy is to facilitate top-end creative services for streaming platforms. We’ve invested significantly in being in the right shape to address those opportunities.”

At The Molecule in New York, Co-founder/Executive Producer Andrew Bly notes how OTT (Over the Top) services have changed the workflow – and the invoicing. “In the 2000s, the schedule was very predictable,” he says. “Now, with OTT services, seasons that used to be your downtime could be the busiest and vice versa. You can juggle all 10 episodes at once, and you have to think about how to invoice it. You’re on the hook to carry that money for a longer period. OTT services have also changed the quality. It used to be about doing the best job, but fast enough to hit the airwaves. Now, the Amazons and Hulus are all gunning for that high quality and viewers expect it. As a company you have to figure out how to keep an efficient pipeline to achieve feature-film quality.”

Framestore’s Managing Director of Integrated Advertising, Helen Stanley, describes how her company has been active in pioneering another new platform, virtual reality, beginning with a VR project in 2012 for Game of Thrones that was presented at the South By Southwest (SXSW) confab. “Since then, we’ve grown in that area,” she says. “We’ve started to work for major ride installations, for the main IP or agencies. Clients come to us with real-time requirements and the VR projects are becoming more and more ambitious.” One outlet is so-called dark rides, in which stereoscopic media is projected on to a huge screen, a very immersive replacement for animatronics. To accommodate this genre of work, Framestore has pulled project management and creatives into one team. “It’s adding a new category for the visual effects facility,” says Stanley. “We combine the creative people with those who are experts in rides, and by end of April we’ll have created a ride in every type of genre, including VR walk-through, riding and motion-based. We’ve done brand-based rides for Samsung and VW in China, and gravity-free experiences where we partnered with hardware manufacturers and worked like a digital production company for the agency.”

The moving cities of Mortal Engines (2018). (Image courtesy of Universal Pictures)

War for the Planet of the Apes (2017). (Image courtesy of Twentieth Century Fox)

TAX INCENTIVES

While new platforms and outlets provide for a growing regional market and stretch traditional digital VFX houses into new genres, tax incentives are responsible for sending productions – and often post and VFX – to far-flung destinations, from Atlanta to Montreal, London to Berlin – to enjoy rebates. “Vancouver was the granddaddy of all of them, and has been very successful,” says Chambers. “But look what’s happened in places like Michigan – they threw big tax incentives out there and used old warehouses for stages, and the producers said yes, but they didn’t have the crew base to support the work.” For that reason, although Atlanta is one of the destinations that has benefited from incentives, many other U.S. states that initially offered them have taken stock of the fact that tax incentives were not a short-term fix to create a new industry sector.

“The way producers are using tax incentives has changed,” says Visual Effects Supervisor Jeffrey A. Okun, VES. “The spend has to be correct and it has to go to the right company and be the right incentive. A VFX producer’s job has become really complicated. My job is more fun. It’s easy to find creative talent because I have a huge pool to pull from – the entire world! What’s important to note is that if most of the incentive companies were put up against the U.S. companies, the U.S. companies are actually cheaper.”

In London, ILM’s Lyster points out that the film tax break “isn’t there to support visual effects, but the growth and well-being of the British film industry. Still, there’s no doubt in many ways it plays a part in the growth of the VFX industry in London,” she says. “There’s a symbiosis. In a place like Montreal, where they have a very healthy tax break, the challenge has been finding and building the talent. I don’t think ILM would have come to London if there had been a tax break but no talent to hire. The two go hand in hand.”

At Framestore, Managing Director of Feature Films Fiona Walkinshaw talks about the decision to open a Montreal facility in 2013. “There are big commitments from the government to maintain healthy incentives there,” she says. “We wouldn’t go into these places without knowing it’s a robust set-up. Incentives attracts a huge number of artists to Montreal, and so many people paying taxes is good for their economy and the other businesses they’re trying to build up.” In Toronto, Ali reports that most of Spin VFX’s work comes from the U.S. “We’ve spent the past 15 years developing relationships locally and internationally,” she says. “Incentives are quite attractive, and many U.S. companies want to shoot in Canada, which creates a great opportunity to complete VFX here.” At the same time, she notes, “many jurisdictions have similar incentives, which has resulted in greater competition within the industry.”

Australia also has competitive incentives, says Clark, with a 30% federal rebate on qualifying gross spend, with various state incentives that can be added on top. “They’re all simple and predictable,” he says. “In Rising Sun Pictures’ home base of South Australia, they can be combined to create a 40% rebate pretty much on all VFX spend – and as high as 50% on an Australian project.” In India, BotVFX Chief Executive/Co-founder Hitesh Shah notes that, although the city of Chennai has incentives, he considers incentives as “a fickle thing. The dynamics of incentives create friction in global decision making,” he says. “The accountants get into the number crunching to see where it needs to be and everyone has to work around those targets, even if it’s suboptimal in other ways.”

The Valkyrie attack Hela (played by Cate Blanchett) while riding winged horses amid swirling layers of atmosphere in Thor: Ragnarok (2017). (Image courtesy Marvel Studios, Walt Disney Pictures and Rising Sun Pictures)

Valkyrie, the Asgardian warrior (played by Tessa Thompson), in Thor: Ragnarok (2017). (Image courtesy Marvel Studios, Walt Disney Pictures and Rising Sun Pictures)

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ROAMING SAMURAI

In a way, VFX artists are probably the biggest losers in the tax incentive game, as noted in the VES’s 2013 White Paper. “Artists are roaming samurai,” says Ulbrich. “They move to where the work is. I’ve lived it, and that’s the hardship for the VFX community. It requires mobility to be where the work is.”

Globalization of the VFX industry was a trend that’s now a reality. “Visual effects aren’t the first industry to be disrupted by globalization,” points out Ulbrich. “We’ve seen it happen in consumer electronics and automotive.” In the early days of digital visual effects, the VFX facilities existed in North America, Europe and Australia/New Zealand – places that had access to the latest, fastest computers and software or developed their own. Ulbrich notes that with incentives, the VFX house has to be able to “move to where you need to be,” spurring globalization. “The California visual effects industry is completely different than it was 10 years ago,” he says. “Two decades of slow, steady globalization eliminated the core business.”

The landscape continues to change, sometimes in unpredictable ways. Look no farther than Beijing-headquartered VHQ Media, where Dayne Cowan heads up the 31-year-old company’s feature film division. Cowan’s career was built in Europe, where he worked as Double Negative’s 3D/VFX Supervisor, Cinesite’s Digital Development Manager and Head of VFX at Molinare/Pixion. For the last six years, he’s been in charge of VHQ Media, which grew from 20 to 350+ people and also has locations in Singapore, Kuala Lumpur and Jakarta. “With public funding from the Taiwan stock exchange, we’ve been investing in a lot of Chinese and regional film and TV,” says Cowan. “It’s driven by a boom in the Chinese film market, as the number of cinemas in China has skyrocketed and the call for content is enormous.” The facility works on “the odd North American or European film,” adds Cowan, “but we have our hands full with work for China.”

BotVFX started 10 years ago as a classic outsourcing facility in Chennai, India, offering rotoscoping, tracking, paint and prep to a variety of clients. At an earlier company he founded, Shah had a fateful conversation with Rhythm & Hues, which had a Mumbai unit. “They helped me to understand that the trick was in cultivating a full culture, have proper training and QC – and not get ahead of your headlights,” he says. “We put our head down and did that.” BotVFX, which does all its work in Chennai, has headquarters in Atlanta with offices in Los Angeles, Vancouver and Montreal. “We work with WETA, Hybride, Rodeo and ILM [among others],” says Shah. “There is still a large base that doesn’t have that dedicated back end and are looking for a reliable player with scale. With 350 people, we can take on a feature.”

Okun points out that, although “roto work is still big in India and China,” that’s not all those facilities do. “They’ve also stepped up their game to make regional films filled with visual effects,” he says. “India has made a couple of great sword and sorcery movies. Those countries as well as Taiwan and Korea have actively gone out and hired a lot of American and British artists to train their artists or run the company.”

Globalization has also meant that the North American and European companies have had to choose – judiciously – where else to set up shop. Vancouver was an early destination, but the number of locations has expanded exponentially. ILM’s Morris notes that opening the facility in London five years ago was a big step. “Setting up in the U.K. made sense – with so many filmmakers and productions,” he says. “The VFX industry in London has grown to be the biggest in the world and the density of talent was and is still very high.” He notes that committing to a London facility also coincided with Lucasfilm making more films in the U.K. With facilities now in San Francisco, Singapore, Vancouver and London, says Morris, “we tri-sect the 24 hours of the globe, which brings challenges, but also benefits us to be able to distribute work among the global community.” Method Studios, a Deluxe company, has facilities in Los Angeles, New York, Atlanta, Vancouver, San Francisco, Pune (India), Melbourne and, with the acquisition of Atomic Fiction, now Montreal. Framestore, in addition to its London site, has facilities in Montreal and Pune, with sites servicing advertising clients in Chicago, New York and Los Angeles.

In her research, Maher has found the beginning of a trend she’s calling de-globalization – which may eventually impact the VFX industry. “There is plenty of outsourcing to Vancouver or wherever there’s an advantage,” she says, “but there is actually less outsourcing than before. Businesses are getting more comfortable working closer to home, in everything from manufacturing to the film industry. I’ve just started to see pick-up in CAD (Computer Assisted Design) and manufacturing. I’m hearing people say they didn’t like the loss of control, the time lag and the cultural differences with other countries.” As one example, Walkinshaw reports that Framestore doesn’t usually outsource anything it does in feature films. “We manage it all ourselves,” she says. “We do outsource if we have to, but we prefer to do it all within Framestore’s operation pipelines. It’s easier to manage your own toolset and you can respond to the inevitable changes. The constant pressure is to do more and be very efficient, and we’re constantly refining our toolset.”

Helen Stanley, Managing Director of Integrated Advertising, Framestore

“We’ve started to work for major ride installations, for the main IP or agencies. Clients come to us with real-time requirements and the VR projects are becoming more and more ambitious. It’s adding a new category for the visual effects facility.”

—Helen Stanley, Managing Director of

Integrated Advertising, Framestore

Jeffrey A. Okun, VES, Visual Effects Supervisor

“Visual effects are seeping into all the other departments – camera, lighting, costumes, sets, makeup, hair, production design and stunts, so there’s more work than ever before.”

—Jeffrey A. Okun, VES, Visual Effects Supervisor

Fiona Walkinshaw, Managing Director of Feature Films, Framestore

“There are big commitments from the government to maintain healthy incentives [in Canada]. We wouldn’t go into these places without knowing it’s a robust set-up. Incentives attracts a huge number of artists to Montreal, and so many people paying taxes is good for their economy and the other businesses they’re trying to build up.”

—Fiona Walkinshaw, Managing Director of Feature Films, Framestore

Dayne Cowan, VP of Film, VHQ Media

“I think all VFX artists would love to have some of the protection of a union, but from a global perspective, it’s very hard to achieve. It’s now a bit of a case of ‘the barn door is open and the horse is long gone’ in many places. It’s hard to apply retroactively. Unions would also have to be set up not just in each country, but in very specific regions…”

—Dayne Cowan, VP of Film, VHQ Media

Hitesh Shah, Chief Executive/Co-founder, BotVFX

“The moment it becomes viable to have the artist workstation rendered out of the cloud, it’ll be a tipping point for the economic model. One of the anomalies of our business is that you have a fixed cost business with a fickle revenue flow. When you can put things into the OPEX (operating costs) instead of the CAPEX (capital costs) side, I believe it will dramatically change the industry.”

—Hitesh Shah, Chief Executive/Co-founder, BotVFX

Mark Ruffalo on the set of Avengers: Infinity War (2018). (Image courtesy of Marvel Studios)

Tom Cruise as Ethan Hunt clings to a helicopter in Mission: Impossible – Fallout (2018). (Image courtesy of Paramount Pictures)

SIZE MATTERS

In today’s market, most would agree with Walkinshaw’s conclusion. “You need to have global locations or have partners to remain big,” she says. That brings up the issue of the size of a VFX facility – how big is big enough? Can small houses survive? Are mid-sized houses getting squeezed between the two extremes?

Lyster reports that ILM has grown its London studio from “very small to quite large – bigger than we originally intended it to be. My experience is that in some ways it’s easier in the industry to be big rather than small,” she says. “Visual effects are constantly buffeted by the winds of change, and running a VFX project is constantly bending to those winds. In some ways, it’s easier to scale [when you’re big] than it is if you’re small. You have more options, more resources to be able to cope with what filmmakers throw at you in terms of schedules and creative changes.” Still, she notes, being big means “you have a lot of mouths to feed.”

The last five to 10 years have also seen a tremendous amount of consolidation and other changes. Chambers refers to the VES survey done almost a decade ago. “We found about 4,000 companies around the world doing VFX,” he says. “How many of those smaller companies were absorbed?” Many VFX companies have closed doors, changed hands, been acquired by bigger companies, or sold a majority stake to equity partners. Ulbrich reports that Method Studios, originally independent, was first acquired by Ascent Media, which sold it to Deluxe when it was transitioning from being a photochemical lab into a digital creative services building. “The strategy is buy vs. build,” he says. “By buying, you scale up quickly.”

Sometimes just acquiring a company isn’t enough to become a force in the VFX industry. Ulbrich notes that Method’s pedigree was commercials and music videos. Then came the decision to get into VFX for features. “You have to change the operation,” says Ulbrich. “You can’t produce a 500-shot movie like a 15-second commercial. Thus began a journey of building and acquiring to put a network of studios in place to optimize talent, low cost labor and government incentives.”

Private equity money is another way to scale up, a path followed  by Pixomondo and Fuse FX. Mayfair Equity Partners acquired a majority ownership in Pixomondo, which valued the VFX company at $65 million, partnering with company founder Thilo Kuther, who remained as Chief Executive/Executive Producer. Pixomondo was founded in 2001 in Germany, and doubled in size between 2014 and 2017. In 2018, EagleTree took a majority stake in FuseFX; no financial details were disclosed, but Founder/Chief Executive David Altenau and Co-founders, Chief Development Officer Tim Jacobsen and Chief Technology Officer Jason Fotter retain a minority stake and have stayed with the company in their current roles.

Everybody notes the pressure to scale in an industry that still produces very thin profit margins. One VFX house executive reports that a VFX industry joke is that facility owners aspire to the profit margins earned by grocery stores, which typically range from 1% to 2%. Walkinshaw notes that one of the pressures to get big is because the projects themselves are bigger. “There are more shops than there used to be,” she says. “You can’t just focus on animation or environments or effects.”

At the same time, it’s getting easier than ever to open a small house, says Chambers, who points out the existence of less expensive, more standardized equipment and software availability. “But maintaining business at a small independent house is very tough,” he admits. “The pressure to grow is intense, but once you get past 100 artists, it becomes a different ball game.” Okun also notes that the idea of a company of five or six people is appealing but, for a smaller house, expanding and contracting per project isn’t as easy to do as a bigger house. Therefore, the need to keep constant work flowing in is essential to the health of the small company.

The Molecule in New York inhabits the space of the mid-sized visual effects facility. “We started with five guys in a room 13 years ago,” says Bly. “Now we are up to 45 full-time employees – up to 90 between New York and Los Angeles, although we do 70% of our business in New York because of the tax incentives.” Most of the work, he explains is for episodic series, including House of Cards, Ballers, The Americans and, currently, Happy. “I would agree that it is hard to run a mid-sized company,” he says. “You’re not so small, so you can’t be as nimble with schedule changes as you used to be. But you’re not a big corporation where you have a plethora of resources to shuffle. It definitely has its challenges.”

He adds that, “it’s easier to form little companies to compete. And as people become more skilled and efficient, you can achieve certain tasks in a day that took a week five years ago,” he says. Even as a mid-sized house, The Molecule does outsource some of the rotoscoping and other similar work. “When we’re allowed to,” adds Bly, “as long as the client is all right with it.”

Sandra Bullock and George Clooney miles from Earth in Gravity (2013). (Image courtesy of Warner Bros. Pictures)

All light is moving towards the black hole in Christopher Nolan’s Interstellar (2014). (Image courtesy of Warner Bros. Pictures)

ROLE OF TECHNOLOGY

Change is a constant and nowhere is that more obvious in visual effects than in the technologies used to create visual effects. The maturity and strength of the VFX industry help explain why visual effects work has become a booming business. “Visual effects are seeping into all the other departments – camera, lighting, costumes, sets, makeup, hair, production design and stunts,” says Okun, “so there’s more work than ever before.” Morris agrees, noting that, “visual effects now support so much of the storytelling process.” Visual effects companies are also leveraging new technologies such as virtual reality and immersive LED walls to grow their businesses.

In pursuit of the ever more-efficient pipeline, executives at visual effects houses are tasked with staying on top of trends as diverse as software-as-a-service (SaaS), light-field capture, cloud rendering and game engines for real-time production. “It’s important to remain aware of the interesting things happening in the market,” says Rising Sun Pictures’ Clark. “We all need to be open to embracing new technology and ideas, but also maintain a stable production environment. We need to test new technologies in smaller, less interdependent environments – and keep in mind that the hard things of today are ultimately commoditized.”

In her research, Maher points to “new tools for collaboration and the cloud. SaaS is coming to all software and will be especially attractive to VFX studios because it’s a logical way to keep track of expenses,” she says. She adds that The Jungle Book ushered in the use of game engines for virtual production, which, encouraged by game engine companies Unreal and Unity, has been picking up greater adoption in the VFX community.

Okun notes that First Man is an example of a movie that took the tools from Gravity and pushed them further. “There are lots of creative technicians and artists working behind the scenes,” he says. “On First Man, they built a bigger LED wall and instead of projecting proxy images, they projected the real images and used that to light the actors inside the space ships. That’s pretty clever.” He also points to Alejandro Iñárritu’s virtual reality installation Carne y Arena as “an amazing use of technology to tell a story that’s never been told, in a way that’s so immersive that it can’t be ignored.” He also points to advances in lighting that have helped visual effects, specifically smaller LED lights that put out more light and are remote-controlled as responsible for speeding set-ups. “Being able to program the lights means I can get my interactive lighting done just right,” he says. “We’re out of the age of grips waving flags in front of lights.”

Rendering in the cloud has had an uneven uptake. At Framestore, Walkinshaw reports they already do cloud rendering. Ulbrich notes that, although the cloud is a massive opportunity and works extremely well, “it is shockingly expensive unless you own it. We’ve sliced and diced it to make sense of it, and now we burst into the cloud when we’re peaking and scaled beyond our data centers,” he says, “but the money is still better spent in our own render farm, where it can be used again and again.” Shah adds that “the moment it becomes viable to have the artist workstation rendered out of the cloud, it’ll be a tipping point for the economic model. One of the anomalies of our business is that you have a fixed cost business with a fickle revenue flow,” he says. “When you can put things into the OPEX (operating costs) instead of the CAPEX (capital costs) side, I believe it will dramatically change the industry. The largest companies may be the initial beneficiaries, but with a highly variable model, you’re in a better position than any company with fixed infrastructure and talent. That small, talented team is no longer limited.”

The future of VFX technology – and, to a degree, the VFX industry – can be found in the research some visual effects companies continue to do, teaming with key partners to make the workflow more efficient and the end results better. One is Project Sauce, a three-year EU Research and Innovation project involving a nine-partner consortium, including Double Negative, Disney Research and Foundry, that aims to greatly increase efficiency and cost effectiveness of VFX. According to its website, Sauce has three “measurable” goals: “Create tools to unlock value in previously-created content by allowing to edit or automatically adapt its properties (e.g. appearance, scale, motion) to the current production needs. Create tools to allow content created in the future to be more easily re-used and re-purposed, by developing light-field technology for the creative industries in terms of capture, storage, distribution and processing. Create management, animation and production tools to keep digital content accessible, discoverable and malleable by using procedural techniques and high-level semantic knowledge.”

The visual effects stretch the imagination in Pacific Rim: Uprising (2018). (Image courtesy of Universal Pictures)

Tony Stark is Iron Man in Avengers: Age of Ultron (2015). (Image courtesy Marvel Studios/Walt Disney Studios)

A.I. INFLUENCE

At ILM, Lyster reports that, with Disney Research, ILM is working on using artificial intelligence to de-noise the images produced by ray tracing. “It will cut down on CPU and render time,” she says. “We’re also investigating techniques to recognize and replace human faces in a semi-automated way, potentially a huge leap forward. Even with rotoscoping, you can ask the computer to hunt for humans and automatically rotoscope. It’s not production level yet, but pretty amazing.” Many other companies are turning to artificial intelligence or machine learning to improve the visual effects process.

Morris adds that ILM, again with Disney Research, is also looking at a technology to capture performance without helmets and balls. “An actor will move differently when you put a weight on his head,” he says. “The best performances are when an actor feels comfortable.” At Spin VFX, Ali points out the changes that 5G – the fifth-generation wireless system – will create in principle 100 times faster than the current 4G. Ulbrich adds that 5G isn’t just a faster phone, but will take down latency to below human perception. “In a few years, it’ll be in wider use, and you’ll be able to move data in seemingly real time. The day when you’re streaming it directly into the cloud with no limits on storage will change everything.”

Looking to the future, Bly points out that anything that removes the friction between the artist and his/her interaction with tools would be a great step forward. “It’s not render power, which is going to evolve naturally,” he says, “it’s finding the nuances through an artist’s day that are redundant or more technical. Taking them out will allow the artist to shine.” When it comes to the artists, Lyster hopes for a more diverse workplace in the future. “One of the big challenges in the industry is that we’re very male,” she says. “I’d like to see anyone coming back in five years to see a large percentage of females in the workforce.”

Noting that with cloud-computing, real-time and improved GPUs, a frame that would take two hours to render now could take two seconds in the future, Ulbrich also looks to the future. “There’s no secret that the ecosystem has been disrupted,” he says. “Disruption isn’t always bad. Look at how the music industry was disrupted two decades ago. It’s thriving now, but it’s different than it was. I’d say we’re in a growth industry. But you have to be nimble and situated geographically in the right place and be capitalized to be able to pivot and remain relevant. Some adapt and reign supreme, and others go the way of the dinosaur.”

Framestore provided concept and production of ‘strange environments’ for Volkswagen Group China Import’s “Touareg Hyper Reality Test Drive” VR experience, unveiled last fall. (Image courtesy of Framestore)

GENDER PARITY AND DIVERSITY

At the same time, other issues are dotting the global VFX landscape. Among them: gender parity and diversity, left-over unionization thoughts, and that old bogeyman – the ‘race to the bottom.’

Says Maher: “We are seeing an increase in 50/50 pledges and we’re seeing it across industries. The film and entertainment industry is much more proactive than what we’re seeing for design and engineering, probably because the customer base is already 50/50 (according to MPAA). There is also evidence that companies with equitable gender distribution are more profitable, though apparently it has taken some time for this news to trickle down to HR. I believe the #MeToo movement has done more to demonstrate that women are willing to speak up and demand fairness or at least redress and thus shake up the status quo. Not coincidentally, the film industry is the flash point for #MeToo.”

“People have work,” Mahar states. “I’m not hearing about unionization so much. Also, sadly, labor movements all over the world are being undermined by companies and governments, but, again, people have work.” Adds Cowan, “I think all VFX artists would love to have some of the protection of a union, but from a global perspective, it’s very hard to achieve. It’s now a bit of a case of ‘the barn door is open and the horse is long gone’ in many places. It’s hard to apply retroactively. Unions would also have to be set up not just in each country, but in very specific regions, from what I am told.”

As for the ‘race to the bottom,’ Maher says, “I think a number of things are going on. I think the race to the bottom was driven primarily by studios and directors, not necessarily contract workers. Sure, people need to have work. I’m sure there was and still is underbidding. But companies who couldn’t deliver went out of business. Also, we’ve seen companies prefer to stay closer to home when hiring contractors (we’ve also seen this in Design and Engineering as well as Media and Entertainment) because there are fewer issues in communications, time lag, etc. However, key to this is quality not convenience, I think. The digital transformation has made it easier to hire people wherever they are. That’s going to continue.” Notes Cowan, “Yes, that is still ongoing, but what tends to happen is that some companies go in so low with bids, offering very high salaries, then collapse quite quickly and fail to deliver. The work ‘at the bottom,’ if you like, tends to then bounce back up the chain to get fixed and re-done. Clients are always under pressure to find a cheaper/better deal, but there is a point where they tend to find that you often get what you pay for, and many are now going with VFX companies with better reputations that are more expensive just to ensure quality is good and delivery is met to the required standard.”

Weta Digital is working on Avatar sequels. (Image © Twentieth Century Fox and courtesy of Weta Digital)

A teenage Diana Prince (played by Gal Gadot) unleashes her Amazonian powers on a competitor in Wonder Woman (2017). (Image courtesy of Warner Bros. and DNEG)

Framestore was the production company for Samsung’s “A Moon for All Mankind,” a lunar gravity-simulation VR experience. (Image courtesy of Framestore)

CONCLUSION

Disruption over the past five to 10 years has irrevocably changed the visual effects industry from the point of view of business models and technologies. As long as financial incentives exist – and they show no sign of going away any time soon – big facilities will fill the space by opening up subsidiaries in “hot” cities. The small shop, headed by passionate artists, will always find a way to operate in and around the margins, and the mid-sized house will always be shifting its weight, trying to find the sweet spot between big and small.

New technologies also promise to disrupt the status quo even further – but it’s too early to tell how. As machine learning and artificial intelligence combine with faster 5G networks, more automated processes are likely to displace manual ones. If rotoscoping becomes a fully automated operation, what does that do to facilities that specialize in that? Will new technology create new jobs that will require the labor of individuals? And when it comes to the operation of the VFX facility, will automated processes cut jobs and costs, enabling better profit margins? These questions are ones that current VFX executives are already thinking about.

On the human scale, the past few years have brought a more intense spotlight on gender parity and diversity in the workplace, two issues of new focus in the visual effects industry as well as in the larger Hollywood film/TV industry. How to make the VFX industry more diverse and protect workers from harassment are just two questions to be addressed in 2019 and beyond.

Visual effects will become ever more ubiquitous as communications increasingly move from the word to the image. With more and more video, there’s every reason to believe that the next five years will be as busy – if not busier – than the last five to 10 years. How visual effects personnel, from executives and producers, supervisors to artists, navigate these evolving trends remains to be seen.

Agent K (Ryan Gosling) cruising the spinner back to base in Blade Runner 2049 (2017). Design by Jeremy Hanna for Weta Workshop. (Image © 2017 Alcon Entertainment, LLC, Warner Bros. Entertainment Inc. and Columbia Tristar Marketing Group Inc. and courtesy of Weta Workshop)

A crash-landed Agent K surveys a desolate L.A. landscape in Blade Runner 2049 (2017). (Image © 2017 Alcon Entertainment, LLC, Warner Bros. Entertainment Inc. and Columbia Tristar Marketing Group Inc. and courtesy of Rodeo FX)

Alita (played by Rosa Salazar) is a cyborg with a human brain, heart and soul, and the ability to save the world, in the anime adapted to film, Alita: Battle Angel (2019). (Image courtesy of Twentieth Century Fox)

Insurance salesman/ex-cop Liam Neeson gets caught up in a criminal conspiracy during his daily train ride home in The Commuter (2018). (Image courtesy of StudioCanal and Cinesite)