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April 05
2023

ISSUE

Spring 2023

VFX INDUSTRY – GROWTH, GLOBALIZATION AND CHANGE

By CHRIS McGOWAN

Guardians of the Galaxy, Vol. 3. VFX: RISE Visual Effects Studios, Framestore, Rodeo FX, Crafty Apes, Wētā FX, Gentle Giant Studios, ILM, Weta Digital and Clear Angle Studios. SFX: Marvel Studios and Legacy Effects. (Image courtesy of Marvel Studios)

Guardians of the Galaxy, Vol. 3. VFX: RISE Visual Effects Studios, Framestore, Rodeo FX, Crafty Apes, Wētā FX, Gentle Giant Studios, ILM, Weta Digital and Clear Angle Studios. SFX: Marvel Studios and Legacy Effects. (Image courtesy of Marvel Studios)

Over the last few years, the VFX industry has surged due to an infusion of visual effects in almost all films and series, the expansion of the streamers, a boom in animation, and the growth of video games and immersive formats. This is happening while LED stages and virtual production have been altering filmmaking and post-production processes, bringing them closer together.

At the same time, VFX work has continued to expand across the planet. “The globalization of the VFX business has been happening for a while, but the opportunities for remote working that have been accelerated by the pandemic have been a great enabler of this trend with artists and teams able to collaborate ever more easily and effectively across geographies,” says Namit Malhotra, Chairman and CEO of DNEG.

Streaming platforms Disney+, Apple TV+, HBO Max, Peacock and Paramount+ launched between 2019 and 2021, joining Netflix and Amazon Prime, collectively boosting production. “The strong growth in demand for content driven largely by the streaming companies has opened new avenues in content creation for VFX and animation companies,” Malhotra says. However, he feels the accelerated recent growth of the industry is now becoming more balanced. “The number of productions globally is now being rationalized to the reality of what can be produced. Demand was outstripping supply to such an extent that it was actually becoming unsustainable. What we are seeing now is more of a sensible and sustainable approach to content creation, and it is finding equilibrium – which is a good thing. There is still growth, but it is a lot more structured and sustainable.”

Because of the streamers, “there is a lot more episodic content than there was five years ago,” comments Pixomondo CEO Jonny Slow. “This is not a new factor, and the growth of it may slow down a little in the short term, but I don’t see this trend going away. This is a whole new sub-genre of content. In publishing terms, it’s like the invention of the novel, and it has created millions more viewing hours per week.”

The streamers have generated plenty of filmmaking work in domestic production centers across Europe and Asia, from Oslo to Seoul, which in turn has generated more VFX work around the world. India has become an especially important pole of visual effects with many foreign-owned and locally-owned VFX houses working at full throttle there.

Vantage Market Research forecasts that “the increased demand for advanced quality content among consumers across the globe and the introductions of new technologies related to VFX market by industry players are expected to augment the growth of the VFX market,” and predicts that VFX global market revenue will climb from $26.3 billion in 2021 to $48.9 billion in 2028, growing at a compound annual growth rate (CAGR) of 10.9% during the forecast period.

“VFX is now an integral component of cinematic narrative in film, episodic, commercials and themed entertainment. Due in part to the convergence of gaming workflows, GPU-accelerated computing functions and cloud computing, VFX is increasingly accessible to all levels of complexity and budgets in storytelling,” says Shish Aikat, Global Head of Training at DNEG.

ACQUISITIONS AND EXPANSIONS

The dynamic activity of the VFX business in the last year includes acquisitions and foundings. One of the biggest deals in 2022 was Sony’s purchase of Pixomondo, which has facilities in Toronto, Vancouver, Montréal, London, Frankfurt, Stuttgart and Los Angeles. Recent projects include: Avatar: The Last Airbender (Netflix) and the next seasons of House of the Dragon, The Boys, Halo, Star Trek: Discovery, Star Trek: Strange New Worlds and many others. About the sale, Slow comments, “It allows us to benefit from being fully aligned with the whole Sony group, both creatively and from a technology development perspective.”

Also last year, Crafty Apes acquired Molecule VFX. The Fuse Group (owner of FuseFX) bought El Ranchito, which has studios in Madrid and Barcelona. Outpost VFX and Framestore opened Mumbai facilities and BOT VFX a Pune branch. After purchasing Scanline VFX at the end of 2021, Netflix acquired Animal Logic in 2022 and signed a multiyear deal with DNEG through 2025 for $350 million. DNEG will open an office in Sydney this year to go with its existing facilities in London, Toronto, Vancouver, Los Angeles, Montréal, Chennai, Mohali, Bangalore and Mumbai.

INDIA

DNEG’s four Indian studios played a role in how India has become a significant source of global VFX production. MPC and The Mill (owned by Technicolor Creative Services), FOLKS VFX (The Fuse Group), Framestore, BOT VFX (based in Atlanta and with three studios in India), Rotomaker India Pvt Ltd, Mackevision, Outpost VFX and Tau Films are other multinationals with facilities in India.

65. VFX: Framestore, Method Studios, New Holland Creative, Quantum Creation FX, Captured Dimensions and 22DOGS. Visualization: OPSIS. (Image courtesy of Columbia Pictures/Sony)

65. VFX: Framestore, Method Studios, New Holland Creative, Quantum Creation FX, Captured Dimensions and 22DOGS. Visualization: OPSIS. (Image courtesy of Columbia Pictures/Sony)

Spider-Man: Across the Spider-Verse. (Image courtesy of Marvel and Columbia Pictures/Sony)

Spider-Man: Across the Spider-Verse. (Image courtesy of Marvel and Columbia Pictures/Sony)

Mission: Impossible – Dead Reckoning – Part One. VFX: ILM, Rodeo FX, BlueBolt and Clear Angle Studios.Visualization: Halon Entertainment. (Image courtesy of Paramount Pictures)

Mission: Impossible – Dead Reckoning – Part One. VFX: ILM, Rodeo FX, BlueBolt and Clear Angle Studios. Visualization: Halon Entertainment. (Image courtesy of Paramount Pictures)

Mission: Impossible – Dead Reckoning – Part One. (Image courtesy of Paramount Pictures)

Mission: Impossible – Dead Reckoning – Part One. (Image courtesy of Paramount Pictures)

TOP TO BOTTOM: Ant-Man and the Wasp: Quantumania. VFX: ILM, ILM/StageCraft, Digital Domain, Spin VFX, Method Studios, MPC, Luma Pictures, Barnstorm VFX, Sony Pictures Imageworks, MARZ, Territory Studio, Rising Sun Pictures, Perception, Folks VFX and Clear Angle Studios. Visualization: The Third Floor. (Image courtesy of Marvel Studios)

TOP TO BOTTOM: Ant-Man and the Wasp: Quantumania. VFX: ILM, ILM/StageCraft, Digital Domain, Spin VFX, Method Studios, MPC, Luma Pictures, Barnstorm VFX, Sony Pictures Imageworks, MARZ, Territory Studio, Rising Sun Pictures, Perception, Folks VFX and Clear Angle Studios. Visualization: The Third Floor. (Image courtesy of Marvel Studios)

Ant-Man and the Wasp: Quantumania.(Image courtesy of Marvel Studios)

Ant-Man and the Wasp: Quantumania. (Image courtesy of Marvel Studios)

Beau Is Afraid. VFX: Hybride and Folks VFX.(Image courtesy of A24)

Beau Is Afraid. VFX: Hybride and Folks VFX. (Image courtesy of A24)

Beau Is Afraid. (Image courtesy of A24)

Beau Is Afraid. (Image courtesy of A24)

One of India’s leading local visual effects firms is FutureWorks, which has 325 total employees in facilities in Mumbai, Hyderabad and Chennai. CEO Gauray Gupta comments, “Of these, our Chennai studio is geared as a global delivery center to service our international clients. Our Mumbai studio, which was our first one, is focused on Indian filmmakers, and also works closely with platforms like Amazon Prime Video and Netflix for their Indian productions. Early next year will see us relocate to a larger studio in Mumbai and expand our Hyderabad operations with a bigger facility in Q2.” He notes that FutureWorks’ recent portfolio “spans global hits including: The Peripheral for Prime Video, Westworld for HBO, Netflix’s Lost in Space and [the Hindi-language movies] Jaadugar, directed by Sameer Saxena, and Darlings, directed by Jasmeet K. Reen.”

FutureWorks currently has “around a 50% split between our domestic and international customers, and our business strategy is to continue along those lines as we grow,” according to Gupta. “Global demand for VFX services has fueled the rapid increase in VFX studios in India. Indian studios are now full of creative sequences and shots, not just RPM or back-office work.”

Gupta notes, “Global demand and supply have increased concurrently, and there is plenty of room for everyone. What we see is a truly global marketplace, [with] more choices for clients in terms of where and who can execute the top-end work. However, [having] more studios also means that the industry needs more talent, and that talent has a wider range of options than ever before.”

Gupta adds, “This is the most excited I’ve been about the industry in India since I founded the company. There is a huge demand for content from OTT networks and filmmakers. Relationships are global, technology is global, vendors are global. The scene here currently is creative, ambitious and evolving at a rapid pace.”

ACROSS THE PLANET

Ghost VFX is opening a studio in Pune in May and has facilities in Los Angeles, Vancouver, Toronto, London, Manchester and Copenhagen, with nearly 600 total global employees (Streamland Media purchased Ghost VFX in 2020). “Having studios across the globe means we’re able to work together across a single technology workflow so we can react to the ebbs and flows of demand,” says Patrick Davenport, President of Ghost VFX. “We’re also in several key locations for tax incentives. Although we offer our employees the option of working from home, hybrid or in-studio, having global studios helps us retain talent who want to work in different countries as well as [work] in-studio.”

Davenport adds, “We have larger projects which we share across the studios, but still focus on being able to support local productions. For example, our Copenhagen studio just worked on Troll, a Norwegian film for Netflix. On a global scale, we’ve worked on several projects including: Star Trek: Strange New Worlds that artists in Copenhagen and Vancouver worked on, and for Fast X we currently have teams in our U.K., Copenhagen, Pune and L.A. studios working on the film.” Another is the new season of The Mandalorian, “one of several projects we’re working on for Lucasfilm.”

Glassworks has studios in London, Amsterdam and Barcelona. “Speaking as a studio with multiple locations across Europe, I can definitely see [having them as an] advantage. The benefits come in different aspects, including a shared pool of resources, access to specialized talent across offices, and opportunities within each market or in tandem across facilities,” says Glassworks COO Chris Kiser. “Scalability is always important in our business, and it’s great to be able to work with artists and producers that you know and trust before needing to go outside of your own studio.”

For Glassworks, “The year started with a couple of big commercial projects, including the Turkish Airlines Super Bowl spot featuring Morgan Freeman and Apple’s Escape the Office film,” Kiser says. “Young adult and fantasy fans will have seen VFX from our team in both Vampire Academy and Fate: The Winx Saga, [and] we have other projects in the works for Netflix, HBO and Amazon Prime.”

VIRTUAL PRODUCTION IMPACT

Virtual production has greatly transformed the VFX business and inspired the construction of hundreds of LED stages, both fixed-location and bespoke/pop-up. Last year ended with the completion of two notable facilities in Culver City. Amazon’s stage, located on Stage 15 of the Culver Studios lot, has an 80-foot diameter with a 26-foot-high volume, a virtual-production takeover of what had been the production scene of many famous movies in the analog era. Nearby, a new LED stage rose at Sony Innovation Studios on the Sony lot, in the same year that the firm purchased Pixomondo and its three LED stages.

Virtual production was valued at $1.46 billion in 2020, projected to reach $4.73 billion by 2028 and expected to grow at a CAGR of 15.9% during the forecast period from 2021 to 2028, according to a market report by Statista.

“Things are normalizing a little now, but along the way virtual production became a more widely adopted production solution, and for a few players, including Pixomondo, there is no turning back from this as we have created some very effective tools. That said, we see it as very complementary to our VFX services business, not a replacement – and in fact, we are able to integrate the processes to deliver additional value and speed of delivery,” Slow says.

INCENTIVES MAKE A DIFFERENCE

Tax breaks are still having an impact on the geography of VFX. “Incentives do create additional production spend overall, as they directly impact how far a production budget will go,” Slow says. “However, not all of the benefit stays in VFX ultimately – our clients have to balance productions books overall somehow. But, a more generous scheme in one region will influence where our clients want the work to happen, so a small change in the rules can create a very big shift in demand for work in a particular region. This has been very effectively used as a tool to drive investment and jobs into Canada, the U.K., Germany and many other places. It’s a big success story, and I think we will see this continue to evolve.”

Malhotra notes, “Frankly, these incentives make the use of visual effects more competitive for our clients, allowing them to create higher-quality content. This is important all round, as it creates more sustainable employment, as well as great quality of work for our clients, while helping them mitigate the costs of content creation.”

Transformers: Rise of the Beasts. VFX: MPC, ILM and Wētā FX. Visualization: Halon Entertainment and The Third Floor. (Image courtesy of Paramount Pictures)

Transformers: Rise of the Beasts. VFX: MPC, ILM and Wētā FX. Visualization: Halon Entertainment and The Third Floor. (Image courtesy of Paramount Pictures)

John Wick: Chapter 4. VFX: Rodeo FX, Crafty Apes, Mavericks VFX, One of Us, The Yard VFX, Tryptyc VFX, Light VFX, Pixomondo, Outlanders VFX, Boxel Studio, Atomic Arts, McCartney Studios, Track VFX, WeFX and Clear Angle Studios. Visualization: NVIZ and Halon Entertainment.(Image courtesy of Lionsgate)

John Wick: Chapter 4. VFX: Rodeo FX, Crafty Apes, Mavericks VFX, One of Us, The Yard VFX, Tryptyc VFX, Light VFX, Pixomondo, Outlanders VFX, Boxel Studio, Atomic Arts, McCartney Studios, Track VFX, WeFX and Clear Angle Studios. Visualization: NVIZ and  
(Image courtesy of Lionsgate)

Indiana Jones and the Dial of Destiny. VFX: ILM, Clear Angle Studios, Important Looking Pirates, Rising Sun Pictures, Crafty Apes, The Yard VFX, Soho VFX, Midas VFX and Capital T. Visualization: Proof Inc.(Image courtesy of Paramount Pictures)

Indiana Jones and the Dial of Destiny. VFX: ILM, Clear Angle Studios, Important Looking Pirates, Rising Sun Pictures, Crafty Apes, The Yard VFX, Soho VFX, Midas VFX and Capital T. Visualization: Proof Inc. (Image courtesy of Paramount Pictures)

Renfield. VFX: Crafty Apes, ILM, Outpost VFX, Connect VFX, Pixel Magic, Weta Workshop and Spectrum Effects. Visualization: Proof Inc.(Image courtesy of Universal Pictures)

Renfield. VFX: Crafty Apes, ILM, Outpost VFX, Connect VFX, Pixel Magic, Weta Workshop and Spectrum Effects. Visualization: Proof Inc. (Image courtesy of Universal Pictures)

Dungeons & Dragons: Honor Among Thieves. VFX: ILM, MPC and Clear Angle Studios. SFX: Legacy Effects. Visualization: Day For Nite. (Image courtesy of Paramount Pictures)

Dungeons & Dragons: Honor Among Thieves. VFX: ILM, MPC and Clear Angle Studios. SFX: Legacy Effects. Visualization: Day For Nite. (Image courtesy of Paramount Pictures)

Shazam! Fury of the Gods. VFX: DNEG, Pixomondo, Clear Angle Studios, Wētā FX, Scanline VFX, Method Studios. Weta Digital, BOT VFX and RISE Visual Effects Studios. Visualization/Effects: OPSIS and The Third Floor.(Image courtesy of Warner Bros.)

Shazam! Fury of the Gods. VFX: DNEG, Pixomondo, Clear Angle Studios, Wētā FX, Scanline VFX, Method Studios. Weta Digital, BOT VFX and RISE Visual Effects Studios. Visualization/Effects: OPSIS and The Third Floor.
(Image courtesy of Warner Bros.)

Servant. Series VFX: PowerHouse VFX, Cadence Effects, Ingenuity Studios and Vitality Visual Effects.(Image courtesy of Apple TV+)

Servant. Series VFX: PowerHouse VFX, Cadence Effects, Ingenuity Studios and Vitality Visual Effects.
(Image courtesy of Apple TV+)

Slumberland. VFX: DNEG, Scanline VFX, Outpost VFX, Rodeo FX, Important Looking Pirates, Ghost VFX, BOT VFX, MARZ and Incessant Rain Studios.Visualization: Halon Entertainment. (Image courtesy of Netflix)

Slumberland. VFX: DNEG, Scanline VFX, Outpost VFX, Rodeo FX, Important Looking Pirates, Ghost VFX, BOT VFX, MARZ and Incessant Rain Studios. Visualization: Halon Entertainment. (Image courtesy of Netflix)

ARTIST CHALLENGES AND OPPORTUNITIES

Davenport comments, “Demand for VFX looks likely to continue, though there is still the challenge of delivering the work within budgets and compressed schedules at a time of rising costs, particularly of labor.”

Malhotra observes that the talent gap is another challenge. “We need more talent in our industry with more experience – not just to creatively deliver projects, but also to manage and produce them,” he comments. “Training is a key focus – the fact that everyone is working from home compromises the culture of learning from your team and those around you, where you gain more experience by asking questions and looking at each other’s work. This has an effect on the time it takes to bring new recruits in our industry up to speed, which poses some interesting challenges for us as an industry — it’s a universal issue.”

Kiser adds, “The biggest challenge to our industry is bringing in the next generation and providing them with training and opportunities to succeed. Many of us were able to get a break somewhere or discover the potential for a career in VFX thanks to technical training or personal connections. We need to take advantage of the momentum and interest in film and TV to reach a wider, more diverse group of young people.”

“The convergence of visual effects and real-time gaming technologies, and the emergence of opportunities in the metaverse, virtual reality, immersive experiences and web 3.0, all significantly contribute to the possibilities for visual effects artists to leverage their skill sets beyond movies and television. It is a very interesting time for our industry and the people that work within it,” Malhotra says.

“We certainly hope the trend for VFX and animation will continue as it has been thrilling and made for some amazing content. The industry and budgets are likely to fluctuate in the same way they have over the years, although the demand has never been higher,” Kiser says. “The key now, as it has always been, is retaining talent and fostering creativity within our teams. We can’t control what happens in the outside world, but we have the ability to build a productive and enjoyable environment where the best creative work happens.”

“[In the] short term,” Slow concludes, “activity levels are calming down a little, but this is a good thing for the industry and the people working in it. Long-term, I don’t think there is any change to the overall trend of continued, healthy, year-on-year growth.”


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