Attracted by low overhead and enabled by fast computer networks, Western companies and entrepreneurs are setting up shops throughout South and East Asia, especially for high-tech production, undeterred by the weak dollar or global economic jitters.
And while that was supposed to spell disaster for U.S. jobs, in at least one case, it paradoxically has proved to be a boon to the home office.
Rhythm & Hues, the Oscar-winning f/x house (“The Golden Compass”), saw itself facing competition from companies and countries with big tax incentives. “We needed to figure out how to transform ourselves and become more of a global company,” says Prashant Buyyala, R&H’s head of international operations.
The solution was a Mumbai branch, which opened in 2001. It has been successful enough that a second branch was commissioned in Hyderabad.
Just don’t call it “outsourcing.”
“We’re structured not as an outsourcing facility at all,” says Buyyala. “We don’t believe outsourcing works for high-end creative work.”
With its India and California operations tightly integrated, R&H cut its costs and drew more work to the company, leading to expansion in both locales.
Sony Pictures Imageworks adopted a similar model, integrating its satellite offices —
including Chennai — with its central facility in the U.S.
Neither company is pursuing local Indian films, instead focusing on high-end studio projects. With the dollar weakening, Imageworks exec VP of production Jenny Fulle says doing business in India is “not as cheap as one might think.” But, she adds, “There’s still a lot of economic advantage” in having an India operation, which provides a hedge against currency fluctuations and other governments’ efforts to sweeten their tax incentives.
The plunge of the dollar has injured many of these Asian facilities, but not fatally.
Ahmad Ouri, prexy of Technicolor Content Services, concedes, “When the dollar was stronger, we could do more with buildout.”
Technicolor was looking to outsource “nonclient-facing services that are labor intensive” when it went to India. After considering several options, the company acquired Bangalore-based Paprikaas Animation Studios. That gave Technicolor its first foothold in the animation biz.
“When you’re looking at an animated feature that requires 150 or 200 artists for nine months or a year, it still makes a lot of sense economically to go offshore,” Ouri says.
In contrast to India’s digital boom, Bigfoot Studios in Cebu, Philippines, is hoping to grab physical production.
Bigfoot is the brainchild of German-born, Hong Kong-based entrepreneur Michael Gleissner. In 2001, Gleissner was looking to relocate an office services company from Manhattan to China but found it too difficult to do business there. Referred to the Philippines, he fell in love with Cebu. With the aid of producer Kacy Andrews, now Bigfoot CEO, Gleissner launched a film school, the Intl. Academy of Film and Television. Soon, they were also renting the facilities to productions.
Bigfoot benefited from the strong dollar when the facilities were being built, and Andrews admits the weak dollar has hurt them. But productions are starting to come to Bigfoot, attracted by low overhead, fine weather, white sand beaches and skilled, English-speaking crews.
The next step, though, would be production incentives, now lacking in the Philippines. “Once (the Philippine government) figures out how much money these foreign productions can bring in, they’ll get onboard,” she says.