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F/x biz in throes of the Walmart effect

Is the whole system broken?

During my interviews for Tuesday’s article on compressed post-production schedules and the crush to finish visual effects on studio tentpoles, something got stuck in my head and I can’t get it out.

I was talking to Warner’s Chris de Faria about whether the whole system is broken. The visual effects community is raising the alarm that it is, and dangerously so. That’s part of the impetus behind the push to unionize vfx artists.

But de Faria told me, “I don’t see a problem with the system.” He noted that since he came on at Warner Bros., visual effects studios aren’t going out of business on Warner’s movies. When the studio is late turning over shots, it pays the agreed-upon late fees. The films are getting made on time, and audiences are happy with the effects.

I countered by noting that artists complain bitterly of terrible personal strains, including broken relationships and marriages, due to the long hours on a job and the nomadic lifestyle. Entire visual effects companies have closed or given up working on features due to low margins and quality-of-life issues. Experienced, talented artists regularly leave the business for the same reason.

De Faria wondered why he is responsible for that. After all, he noted, it’s the vfx shops and their management that impose those long hours, not Warner Bros. And in a strict sense, he’s absolutely right.

But listening to him, I flashed on something outside the entertainment industry: the Walmart Effect. For a supplier, getting a contract to sell to Walmart can be both the best thing to happen to a company and the worst. I think the relationship between the studios and the visual effects companies is moving in the same direction.

Suppose you manufacture widgets in Los Angeles, and Walmart decides to carry your widgets. Walmart buys in enormous quantities, so getting your widgets into Walmart is a boon.

But Walmart insists you cut your prices year after year. At some point, you can’t cut any more and keep your L.A. plant open. So you decide to move your manufacturing overseas. Do a Web search on “Walmart” and “hollowed out” — you’ll find plenty of articles describing this effect.

Hollywood isn’t a single buyer with monopsony power, like Walmart, but the studios are constantly pressing vfx companies to cut prices and schedules while demanding ever more complex effects, in larger quantities. And we’re seeing the same result: California’s vfx industry is contracting, and work is shifting abroad to regions with major tax incentives or to lower-cost regions such as India and Southeast Asia.

Jeff Okun, a vfx supervisor and chair of the Visual Effects Society, said, “The bottom line is that all studios are correct: It’s a business, and they’re obligated to get things for the lowest price they can get. That turns things back on the visual effects industry. We sold ourselves too cheap, and we didn’t put any emphasis on the artist; it was all on the technology. So the perception is ‘You’re a dime a dozen. If you won’t do it at my price, I’ll find someone who will.’?”

Okun calls it “a failure of capitalism” but doesn’t see a way out of it. Nor do I.

By the way, I received several emails in response to the article, but two stood out.

One was from an American visual effects supervisor who said the real problem wasn’t compressed post schedules but having to compete with the low wages paid to artists in India.

The second was from a vfx supervisor in India, asking me to spread the word about the vast untapped capacity there, with talent ready and willing to deal with compressed post schedules.

Bits & Bytes

SMPTE will present an educational webcast, “Autostereoscopic Displays: State of the Art and the Way Forward,” today at 1 p.m. ET/10 a.m. PT… Panavision celebrates the grand opening of its new Atlanta facility Saturday … The Motion Picture Academy will present “Evolution or Revolution? Production Design in the 21st Century” on Monday, May 2, at the Linwood Dunn Theater in Hollywood …

Hybrid production company Mothership has moved to new digs in Marina del Rey … Producer Kelly Slattery has joined Therapy Studios as executive producer of the company’s feature film division. … Litepanels has announced the new H2 Hi-Output LED light. Company says the H2 is 5600K color balanced and “HD-friendly.” … Pixologic has released GoZ Update 1 for digital sculpting application ZBrush 4.

Entertainment Partners has released Movie Magic Scheduling To Go for iPad … Company3 is an industry sponsor for the Tribeca Film Festival. It will offer $100,000 in post services to winning films in select categories. … Star TV is using Dolby Digital Plus to deliver high-quality sound on four of its HD channels in India: Star Plus, Star Gold, Star Movies and Star World. … On Wednesday Cinesystem celebrated the grand opening of the first 100% Dolby Digital cinema multiplex in Rio de Janeiro … Los Angeles-based entertainment tech company Creative Science has struck a strategic partnership with Budapest-based Colorfront. Creative Science will represent Colorfront’s On-Set Dailies system in North America. … Gravity, the vfx/graphics/animation house in Tel Aviv, Los Angeles and New York, has hired Kristen Bedard as its East Coast sales rep….

THX has acquired the cineSpace Color Management Suite from Cine-Tal Systems… Software maker Maxon announced results last week. 2010 was the most successful year in the company’s history, with earnings 23.3% above the company’s best previous year, 2008 … Canadian telecom company Telus has signed on as a gold sponsor of the Entertainment Technology Center at U. of Southern California … Hollywood-based post facility DigitalFilm Tree has opted to use the Xytech MediaPulse platform to manage its production and post operations … Testronic Labs has launched quality-control test services for the Nintendo 3DS handheld.

Want to comment or suggest a column topic? Email david.cohen@variety.com