Thursday, April 12, 2012

Textor, DD, and our industry in crisis.

I will give him a listen to be fair but am very skeptical. 

AFAIK, being CEO of DD (by virtue of becoming the largest investor in the private equity group that bought DD under Carl Stork's leadership a few years earlier) in the past 2 years is his only connection, ever, to the industry.  He has historically shown no interest in VFX per se, or even filmmaking.  His $17MM/year as CEO of DD is a small fraction of his income from other sources. He is a very wealthy businessman who now realizes that his plans could be disturbed by a bunch of prickly nerds and is most likely just telling us what we'd like to hear, just as his talks to investors have been filled with what they'd like to hear.

Unfortunately for us, one thing he is not is stupid.  He is a very smart, perhaps ruthless businessman, and if he is saying that the work-for-hire VFX model is not a business worth pursuing, we'd freakin' better pay attention.  Not that we hadn't reached the same conclusion ourselves, but validation by a qualified professional is useful.

If he is serious about "detesting the cheap-overseas-labour-chasing side of the industry" then why do the deal with RMW at all? Indeed, why do the deal with Florida?  If you're looking to build a healthy VFX business venture, making it dependent on an outside infusion of capital + state subsidies + tax breaks + tuition charges + "free student labor" + a right-to-work state that's physically and politically isolated from the entire industry ostensibly being served seems to be a strange way to go about it.

Look at the numbers.  IIR, DD's reported income from film VFX work was less than $75MM last year. The State of Florida deal *alone* is worth more than $150MM, is it not? Of course he's going after that money -- he'd be a fool not to. But we all have to realize that makes DD no longer a VFX business -- it is a pursue-government-subsidies-and-tax-breaks business, which is obviously lower-risk and more profitable (an unusual combination in business!).

So Textor's message, to me, is not "John Textor isn't such a bad guy," nor "the students paying to work thing is no big deal," but "work-for-hire VFX is an officially failed business model."  This is HUGE.  This is a guy who understands business and making money better than any of us, saying that the core business model of our whole industry is NOT WORKING.

The work-for-hire model is, I believe, the root cause of all of the issues of workplace fairness, stress, long hours, shops closing when subsidies run out, lack of profit participation -- EVERYTHING.

David Stripinis has a dead-on accurate, and disheartening, post up on his blog, on why everyone's efforts,or wishes, to fix the labor side of the business (in the US at least) have already failed. I'm a tiny bit more optimistic, because I think Textor is showing us the only way out: change the core model.  His type of change will make him and a few people even richer, while hastening the demise of the industry that we need and love.  I think that we can, just maybe, eventually have the industry that we want, if we eliminate work-for-hire, and switch to a cost-plus model. Otherwise, we'll just continue as we are, with the industry we deserve.

(climbs down from soapbox and shuffles away, head down, pulling threadbare coat tighter against the growing chill)



Scott Squires said...

I think news that the current business model for visual effects companies isn't working isn't actually news to many of us. The ones clinging to it are the companies themselves. Maybe if there was a way for them to get together and agree on a new business model?

Unknown said...

I agree that Textor's lack of experience in VFX is a hindrance and in reality he should not be the spokesman for DD. He would be better off to stay out of the spotlight as a silent partner. But Textor's message is a simple one: DIVERSIFICATION. Stop putting all of your eggs into the VFX basket... have some other revenues streams to fall back on, because the race-to-the-bottom VFX storm is only going to get worse.

etmthree said...

Scott --

Of course you are correct, and it's not news to many. But if it's news to anyone in our community, it's worth spreading the word. I'm sometimes discouraged by how many people in the business don't take these issues seriously.

On the question of how to get the companies together -- AFAIK, not being privy to the thoughts or conversations of those who run the big 5 (or 8 or whatever), the big obstacle is fear of the DOJ. The ILM/Apple/Pixar collusion case, and now the publishing industry/Apple collusion case are frightening to many. Personally, I think the DOJ would be less inclined at present to investigate price-fixing directed toward larger clients than toward consumers, but everybody's lawyers are very skittish about this. Even the AICP cannot discuss pricing or fair bidding and billing practices without their own counsel cutting things short.

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