Casualties of the Recession

Posted By Martin McEachern on June 23, 2009 11:00 am | Permalink
Tags: Recession
Categories: Martin McEachern

The econopocalypse has blazed a path of destruction through every sector of the economy—leaving Chrysler and now GM in bankruptcy. Now, it looks like the wave of destruction is bearing down on the effects industry, too, refuting the theory that this industry is recession proof.

Visual effects leaders, specifically ILM, are predicting that the slump in vfx work following the release of this year's f/x heavy pics, coupled with the lack of commerical production caused by the recession, will kill small and mid-size effects houses who depend on commercials to sustain them in the lean months. As a result, they say, there will be a shortage of visual effects houses next year, threatening the next wave of f/x heavy tentpoles, like Iron Man 2, Thor, and Green Lantern.

ILM’s marketing department is predicting that, within a year, studios may run out of options for doing the high-end effects they need in increasingly contracted turnaround times for their big spring and summer films. Anticipating this crunch, studios are pushing back production and release dates on next year’s blockbusters, including Marvel’s Thor and Warner Brother’s The Green Lantern.

The crunch came sooner than later for some companies. After 10 years of doing some of the most highly-respected work in the industry, The Orphanage has shut down, and CaféFX has cut costs and dropped its benefits to stay afloat. Marvel Studios has said it will look to smaller companies around the world, such as France's BUF and Germany’s Pixmondo and Trixter, with a specific skill set, to get their films done. Trixter handled Roland Emmerich’s 2012 and James McTeigue’s Ninja Assassin.

Nevertheless, only a handful of shops in the world can do the high-end character and effects work audiences demand of a blockbuster—companies like BUF, Pixmondo, Trixter, of course MPC and Framestore in England, and CORE in Toronto. Unfortunately, many of them, especially London’s big effects houses, are already reportedly booked solid for the next year, so studios looking to complete their films abroad may be out of luck.

As American companies struggle, exporting shows to the UK, Canada, or even Germany may be even more enticing to studios aiming for cost-efficiency. All of these countries are awash in tax incentives, regional and federal grants, and huge government subsidies from such organization as Germany’s DFFF (German Federal Film Fund) and Ontario’s OMDC (Ontario Media Development Corporation).

While GM, Chrysler, the banks and insurance companies get trillions from Washington, most american businesses, effects houses included, get nothing. Not so in these countries. That’s Elton John above, posing with Ontario premier Dalton McGuinty at Toronto’s Starz Animation, which just received a 23 million dollar cash infusion from the government on the heels of luring John’s new animated film, Gnomeo and Juliet, to the studio.

In this new era of cost-cutting, American companies could have a hard time competing with foreign studios swimming in this kind of free money. Maybe what we need is a piece of that bailout pie.