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vfx
07-03-2009, 05:27 PM
http://www.variety.com/article/VR1500001200.html?categoryid=18&cs=1

Ouch, feeling for the artists, this can't be nice given how hard they've clearly been working!

But this is the bit that got me:

It's finances have been under a cloud since SEC filings revealed the company (Digital Domain) has never turned an annual profit since its founding in 1993 by Scott Ross (http://forums.cgsociety.org/javascript<b></b>:zodInfuser.FillDescriptions('Scott Ross');), James Cameron (http://forums.cgsociety.org/javascript<b></b>:zodInfuser.FillDescriptions('James Cameron');) and the late Stan Winston (http://www.variety.com/profiles/people/main/29721/Stan%20Winston.html?dataSet=1).

spurcell
07-03-2009, 07:19 PM
Ouch is right. Hopefully they pull through. For their artists sake anyways.

SheepFactory
07-03-2009, 08:47 PM
Here is some info in case others are wondering what the hell is going on because the article above assumes you know this stuff:

Digital Domain, the Venice, Calif.-based visual effects shop that won the Oscar earlier this year for its work on Paramount's "The Curious Case of Benjamin Button," is scheduled to be in court Wednesday for opening arguments in a wrongful termination suit by the company's former prexy, Christian Bradley "Brad" Call.

Call alleges the company pressured him to falsify the company's financials to attract investors.

DD has countersued Call, charging breach of fiduciary duty. Company alleges that Call poisoned other employees' attitudes about the company and encouraged some to seek larger compensation packages.
Digital Domain has a large outstanding loan from Falcon Partners and has been owned since May 2006 by Wyndcrest Partners, an investment group that includes helmer Michael Bay. Call was terminated in August of that year.

While the financial picture for the entire vfx industry is gloomy, DD's finances are more exposed than most, having filed SEC disclosures in preparation for a hoped-for IPO.
The documents reveal that the company, founded in 1993 by Scott Ross, helmer James Cameron and creature wiz Stan Winston, has never turned a profit despite having a thriving commercials division for much of its existence to supplement its feature work. (Cameron and Winston cut ties to Digital Domain in 1998.)

DD management declined to comment on the pending lawsuit, but CEO Cliff Plumer told that the SEC filing is out of date.

"We have conducted a significant amount of business, and our financial picture has changed significantly since our filing," said Plumer.
Call's lawyers did not respond to requests for comment on the suits.
Company recently delivered more than 100 shots on "Transformers: Revenge of the Fallen," and its slate includes "G.I. Joe: The Rise of Cobra," "2012," Disney's "Tron" and other tentpoles.

Since studios commonly examine a visual effects company's books before awarding large vfx contracts, Digital Domain management points to those projects as an endorsement of its current financial situation.

ivanisavich
07-03-2009, 10:38 PM
The documents reveal that the company, founded in 1993 by Scott Ross, helmer James Cameron and creature wiz Stan Winston, has never turned a profit despite having a thriving commercials division for much of its existence to supplement its feature work.

How the hell is that possible, considering the amount of work they do???

Animasta
07-03-2009, 11:39 PM
How the hell is that possible, considering the amount of work they do???

Perhaps they pay the employees too much?

Autarkis
07-04-2009, 12:59 AM
Underbidding for projects is why they can't seem to make a single profit in my opinion. With the rise of the smaller vfx shop when a lot of artists left ILM in the 90's, many smaller studios underbid in order to get the project, in a downward spiral that break vfx shops while studio executives laugh all the way to the bank.

GatorNic
07-04-2009, 01:13 AM
How the hell is that possible, considering the amount of work they do???

I believe companies will show low profit margins or no margin, if the company is investing the money back into company for expansion or other endeavors. Also if a company makes profit they can give out bonuses to execs (or possibly artists if they are really, really nice), which lowers their profit margins and allows them to pay less taxes.

Ofcourse it also doesn't help when basically vfx houses have to underbid everyone else to get jobs. Thus why so many are outsourcing to stay competitive. edit: oops, Boris you got that point in before me :thumbsup:

Malanjo
07-04-2009, 02:31 AM
How the hell is that possible, considering the amount of work they do???
Indeed...

Common words this days: "The fault is the global resection..." will always be for the next decades... (they said...) :twisted:... lol

Anyway... Sad...

Global
07-04-2009, 04:43 PM
How the hell is that possible, considering the amount of work they do???

Clients asking for increasingly more for a heck of a lot less and an ever increasing number of shops falling hand over feet to bid for it!

Almaghest
07-04-2009, 06:18 PM
Scott Ross actually addressed this lack of profit margin in a small lecture I attended, saying that most companies do not in fact make large profits after paying their employees and it's normal for Digital Domain to make very little profit or even lose money in a normal year (so this isn't because the company is doing poorly, it's just something that happens.) I seem to remember him implying that when this happens it is the company execs who lose money, because they were aware of these risks going into the company and are in it because they love it, not to make a profit.

lazzhar
07-05-2009, 07:24 AM
It's finances have been under a cloud since SEC filings revealed the company (Digital Domain) has never turned an annual profit since its founding in 1993 by Scott Ross (http://forums.cgsociety.org/javascript%3Cb%3E%3C/b%3E:zodInfuser.FillDescriptions%28%27Scott%20Ross%27%29;), James Cameron (http://forums.cgsociety.org/javascript%3Cb%3E%3C/b%3E:zodInfuser.FillDescriptions%28%27James%20Cameron%27%29;) and the late Stan Winston (http://www.variety.com/profiles/people/main/29721/Stan%20Winston.html?dataSet=1).

I couldn't find this quote in the original article. Did they remove it?

Edit:found it on google cache.

vfx
07-05-2009, 10:26 AM
I couldn't find this quote in the original article. Did they remove it?

Edit:found it on google cache.

They edited the article - how strange.

Pyke
07-05-2009, 04:01 PM
Its not odd that they haven't shown a profit. In fact, if a company isn't listed, and they DO show a profit, thats bad accounting.
As soon as there is a profit, the government tries to take its share. The more profit the company makes, the bigger the slice the government wants, so the people in charge put that money to work before it can be taxed.
When money is made, its funneled back into the company, be it through salaries, upgrading computers, building new facilities, getting a new coffee machine, bonuses to the CEO's, to the staff, donating it to charity, etc.

Kabab
07-05-2009, 04:05 PM
Its not odd that they haven't shown a profit. In fact, if a company isn't listed, and they DO show a profit, thats bad accounting.
As soon as there is a profit, the government tries to take its share. The more profit the company makes, the bigger the slice the government wants, so the people in charge put that money to work before it can be taxed.
When money is made, its funneled back into the company, be it through salaries, upgrading computers, building new facilities, getting a new coffee machine, bonuses to the CEO's, to the staff, donating it to charity, etc.
This theory is half the reason the world economy is in such a bad shape.

Nothing wrong with companies posting strong profits and having some serious $$$$ in the bank to ride out the harder times....

CHRiTTeR
07-05-2009, 06:53 PM
nvm....

*filler*

mr Bob
07-05-2009, 11:30 PM
Vfx making vast profit ?!?!?! .Sadly those days ended years ago, many companies barely make it over the line every year. There's no future left in just providing a service to complete the VFX. I predict the big shops will move into part owning ip / joint ventures with the big film studios.

richcz3
07-06-2009, 08:29 AM
Underbidding for projects is why they can't seem to make a single profit in my opinion. With the rise of the smaller vfx shop when a lot of artists left ILM in the 90's, many smaller studios underbid in order to get the project, in a downward spiral that break vfx shops while studio executives laugh all the way to the bank.Precisely and it's been happening for many years now - the first I became aware of it was in 2000. Some ex employees start boutique shops and directly compete. And yes, the bidding starts an incessant downward spiral. Even knowing that, saying that DD didn't produce a profit for such a period of time is still surprising.

TJFrame
07-06-2009, 08:39 AM
http://en.wikipedia.org/wiki/Hollywood_accounting

Pyke
07-06-2009, 09:26 AM
This theory is half the reason the world economy is in such a bad shape.

Nothing wrong with companies posting strong profits and having some serious $$$$ in the bank to ride out the harder times....

It is a flawed system. You are basically punished for being successful. I don't blame them for putting the cash back into the company tho. There definitely isn't anything wrong with having cash in the bank to ride out the harder time, but as soon as a company has extra money that its not using, the government tries to take it.
Its either upgraded computers, or pay more TAX.

AdrianLazar
07-06-2009, 11:23 AM
"company has extra money that its not using, the government tries to take it"

And you will be thankful for that when you are going to be elder or when you need to go to a hospital and it's free ;)

TJFrame
07-06-2009, 12:16 PM
"company has extra money that its not using, the government tries to take it"

And you will be thankful for that when you are going to be elder or when you need to go to a hospital and it's free ;)


The two issues have very little to do with each other and the subject is way more involved than high taxes = good because it pays for old people. A lot of people here in the states don't think that medical care should be paid for by the central government.

The fact remains that companies everywhere are going to do whatever they can to avoid profits being drained away by the government. That's the whole concept of business in a capitalist society: make money and keep as much as is legal.

I have no idea what the true financial state of DD is, but I would not at all be suprised to find out that they use hollywood accounting practices and shady accounting to appear worse off than they are.

Unless it's a public company with shareholders, they can operate at any sort of loss the owners care to deal with.

Pyke
07-06-2009, 12:20 PM
Not in South Africa mate! :D
I don't have an issue with paying TAX at all. I have an issue with a system that penalizes you for doing well. TAX should be a set %, and not on a sliding scale. You would be sickened at the amount of EXTRA tax that even small startups have to pay.

NetMapel
07-06-2009, 09:00 PM
Not in South Africa mate! :D
I don't have an issue with paying TAX at all. I have an issue with a system that penalizes you for doing well. TAX should be a set %, and not on a sliding scale. You would be sickened at the amount of EXTRA tax that even small startups have to pay.

I've worked in public accounting before. You'll be surprised at how little taxes these companies pay when they are all reporting net losses. It is as others have said, a net profit is avoided as much as possible because companies don't want to pay corporate taxes. If you are forced to pay $10,000, for example, regardless of what you do, wouldn't you choose to spend that on buying capital assets instead of paying it out in taxes ?

mr Bob
07-07-2009, 12:14 PM
Companies declare gross profit and expenditure in micro detail. The tax man is not stupid nor are shareholders. Since I started in this industry many years ago I can think of plenty of firms who have gone to the wall due to just not being able to turn a profit. Would I buy or invest in a vfx firm ? No way.

Bucket
07-07-2009, 05:42 PM
A lot of the business aspect of vfx was actually discussed in cinefex 100 and 101. It's a good read if you have the time. Lot of different perspectives but most tend to agree that they barely break even and sometimes hint at the prospect of taking a hit just to keep business going.

richcz3
07-07-2009, 08:01 PM
"The beleaguered f/x houses also find their pay eroding as rival shops open up around the world. Effects budgets may be soaring, but they're being spread over many more houses and many more shots. Effects houses are still paid by the shot, and per-shot fees have fallen 30%-40%."

This Variety article was valid in 2007 as it is now. Article Link (http://www.variety.com/article/VR1117965871.html?categoryid=2520&cs=1)

Industrial Light & Magic topper Chrissie England, who's seen many blockbusters come through her shop, calls the editing/post-production race to the pic's delivery deadline "about the scariest thing I've ever seen." The film's vfx supervisor, John Knoll, calls it "a freakin' miracle" that the film was done on time.

Studios are worried about the outcome. With increasingly frantic post-production schedules, there is less time to edit, test and recut a film, and a megamillion-dollar investment is in jeopardy....

metroeast
07-09-2009, 12:50 PM
I wouldn't blame all of this on the state of the economy. It seems that much of this is because the smaller fx are driving down the price of the work to be done. Why should producers pay for higher prices for the increased overhead and exceptional talent of the larger studios when they can get by using smaller studios that have half the resources and don't pay high salaries?

I love the work that the large fx houses do. Believe me, I am a huge fan of what some of these places crank out. At the end of the day, it is a business and it is all about the ROI. If they can get more return from lots of smaller houses collaborating on a project than a few large studios, they will go with what is more profitable.

What other choice do large studios have but to drop their prices to make themselves price-competitive?

I hope Digital Domain pulls through this. I love their commercial and feature film work. Would be a shame to see some much talent to be out of work.

CHRiTTeR
07-10-2009, 03:10 PM
Why should producers pay for higher prices for the increased overhead and exceptional talent of the larger studios when they can get by using smaller studios that have half the resources and don't pay high salaries?

Because the smaller studio cant do what the bigger studio does. Especially not in the same quality/timeframe balance. If they can, then clearly the bigger studio is doing something wrong.

thatoneguy
07-10-2009, 04:21 PM
Because the smaller studio cant do what the bigger studio does. Especially not in the same quality/timeframe balance. If they can, then clearly the bigger studio is doing something wrong.

Depends on what you consider "Big" and what you consider "Quality".

One man shops can even by themselves create pretty damn good VFX now. What they can't do is anything that requires extensive R&D and ground breaking research with the assistance of multiple PhDs.

That's why we have companies like Matte World or the 10,000 companies which worked on The 300. If it's green screen, a little 3D and some match moving you only need like 4 guys. And more and more tools continue to filter down into the mainstream product lines. You have products like FumeFX which is the go to product now for smoke and dust. ILM might have their own tools but they also use Fume. The toolset playing field is leveling.

ManuelM
07-10-2009, 05:02 PM
Depends on what you consider "Big" and what you consider "Quality".

One man shops can even by themselves create pretty damn good VFX now. What they can't do is anything that requires extensive R&D and ground breaking research with the assistance of multiple PhDs.

That's why we have companies like Matte World or the 10,000 companies which worked on The 300. If it's green screen, a little 3D and some match moving you only need like 4 guys. And more and more tools continue to filter down into the mainstream product lines. You have products like FumeFX which is the go to product now for smoke and dust. ILM might have their own tools but they also use Fume. The toolset playing field is leveling.

don't fully agree with that.

jCastile
07-10-2009, 05:24 PM
what's wrong with taxes? you like those roads you drive on and waste management don't you?

VrodRick
07-12-2009, 07:58 AM
I've run a design studio (web/print/hosting) for the past 6 years or so and have about 8 employees. While i'm not sure the if DD is an LLC, S-CORP, LLCP, it all factors down into how much is left at the end of the year that is taxed (both as profit as well as owner/partner draws).

It's one of those things where I'm sure DD has enough cash flow to pay their bills (if they didn't you would be hearing about cost cutting scenarios like layoffs, more outsourcing, etc)...sounds to me like DD has enough cash coming in the doors to keep the lights.

bisenberger
07-16-2009, 02:28 AM
looks like smoke and mirrors to me..........some CEO and/or Execs are probably making out like bandit at the expense of the people actually doing the work..........it's a shame, but that seems to be todays business model

alberto
07-16-2009, 10:35 PM
what's wrong with taxes? you like those roads you drive on and waste management don't you?

I'm sure the thinking behind those crazy sliding scale taxes is that the government prefers that companies invest in themselves instead of paying tax because it feeds money into the economy and they believe feeding that is better than having enough money to pay off debt and and health care for the poor and such. I guess what I mean is... a company buys computers instead of paying taxes on net profit and then that money filters down creating jobs on the way. Right? That's how it works, no? It just breaks if the people at the top take too much of a slice reducing the amount that filters down to nought.

Hmm, it's clear in my head but I can't explain it for poop.

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