sentry66: understand the economics of the film (and to a degree game) industry and it will hopefully enlighten you:
The source of revenue for films are fans and patrons on theatrical release. This is accompanied by in film advertisement. Merchandise revenue does not affect the studio (Warner Brothers) or vendor (Rhythm etc.) on the day of release. It does however help WB and it's partners make up losses later.
Where does the money come from to take on these big films? From Wall Street hedge funds (Relativity, Legendary etc.) and from the studio's previous revenue (FOX, WB, and the like will reinvest their revenue to create more content.)
A film is often seen as a singular entity legally. Let's assume this case since it more often than not represents how production is treated.
WB and partners form '301 Inc.' to handle the entire creation of the sequel to 300, called 301! Assuming the movie has been greenlit, WB and partners loan 301 Inc a large amount of money. Producers match funds with tax incentives, product placement, and point deals with vendors, actors, directors etc. That is: 301 Inc has a loan to WB and partners already, so any money 301 Inc earns in ticket sales goes to WB and partners first, then on a point (percentage) system to actors, directors, producers, screenwriters, and most recently vendors. You can see this with Prime Focus who recently invested into the new Sin City film.
Understand this relationship: 301 Inc is already in debt and it has promised profits to a lot of people. How did those people get those profits? They have the talent, the star power (name,) and most likely the money to negotiate for them. Why do vendors (Rhythm, etc.) not invest in films? They have been, Digital Domain with Ender's Game, PF as mentioned earlier, Rhythm with Yogi Bear. Remember though: they usually have to pay for the effects themselves; Digital Domain was
paid and received points on Ender's Game, but if you read John Textor's post
you'll see their fee for doing the work was greatly reduced.
Now 301 Inc only has a finite amount of money to use to make this movie. Why? WB and partners don't want to take too many risks in this climate. Why? No one buys DVDs, most people rent or Netflix, and piracy hurts. Why? Because the system of selling, booking, and getting movies into theaters is antiquated in a digital world. Everyone is moving to digital distribution: Disney signs with Netflix, Netflix and Amazon create their own properties for international distribution, iTunes is the #1 digital store world wide. However the whole industry isn't there yet. Look at the fiasco that happened with Alice In Wonderland when Disney wanted an accelerated release schedule for the DVD/Blu Ray. Theaters were angry.
Ok so we can't earn money really quick because of old ways of releasing a movie. Where does the money come from then? Releasing it theatrically. Again, merchandise and other forms of income aren't related to the actual creation of the film and the people working in it, so let's stay focused.
301 comes out. 301 does poorly in theaters, twitter kills it, RottenTomatoes gives their first ever -1% review. The movie made no money.
No directors, partners, WB, no one sees their money back, it's a complete failure. WB takes a loss, directors, actors, etc have worked on a film for 18 months and earned nothing.
Then it comes out on DVD/BluRay and it's a surprise hit. People love it, WB and partners get their loan back plus other hidden 'fees
.' Somehow, directors, actors and others with points also get a check after all these fees.
... what about the VFX artists?
Well we've been out of work for 6 months by this point. You see, 301 Inc only had a limited amount of money to spend on vendors. It made them compete hard to see who would do it at the lowest cost. Vendor VFX Inc was given only 20 million to do the effects. But the producer wanted the work done in Canada because Canada will send the Producer (NOT the VFX company!) a check for giving Canadians work. Vendor VFX Inc hires a lot of people in Canada, a few in the US and maybe some key personnel in LA to manage the studio (WB) in person.
In the US, Vendor VFX Inc has a small budget for artists locally. They post an ad and are flooded by people. The high supply of artists drive down the costs of hiring them. They hire a few people, but only have enough money to do maybe 2-3 months work in the US. Vendor VFX Inc tells you they will hire you either as a A) pre determined end-date W2, B) Through a third party so they don't have to pay unemployment costs, taxes or anything else. If you're lucky to be on a W2, then you have to work for 90 days to get health insurance, but the job ends in 60 days. Damn. If you are hired through a third party, then you can file for unemployment, but you deal with a third party firm (like YurCor) and not with Vendor VFX Inc at all. Vendor VFX Inc pays third party a 'fee' who then pays you (after they take out their fee from your paycheck.)
Then you're fired, let go, or if lucky rolled onto the next project. If you're rolled on, you may be asked to take a month or so off so you're not seen as a fulltime employee.
Because Vendor VFX Inc only has a small amount of money left over after producing the VFX. This is called margin. From this margin we remove A) utilities B) taxes, lawyers C) your snacks in the snack machine D) the founders/owners getting paid E) any other administrative stuff (like copy paper!)
Vendor VFX Inc has no more money at the end of a show (the movie 301, the sequel to 300) to pay you. They cannot afford health care except for a few key employees/seniors. It's not that they don't want to, trust me, every vendor owner I've worked for is genuinely interested in the artist's health. It's just they cannot afford to.
Anyways we're let go, 301 comes out in theaters 6 months after we were let go (standard in my experience at least) and makes no money. 3 months after that, it is a surprise hit on DVD sales. I've been out of work (or found a new job) because it has been 9 MONTHS!
since I worked on that film.
For all I know:
- Vendor VFX Inc declared bankruptcy (and forfeited their points on 301 to creditors)
- WB and Partners love the work that Vendor VFX Inc did so much that they asks them to do work again on another film, so they begin rehiring people 9 months later.
Obviously I'm glossing a few things:
- The changes the director will keep making to the VFX until the money runs out on their budget
- The fact that the money hasn't been paid to the VFX Vendor Inc because they can't charge for changes, so they may already be in debt
- Or it just hasn't been paid period, WB and Partners will stretch you thin because you'll keep working, the financing runs out, partners pull, options expire, whatever.
- That Vendor VFX Inc could very well make money from 301 the movie, but may not see that money for almost a year or two after it was released. I as a VFX artist see no benefit.
Movies take years to produce; 18 months is a tight schedule. Movies don't make the money they used to, but there are new avenues opening up for profit, it will take some balls to do this on a tent-pole scale. By the time the film comes out. Why such delays and crappy restraints? Because that's how it used to be. Why so many changes? Because as artist's we're never satisfied. Why do I get no health care or benefits? Because there is extreme downward pressure to make a movie cheaply; producers will find ways.
Wait! I heard other people have health care, like grips etc! Yes they do. Grips and the like have unionized many decades ago and have reaped the rewards of working in a union on a large number of films. Those points we talked about earlier? Grips, camera ops and everyone else in physical production unions earn those points, those points go to the Motion Picture Industry Pension & Health Plan
. Even if some fail, most will overall make money in aggregate over a long period of time.
That's how they have benefits.
I don't want to argue for or against unions in this post. I just want to point out how the whole thing is set up.
I will say this though: the pressure to make movies, I imagine soon games, as cheaply as possible for the greatest reward is definitely in the up swing. This is compacted by changing revenue streams for the studios. I know we like to demonize them, but they're losing money and investing what they have back into new films. GE could rarely make NBCUniversal profitable; I'm sure Disney relies more on merchandise and parks than their films too.
Entertainment is this funny business that once in a while makes money, but rarely does. In the long run you either keep at it because you're mad or you're in love with it.
I happen to be in love :P