DD: What we know so far

We would like to take a moment to summarize what we have heard about significant changes announced at Digital Domain so far.

As a disclaimer, this information comes from secondary sources and some of it is potentially hearsay. If we got something wrong, please speak up and correct us!

Digital Domain had a company-wide meeting yesterday on June 13th. In it, CEO Ed Ulbrich informed employees about long-standing rumors that have been circulating around. We have summarized the main talking points in the list below.

  • DD Executive management feels that in order to remain competitive in feature production, it simply is no longer cost-effective to perform shot production in Los Angeles.
  • All shot production work will take place in Vancouver and elsewhere for features, no longer in Los Angeles.
  • DD Venice facility, located at 300 Hampton Drive, to close permanently sometime before the end of the year. It has long been rumored that the lease on the buildings expires this year, and they opted not to renew it.
  • DD Commercials is doing well, and will remain in the Playa Vista facility.
  • Production management, executive management, creative supervision, look development, systems, and pipeline to remain in Los Angeles.
  • DD unable to locate a building to house feature, commercial, and virtual production in the area.
  • DD currently employs roughly 450 people in the Los Angeles area, including features and commercials. That number is to be scaled down to 250, and all remaining employees will be consolidated in the Playa Vista facility.
  • Minor layoffs occurred in the Venice facility yesterday. Exact count or what positions/departments affected unknown.
  • Timeline for closure of Venice facility and relocation of remaining employees to Playa Vista unknown, but will most likely happen before the end of 2013.

29 Responses to DD: What we know so far

  1. Scott Squires says:

    “it simply is no longer cost-effective to perform shot production in Los Angeles.” My understanding (which may be wrong) s it wasn’t because the work itself is too expensive in LA. It’s because the clients are going to places with subsidies. That’s different than actual cost-effective issues of doing the work itself. Costs are probably the same or similar but the clients get reimbursed from the government,

    • occupyvfx says:

      Correct you are, and thank you for pointing this out. The quote was not exact or verbatim. If someone has the exact quote, let us know and we will edit the main post.

      Costs of doing business in Canada are pretty similar to those in Los Angeles. Canadian overtime doesn’t kick in until over 50 hours instead of 40, but the cost of employer-sponsored health care contributions are higher in Canada.

      This gets trickier when you take into account various other factors, including:

      The Canadian dollar is nearly as strong as the US dollar, and has been valued over the American dollar quite recently. This is a far cry from the very advantageous USD -> CAD exchange rates of the 1990s.

      The cost of living in Vancouver is approximately 35% higher than it is in Los Angeles. Reference: numbeo.com Given this, artists who are not already residents are going to have to be incentivized financially to move there.

      The complications of management increase by an order of magnitude when you involve an international site. Multiple coordinators, producers, and production managers need to be hired on both ends, as well as creative supervisors. Both teams have to effectively communicate with one another as well.

      Finally, it takes a significant amount of capital to open up a new facility. Leases have to be signed, equipment and software needs to be purchased, remodels need to be paid for, and on and on.

      Oddly enough, DD is not going to receive any money from the province of BC for sending the work up there from Los Angeles. We have not seen the financials, but you can make a pretty compelling argument for work that is completed in Vancouver actually costing Digital Domain more than it does if they were to do the work in Los Angeles.

      The only benefit is that the studios, who do receive the benefit of the subsidies, still continue to bring them enough work to keep the doors open a little bit longer.

      Are they going to turn a profit on this strategy in the long term?

      • VFX Venice says:

        Everyone’s missing the point when we talk about subsidies. There is uproar over subsidies in North America, there was uproar over my old boss who tried to create heavy numbers of student niter ships to keep big jobs here in the US. But there was no uproar from us when ILM announced plans to push work to BaseFX in China! Now there is no uproar when our new boss at DD quietly says that work will move to vancouver and OTHER PLACES. That means CHINA! This did not have to happen and I should not have had to move back to Florida. We had a good thing going in Florida at less than the cost of Florida. Ulbrich lied about Venice doing well. Said Florida was the problem when Florida was funding him. And he was supposed to help lead Florida. So now we learn that LA is too expensive? Didn’t he already know that when he stripped the Florida studio with his new Chinese partner? The point here is that we are a Chinese company and Mr. Ulbrich sold out a cheaper studio that in the long run could have saved his job. Oh, but he’s been pretty good at saving his job all along. Just tell the truth for once. Vancouver is temporary. The work is going to China.

        • VFX Venice says:

          typos – should have said “This did not have to happen and I should not have had to move back FROM Florida. We had a good thing going in Florida at less than the cost of CALIFORNIA.”

  2. VFX Venice says:

    Gee Mr. Ulbrich,
    If only you had friends in Florida to pay for our California losses while building a studio of extremely talented, recognized VES members and digital artists (friends of ours) that did extremely high quality work. Then, when your spin story of Venice success proves a lie, at least you and those of us that relied on you could at least have a place to work in the US. Florida was already 30% cheaper with no subsidies and you shut it down and stripped the equipment so it could never re-open. Now we have no choice. Canada won’t even hire us.
    Thanks Boss

  3. Vancouver VFX says:

    I just want to make a correction. BC (each province is different) has laws that state overtime has to be paid after 40 hours in a week or after 8 hours in a day. Some bigger VFX studios here in Vancouver have decided to break the law and only pay after 50 or even not pay overtime on weekends. In some cases, junior artists get paid less than the legal minimum wage when overtime is factored in. The fear of being blacklisted is probably why artists haven’t blown the whistle to the government. (Other VFX studios in Vancouver abide by our laws and pay properly.)

    From the Government:

    “Weekly overtime is time-and-a-half after 40 hours worked in a week. Only the first eight hours worked in a day count towards weekly overtime.”

    http://www.labour.gov.bc.ca/esb/esaguide/

    • VFX Nomad says:

      http://www.labour.gov.bc.ca/esb/facshts/high_tech.htm This is the law that the studios hide under classifying everyone as technology workers.

      “For the purposes of the Employment Standards Act, a “high technology company” is a company in which more than 50 percent of the employees are either “high technology professionals” or managers of those professionals, or are employed in an executive capacity.”

      I imagine most studios have enough folks in IT, R&D, TD’s, ATD’s, Managers, and Executives to make up 51% of the company.

    • kwagmirewagner says:

      VFX Nomad is correct and assuming by your name you are living in Vancouver, you would do well to familiarize yourself with the law.

      The Employment Standards act requires straight time pay for solicited work after 40 hours. Nothing more. Anyone in film, television CG animation is considering a high technology employee. It has been this way for a decade now.

  4. Vancouver VFX says:

    I don’t see how a Modeler, Lighter, Roto Artist or Compositor using Maya or Nuke would fit in any of these categories better than an office worker using a computer for Excel or Word.

    The regulation only covers “high technology professionals” at the company (not other employees):

    “Employees in “high technology companies” who are not “high technology professionals” are covered by the hours of work, overtime and statutory holiday provisions of the Act. “

    • VFX Nomad says:

      I am no lawyer but the law seems to say that having 51% of your workforce being a combination of technology workers (which would include TECHNICAL directors, Assistant TECHNICAL directors, R&D, Information TECHNOLOGY), the managers that lead them (technology managers, production, managers, producers,) and the exectutive staff, qualifies you as a “high technology company” and thus can apply this looser “averaging agreements” to the entire workforce.

      The law says “An employee of a high technology company who does not meet the definition of “high technology professional” may agree to average hours of work.”

      I know at my current studio today, more that 51% of the workforce falls into this category. I know its seems wrong, but at least two Vancouver employment offers I have seen explicitly cite this law and companies are not doing it quietly. Perhaps they are all in violation of the law, but if that is true, then they are being very brazen and open about it.

      • kwagmirewagner says:

        They are not in violation. Call the office of Employment Standards if you have any doubts. I have several times on several employers when I wondered about OT laws/ job title reassignments etc. They are super helpful and will cite the law with extreme accuracy and without bias.

  5. anonVFX says:

    Point of this new development is that it’s yet another sign that the entire feature side of VFX will be completely off shored from North America & Europe. California is done and Canada & the UK will have the torch for only a short time longer and then it’s all going to India & China. Plane and simple. This is why in the past we have had tariffs on goods and services and desperately need them again for digital work since many tech fields are suffering from this. Until then, the race to the bottom is how low of wages can you get to maximize studio profits. A short term profit strategy which is suicidal for the home countries in the long run.

    Something we can really do to fight this is vote with your dollars and don’t give studios which off-shored our jobs any more money by not seeing movies in the theatre anymore.

    • candidCamera says:

      So what about feature animation?
      Is it also just a matter of time before Disney, Dreamworks and Pixar leave North American shores forever?

    • J_animator says:

      “Vote with your dollars and don’t give studios which off-shored our jobs any more money by not seeing movies in the theatre anymore”

      It’s a nice sentiment but sadly the reality is that virtually all films and productions contain some work done off-shores. You will basically be seeing no movies, and should everyone actually do that, it would cripple further the industry if these movies fail.

      This is a new reality of capitalism and globalization, and it is not localized to the vfx industry by any means. This is not to say it’s ok, but it is widespread over virtually all industries.

      • anonVFX says:

        In regards to the animation studios. Core creative work can’t be outsourced. Technician, assembly line, worker bee artist work can. So on the animated feature front, yes Dreamworks already has plans to do entire future features in India. Pixar has already opened a Vancouver location which is a stepping stone to opening shops in slave wage countries.

        In terms of voting with your dollars, of course I’m not advocating good films not making any money. I am saying don’t go see big budget VFX tentpole films or shitty franchises in the theatre anymore. Wait till their online or on Blu-Ray/DVD/etc. Especially cause all that Hollywood seems to care about now is opening weekend/month. This also doesn’t include smaller, lower budget or independent films. The vast majority of which have more substance anyway. Remember, the whole system is changing into bottom up instead of top down.

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  8. Chris Simmons says:

    You guys need to contact IATSE in Canada and organize. With the level of tax credits offered, the studios will take the hit. They have little choice if you are serious and willing to walk out if they don’t sign. The studios can’t gripe about the increase to wages as those wages will be covered in large part by the tax credits. The choice is yours if you want it.

  9. Steve Kaplan says:

    Here’s what’s confusing to me .. who didn’t see this coming? I hate to sound callous, as I’ve been known for saying the right thing at the wrong time. For those who are affected by this change, I am truly sorry.

    Having said that, we all have watched as vfx shops clammor to fill their Vancouver facilities before any other seats are filled in order to maximize the tax subsidy. This move from DD, especially in light of the information provided by fxguide in their latest article, makes perfect sense. They **NEED** to cut costs.

    However, take a look at Imageworks. They did the same thing, right? “Closed” down their Culver City office and opened the Vancouver facility to maximize the BC ATM machine. So, why were there between 200-400 artists working there for the past few months?

    Leverage and talent. DD Features will not all leave LA. Yes, they’re leaving the Venice facility. Yes, the commercials space can only hold so many. However, its not feisable to move the entire operation to Vancouver. We’ve seen vfx shops try .. and they never end up with the whole shop up there.

    Just my observation and thoughts ..

  10. Scott says:

    With DD’s Venice lease ending in late 2013, their presence in Vancouver, the interests of their owners (Chinese and Indian) and subsidies… I can foresee the following:

    1. DD retains their space in Playa Del Rey, housing their key management, sales and marketing, administrative and Commercials.
    2. The majority of their Feature work is done in Vancouver ( or possibly other hi return tax subsidized locales).
    3. Their lower end work gets done in BJ China and RMW in India.
    4. China and India slowly learn more and more, pipeline becomes robust, cloud computing and cloud rentable SW becomes course de rigour… and the work starts to move farther East to the lowest cost providers.

  11. Doodle boy says:

    My personal feelings are this. All of us artists are complaining about companies taking business to other countries. These companies are literally nothing without the artists, WE make the visuals and develop the technology and techniques. All you guys from DD are considered the greatest artists of all time….don’t sell yourselves to other companies and grovel at their feet for work. Eff those guys, form together and start your own company and keep it here. Continue to out do the rest of the studios world wide and force the competitors out of business. China has absolutely NOTHING without the training and sups, so don’t give them any of that!!!!

    All easier said then done I’m sure but that’s my dream, and sometimes I wish that dream could be a reality. Artists making the companies kiss our assss instead of it being the opposite.

  12. Raphael says:

    I invite my fellow artists to consider what happens when they take an opportunity to work at studios in India and China in the capacity of leads/trainers… You are helping your peers back home to lose their jobs faster.

    The knowledge base in VFX was accumulated through years of a tightly knit culture, mostly based out of California in the beginning, and unless we just hand it off to studios in China and India willingly, they are going to have to develop the expertise base on their own… And I don’t care what they promise, I know it takes time and the right talent to come together. I haven’t seen very conclusive results out of asia yet, and the best ones yet came through heavy brain drainage from western talent. The promise of cheap quality work out of China and India is not what it’s cracked up to be. Look at half the crap that is manufactured over there. What makes you think vfx would surpass the craftsmanship seen in other areas? Sure its a numbers game, but the business heads who decide to uproot our industry hoping for higher profit are walking themselves into a trap, and will get their karma.

    Manifestly, you are already seeing with DD, and Sony, the results of bottom line mentality. Disney is often brought up as a shining example of American success. Now it’s Pixar. Do you think the people behind these institutions were driven by profit? They loved their CRAFT first and foremost, and the product was good, and brought them success… What you are witnessing is the floundering of profit driven mentality in our industry. As individual artists, we already know that we aren’t in it for the money. We made that choice and live with it. Yet we are at the mercy of people who have other desires, and who do not think the way we do. This is what is tearing this industry apart.

    This said, I just don’t see how we could reverse economic currents and return our industry to what it was… It’s technology in the end that enables our work, but it also enables our work to be done further and further away from the production origin. We can’t fight progress. Just come to terms with the changing nature of the business and decide whether you like it enough to stay in it. I’m willing to do interesting work for less money than I’ve made in the past, but I want work security in exchange. It’s not asking for too much but even now the industry cannot provide me with this. I’m looking for another career. I’ve done it before, I’ll find something rewarding and in line with the times.

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