A studio known for its visual effects wizardry, Digital Domain could very well have realized its most dazzling suspension of disbelief with its recent accelerated emergence from bankruptcy protection, transitioning from a company fraught with problems outside its core business to one with a well capitalized future and growth prospects stateside and internationally.
The problems triggering the bankruptcy declaration in September included losses incurred on such ventures as publicly traded parent company Digital Domain Media Group’s (DDMG) launch of a Florida animation studio which is now closing. DDMG CEO/chairman of the board of directors John Textor resigned from the company which had also earlier partnered with Florida State University to open an animation and digital arts institute in West Palm Beach. According to the Associated Press, Florida Gov. Rick Scott has ordered an investigation of the process used to award incentives that brought Digital Domain to the state, including millions of dollars to subsidize construction of the Port. St. Lucie studio. And even before DDMG’s Chapter 11 bankruptcy reorganization filing, industry controversy surrounded the school with some contending that it was a conduit for cheap student labor, potentially taking jobs away from visual effects professionals.
According to Ed Ulbrich, a Digital Domain mainstay exec on the production side, the company’s core business of VFX always remained viable. It was expansion on other different fronts, including in Florida, that weighed down the overall company with debt. Determined to save that core biz, Ulbrich got a crash course in bankruptcy proceedings as he endeavored to separate the VFX/production component–the studios in Venice, Calif., and Vancouver, B.C., and production house Mothership–from the overall DDMG operation. “It was asking too much for the visual effects business to sustain a company that had moved into all these other areas. Visual effects alone–for features and commercials–is a tough enough business as it is,” said Ulbrich.
As it turned out, Ulbrich and his compatriots at Digital Domain Productions Inc. (DDPI)–with considerable help and patience from feature film and commercial clients–were able to separate that core VFX/production component from the parent company in the bankruptcy proceedings and convince Judge Brendan L. Shannon of U.S. Bankruptcy Court in Delaware that an expedited schedule and an unprecedented auction process represented the only way to save the visual effects studio and hundreds of jobs from falling by the wayside.
“If we waited for the process to unfold on a normal timetable, it would have been too late to save our business [DDPI],” said Ulbrich. “As the news of the bankruptcy began to emerge, we had to hold the hands of our clients, calling them every day to convince them that everything would be alright. We had to convince all the major motion picture studios who were doing tentpole event movies with us and literally a couple dozen agencies and videogame publishers not to pull their work from the studio. I don’t know if I would have stuck things out and done what we were asking them to do but they did. We were facing long odds. But our clients stepped up and gave us a chance to save the business. And our own people stayed with us. No talent left during the bankruptcy period.”
Long Odds The “long odds” entailed DDPI finding and convincing a well capitalized buyer that it was a good investment. Furthermore, Judge Shannon had to approve a timetable of just nine days. “We had to plead,” said Ulbrich. “Anything more than two weeks would have resulted in a run on the business. If one studio or agency backed out, the whole thing collapses. The judge understandably didn’t want to be perceived as having a fast-track bankruptcy court. But testimony from Marvel Studios helped, explaining that if a super fast-track schedule wasn’t approved, then the risks would be too great, business would leave and we wouldn’t survive. We pretty much stood naked before our clients. ‘This is what’s happening to us. Here’s the only way we can fix it’…Judge Shannon finally and reluctantly approved a hyper-accelerated schedule, acknowledging that this was an unprecedented situation and a unique and special case.”
During this same brief time span, Ulbrich and his compatriots had to find a stalking horse bidder and creditors had to agree to the deal presented by that potential buyer. The financial wherewithal and commitment of the stalking horse bidder would allow DDPI to continue operating in the normal course of business. Searchlight Capital Partners L.P. became that stalking horse savior, agreeing to acquire DDPI and its operating subsidiaries in the U.S. and Canada, including Mothership Media, for $15 million. Pursuant to the agreement, though, the sale remained subject to an auction process during which higher and better offers could be considered, with the approval of U.S. Bankruptcy Court required. (DDPI was also navigating through concurrent bankruptcy proceedings in Canada for its Vancouver studio.)
DDPI continued business as usual, creating digital visual effects, CG animation and digital production for the entertainment and advertising industries under the aegis of Ulbrich who had recently been promoted to DDPI’s CEO.
While Searchlight injected the stability needed to keep things running at DDPI, the aforementioned auction process soon went into motion, culminating in a daylong marathon in which eight qualified bidders jockeyed to acquire DDPI. The competition was stiff, with bidders free to partner with other bidders on the fly in order to offer the most attractive bid. During the auction, Beijing-headquartered Galloping Horse America, LLC, and Mumbai-based Reliance MediaWorks, Inc., started out as competitors. But as the day wore on, the two companies teamed at the 11th hour to fend off other bidders and ultimately made the winning bid of $30.2 million by which Galloping Horse acquired a 70 percent stake and Reliance MediaWorks the remaining 30 percent interest in DDPI, which entails all assets constituting the businesses of Digital Domain and production house Mothership–feature film and advertising visual effects, commercial production and virtual humans, studios in California and Vancouver, B.C., Canada, and a co-production stake in Ender’s Game, an epic, futuristic live-action adventure movie directed by Gavin Hood and featuring a cast including Harrison Ford, Asa Butterfield, Sir Ben Kingsley, Viola Davis, Hailee Steinfeld and Abigail Breslin. The film is a co-production of Summit Entertainment, OddLot Entertainment and Digital Domain. Ulbrich is an executive producer on the film and Digital Domain is creating the visual effects with Matthew Butler serving as VFX supervisor. Ender’s Game is slated for release on Nov. 1, 2013, from Summit Entertainment.
Ulbrich said that DDPI has met or is in the process of meeting its financial obligations to its creditors, and that holding company DDMG was still in bankruptcy proceedings at press time in U.S. Bankruptcy Court in Delaware.
Core strength The robust competition for DDPI and the doubling of the purchase price from $15 million to $30.2 underscored Ulbrich’s belief all along that the core business of Digital Domain was healthy despite all the challenges in the VFX marketplace. Ulbrich contends that the new DDPI is well positioned to meet those challenges. For one, having virtually all its obligations with creditors cleared up, DDPI can continue to do business with those vendors going forward. Furthermore, Ulbrich is relieved to no longer be operating as a public company. “Visual effects is not the perpetual growth kind of business the stock market likes. You essentially stop being strategic and live for the next earnings call as a public company–some people may not agree with this but that’s my experience. Being public when you’re the only revenue entity [within the company] is tough. The visual effects business itself is tough. There’s a reason there are no publicly traded commercial production companies.”
Fueling Ulbrich’s optimism over current and future prospects for DDPI are its two owners, Galloping Horse and Reliance Mediaworks. “They’re both strategic owners. Galloping Horse is in the motion picture business. If you look at the Chinese film market, three to five years from now it will eclipse the U.S. film market. There’s a big push mutually between China and Hollywood for co-productions. Something like 48 of the top 50 top grossing films in worldwide box office in history are VFX or CG movies. Digital Domain does effects for the big tentpole movies that do gargantuan business in China. What they don’t have in China are the technology and the people who know how to do this work. Chinese films will be hard pressed to compete with the big American films. So instead Galloping Horse is the kind of company that invests in these films and gets the Chinese distribution rights. At the same time, they hope to expand, educate and develop their homegrown film community to improve the quality and performance of their visual effects movies. We fit in with what they are trying to do.”
That also applies on the advertising front in that Galloping Horse is a large media entity in greater Asia, working with the 4As here as well as major international brands. At press time, Ulbrich was on his way to Beijing to meet with Galloping Horse’s global advertising and film clients.
Synergies also exist with Reliance Mediaworks which maintains VFX facilities in the U.K. and India. “They have locations around the world we can tap into,” said Ulbrich who noted that while global productions deploying cloud technology and connectivity are fairly standard in visual effects for major motion pictures–which take advantage of resources and incentives around the world–this isn’t the case so much in the advertising business. Ulbrich envisions ad projects being able to more meaningfully leverage resources, talent and incentives worldwide through Digital Domain in the U.S. and Canada as well as its international partners. Reliance–which is the leading phone/telecommunications company in India and Asia–also has other entertainment industry interests, including theater chain ownership in the U.S. and providing production financing on select projects for DreamWorks.
“There are all kinds of new opportunities that our owners can open up for us,” affirmed Ulbrich whose promotion to CEO will result in Rich Flier moving into the role of VP of the Advertising and Games division. Flier joined Digital Domain and Mothership in January 2011 as executive producer/business development. Ulbrich described Flier as “a strong brand strategist and marketer and in this new role will focus on enabling clients and partners to tap into all of the expertise and talent that Mothership and Digital Domain have to offer.”
Surveying the work While not setting a legal precedent, there have been plenty of challenges this year–revolving around the work–throughout the visual effects, animation and post community. Towards that end, SHOOT surveyed several shops about their most significant projects in 2012. We posed the following pair of questions:
1) What project (film, TV, commercial, other content form) has represented your greatest creative challenge this year and why? What problem solving did it entail and/or how did you meet that challenge successfully?
2) What have been the most significant development, issue and/or trend to emerge this year in postproduction, VFX or animation? Please share your perspective.
Here’s a sampling of the feedback we received:
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2) The key trend in 2012 for The Mill has been about extending the depth of our relationships with clients. This year we’ve collaborated with more and more clients, from brands, advertising agencies through to production companies as we demonstrate the value we can bring to an advertising campaign, right the way from initial script and concept development through to execution. |
 Glen Noren, Effects director/partner, Optimus.1) One of our greatest challenges this year in visual effects was the split-screen technique we created for Ogilvy for a spot called “Side by Side”, for BP gasoline. The spot compares two sides of the same car, one half a silver car and the other half a green car.The two cars were shot as separate takes over a multi-day shoot in different locations, using a camera car without any sort of driving rig or motion control rig. Each take for the left side of the car was shot trying to match the speed and camera move of the corresponding take for the right side of the car as closely as possible. The left side and the right side had to then be timed and seamlessly stitched together to give the illusion that it was a single car, with continuous live action of the family and pet dog inside the car. There was also some CGI imagery involved in the opening sequence, where two cars are pulling out of two different gas stations, one of them a BP. The scene was a moving shot that takes place on a country road where no gas stations existed. The challenge was to create two photo-realistic stations in CGI that had to track in 3D space, matching lighting, camera motion and perspective. Optimus completed the spot to perfection and was rewarded with a nomination for “Side by Side” in the Outstanding Compositing — Commercial category this year by the Hollywood Post Alliance. 2) The significant developments and trends this year in post are really a continuation of the developments we’ve been seeing for the past few years. Deadlines and budgets that seem to always be getting tighter means that post has had to adapt by having more efficient workflows and faster turnaround. Previsualization can be a key component in the process by solving production problems, saving time and helping make creative decisions up front. And of course, the continuing development and affordability of digital cameras has made shooting quality footage more accessible to more people, blurring the lines between traditional production and postproduction. |
 Tony Smoller, creative director, Chemical.1) The greatest challenge we faced this year was creating two global launch films for vehicles that had yet to roll off the production line. The first was for the 2013 Chevy Malibu. The second was for the 2014 Mazda6. Both films were slated for two minutes in length. And in both cases we went from initial idea to finished film in 10 weeks.But with no picture cars available in either case, the only true option was the often maligned, and greatly misunderstood, CG car. As a VFX supervisor, I’m always the first to say, let’s get it in camera if we can and the last to say, let’s do it all in CG. But if you can’t be with the one you love…and there’s literally nothing to shoot…then a few million polygons and a heap of render nodes is the only way to roll. So we set out for the Hills of Malibu and the Salt Flats of Bonneville with back packs full of 5Ds, portable motion control dollies, and two 70 shot previses. Given the limits of our time and money, which meant we were void the usual production bells and whistles (cranes, arms and mounts), the plan was to capture as much of reality as we could (location, talent, light and lensing) and go back into the dark and recreate as much of that reality as we could in CG. Once we had that, I knew we could turn bootstrapped shoots into luxurious shoots in post. With a CG location and a CG vehicle there really are no limits to what you can bring to life. Like anything else you just need a good story. 2) For me the true breakthrough has not been on the R&D or technology side of post but, more importantly, has come on the client side (director and agency). For the longest time VFX capabilities have outpaced client comfort levels with VFX. Rightfully so in many cases where the use of VFX was oversold and under delivered causing moderate to extreme fear in clients. But now Clients are embracing all that VFX (CG and compositing) can do, not only where you can see it), but also where you can’t. I supervised campaigns for Lincoln, Cadillac and TaylorMade that are currently on-air in which we relied heavily on CG to do everything from full color correction and re-lighting of live-action vehicles (Lincoln) to partial and complete rig removal/chassis replacement (Cadillac) all the way to full golf club replacement on an otherwise complete live-action execution (TaylorMade). VFX have finally come of age in the minds of all those who can most benefit from them. We have a bunch of tools in the shed now…it’s really just a matter of objectively picking the best (right) tool for the job. |
Ben Hampshire, managing director, 