The visual effects business in 2002 isn’t what it used to be, several top players in the field say, but it’s better than most expected at this stage. A sampling of effects companies surveyed by SHOOT finds that after a disastrous tail end of 2001, the first quarter of ’02 was strong, albeit a little erratic and unpredictable. The execs are shrugging off new competition from overseas and questions that were raised when effects giant Industrial Light+Magic (ILM) announced that it would be closing down Industrial Light+Magic Commercial Productions (ILMCP). From major com-panies like Digital Domain and Rhythm & Hues Studios to boutiques like Sight Effects and Ring of Fire Advanced Media, executives say business is coming back after the ’01 ad slump, the ’00 actors’ strike and terrorist mayhem.
At Digital Domain, Venice, Calif., the commercial side of the company recorded a record first quarter, according to Ed Ulbrich, senior VP/general manager, commercials and music videos. "In September, it was like someone flipped a switch off and we watched the whole industry come to a stop," relates Ulbrich. "We decided to hunker down for 2002, and that it would likely get worse before it got better. January rolled around, and we just completed a record first quarter. We have been one hundred percent booked, January to March. We were prepared to let some people go, but we had to go out and recruit."
Recent work out of Digital Domain includes the Cingular spot "Wingtip," directed by Erick Ifergen of Serial Dreamer, West Hollywood (a satellite of bicoastal/international Believe Media), for BBDO Atlanta; three Michelin ads—"Shuttle," "Dance" and "Hands On"—out of Campbell-Ewald, Detroit, helmed by David McNally at Omaha Pictures, Santa Monica; and a package of Dodge spots helmed by Lance Kelleher via Ritts/Hayden, Los Angeles (he has since shifted representation to Copper Media, Los Angeles), out of agency PentaMark Worldwide, Southfield, Mich. Despite the strong quarter, Ulbrich is reserving judgment on the full year. The second quarter started off slowly, but the real change that Ulbrich notices is in the flow of business. "I’ve been here for nine years," he says, "and for the most part we have had a constant burn rate for commercials—meaning that we didn’t have peaks and valleys in workload. Now, we’re seeing very erratic peaks and valleys. It’s a result of the economy, issues in the Middle East, ad spending, accounts changing agencies, accounts having to readdress the marketing message—the world is a different place now."
Rick Hassen, partner/executive producer at A52, Los Angeles, says that company is busy with commercial work and is seeing top-quality creative, but budgets are challenging and clients are moving carefully. "There is still some hesitancy in the agency and corporate world in making long-term marketing plans," notes Hassen. "We’re having to work smarter and more efficiently. You’re being asked to do more for less money. To win jobs, we’ve done a lot more testing—proof of concept. We kind of enjoy it, because it gets artists excited about the job and it gives clients a chance to see it, and visual effects become less of a mystery that they have no control over. Sometimes, we’ll do it without being asked." Recent work through the shop includes Nike’s "Move," directed by Jake Scott of bicoastal RSA USA for Wieden+Kennedy, Portland, Ore. The 90-second ad mixes world-class athletes and everyday people engaged in sport, all without dialogue. "That’s a spot you’d look at and say, ‘What did A52 do?’ " notes Hassen, "but in every transition there was an adjustment of body position, and there were color corrections, sky replacements—those kinds of things."
A52 also worked on the recent Nissan Altima package, which includes "Claustrophobia," "Side Effects" and "May Impair," all helmed by the directing duo rad-ish—a.k.a Christoph Chrudimak and Mortiz Friedel—of bicoastal Go Film for TBWA/Chiat/Day, Los Angeles; and on "Defining Mia," a new Gatorade Ice commercial helmed by Phil Joanou of bicoastal Villains for Element 79 Partners, Chicago. (See Top Spot, p. 10.)
At Venice-based Sight Effects, partner/visual effects supervisor Alan Barnett stresses the way the pace of business has changed in recent months. "There’s no consistency any more," he explains. "The board flow is very erratic. We held our own last year, and we hit decent revenues. This year has been fine, but it’s still very erratic. It seems that there are people grabbing at straws right now. People are underbidding to get the work and keep afloat. It’s definitely a changing marketplace." Sight Effects’ recent work includes a UPS package, headed by "Logistics Manager," which was directed by Joanou for The Martin Agency, Richmond, Va.; the Gateway talking cow spots for Siltanen/Keehn Advertising, Santa Monica, including "Ski Jump," helmed by Craig Tanimoto of Japanese Monster, Los Angeles; and the Coca-Cola commercial "Owls," a Harry Potter and the Sorcerer’s Stone tie-in directed by Dante Ariola, then with Propaganda Films, for Leo Burnett USA, Chicago. (Ariola is now with bicoastal Morton Jankel Zander.)
Rick Wagonheim, partner/executive producer at Rhinoceros Visual Effects and Design (RVED), notes that the firm is off to a good start for the year. "We’ve turned a number of projects down in the first quarter," he relates. "We’ve been very fortunate."
Recent projects out of RVED include Mazda’s "Illusions," out of Doner, Southfield, and helmed by Nico Beyer of bicoastal Neue Senimental Film USA; and L’Oreal’s "Endless," directed by Jim Sonzero of bicoastal Venus Entertainment, out of McCann-Erickson, New York.
Peaks And Valleys
Commercial business has picked up at Rhythm & Hues Studios, Los Angeles, but like some others in the business, Michael Theurer, head of commercial 2-D, says it’s not a steady pickup. The market is more competitive, he says, and the company has done some restructuring, including making some cuts in its over-300-person staff, to reconfigure itself for that market. "We’ve made changes here to make ourselves more flexible to the outside world," Theurer reports. "We’ve been marketing ourselves as a combo shop that can execute entire projects from live to finish, including CGI and effects work. Now we have to be able to look at projects where we might be doing only one component. We want to respect existing relationships that agencies and directors have with production companies, editorial, CGI or 2-D finishing, and see what we can do to fill in the gaps—not try to force the whole package on them."
Recent work includes "Cingular Nation" for Cingular and BBDO New York, a tie-in with the upcoming Spider-Man film. Sam Raimi, the movie’s director, helmed the ad, which was produced through bicoastal Zooma Zooma. "It was very demanding," Theurer says of the job, "because Sam wanted to keep everything high quality so it doesn’t diminish the movie."
Another Spider-Man tie-in—"Two Things" for Carl’s Jr. and Mendelsohn|Zien Advertising, Los Angeles—was directed by Randy Roberts of Rhythm Live, the live-action division of R&H, but had to earn Raimi’s approval. Rhythm & Hues also worked on the current Geico Insurance campaign, which was directed by Stacy Wall of bicoastal Epoch Films, out of The Martin Agency.
John Myers, founding partner/ executive producer at Ring of Fire Advanced Media, Los Angeles, says the company is steadily busy. "We’re slowly recovering from some things that have happened over the last couple years," he says. "Board flow is up a little bit, and the work is starting to pick up, but the budgets are not what they used to be."
Ring of Fire worked on three all-CGI Winter Olympics spots for AT&T Broadband: "Ants" and "Type" for Young & Rubicam, New York, and "17 Nights" for DVC Group, Morristown, N.J. "We produced those in-house, and Jerry Spivack, founding partner/creative director, served as the primary creative," Myers explains. Other recent work includes two spots for Genuity’s "Behind the Wall" campaign, which includes the ads "Security" and "Continuity," directed by Phil Morrison of Epoch Films, out of Mullen, Wenham, Mass.
One factor that Myers and some others in the business point to in the context of budgets is the relative scarcity of big, over-the-top, effects-driven spots. "We just had an AICP judging for visual effects and there was nothing like that," notes Myers, referring to the Association of Independent Commercial Producers’ Show scheduled for June. "Every once in a while you’ll get a set of boards that everybody is bidding on that is a huge visual effects package, but it’s less than it used to be. There’s a fair amount of work out there, and a lot of it is seamless visual effects—things you may not realize that a lot of work went into: sky replacement, sheet metal cleanup, environment enhancement."
Diversity
Television and feature film work is also a major line of work at places like Digital Domain, Rhythm & Hues, The Mill and Animal Logic, and most effects companies are looking to diversify beyond commercials, they say. Ring of Fire, for one, just finished doing the main title for the new ABC sitcom George Lopez, in high definition. And New York effects house Spontaneous Combustion has been emphasizing its design work lately, according to Sally Kapsalis, managing director. A recent project was the new brand identity for Verizon, from Lowe, New York. The ID will be used in all Verizon commercials, she says. "We were contacted by Lowe, which does the image campaigns for Verizon, to create some sort of brand identity that would lead into an end tag animation. We worked closely with Lowe and Verizon to create a brand identity that will be distributed to all the agencies that work on Verizon."
Although players in the visual effects community seem cautiously optimistic about the rest of ’02, news coming out in recent months is sending something of a mixed message about the state of the business. San Rafael, Calif.-based ILM’s decision to close its commercials unit suggests, at first glance, a bleak future. At the same time, London-based The Mill, and Animal Logic, out of Sydney, Australia, have opened satellites in the U.S., suggesting a rosy outlook for the market, but more competition. In fact, those events say little about the effects business, according to execs. Among those canvassed, no one in visual effects takes the ILM decision as a bad omen. They see it more as a response to a soft ad market in general and a glut of production houses and directors. And they note that it doesn’t take ILM out of the business of providing effects for commercials—executives at the company have said they will still work on select spot projects, as studio capacity permits.
Ulbrich says he got a number of congratulatory phone calls when ILM made its announcement—calls that assumed Digital Domain would benefit competitively. Not so, he points out. "They’re not really a direct competitor, and they’ve never been," he contends, noting that the two companies were structured differently, with ILMCP packaging live-action directors and visual effects. "When ILM loses a job to Digital Domain, they’re not really losing to us; they’re losing the job to, say, David Fincher. Their director is losing a job. If we’re losing a job to them, we’re not losing a job to ILM; it’s the director we’re bidding it with who is losing it to the director they’re bidding it with."
As to new competition from The Mill and Animal Logic: Most effects people say they already compete with them, and offices in New York and Venice, respectively, won’t change that significantly.
For their part, The Mill and Animal Logic aren’t making too big a deal of their outposts in the U.S. The Mill CEO Robin Shenfield says the move to New York "is less about the market and more about The Mill and the brand of The Mill and the client base." The Mill, London, is already a major supplier of visual effects for New York agencies, points out Shenfield. "The logic for being there has been very compelling because of client demand. The interest is very strong. The whole market is just shifting around a bit there." The New York office, which is evolving toward being a full-service facility due to officially open in mid-May, is connected to London via a high-bandwidth, Internet-based link called BEAM. TV, for content sharing, review and approval. Shenfield isn’t concerned about opening in what is perceived to be a down market. "I think ultimately it’s really about demand for our business," he says, "and all the readings are that demand for our business is good. It’s a very talent-based business and the individual talent of many of our people is highly regarded. The Mill is in a very good position because its clients have been busy. We have been above last year’s levels, and to a large extent run counter to the general market. The company has kind of bucked the trend."
Wagonheim of RVED thinks The Mill’s entry into the New York market is a good thing. "It’s fabulous that it’s bringing this much attention to New York," he notes. "If [the new office] keeps business in New York, I’m all for it."
Also little concerned about the weak market is Bruce Carter, creative director of Animal Logic, Sydney. "For us, the market conditions had the least relevance," states Carter. "We just want to step up the level of service. The economy is always fluctuating. If you try to second-guess it, you end up doing nothing. At this point we don’t want to recreate our facility and our skill base in Los Angeles. It’s a place our clients can have contact, bid jobs, see jobs in progress in real time." Carter holds out the possibility of doing effects work in the new Venice office, but for now the talent remains in Australia.
Animal Logic’s satellite is headed by executive producer Brad Steinwede, a 20-year production veteran on the agency side, most recently at J. Walter Thompson, Sydney. Steinwede points out that the timing is right for a U.S. outpost. "The continued pressure on agencies and production companies to find more creative ways to push their production values further is probably making it a very good time for Animal Logic to be beginning a larger-scale operation here," he says. "Animal Logic has recently consolidated its commercial and film divisions in Sydney, which had the effect of strengthening both," he continues. "And the new technologies that now allow us to share and review work is another factor in the timing."
Carter says Animal Logic is "pretty gung ho" about ’02, and that the company has U.S. projects in the pipeline now. "We’ve completed two this year out of the U.S. that are of a reasonable size," he reports. "Neither is on the air yet. Both were out of New York agencies, and we’re in the midst of a very big one out of Chicago with a name director and big-brand client."
Another way that U.S. agencies and production companies can access overseas talent is through the digital AVA network set up by edit house Red Car, which has offices in New York, Chicago, Santa Monica, San Francisco and Dallas. Clients can use the network to access talent at a number of companies, including London-based effects house Smoke & Mirrors. "This is the super-Internet come to post," says Red Car founder/CEO Larry Bridges. "It’s like a buddy list of postproduction practitioners teamed up. My idea is to aggregate best-of-breed suppliers throughout the world on an international post-production network."
According to Bridges, the network allows Smoke & Mirrors to go international without adding overhead. "They are deployed in all our offices," he says. "[Smoke & Mirrors’] decision was to go with this network that would give them, not one outlet, but as many as there are nodes on our network. That currently consists of all the Red Car offices and all the affiliates, which range from London to Australia." Smoke & Mirrors considers the network to be its U.S. deployment, Bridges explains, and is not interested in opening offices here.
Most U.S. effects execs are keeping an eye on how successful overseas houses will be in attracting budget-challenged clients, but aren’t particularly concerned about their new U.S. presence. "We’ve competed with them for quite some time," states Karey Maltzahn, executive producer, 2-D at Rhythm & Hues. "We have to make sure that we’re doing the best we can to creatively and effectively produce projects. A little competition doesn’t hurt that."
