Aug 24, 2011
The Business Reasons why the Artists are Being Asked to Work Longer Hours for a Flat Rate
Our last post generated some interest from the entertainment industry. The community can be for or against unions, the importance is to help companies solve this industry crisis and it doesn’t matter if they are based in California, Canada, Australia, England, France, South Africa, Argentina, Chili, New Zealand, India or China. The reality is that we can now see some key industry VFX supervisors and producers working in India to produce Indian film… this reality is also true in China.
We can now agree that the globalization of the Entertainment Production Industry is in motion and it is no longer only a Los Angeles or California product. The industry is now taking place anywhere in the world, like every economic industry in our society. The outsourcing process (for the studios) is at his best right now for the following reasons:
REASONS:
The entry barrier is now at the lowest point
Producers can now film quality production with low-cost camera. The VFX industry is now seeing the Flame/Smoke/Luster suites at the fraction of the price it used to be five years ago. You can now produce 3D animation with your home computer and edit your film from your laptop. The barrier defending the market from new arrivals is now low enough that anybody can jump into servicing studios with minimum investment to start the new venture.
The increase in the number of competitors
The limitations in defending the market has given away chances to many new entrepreneurs and artists to start their own companies and providing services to anyone who requires LIVE action shoots services or visual effects. This has created a wave on the established production services/vfx facilities by reducing the profits margins since the market had to be shared with many other players.
The reduction of the prices
The first two reasons created a consequence: reducing the prices of the services. The addition of new competitors and the reduction in the costs of equipment have created a downfall in the prices of the services. We can just remember the price per hours of a Discreet Smoke/Flame online suite, 10 years ago (850$/h.) compared to today’s price (450$/h.). The reduction of prices had a direct consequence on the possibility to generate high ROI for the investors in the servicing companies.
The reduction in the net income
The last impact on all the democratization we’re now seeing in the production and post production industry is the bottom line. Companies are now facing difficult quarters and the net income is no longer at the percentage it used to be. The difference between making and losing money is turning around a thin line. The creative requirements are now at the peak when the net income is at it’s low. Reduction in the pricing of the services, increase in the number of competitors have dropped prices down with a direct impact on the bottom line of the companies and the shareholders.
CONSEQUENCES:
Companies needs to generate profits or they will eventually go bankrupt, go out of business and they won’t be able to generate the traction of good entrepreneurs and managers. The business will be running only for artists and they will cease to generate profits, the companies will become non-profitable, the employees salaries will need to flatten or even decrease over time, salaries rooftop will be established and longer hours (work effort) will be requested from artists to compensate for the losses and to keep the company running with a limited cash-flow just to survive.
The basic theory that the employees should not finance bad management, be responsible for the increase in the numbers of change orders or get squeezed to maximize profits is totally true. The artists have no chance of making profits: they shouldn’t share the financial risks. The shareholders are making the bottom line money, they should be taking all of the risks.
In other hands, how can those managers keep generating profits for the benefit of the shareholders in this difficult industry environment without sucking it from the artists free “contribution” overtime efforts in the name of the “art”. We’ll try to place over the next weeks different solution and we hope to have many suggestions, reactions and comments from the community…
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