Films have been welcomed by American audiences since their establishment in the early 1900’s. Films continue to evolve by incorporating sound, color, and visual effects. Since its introduction, visual effects have been utilized for almost every movie. However, visual effect companies have struggled meeting the high demands of big film corporations while attempting to remain afloat on top of flawed business models. The struggles faced by the visual effects companies can be observed in the ups and downs of Digital Domain.
Company Background
The Digital Domain Visual Effects Company was founded in 1993 by James Cameron, Stan Winston, and Scott Ross (Seymour, 2014). It is responsible for creating effects for over 100 movies, including titles such as “Iron Man 3,” “Titanic,” and the “Transformers” trilogy (Digital, 2013). The Digital Domain creatives have received several Academy Awards for visual effects as well (Digital).In 1998, Cameron left Digital Domain, and was followed by Scott Ross 2006. At this time, Digital Domain was doing well as a company and by 2008, grew from “mid 40 million to mid 60 million” in revenue (Seymour, 2014).
Digital Domain VFX Work in Movies
In 2009, John Textor took charge of managing the company, but by “2010 the company reported operating losses of $2.8 million and $5.7 million in the first half of 2011” (Seymour). Due to the losses, the company proceeded to sell 2 million dollars worth of shares. But within a month of the sell, they decided to buy back all of the shares (Seymour). The inconsistency and unsound business structure led Digital Domain to bankruptcy in 2012 (Seymour). In 2013, Digital Domain Holdings located in Hong Kong acquired Digital Domain 3.0. Today, the company focuses “on the production of digital visual special effects, animations, and movies” (Company 2015). Digital Domain Holdings employs 3,000-5,000 employees, with Digital Domain having approximately 201-500 employees (Company). Digital Domain Holdings presently has offices in “Los Angeles, London, Vancouver, Beijing, Shanghai, Taipei and Hong Kong” (Visual, 2017). Digital Domain’s Current CEO Daniel Seah seeks to revamp and refocus on the strengths of the company (Visual).
Business Model/ Revenue Model
Digital Domain is a service provider which produces visual effects and animation for movies (Kwong, 2016). The big six Hollywood film studios (Warner Bros, 20th Century Fox, Paramount, Universal, Sony, and Disney) give VFX facilities a fixed price for its work, this represents most of the VFX company’s revenue models. This means visual effect companies such as Digital Domain must finish the job “no matter how many days or months of additional work are necessary to complete the job to the director’s satisfaction” (Ross, 2013). The former CEO Scott Ross says, “The clients call the shots… and studios are the only ones winning” (Giardina, 2014). Due to this fixed bid price, VFX companies “often lose money on work they’ve done” (Ross). When working on “Titanic”, Digital Domain lost money even though the film itself made almost $2 billion (Ross, 2013). In speaking with a representative of a small visual effect studio she said, “This is the busiest time of the year, and our VFX people are working many hours.” This is the main reason Digital Domain filed for bankruptcy in 2012, and why other VFX companies followed suit. Shortly after winning an Academy Award for “Life of Pi,” Rhythm and Hues filed for bankruptcy in 2013 (Busch, 2017). “Today, the VFX community comprises migrant artists that must move every six to nine months” to find jobs transferring globally such as Vancouver or Japan, “creating havoc with their personal lives” (Ross, 2013). “We have no trade association, no union, no common voice,” Ross says, “Getting all of them (VFX Companies) to speak with one common voice will be very difficult. There are things they all need to agree on, but they are competitors” (Strauss, 2017).
Recently however, CEO Seah said, “Our business model in China is different as we want to partner with more local companies to diversify our income” (Kwong, 2016). This plan to diversify the income will help the visual effects company stay afloat when numbers dip, and will hopefully help prevent another file for bankruptcy. Digital Domain is also quick to strike on China’s “booming TV and movie industry as it announced partnerships with production companies Shanghai Film, Zhejiang Talent Television and Film and Cenic Media Shanghai” to create more content (Kwong).
Assets
Digital Domain has done a lot of VFX work for well-known films such as The Avengers, Spider Man, Thor, Power Rangers, Iron Man 3, and Beauty and the Beast (Visual, N.D). Although once bankrupt, the company has created an established reputation and with awards given to Digital Domain it is clear it has been delivering superior work to its clientele. Yet the company’s assets far exceed its hand in films in being involved with commercials, virtual reality, situational awareness, and virtual humans (Visual). Digital Domain has worked in commercials with company’s such as Nike, Pokémon, and UFC (Visual). Virtual reality and situational awareness is also a realm the company knows well, as it was the developers behind the Google Street View (Visual). Currently, Digital Domain is working on its in-person entertainment with the newest being a live virtual performance by Tupac (Visual). The graph below explains where Digital Domain lies under Digital Domain Holdings.
Current Umbrella of Digital Domain Holdings
Looking Forward
Digital Domain will try to mend the broken business model of fixed bids, by venturing into more diverse business areas such as videogames, commercials, music videos, and virtual reality (Digital, 2017). Digital domain is becoming a pioneer in “livestreaming landmark events in 360 degrees virtual reality, building situational awareness applications, creating virtual humans for use in films and live events, and developing interactive content” (Visual, 2017). CEO Seah says the visual effects for film will “provide the stable income, while the Chinese market will drive revenue growth” (Kwong, 2016). Digital Domain recently collaborated with Poly Capital and Hony Capital, “to establish Digital Domain Space (Beijing)” where it “aims to develop and execute an innovative Virtual Reality experience with plans to open VR theaters,” as well (Newswire, 2017). By rearranging its business model and adding different sources of income, Digital Domain will create a disruption in the system of the popular fixed bid template for other struggling VFX studios. This is of utmost importance considering how much visual effects has revolutionized the film industry. With new emerging practices such as virtual reality, Hollywood’s big six film studios need to realize the importance and value of visual effect companies such as Digital Domain.
References
Busch, A. (2017, June 06). Rhythm & Hues Co-Founder Launches New VFX House PHD. Retrieved September 13, 2017, from http://deadline.com/2017/06/vfx-house-phd-john-hughes-helena-packer-kevin-donovan-1202107661/
Company Overview. (2015). Retrieved September 13, 2017, from http://www.ddhl.com/en/AboutUs/co.html
Digital Domain 3.0 Becomes Part of Sun Innovation. (2013, July 27) Retrieved September 1, 2017 from http://www.buisnesswire.com/news/home/20130726005913/en/Digital-Domain-3.0-Part-Sun-Innovation
Giardina, C. (2014, September 18). Scott Ross on the Visual Effects Business: “It Has Gotten Worse”. Retrieved September 10, 2017 from http://www.hollywoodreporter.com/behind-screen/scott-ross-visual-effects-business-733950
Kwong, P. (2016, July 20). Digital Domain to develop virtual reality content for China market. Retrieved September 09, 2017 from http://www.scmp.com/business/companies/article/1992365/digital-domain-develop-virtual-reality-content-china-market
Newswire, P. (2017, September 11). Digital Domain Holdings Collaborates with Poly Capital and Hony Capital to Professionally Develop VR Consuming Experience. Retrieved September 13, 2017, from http://markets.businessinsider.com/news/stocks/Digital-Domain-Holdings-Collaborates-with-Poly-Capital-and-Hony-Capital-to-Professionally-Develop-VR-Consuming-Experience-1002356515
Ross, S. (2013, March 07) Why VFX Houses Lose Money on Big Movies (Guest Column). Retrieved September 11, 2017, from http://www.Hollywoodreporter.com/news/why-life-pi-titanic-vfx-426182
Seymour, M. (2014, October 03). John Textor and what really happened inside Digital Domain Media Group? Retrieved September 13, 2017, from https://www.fxguide.com/featured/john-textor-and-what-really-happened-inside-digital-domain-media-group/
Strauss, B. (2017, August 28). Movie visual effects business in turmoil, artists consider union. Retrieved September 13, 2017 from http://www.dailynews.com/2013/03/24/movie-visual-effects-business-in-turmoil-artists-consider-union/
Visual Effects. (n.d.) Retrieved September 8, 2017, http://www.digitaldomain.com/feature_films/visual-effects/