Tuesday, December 30, 2008

The Credit Crunch & Animation

The Animator's Guild blog (TAG Blog authored by Steve Hulett) keeps a pretty good eye on the wheelings and dealings of finances in animation. They recently posted a note about the independent Imagi Animation Studio. They're the folks who brought you The Teenage Mutant Ninja Turtles movie a year ago. Their creative efforts are run out of LA, while production is based in Hong Kong (as well as outsourced to other vendors, like ReelFX). Turns out they're in a bit of a cash pinch. They need 'additional funding' just to get through production on their latest film. At their current levels my guess is they run out of money by March and they'll need to get some loans to carry them through. Well, in the old halcyon days of 2007 that'd be an easy thing to pull off. Credit was cheap and plentiful. Now? Uh.. not so much. Credit across the world has ground to a halt. Seems that offering super easy and cheap credit wasn't exactly a great idea to begin with. Who could have known that giving loans to people without the ability to repay them would result in significant financial losses? Heh. Gotta love hubris. It provides entertainment (even if in this case it's not 'cheap' entertainment).

Anyhow, I expect to see fewer and fewer independent animated films getting made in the next few years. Film projects from folks like Imagi, Vanguard, Weinstein, etc. will have a very difficult time getting funding. These films live and breathe on outside money. I don't know what Laika's finances are like, but they recently shut down their second film and laid off a number of folks. My guess is they're waiting to see if Coraline pays off. Reminds me of what happened at Blue Sky after production wrapped on Ice Age. Fox pretty much went skeleton crew while they waited to see if Ice Age would make enough money to justify keeping the studio going. I don't know if that's the case at Laika, but from this corner of the internet that's what it looks like. Phil Knight has deep pockets, yes- but he keeps those pockets deep by not spending his own money if he can help it. Which is standard operating procedure in Hollywood. Use other people's money as much as possible. That plan works when people's investments are doing well and they're looking for more. It doesn;t work so well if they've lost almost half their money in the last year and they're focused on avoiding further losses. Investors want nothing to do with risk right now, and there are few investments riskier than films. Last year I wrote that hedge funds were going to get beat up and as a result you'll see fewer films getting funded that way. Well now hedge funds aren't getting beat up, they're getting murdered. Losing tens of billions of dollars by investing in a giant Ponzi scheme (ie: Madoff- a more appropriate name never existed) has a tendency to put a pinch on the purse. Investors asking for their money back magnifies that.

The good news is that so far Disney, Fox/Blue Sky, and Dreamworks are mostly self funding enterprises. Not so sure about Sony, though. They've been wishy-wahsy on their animation studio the last year or so already. A lacklustre result for Cloudy With a Chance of Meatballs might convince them to throw in the towel. But the other big animation studios- as long as their overall film businesses make money they'll be able to make animated movies.

What does this mean for us lumpen down here on the bottom of the foodchain? Animation jobs will still exist, but competition for those jobs will heat up even more. But even if you have a larger studio gig, don't get complacent. Being in a larger studio is no guarantee, either (ask the Bolt crew). The indy film market has been a real blessing over the last 4 years to a lot of animators looking to get into film. Screen credits, experience, nice shots on the reel, opportunity, paychecks, etc. I'm guessing as the next year unfolds it will be a little tougher to get work as projects wither for lack of financing. 2010 will be worse. There's a 9-12 month lag between funding greenlight and production.

While I don't follow the games side of the biz that much, it seems to me that it will probably be the same over there. Big AAA+ titles made by the giant producers will still hum along, but smaller, less well capitalized efforts will hit a dry patch.

If you have work now, do yourself a favor. Start saving. A lot. You're gonna need it. And if you have any other employable skill, keep that sharp. You might end up doing something other than animation for a while. And keep animating- even (especially?) on your own time. Atrophy can happen pretty quickly if you're not staying in practice and you can fall behind before you know it.


Jonathan Grimm said...

Most, if not all, animators should take the last paragraph to heart, even in good economic times. From what I've seen, Animation can be a very nomadic profession. Also, no one can be too good at their craft, right?

One of my old layout coordinators currently works a at Imagi. Although he hasn't said anything, I'm certain he's feeling the pinch.

Tim said...

The motion picture business makes profits on a few hits to cover modest (to no) returns from the rest of their products.
It's a risky business.
Independent film (animation or live action) definitely feels the pinch more than most. Investors are not full time in the film business, and their stock portfolios are suffering like every one else's. So when they wake up and find that their holdings are half of what they were yesterday, you can sure bet that they are holding their purse strings a wee bit tighter.
Maybe they'll turn their investment capital toward something more sure, like casket manufacturing.
Yes, the boom of the 90's flooded the talent pool, which means it's much harder for every person to find work. We're now like all the waiters in L.A. who are merely actors and writers between gigs.
Don't despair surfers... another wave is bound to come along eventually.

Josh Bowman said...

Sounds like I'll need to sharpen up on my coffee barista qualifications.

Heh so I guess I should reconsider taking your APT then eh Keith? :)

Anonymous said...

Should have been a carpenter. :(

Keith Lango said...

Jules: Not sure I'd want to be a carpenter in this economy. There is already such a glut of housing world-wide that those with carpentry as a primary job are going to find it very tough sledding. Many already do. House painters might find it less hazardous since people will be staying in their homes now that they can't sell them. Sprucing things up will replace moving up.

Josh: Starbucks has been getting whacked hard this year. High end coffees are very discretionary expenses. Stuff that saves money or essentials are going to be the stuff that does well. Auto mechanics are going to find themselves doing better over the next year as people try to make their cars last longer.

Tim's definitely thinking along the right lines re: caskets and waves. I don't mean to be an alarmist or a gloom-doomer. I just look at what's going on and I can see that things will be a little tight for a while, that's all. But for those who are good and professional and who have good contacts there will be work. It might not be high end film work. It might be less interesting work. It might not pay as much as it did 5 years ago and the gaps between gigs might be a little longer than they've been lately. But the world is still spinning and there is still a demand for what we make. The studios and producers will need to adjust their budgets to stay profitable, that's all. I think the days of the $200 million budgets for summer tent pole films are coming to an end.

Anonymous said...

Keith you are right about this ... 200 milion for 1 movie ? This is too much.Last night I watched Corpse Bride ,very nice movie,great animation and it cost only 40 million(that's what say imdb) .There are many movie that is in the making now for small Budget,and some of them gonna be very artful.
Happy New Year !

Kevin Williams said...

way to end the year on a high note.

Josh Bowman said...

LOL looks like I'm down to relying on my charm and good looks then ^_^

Anonymous said...

Damn! That's depressing :(

The way I look at it, it comes down to this:

Competition is going to be tighter and we will have to sharpen our skills even more. Which is a good thing... Right? Survival of the fittest which is, by the way, what the capitalist system prides itself on. So unless any of you has other economic sensibilities, we are supposed to be even happier in times when such concepts are glorified through economic hardship. :)

Anonymous said...

I am going to take this as a challenge. Keith's APT & VTS are going to make me more relaxed on this journey. Any way when I had money I invested it for studies. And now I believe,it was a great decision to join for APT. Thanks Keith :)

jeff said...

Games are definitely feeling it. My current company started out with 13 animators and was whittled down to 3 over a year or so.

Also, it's harder for smaller game companies to get funding for the aforementioned credit issues. Whereas a letter of intent used to be good enough to get a production underway, this seems to be no longer the case. The 18 month game production cycle has been nice in that you most likely have a place to hang your hat for most of that time, but this too seems to be changing, as productions are becoming leaner and more outsourcing is used. It also seems like there is a shift towards bigger companies, but with EA laying off about 10% of its workforce this year coupled with tons of small studios shutting down...
..not sure where I'm going with this, but games are no longer the safety net they used to be. Outsourced cinematics seem to be more in demand though, and the cheaper development cost of wii games make me wonder if studios targeted to that platform might have more stability. I've never been able to figure out the economic voodoo with games though...the stats that always ring out are that games make more money than hollywood, and that the top 5% of games make 95% of the sales (i couldn't back those up, but i've heard those phrases in staff meetings for years)

Anonymous said...

Hey Keith and company,
A little glimmer of hope: I started over to DreamWorks a few months ago and have to say that the upcoming films are really looking amazing and with some really great stories. DWA has done VERY well this past year (Kung Fu Panda$215 and Mad 2 $175mil) and they still seem to be hiring people. I would bet the farm that Monsters Vs. Aliens is going to be a huge hit. I am beyond thankful to be there. Hopefully the hard times will force studios and companies to think twice and make better products.

Anonymous said...

Good article. Learn rigging or modeling or some close (at least in pipeline) to CGI animation (contrary to popular urban legend "you only have to animate to be good") skill.

Animate in your free time when there is no animation jobs.

You will never run out of work.

Jesse said...

Keith, great commentary as usual. Being a small studio owner myself, I'm realizing my dreams of creating anything worth being noticed will have to be on my own blood, sweat, and tears even more than normal. But it's very difficult to justify working on "your own stuff" when you got bills to pay and are crunching away at keeping your studio doors open and trying to minimize layoffs. It's gloom/doom but more reality than anything else. It makes you work harder and think more business-like and entrepreneurial. Even as a freelancer, you have to think the same way. So I agree, let's sharpen our wits in our crafts and make ourselves indespensable to the industry. Complacency will ultimately weed you out of the competitive race.

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