James Whittington of TrendWatch finds that studio decision-makers are cautiously optimistic about business prospects for 2005. All images © TrendWatch Inc.

VFXWorld.com invited TrendWatch to participate in this issue featuring various perspectives on the 3D market trends. As you may know, at TrendWatch, we survey studio owners and senior production executives every six months to help industry suppliers and analysts keep abreast of industry and market trends and changes.

The numbers used in this article are from TrendWatch mail surveys conducted directly with U.S. studios/facilities, including: production companies, corporate film and video companies, broadcast/cable studios, visual effects and animation studios, post-production houses, audio recording /mixing studios, video editing /recording studios, Web/ interactive media companies, interactive ad agencies and design firms, as well as independent filmmakers.

Here’s what we’re hearing:

• Business is finally improving. Studio decision-makers are cautiously optimistic about 2005;
• Competition remains a top problem — especially for U.S. studios doing 3D work;
• The number of U.S. studios doing 3D work is declining;
• The complexity of 3D work continues to increase from hardware and software advancements;
• An industry-wide focus on productivity is increasing demand for investing in the right technology and hiring the right “trained” people;
• Employee training is now seen as a competitive tool to help keep key employees, improve productivity and collapse learning time for new-hires;
• As the sophistication of 3D graphics in games intensifies, game developers are recruiting talent from the visual effects industry.

Studio Owners Are Cautiously Optimistic About 2005
For the past several years, business in our industry has been tenuous for all but the biggest studios. In fact, in our summer 2004 survey of U.S. visual effects/dynamic media and broadcast/cable businesses, eight out of 10 studio owners reported “economic conditions” as their top business challenge.

Total Establishments by Size for U.S. Studios.

This is not entirely surprising since eight out of 10 of the almost 43,000 vfx/dynamic media and broadcast/cable studios in the U.S. are small businesses that have less than 10 employees. From our research of the graphics markets over the years, we have observed that many small business owners believe business would improve if the economy were better. This has been the case in good times as well as bad and is symptomatic of other small business problems usually unrelated to the state of the economy.

The good news is that business is getting better. In this chart, we see the TrendWatch Business Conditions Index for current economic conditions steadily rising for the past 18 months. The TrendWatch Business Conditions Index (BCI) is our adjusted look at how business has been for the industry over time. It is indexed to the first year we conducted the Visual Effects/Dynamic Media survey in 2002. What is important about the BCI is not the actual number at any given moment, but the trend over time. Current business is looking up, and the industry also is cautiously optimistic about the future.