London Calling: Mega-VFX, Financing and Cultural Fusion [UPDATE]

Christopher Harz pays a visit to one of the hottest vfx havens, Londons Soho district, which has attracted a flurry of American movies, thanks to creativity and tax incentives.

Financial incentives, diverse culture, deep experience and a ready-made infrastructure make the London vfx community appealing to foreign production companies.

Financial incentives, diverse culture, deep experience and a ready-made infrastructure make the London vfx community appealing to foreign production companies.

If youve been reading the credits on movies at your local cineplex, you may have discovered an interesting fact: a huge number of them have the post- production and vfx done in the U.K., mostly in London. You probably also read lately that Kodak closed the vfx division of Cinesite Los Angeles while Cinesite London is recruiting more staff to work on current production that includes Alien vs. Predator, Alfie, Hitchhikers Guide to the Galaxy, King Arthur, Sahara and Charlie and the Chocolate Factory! What is going on over there, you ask is warm beer good for you, after all?

The answer comes in several parts. The first is that London turns out to be a terrific place to get media work done. It has a thoroughly developed infrastructure you can get almost any film-related work done within a few blocks in Central London, whether its vfx, set design, catering, transport, filming, PR, or pyrotechnics. The U.K. is the leading European location for film production investment, and London has the U.K.s largest media-related skill base, with more than 200,000 people working the field. There are more than 220 stages in more than 60 studios in London, including Pinewood (14 stages, five tanks), Shepperton (14 stages, four tanks), and Leavesden, which boasts the largest back lot complex outside of the U.S.

The government and labor laws are relatively friendly, and there is good connectivity a new fiber optic network called SohoNet links 12 London-based production houses together and connects London to Los Angeles as if they were neighbors. There appears to be great creativity in adapting London and its environs for a remarkable range of live shots how else to explain Stanley Kubrick using Londons Docklands for scenes supposedly shot in Saigon for his Full Metal Jacket? The number of films shot and/or post produced in London is remarkable. Some of them seem obvious candidates for work in the U.K., because they relate to stories that take place in England, such as About a Boy, 101 Dalmations, Harry Potter (all three), Robin Rood and Bridget Jones Diary. But what about The Fifth Element, Evita, True Lies, Event Horizon, Batman Forever, Saving Private Ryan, Mission: Impossible 2, Gladiator and Cold Mountain? Clearly, there is something about shooting and vfx production in London that directors and American studios like.

Double Negative has perfected underwater work in many films, including Lara Croft Tomb Raider: The Cradle of Life. Courtesy of Double Negative.

Double Negative has perfected underwater work in many films, including Lara Croft Tomb Raider: The Cradle of Life. Courtesy of Double Negative.

Which brings us to the second reason: there is a terrific creative pool in the city. The epicenter for star-studded vfx houses is Soho, an edgy area full of creatives, pubs and post-production facilities. Unlike its New York counterpart, which gets its name from being SOuth of HOuston street, this artists colony got its moniker from one of its 18th Century residents, the Duke of Monmouth, son of King Charles I, who used to bellow So-Ho when galloping off on a hunt or into battle. Apparently he did a lot of bellowing and galloping, because the name has stuck ever since.

One of the star studios in Soho is MPC, originally The Moving Picture Co., on Wardour Street. The facility is not what you would imagine a traditional British building to look like it is open, bright, airy and modern, with a blue-colored pool table and industrial-sized espresso coffee machine on one of its six floors to entertain and energize the working troops; other floors contain major office space and humming air-conditioned pods of ultramodern server and render farms. MPC has an impressive list of titles it is working on, including Harry Potter and the Prisoner of Azkaban; it just finished work on the recently released Troy. Surprisingly, although MPC makes expert use of normal toolsets such as Maya, Red Hat Linux, RenderMan and Shake, it also has a major force of programmers to generate custom-built tools. We decided not to use the Massive toolset for crowd management, says MPCs Michael Elson. It did not have the fine levels of control we were after for Troy and Harry Potter. Weve had up to 25 programmers working on a proprietary toolset that we feel is world class which is what we needed for the highly realistic men and horses in Troy.

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MPCs style is boutique-like and welcoming. Clients and employees alike are encouraged to interface.

Although MPC has ramped up its staff for its busy production schedule (it had more than 350 people employed recently), it prides itself on its boutique-like sensibilities. We dont want the dynamics of a big company, notes Elson. We want to be able to talk directly with all of our employees. And we want our customers to have direct and immediate access so that they will really enjoy the experience of working with us. We want to be known as being easy to get along with. Whereas MPC has a wide variety of vfx work, it outsources audio and other tasks. There is so much talent in the immediate neighborhood that it makes no sense to do things that others can do more economically, Elson notes. We work very hard on keeping our prices competitive.

One of the things that MPC apparently does well is pre-visualization. Films like Troy require very precise orchestration of the movement of real and virtual objects, both animals and humans. We worked very tightly with the director to adapt the previs to his vision throughout the production process. Weve had offers by outside companies to do the previs for us, but it is much easier and more effective with an in-house team.

What is also surprising is the level of cooperation between the studios in the area. It is not unusual for several of them to be working on the same film. Rather than the bitter competition sometimes seen in Hollywood, Soho seems to relish a spirit of friendly rivalry, with some of the workers drifting back and forth between different studios only a few blocks apart. The work force is definitely multinational whereas there is a core group of workers originating in England, you hear foreign accents everywhere. We have staff from Germany, Spain, France, Australia, South America Id have to stop and think about what countries we dont have workers from, Elson notes with a grin. How do all those cultures and ethnicities mix together? Not a problem, Elson replies. When they first come here they might stick together with their native countrymen a bit, but we encourage them to socialize together after work. They might go into the pub as French or Spanish or Ukrainian, but at the end of the evening they emerge as a team. Take note, U.S. studios this phenomenon, which could be called PBL Pub-Based Learning might catch on in the United States.

Meanwhile, Cinesite (Europe) Ltd. has recently experienced a flurry of American business. Along with the aforementioned titles, it just announced that it has been awarded Harry Potter and the Goblet of Fire, the fourth entry in Warner Bros. blockbuster film franchise. This represents a large volume of work for Cinesite, which has moved straight into previsualization and development.

Earlier this year the U.K. Film Council and the DTI revealed the results of a report into the regions post-production industry, which indicated that the industry had helped to generate £1.39 billion for the economy and 15,000 jobs. Post-production now accounts for 25% of all production budget spending.

Antony Hunt, managing director of Cinesite, says, What is particularly exciting about this new slate of films is that many will be utilizing multiple Cinesite servicesAlso, over the past few months we have considerably developed the 3D creative side of our businessThis newly won work will be a further opportunity for Cinesite to demonstrate the high quality of our 3D work.

Cinesite ceo Colin Brown, recently appointed to the board of the UK Film Council and the newly established UK Post, which will serve to represent the interests of UK post-production, adds, There has never been such a busy and successful year at Cinesite (Europe). The volume of work and the quality of our output sets new benchmarks for the U.K. visual effects industry

Another Soho star is Framestore CFC, a large (up to 400 employees) studio, which worked on feature films such as Harry Potter and the Chamber of Secrets, Cold Mountain, Blade 2 and Resident Evil, along with the ground-breaking work on Walking with Dinosaurs and its companions Walking with Sea Monsters and Walking with Beasts. The Walking with Dinosaurs work, which approximates Jurassic Park animation but on a made-for-TV budget was animated, modeled and rendered with Softimage, according to Mike Milne, head of animation at Framestore, while the extremely difficult combining of digital images with live action was accomplished via Henry and Inferno sets. Whereas matting 3D models into a 2D film environment is difficult enough normally, in Walking with Dinosaurs the digital animals interact extensively with the live sets, kicking up water as they cross a stream, for instance. According to Milne, all the interaction was shot live, and then the animation team (nine animators, three technical directors and one texture painter, who worked on this project for 18 months) had to very precisely match their animations to the moving elements in the filmed backgrounds.

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Framestore has also produced many award-winning commercials, including the famous Johnnie Walker Body and Shoal ad (directed by Daniel Kleinman and produced by Spectre for BBH), in which the camera goes underwater to take in what appears a shoal of fish which turns out to be a group of humans that race along near the surface of the water, leaping in and out like dolphins. Eventually one of the humans walks onto the beach, while we fade to the slogan Keep Walking its an ad for Johnnie Walker whisky. Framestore recently opened an office in New York City, to make its ad work more accessible to the American market.

Farther down the street you find Double Negative, which also has an impressive slate of vfx-laden films to its credit, including 007s Die Another Day, Enemy at the Gates, Johnny English, Lara Croft Tomb Raider: The Cradle of Life, The Nutty Professor 2 and The Hours. Double Negative also has an extensive in-house capability to build proprietary tools, which it uses in addition to industry standards such as Maya, RenderMan, Shake and Commotion. We worked very hard to come up with great tools for particle rendering, especially for natural phenomena including water surfaces and underwater scenes, says Matt Holben, Double Negatives ceo. We did a series of underwater scenes for submarines in films such as The League of Extraordinary Gentlemen and Below, and we wanted to get it exactly right. Smiling, he adds, From now on, we can ace any water or submarine work that comes our way.

Holben has a theory on why the area produces such good vfx work. It was very helpful that there was a highly talented group in London all working on commercials people that work on commercials are almost by definition very creative and this has produced a talent pool for film fx, he says, adding, we have a very tight knit community here, with great communications. This studio also has an eclectic mix of staff from worldwide origins complementing a British core group. We all speak the common language of vfx here, says Holben. Creative people find a way to work together. This is such a visual business we really have no language barriers here. At the end of the day, what we deal with is pictures. Asked how he keeps his people on staff and motivated, he replies, We treat our staff with respect, and work hard to create a great studio with great people that takes on special challenges and delivers great work. Its very simple, in my eyes keeping excited and motivated people happy is my job. And the rest is history. Double Negative does more than just spectacular vfx it also takes pride in work that is, for lack of a better term, sophisticated. In a recent article, The Independent pointed out that Double Negative's effects are so special that you barely notice them.

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MPCs work on Troy included creating the city background (above) as well animating humans and horses. Courtesy of Warner Bros. Ent. © 2004 Warner Bros. Ent. All rights reserved.

Unlike many other countries, the U.K. has some excellent schools for training nascent animators, including the University of East London (www.uel.ac.uk), Escape Studios (www.escapestudios.co.uk), which claims to be Europes first dedicated school of digital animation, and the London Animation Studio at Central St. Martins College of Art and Design (www.londonanimationstudio.tv). There are also four-year masters degree programs available at the National Center for Computer Animation (http://media.bournemouth.ac.uk/mpca.html) at Bournemouth, a very attractive campus on the English southern coast.

The third (and perhaps dominant) reason for all the work thats going to London ismoney. Filmmaking is, after all, a business, one thats voraciously hungry for cash. Films made in Britain receive very active support by the British government. An American studio that spends at least 70% of its film budget in the U.K. can get rebates of more than 10%, a very respectable sum for a blockbuster (a major Hollywood feature cost about $103 million to make in 2003). Several studios mentioned this as the major factor in the recent flood of American films into Britain between 20 and 30 major features are in some stage of being produced in the U.K. This is a huge increase from recent years in 1998 only about 2-3% of U.S. features were made in Britain, compared to over 20% in Canada, according to the Screen Actors Guild. There is no question that the government rebate has been very helpful to our industry, says MPCs Elson.

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The great benefit that the U.K. has is sale-leaseback schemes, which other countries do not. Basically, a U.K. taxpayer (usually a group of investors) buys the negative and copyright of the film from the producer, deducts the full cost against its tax bill, and then leases the film rights back to the producer for a period of up to 15 years. The total amount of lease payments is less than the price paid up front, due to tax benefits, and that amount is shared between the producer and the British investing entity in effect, the producer gets 11-14% of production costs back, in cash, not just in tax credits. In order to get this treatment, 70% of the film work is supposed to be performed in Britain. There is some leeway, however the British government has special relationships with certain other countries such as Romania. It is because of such an exemption that a British film such as Cold Mountain, for instance, could have its American Civil War scenes filmed in Romania.

Why has this type of British financing become so hot almost overnight? A major reason appears to be the sudden collapse of German tax-related financing in recent years, together with the pullback of German companies such as Kirch Media, which tended to be generous purchasers of foreign rights. Until recently, wealthy Germans had the option of investing in sale-leaseback funds for films that involved both their cash investments plus additional borrowings getting them a tax write-off on more money than they actually put at risk. This type of tax benefit resulting from time-shifting taxes was popular in America until the Tax Reform Act of 1986 after which Hollywood studios started looking overseas for financing from tax-supported investment groups. The investment from German funds was huge tax related film financing by Germany in 2002 was $2.33 billion (according to Variety), compared with $1.6 billion from the U.K. The next highest funding figures were paltry by comparison: $86 million from Ireland and $84 million from Holland, while Canada came in with $44 million and France with only $40 million. The great advantage of the German financing was that the films could be produced anywhere, and that overwhelmingly meant production was done in the U.S. and Canada. Paramount Pictures was one of the first to exploit this source of German financing, when it raised $130 million to finance several films such as Mission: Impossible 2, but other studios quickly followed.

With the disappearance of much of the easy money from German funds a couple of years ago due to changes in their tax laws, American producers turned increasingly to the sale-leaseback possibilities in the U.K., with the result that foreign investment in British films increased by a staggering 85% in 2003. These of course required production of much of the work in Great Britain whereas there were exceptions, a great deal of the work actually did have to be done on-island. Hence much production work flowed from Canada and other countries to the British Isles, followed by many of the workers that had previously been employed in studios in those countries.

In addition to the Sale & Leaseback scheme allowed by Inland Revenue (the British tax authority), there are additional sources of tax credits and other revenues from local film boards. Tax laws keep evolving all the time, of course, giving Hollywood bean counters many sleepless nights. For instance, whereas the British government in the past supported both low budget films (defined in the Films Act 1985, Section 48, as those films budgeted at less than £15 million) as well as high budget productions (defined by Section 42 as more than £15 million) with tax relief, it may be restructuring the program to concentrate on just the higher-budget projects. Several loopholes have recently been closed, including an attempt by Disney to get credit for marketing costs as production expenditures.

The recent weakening of the U.S. dollar is of concern to the British industry. Clearly, we have to work hard to remain competitive, and keep the exchange rate in mind for our bids to American studios, notes Holben.

So, if youre interested in digital animation in London, pick your reason environment, talent or finances but by all means check out Soho. If you are looking for veddy British attitude or reticence, you will not find them here. What you will find is an eclectic mix of friendly and enthusiastic people and good cold beer.

Christopher Harz is an executive consultant for new media. He has produced video games for films such as Spawn, The Fifth Element, Titanic and Lost in Space. As Perceptronics svp of program development, Harz helped build the first massively multiplayer online game worlds, including the $240 million 3-D SIMNET. He worked on C3I, combat robots and war gaming at the RAND Corp., the military think tank.

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