The CEO at one of China’s top VFX studios assesses the often painful but mostly positive realities of China’s explosive feature film industry growth.
We conclude Chris Colman’s expansive two-part interview with Base FX founder and CEO Chris Bremble’s thoughts on critical issues surrounding China’s growing feature film industry and the difficulties VFX studios face against stiff international competition, pricing pressures and a significant lack of talent and means to train the next generation of digital artists.
Don’t forget to read Chris Bremble: Leading the Base FX Juggernaut - Part 1 to learn about the studio’s path to becoming one of China’s leading and most innovative VFX businesses.
Global and Chinese VFX Industry Assessments
When Bremble and I spoke at SIGGRAPH Asia, we had both earlier that day listened to Digital Domain founder and VFX industry champion Scott Ross’ keynote lecture [see AWN's interview at FMX 2015 with Scott Ross about the flawed economics of the VFX industry], in which he warned about the dangers of China’s visual effects companies getting embroiled in what he calls a “race to the bottom.” Companies compete for movie visual effects contracts, underbidding each other until prices reach an unsustainably low level, driving companies out of business. When asked if things are going in a similar direction in China, Bremble replies, “I manage a bidding process where every studio is chipping away, going 200,000, 300,000 rmb lower, and then someone comes in and drops the bid 5 million rmb, which basically means they buy the show. Those companies are really buying market share. They want to pull all the artists into their ecosystem and then go to the clients and say, ‘We have all the artists.’ That doesn’t last and it’s a terrible business model. Market share is the death of a visual effects company. You don’t want to be the biggest with the most, because the day you’re not busy, you’re out of business.”
According to Bremble, companies just don’t learn from what has gone wrong before. “The new guys always think that the old guys weren’t smart enough, that they have some insight or perspective that will make the next time different. They rarely do. It takes a lot of self-control to make disciplined decisions, and unfortunately, that’s in short supply in the creative industries.”
Having spent more than 13 years in China, and eight before that in Hollywood, Bremble has a first-hand understanding of both the international and local industry. As he explains, everything in China follows a relatively predictable trajectory. “There’s the initial opportunity, followed by a rush into the market, then there’s a massive ramp up fueled by easy capital, then oversaturation, then a crash. Right now we’re in the ramp up phase in visual effects. China tends to foster bubble economies – it’s the most Keynesian economic environment in the history of the world. When these industries plateau in terms of growth and market saturation, what happens? The industry will very quickly look like LA in 2012.”
Consequently, he knows that the storm is coming for his own company. He went on to say, “We’re not in that cycle yet, but we certainly know it’s coming. We have a very viable business and we just had our best year, but it’s not going to last forever. I have to always keep that in mind when I think about growth and the long term health of the company.”
One of Scott Ross’ main gripes is that the existence of tax subsidies for visual effects companies in certain territories like Vancouver has given companies located there an unfair advantage over their worldwide competition. China too faces this same challenge closer to home, namely from Korea.
Bremble notes that it’s very difficult for companies to compete with Korea because the Korean government offers pretty significant subsidies. Hence even Chinese studios outsource to Korea. “If you’re just competing on price and quality and you’re a small to mid-sized Chinese studio, you’re going to get crushed by Korea. They’re cheaper and probably better. So you have local Chinese companies that are securing a project and throwing all the work to Korea. The local model is basically to work as an aggregator.”
While this is not such a threat for Base, with Bremble claiming, “We can outperform them on quality and we can usually match them on price,” he stops short of suggesting China should retaliate by offering subsidies of their own. “China is unlikely to create a tax rebate program like Canada; it’s just not in the DNA of the Chinese government, nor should it be. I’m not a fan of the rebate system. It’s a corrupt bargain. But it’s not going away. So we have to make sure we’re always competitive and working as efficiently as possible.”
So, how can Base and their competition avoid getting drawn into this price whirlpool without government support? According to Bremble, it’s about much more than numbers and subsidies. “It’s about having a thoughtful roadmap. We want to make sure we’re in an efficient environment where we have as much public and private support as possible. It’s also about relationships, and building trust with clients. You also have to be very careful about growth, as the margins are so thin; one mistake can close a company.”
Base’s roadmap includes establishing relationships with major players in Hollywood and China. “ILM remain our primary relationship. The alliance is designed to be perpetual. Now we have relationships with the online video platforms in China, which are going to see a lot of growth. We’re looking at creating really healthy, efficient partnerships that allow us to create horizontal alliances, to help create an ecosystem where performance and incentives are aligned,” Bremble notes.
He also concurs with Ross in his assertion that it is the companies that create their own content, or are part of larger IP entities, that have the distinct advantage over their competition. Bremble states, “ILM and Weta have been the beneficiaries of their relationships to major franchises; Star Wars for ILM and Lord of the Rings for Weta. They also both have franchises that are associated with their studio in a very strong manner: Transformers for ILM and Avatar for Weta. But for other companies, the headwinds are much stronger. I think that’s why you’re going to see some other major companies get driven to consolidate. The Imagine Engine / Cinesite merger is likely the beginning and not the end of consolidation in the industry.”
China Post Production Alliance (CPPA)
It is this appreciation of the benefits of cooperation that has led Base to spearhead the drive for a different kind of inter-company relationship – an unprecedented alliance of China’s major visual effects players. On April 20, 2015, at the Beijing International Film Festival, Base announced the founding of the China Post Production Alliance (CPPA) with the broad mission of promoting and enhancing the development of visual effects in China.
As Bremble describes, “We are a group of companies that have all put our stake in the ground, we all have a significant presence, we’re not in 16 different places, we’re here and we want to create a thriving, professional industry in China. We can work against each other or we can talk about the common challenges and how we overcome them.”
The CPPA has a financial sponsor from the real estate sector, but it is still the early days and preliminary conversations are still taking place with would-be members and, crucially, the government. On the face of it, the alliance could be misconstrued as a union or lobby group. When asked how they are broaching the potentially thorny issue with the government, Bremble replies, “We’re not trying to step on anything that the government has done. We’re working with them to build trust, sharing our agenda, our goals, making sure it’s a transparent discussion. There’s a real opportunity to work together to make this industry globally competitive in ways that are aligned with the agenda of the government.”
The first challenge has been finding time to discuss the issues with other companies, as the Chinese film business is taking off so quickly. The hardest part is to get companies to step out of their crazy production schedules. An experienced China-hand, Bremble is in no rush to force anything. He notes, “I’m the guy that’s always preaching to slow down. Over a long period of time I’ve watched tons of press conferences and announcements, but if you haven’t done the real foundation work, you’re going to fail. The VFX industry has broken a lot of promises over the last 10 years. Look at the number of training schools in China that have been opened and closed. Look at the number of young people that have come into the industry and left. We realize that we all have to do a better job at making promises and putting a real value proposition in front of talent.”
Indeed, first on the agenda for the CPPA is an issue that affects every post house in China – an insufficient talent pool to meet the demands of a booming industry. Bremble only sees the situation worsening due to what he calls the “15 year lag” from the time the visual effects industry begins in a country, to when young, formerly inexpensive artists start having families and needing greater income. Wages must rise or talent will leave the industry. Wages for an experienced artist in China are already on par with those in Canada. As a former artist himself, he is not against talent making money, and claims, “I know it’s not fun to be young, creative and hungry.” But he warns that things must change. “If we don’t take what we’ve learned and help build a better ecosystem, the industry is going to go the way of LA. Wages will spiral out of control. If China doesn’t ramp up its training and talent development, it’s going to become too expensive to do work here, which is only going to benefit Korea, Malaysia, Vietnam, and Thailand. In those countries, by population, there’s going to be fewer studios and fewer options for artists, so wages will remain depressed.”
Alongside soaring wages is the widespread problem of artist poaching. Base has been affected as much as anyone else. According to Bremble, “There are about a hundred companies that would like to hire one of our artists. We do a really good job of training and developing talent. We focus our efforts on building creative, collaborative and highly communicative artists and the nature of the work we do challenges them to perform at the very highest level. Our competitors don’t have the benefit of those projects so they tend to want to get artists that have been through the wars.”
The problem is being exacerbated by the arrival in China of major Hollywood companies like DreamWorks, Disney, Fox and Warner Bros. Domestic companies are going to have to fight to get talent. Notes Bremble, “You have about eight companies now that are trying to make animated features, with a body of talent in the country that might be capable of making one. Six of those are going to fail because they don’t have the creative talent, the writing, animating, lighting or rendering talent, to really compete creatively.”
The solution, he says, is simple: “The most important thing for the Chinese industry right now is to develop more talent.”
Base FX Training Center
In this drive too, Base is taking the lead. On December 29th, 2014, the company signed a strategic cooperation agreement with China Fortune Land Development Company, to develop a high-end VFX training base in Beijing. As Bremble outlined the project, “The goal is how to build careers for professionals because China is ready for that moment. We initially stayed away from training on scale because we didn’t think that there would be enough companies that would pay well enough to justify investing in a career. Now we see the industry getting healthier, I think that will change.”
The mission is both a benevolent move to help the artists, and a pragmatic one for Base. Says Bremble, “It allows us to build talent so that our production team is not constantly seen as a talent generation source.” The training is not designed as a revenue generating business. The goal is it to deliver quality education at as low a price as possible. “It’s a good way for us to give a little bit back,” he notes.
The company will work with various partners, including online training provider Zihua, allowing students to learn key software skills before they step into the classroom. Talks with other companies are taking time as they ensure all partners share the same goals. ILM, naturally, is keeping a close eye on things. Indeed, a major aim of the school is to provide students with opportunities to work abroad. Bremble explains, “Young Chinese artists want to work at overseas companies that they grew up looking at. This is going to provide them with a great gateway to get there. Take an artist that has worked overseas and comes back with that knowledge and those skills, multiply that by a thousand, and you start seeing how this industry becomes viable.”
Again, Bremble urges patience, stating that “Being able to charge people to sit in your class is not difficult. Being able to give them something that’s going to change the direction of their careers, that’s the kind of value proposition we’re looking to create.” The target is to start recruiting students graduating from university in the late spring of 2016.
The curriculum is still under development but they are likely to provide training in three areas: assets, animation and finishing, with a modular structure allowing students to graduate in 3, 6 or 12 months depending on their chosen pathway. The courses will also educate artists on which roles create the most value for companies and thus command the highest wages. Alongside the skills, he stresses the need to provide a foundation, making up the gaps left by the Chinese education system. “I’m always amazed that our matte painters - who have done amazing, award-winning work - don’t have a fundamental art education. They don’t know the great landscape painters from history. In China, it’s just not part of the education system, which has been focused on science and math. It’s not a bad decision, we see the results of it every day - but they’re not getting a liberal arts or creative education,” Bremble notes.
In order to provide the fundamentals to succeed, he emphasizes that the standard of teaching must be not just equal to, but better than leading schools like Gnomon, VFS or Full Sail because, “A student there probably has a pretty good art education already.”
Another adverse outcome of the Chinese education system is that students are graduating lacking teamwork skills. They are used to working alone to pass their exams and competing against their friends to win places at the best universities or in the best jobs. Clearly this poses issues in a collaborative work environment. Says Bremble, “Being a professional is being able to do it every day, on schedule, to a client’s notes, as part of a broader team. When we bring in people for a shot that may involve 15 artists, we’re really teaching them the skills and creative approach to work with other people, with a creative person at the head who changes his mind and sees things differently. That takes a lot of training.”
Base will not be cherry picking the best people from the program. Rather, companies will be invited to come in and present their work so artists can make an informed choice. All students will undertake a paid internship upon graduation, either with Base or one of their partners, giving artists time to consider in which area they would like to specialize and, critically, ensure they will be able to manage the emotional, intellectual and creative stresses of the business. According to Bremble, “The last four weeks of any project are pretty hard. You’re battling fatigue, deadlines, personal challenges outside work because you’re not seeing your partner. It takes a certain amount of resilience to do that and perform well. So how do you develop resilient talent that won’t burn out at 27 and leave? Companies need to feel that if they invest in that person, it’s a relationship that will carry on for years.”
With a leading brand, a healthy slate of projects and moves to lead the industry on different fronts, Bremble and his company are not immune from negative comments and criticism common in any competitive field. Says Bremble, “There’s been a lot of banter from companies trying to poach talent. We’re used to it. We try to stay above it. The usual comment is ‘They’re too busy,’ which, of course, means that we’re servicing our clients well and keeping the pipeline full. We hope that everyone succeeds, because it’s a hard business.”
Ultimately, Bremble is hesitant to recommend jumping into the VFX business in China. “The VFX business is very, very difficult. I’m watching all these new companies sprout up and I think, ‘it’s going to be tough.’ I know all the pain that they’re about to endure. Every day is hard because the creative process is hard. I mean, I love what I do but I’m invested, I’m not getting out. But, for China? The ship has likely sailed. Building scale effectively to secure larger productions takes time. The next great adventure in visual effects is likely in Africa somewhere, which is the next China, in economic terms,” he explains.
Upon further reflection on growing Base over the last 13 years, he says, “It’s really been a series of exhilarating successes and heartbreaking losses. It’s tough because it’s a human business. You invest in people and you build relationships, you ask young artists to give huge percentages of their creativity and time but, ultimately, you can’t keep them. Saying good bye, even under the best circumstances, is tough on the soul.”
Thankfully, in spite of the testing environment, he feels the company has managed to develop and foster a happy and stable group of artists. “I’m really proud of the team,” he says. “We’ve been able to develop ourselves successfully, often with the help of ILM, and consistently tackle more challenging work. On the human side, watching the staff marry, buy homes, start families…that’s also been a very rewarding experience. We continue to make improvements to how we manage the company, but the culture has been built, and that’s one of the core drivers of the company’s success.”
And despite the challenges ahead, his outlook for the future remains positive. “As for the big picture stuff, we’re fine. I think we still have a few years of a really nice tailwind, and we’re going to enjoy it. We’ve got an incredible slate of projects ahead, a successful and positive alliance with ILM, new partners in China soon to be announced, and a great management team. This is never an easy business, but I’m confident we have the experience and leadership to weather the storms ahead,” he declares.
Finally, we return to that first morning back in 2002. When he was watching those construction workers obliterating a hotel with sledgehammers, did he ever imagine that 13 years later the filmmaking landscape would be as vibrant as it is today? Bremble concludes, “It was clear to me that the opportunities would be on a scale that we hadn't yet contemplated, that the young people had a hunger for content that was even greater than the US market. Everyone is on their phone, playing a game or watching something. They want to know more, see more, do more - bigger, faster, better. China today radiates an insatiable, aspirational culture. It’s not the easiest place to call home, but I’m comfortable here, and for me it feels like the center of the world.”
Chris Colman is a writer and animator based in Shanghai, China, primarily focusing on Asian animation for AWN.com. He is founder of the China Animation & Game Network (c-agn.com), a national community of industry professionals.
Chris is a writer & producer based in Shanghai. He’s the founder of the China Animation & Game Network, encouraging communication in the industry via live creative networking events.