June 27, 2020
Visual Effects (VFX): The Engine Behind the Growing Entertainment Market
How time, business and technology shaped a fascinating industry.
It was 1977, almost Christmas time in Rome, Italy. I was thirteen-year old. My father, as a movie industry journalist, had his own nice routine to go out two, three times a week to watch, with his enviable free-pass privilege, any type of movies genre available at late night show of the closest movie theater. That night he asked me to join him, which I did, with great excitement. He was going to watch a new science-fiction movie named “Star Wars”. It was supposed to be very good!
The movie theater was packed with people even sitting on the floor. From the first few minutes of the opening sequence with the scrolling text on a starry black space background, it was already clear that the movie I was going to watch was something special, never seen before, a game changer!
That was it, no more Godzilla or King Kong, goodbye to good old James Bond, and even to my favorite spaghetti westerns. It was definitely the beginning of a new era!
At that time, the so-called Computer-Generated Imagery (CGI) was still in its infancy and not fully adopted. George Lucas and his newly founded special effect division, the Industrial Light and Magic (ILM), with the release of “Star Wars”, were able to deliver unforgettable movie experience and emotions, exploiting hand-paint techniques, classic stop motion mixed with great physical plastic models, creating a complete new level of standard for the whole VFX industry, for years to come. Since then, a lot happened.
CGI technology evolved in time and after its debuts in some of the sequences of “Star Trek: The Wrath of Khan” in 1982, it was still ILM to define a new VFX milestone in the 1985, winning an Oscar for a fully CGI-generated character in the movie “The Young Sherlock Holmes”. Do you remember the Knight deconstructing and reconstructing out of the church window? Yes, it was him, the Oscar winner!
Eight years later, out of the collaboration between Steven Spielberg and ILM, the movie “Jurassic Park” opened up another new chapter of the VFX history. This time CGI gave life to believable animated dinosaurs sharing screen with real human actors. Special effects were done so well, that even today, the movie does not appear dated. However, it would be unfair to give the full credit to GCI. The blending of digital techniques with other hands-on alternatives, lot of hours of study of wild animal behavioral pattern, and a great cinematography were the additional ingredients that made the movie an original breakthrough.
CGI techniques continued to surprise us and the list of movies that introduced innovations and gradual transformation is long, just to name a few, like the Oscar winners “The Matrix”, “Gravity”, “Avatar”, until Peter Jackson’s “The Lord of The Ring: The Fellowship of the Ring”, where Weta Digital ushered in a new era for motion capture, merging the performance of a real actors with the image of a digitally generated monsters.
In reality, motion capture was not a new technique. The famous Rotoscope, invented in 1915 based on the use of the trace over live action footage frame by frame, to give cartoons characters natural fluidity, and successfully adopted by Walt Disney in “Snow White and The Seven Dwarfs”, can be considered the first approach of motion capture. Rotoscope has been the basis for the evolution of such technology into optical system, where performing actors are covered with tiny reference markers all over the body, allowing the triangulation of movements between various cameras.
In “Lord of the Ring”, Weta Design was the first VFX company to introduce real-time, full performance-capture, in which actors could be on the set at the same time, while shooting with the other actors, bringing capture motion to the next level.
It was just a year ago that Artificial Intelligence (AI) made its breakthrough into the world of VFX with sophisticated Machine Learning (ML) software and hundreds of track dots on Josh Brolin’s face to elevate to the next and flawless level of realism, with the supervillain Thanos in “Avenger: Endgame”.
But there is another side of this fascinating world.
VFX industry had to navigate rough waters and learn its own lessons. Globalization, tax incentives creating sanctuary cities like London, Montreal, Vancouver, resulted in nomadic workforce, thin margin predicated on artistic passion. Mixed with lack of robust business model, these created a perfect storm seven years ago, when the iconic VFX company, Rhythm and Hues, had to shut down its business and declare bankruptcy, after delivering the wonderful special effects of the movie “Life of Pi”, winner of multiple Oscars, including Best Achievement in Visual Effect. The documentary on this topic, the “Life after Pi”, directed by Scott Leberecht, is an eye opener.
Since then, the whole industry had to re-analyze and restructure itself to recover from such traumatic experience.
Today, the VFX industry, despite continuing complexities and challenges, is much more robust and mature, with more optimized and efficient cost structures, and business models, thanks also to a continuing consolidation of vendors and new growing market opportunities.
Movie theater business continued to make blockbusters records. In 2018, the US market reached its highest ever achieved blockbuster earning of $11.89B. In 2019, the global earning touched a record of $42.5B, despite a 4% of dip in USA. All the ten top blockbusters were rich of VFX or animations.
The TV market today is living its golden age, with the video streaming growth from Netflix, YouTube, Amazon and other OTT (Over-The-Top) players, which is reaching the point of strangling the present Internet. Growing mobile content demand contributed to such relentless trend. Fortunately, future convergency of the 5G infrastructure and NextGenTV will create opportunities for more capacity and enhanced quality, further boosting this market.
The evolution of VFX technology and capabilities in the last few years has also dramatically affected the creation process and the quality of Animations and Video Games, with growing adoption of hybrid 2D/3D animation, Virtual and Augmented Reality. VFX specialists and talented teams from movie industry are today a critical part of Video Games workforces, making these two worlds closely intertwined, with Video Games inspired by Movies and Movies mimicking Video Games.
The combination of all these factors made the VFX and Video Games the fastest-growing segments in the global media and entertainment market. Based on Research and Market, the total value of the Global Animation, VFX & Video Games industry in 2019 was $ 264 billion, with an expected CAGR of 9% between 2020 and 2025 only for the VFX market.
New technologies like AI, cloud infrastructure, Software-as-a-Service are helping VFX teams, and will do more in the future to shorten and automate routine and labor-intensive tasks, thereby reducing both operating costs and capital expenditures, while opening more space and time for creative work.
All these aspects are very positive trends and dynamics for the VFX space, which remains a very fragmented industry composed by small and mid-size studios with innovative and talented creative teams, like Weta Digital, Spin VFX, and Cinesite, competing with larger companies with stronger muscle and larger global footprint, like ILM, Framestore and DoubleNegative.
Will we see more consolidation involving VFX, Animation, and Video Games Companies? Most likely yes, as the field is fertile for that to happen. In addition, according to Mondor Intelligence, with more adoption of animation for professional services, unexpected big players like Autodesk and Adobe are popping up in this market.
A market space that could definitely benefit from a Special Purpose Acquisition Company (SPAC) financial vehicle, which facilitates a public market entry and implementation of startegic consolidations.
For the time being, I look forward to continuing to be surprised and amazed, both at home and on the big screen, by such beloved, fascinating, and longstanding industry.