Company Town : Technology Raises Pressures on Special Effects Companies

Available Light, a Burbank special effects firm, is basking in the glow of “Mortal Kombat.” The film was No. 1 at the box office for three weeks, and the company is attracting notice for nifty effects ranging from exploding skulls to a vapor-like soul that’s sucked from a character’s body.

Yet Available Light co-owner John Van Vliet acknowledges that his profit on the film was slim.

“We got to explode a lot of stuff and it was fun,” he said. “But from the standpoint of being able to contribute to the retirement fund, that was not up there at the top of the list.”

Special effects has always been a tough business, with companies existing from project to project. But now it’s even tougher. The reason, ironically, is digital technology, which has been a major factor in the phenomenal growth of the industry.

The “Apollo 13” space ride, dinosaurs in “Jurassic Park” and the seamless blending of historical footage with studio shots in “Forrest Gump” were all courtesy of computers, which are quickly replacing the old optical and photochemical methods. But the digital revolution has also led some firms to spend lavishly on high-powered computers, while fostering a host of new competitors, from film studios to video post-production firms to the proverbial guy in his garage.

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The pressures are evident in recent cutbacks at Boss Film Studios in Marina del Rey, which closed its commercial division and laid off 25 workers, and at Los Angeles-bLA, which curtailed its feature film work. Last October, Digital Magic in Santa Monica was acquired by Burbank video post-production firm 4MC.

To many insiders, these events signal the start of a shakeout that could touch all but a few stalwarts such as effects king Industrial Light and Magic, director George Lucas’ San Rafael firm.

The problem is that most special effects firms have invested millions of dollars in sophisticated Silicon Graphics computers. The cost of that equipment must be amortized over several projects, so there’s constant pressure to keep work coming in the door. Meanwhile, many effects can now be done on relatively cheap Macintosh computers, spawning legions of small, upstart competitors.

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What’s more, the technology is changing so fast that the digital equipment purchased today will be considered obsolete within 18 months. “If I owned a whole bank of Silicon Graphics terminals, I’d be sweating bullets,” said Van Vliet.

Even Industrial Light and Magic isn’t immune to these concerns. “We may hold a dominant position in the marketplace, but we are not facing any different pressures than any other player in the market,” said ILM President Jim Morris. “The profit margins are traditionally quite low in this business. You don’t have a lot of headroom for making mistakes.”

For a smaller player like Available Light, where the staff fluctuates from 10 to 30 depending on the workload, staying profitable means forgoing expensive equipment and instead keeping just five Macs. Though Macs can’t do everything that Silicon Graphics terminals can, such as three-dimensional effects, the gap is closing fast, Van Vliet said.

Van Vliet points to Digital Productions, which in the early 1980s used a $12-million Cray supercomputer. The effects produced on the Cray now look primitive next to Mac-based effects, and Digital Productions is no more.

Like Van Vliet, Pete Kuran, president of VCE Inc. in Sylmar, argues that many filmmakers have become so enamored of technology that they overlook old-fashioned, less costly effects.

For the Robin Williams movie “Toys,” for example, VCE could have digitally removed a pyrotechnics supervisor who inadvertently appeared in 20 seconds of film for about $20,000. But Kuran suggested an optical approach, using a stock explosion to mask the technician. It cost $1,000, and they got “a better-looking shot.”

And while there’s been much fanfare surrounding the concept of “digital back lots”--computerized background images such as city streets and crowd scenes--some argue that it’s not always the best answer. To digitally simulate a concert audience in the TV movie “The Judds” would have cost at least $25,000, said Bill Taylor, director of photography at Illusion Arts in Van Nuys.

Instead, Illusion Arts used the old method of moving about 100 extras around an auditorium and filming them, then making a composite of the shots--a solution that cost about $5,000.

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That’s not to deny the opportunities afforded by computers. Many effects company owners cut their teeth at ILM with work on the “Star Wars” films, which marked a huge breakthrough in visual effects with their stunning application of motion control equipment. After a rash of less successful effects-based movies, a lull ensued, and it was only when the digital wave hit in the late 1980s that the impossible became possible in movies such as “Die Hard,” “Terminator 2” and “Cliffhanger.”

Once relegated to a handful of films, visual effects have become commonplace in movies, TV shows and commercials. Directors now employ effects companies to add visual touches that often go unnoticed by the viewer, such as turning day scenes into night and even inserting weapons into actors’ empty hands. As new capabilities develop, the demand for effects work continues to grow.

Encouraged by that growth, some firms have started with help from deep-pocketed investors, such as Eastman Kodak’s Cinesite and IBM-backed Digital Domain. Movie studios are also getting into the act.

“We find it hard not to be in this business these days,” said Ken Williams, Sony Pictures’ executive vice president who oversees the studio’s Imageworks unit. “You can’t necessarily make the film you want to make, when you want to make it, when you’re hostage to outside vendors.”

Plus, Williams said, Sony Pictures can spread its Imageworks investment across its location-based entertainment and video games businesses, and use the digital effects unit as a test lab for the studio’s Japanese parent, consumer electronics giant Sony Corp.

As a result of the increased competition, some observers predict many mid-size firms will be squeezed out by their better-funded rivals and low-cost upstarts.

But others say the danger is just as great for the firms with moneyed interests behind them. “Pretty soon,” said Van Vliet, “investors are going to say, ‘OK, where’s my money?’ If you’re not making a profit, they’re going to go away.”

There’s also more pressure on the large firms to maintain cutting-edge technology to win work on big-budget films. Richard Edlund, Boss Film’s president, said he tries to delay equipment purchases until technological advancements warrant the investment. But, he said, “a lot of times you’re not afforded the opportunity because you’re working on something and you need it now.”

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So to offset the volatile film and TV work, some companies are turning to new businesses. Boss Film has a new video game division. Dream Quest Images in Simi Valley, which just won an Emmy for NBC-TV’s “Earth 2,” is mulling joint ventures to produce video games and CD-ROMs.

But with the upheaval many believe is inevitable in the effects industry, company owners say it’s only the love of their craft that keeps them going.

“It’s an insane business to be in,” said Van Vliet. “If you’re doing it for the money, you wouldn’t be doing it. But I can’t think of anything else I’d rather be doing.”