In the wild world of high-tech special effects, a handful of upstarts are challenging the kingpins.
A handful of upstarts are challenging the high-tech kingpins
Last year, when producer Alan Marshall needed state-of-the-art special effects for his upcoming movie, Showgirls, he might have considered the usual suspects: Industrial Light and Magic, Pacific Data Images, Digital Domain, and the few other well-heeled companies that have come to dominate the field of Hollywood special-effects wizardry. But Marshall ended up passing over those ultra-high-tech top-tier companies in favor of Hammerhead Productions -- a four-employee start-up ensconced in a dreary, $525-a-month apartment in Burbank, Calif. Hammerhead didn't even own a computer, the primary tool of the big-effects companies; it couldn't afford one. Only by talking Marshall into kicking in an up-front payment of $75,000 were Hammerhead's owners able to lease a few computer workstations.
And yet even as some of the larger special-effects companies are cutting back in the face of stiffer competition, Hammerhead is taking off. It grossed $500,000 in 1995, its first year, and is now on track to a $1.5-million second year. The upstart company has even swung an ambitious deal that few of its far-bigger counterparts have managed: it is coproducing a full-length feature film, financing its share of the costs by donating its special-effects capabilities to the film.
In more and more industries, smaller companies are positioning themselves to compete with giant competitors by investing in low-cost computer technology. The neighborhood bookstore can instantly go global by building a site on the World Wide Web, for example; a small clothing manufacturer can tie its computer systems into those of huge retailers, allowing it to tailor its production to the shifting tastes of millions of consumers.
But the red-hot Hollywood special-effects industry has gone well beyond that stage: the start-ups that turned to computers to produce stunning effects that the giant studios couldn't match in-house have in many cases themselves become the dominant players, armed to the teeth with the very best in technology. Is there room for tiny companies to compete in that more sophisticated business environment?
The answer turns out to be a resounding yes. A growing army of "cybergnats" is stealing business away from the more established special-effects companies by eschewing the giants' high-priced staffs and state-of-the-art computers in favor of a more personal, guerrilla approach to technology and highly tailored, low-cost service. To the extent that the lesson applies outside of Hollywood, that's good news for little companies looking to muscle into an established industry -- even one packed with digitally intensive competitors. By the same token it should serve to warn today's successful technology-savvy small company that getting big may mean having to give up competing strictly on a technological edge.
Much has been written in recent years about the growing power of computer-focused companies in the special-effects industry. With the debut of George Lucas's Star Wars in 1977, interest in new visual technologies exploded. Formerly the province of in-studio model makers, computerized special effects began to transform the industry in the 1980s, starting with movies like Looker, Star Trek II: The Wrath of Khan, and The Last Starfighter. Today many of Hollywood's biggest hits, such as last summer's Mission: Impossible, Twister, and Independence Day, are effects-dominated movies.
With audiences, and consequently studios, hooked on special effects, huge wads of cash were suddenly being thrown at a handful of digitally sophisticated companies, led by George Lucas's Industrial Light and Magic (ILM). As had happened in the early 1980s with the computer industry, special-effects businesses -- for example, ILM, Pacific Data Images, Dream Quest Images, Robert Abel, Metrolight Studios, and Apogee Productions -- set up elaborate facilities and began hiring large numbers of software programmers. ILM alone employs more than 400 digital experts and 250 high-end computer workstations. All told, the digital-production business is growing at a rate of more than 25% a year.
But for the once-brash young companies that have been maturing into the industry's leaders, growth has created problems. The need to outshine the competition with the brilliance of their effects has forced companies to invest more of their resources into new computer-graphics machines from Silicon Graphics and Sun Microsystems that can cost upwards of $100,000 each -- not to mention software, which can exceed the cost of the hardware per machine. It's not unusual for the larger companies to invest as much as $30 million in hardware and software.
And that's not including the cost of the people who sit behind those machines. The insatiable demand for skilled technicians and graphic artists calls for salaries ranging from $50,000 to $150,000 a year or more, with computer-savvy graduates of film schools like the California Institute of the Arts being bid over like NBA prospects. Per-employee salary costs at Rhythm & Hues, a $30-million up-and-coming industry powerhouse, have more than doubled in the past two years. Salaries now constitute roughly 70% of expenditures at the West Los AngelesÑbased company, which last year won the visual effects Oscar for its work on the surprise hit Babe.
What's more, as the companies grow, they find themselves needing an ever-expanding cadre of managerial and administrative employees, who add mightily to expenses but don't produce product. At Rhythm & Hues, for example, a staff of 200 -- including everyone from lawyers who structure corporate alliances to publicists who keep the company in Hollywood's eye -- supports the 80 people who actually work on the company's computers. "You get bigger and bigger but the costs kill you," says Al DiNoble, a former executive with Pacific Data Images and Metrolight Studios who's now with Eastman Kodak Co.'s Los AngelesÑbased Digital Motion Imaging division. "If the next job gets delayed, you end up going through all the profits you made on the last one."
Competitive pressures have been exacerbated by the recent decision of major studios such as Sony and Warner Brothers to launch their own effects operations in-house. Dream Quest Images, a southern California company that won academy awards for The Abyss and Total Recall, was bought by the Walt Disney Company. Apogee and Robert Abel, which produced the groundbreaking Looker, have closed shop altogether.
In a modest, boxy industrial building in a working-class neighborhood of Van Nuys, Calif., Syd Dutton and his team of artists are reconstructing 16th-century Venice for the movie Honest Courtesan. On one wall hangs a "matte" (part oil painting, part computer graphics) of a Cardassian world from Star Trek: Deep Space Nine; on another a precise rendering of Albert Speer's grandiose vision for postwar Berlin, used for the television version of Robert Harris's Fatherland.
The idea of putting oil to canvas in this age of dazzling high-tech effects might seem anachronistic. But Dutton, an earnest and unpretentious man in his 50s, sees in the artistic roots of Illusion Arts Inc., his 15-person company, a critical niche that has made his business a key player in the evolving world of special effects. "A computer is not always the solution to a problem," observes Dutton, who cofounded Illusion Arts with partner Bill Taylor in 1985. "You don't get the range of feeling you get in oils -- or the happy accidents that lead to great images."
