September 13, 2012
MyOp | Matthew McManus
News reports of Digital Domain and the their financial difficulties of come to light in the last week. Their stock has dropped 80% in value in a mere week. John Textor, the CEO who managed their IPO was fired and then replaced with Digital Domain stallworth, Ed Ulbrich. The situation is dire, and one that could have been avoided. We in the VFX community are watching yet another LA based venture crumble. The issue though is not the rebates in Canada or lack of work - it is plain and simple mismanagement.
We all watched from the sideline as the newly vested company built new studios in Florida and Boca Raton. Lured to the states with tax incentives, lower wage workers, the studios at large expense to the local and state governments, but regardless of the tax breaks and or incentives, the cash outlay to manage the operation is large. Then came the foreign studios, all the while Digital Domain in Los Angeles was working on commercial and feature work driving the companies revenue. From out the outside, it did not make any sense. From the outside we could not see the value in the operations. From the outside, we saw well financed and well educated MBA’s driving operations to increase a share price and profit to its stock holders. There must have been a plan.
However, it is clear the plan was not well conceived. Business does not simply arrive once the studio is built, and we are still in the grips of a very reluctant economy. Whatever the revenue projections were they did not maintain to the level necessary to hold the operation together. From the outside it flew in the face of common sense, and in the end unfortunately common sense does in the end rule the day.
Digital Domain has shuttered its operations outside of Los Angeles and Vancouver. Over 500 employees have already lost their jobs. The studio has very little money left in the bank and a bankruptcy judge in Delaware has blocked the Chapter 11 filing and sale of the studio in that protection saying more time is needed to assess the damages to the creditors.
The situation of Digital Domain is not poor work. It is not from lack of work. It is not from lack of exposure. The persons who made the most money at the studio drove the company into a financial panic, which it may never come out of.
The studio has been around for almost 20 years. Many of our VFX counterparts and friends have been through the fire that is Digital Domain. It has been a proving ground for some of most talented artists, producers and engineers in the industry. The company has been founder of digital VFX and a Los Angeles icon. To watch its demise from the hands of someone so distant from the company’s origins is heartbreaking. We all hope for many reasons the company can find its way out. For the employees that are still there, for the VFX community in Los Angeles and the larger business community in Los Angeles. We will all suffer from its loss and we should all bond together for its success. And once we can see they have survived, maybe we can all take a silent but true step back. Realize there is something more than a share price and that the face of a company is not the investment brochure. Companies are built of humans, of families and friends. We are all students of capitalism, but that does not mean profit and loss regardless of the expense. There were people who knew for quite some time where the company was headed, and they choose to either ignore or deceive the condition of the company for their benefit - their profit. This most certainly could have been avoided. Let’s all keep our fingers crossed that can find their way out.