DreamWorks Lays Off 500 and Shutters PDI

This is horrible news, and my heart goes out to all those affected by it. I’ve known many people that have been in and out of DreamWorks over the years, though I’ve never worked there myself. When I started working in LA in 2005 there were three places doing full-length CG features: DreamWorks Animation, Disney Feature Animation, and Sony Pictures Animation. The other big ones were located outside of LA: Pixar in Emeryville, and Blue Sky in New York. DreamWorks was unique because it had also acquired PDI (Pacific Digital Images) a VFX house in northern California, in order to meet production needs for Antz. This was the time when studios were trying to replicate the success of Pixar. DreamWorks had several successful films (not all were critically acclaimed, but they were financially successful), and Sony Pictures was trying to compete by hiring producers from DreamWorks and some talent (directors, artists) from Pixar.

Theoretically, making your own CG feature was a sound investment. CG works in a pipeline, so you could constantly feed the pipeline with new stories and then they would cascade through departments. Everything would be under the control of the studio from start to finish.

This did not turn out to be the case. The other studios never quite got the knack of it, and even Pixar had a few movies pulled. Stories were often held up and retooled, which resulted in idle time for artists. It is not cheap to pay people to sit around and do nothing, so they would usually have training, or other things to fill time and enrich artists — also not cheap. The thinking was that they’d have skilled, educated, happy workers that were up-to-speed and ready-to-go as soon as the work was there.

The current school of thought is that an idle artist is expensive overhead that should be immediately cut. Rather than invest heavily in producing quality stories to keep the pipeline fed, it makes more sense to management to cut the artists. And why not? Historically, every company has been able to staff up to meet production demands whenever they needed to. There’s no real fear of missing a deadline because artists aren’t available. Some key people are kept on, and everyone else is a nomadic workforce that can be hired and fired at a moments notice.

With the exception of some smaller layoffs, Pixar, and DreamWorks, have been the most stable places to work.

Today DreamWorks announced 500, of the 2,200 people that work at the company, would be laid off, and the PDI offices in Redwood Shores would be shuttered.



From Variety’s reporting by Marc Graser:

“My time and my focus needs to be on making blockbuster films,” Katzenberg said during a call with analysts after announcing the re-org. “We have the people to do it. That’s where my energy is going to be focused.

“Feature animation is the core of our company. Getting our feature film business back on track is our number one priority.”

So what, exactly, was Katzenberg doing that distracted him for years leading up to this? All of the articles cite poor performance of films, and specifically call out Rise of the Guardians by name, but they weren’t all 2014 releases. Many of their films have been grossing more than their budgets.

Maybe part of the problem is management? That can’t be the case though because in November of 2013, Obama personally visited DreamWorks Animation in Glendale to give a rousing speech about how great the management at DreamWorks was. He talks about how much he wants to work for DreamWorks. Perhaps you would like to start at the part where Obama says:

At the time he made this speech I was immensely frustrated, and disappointed. Unfortunately, it seems that he believes these things about his friend, Jeffrey. No one told Obama that Katzenberg is a firm believer in outsourcing labor, like with the 2012 founding of Oriental DreamWorks. It’s not an anti-Obama stance, or an pro-USA-workforce stance. I am pointing out that this isn’t what the reality was at the time of the speech, and it’s not what the reality is now.

16 months after Obama’s speech, 500 people are to be laid off. 500 middle-class jobs this country needs.

Obama awarded Katzenberg the 2013 National Medal of Arts in a ceremony at the White House in July of 2014. Five months later, 500 people at his animation company are laid off.

It’s also worth pointing out that Jeffrey Katzenberg was a party to Ed Catmull’s “no-raid” agreement which stagnated wages in the industry. So obviously, Jeffrey has had quite an impact on the field of animation.

I am unconvinced that Jeffrey Katzenberg should be lauded for his achievements in the arts. I am extremely unconvinced that laying off these 500 people will rectify real problems at DreamWorks. A troubling sign of further layoffs is hinted at with the positive spin placed on Captain Underpants:

DWA also said “Captain Underpants” will be produced outside of the studio’s pipeline “at a significantly lower cost” with a 2017 release.

The “significantly lower cost” comes from hiring a small studio on a fixed bid, just like VFX work. I can’t find reference to which studio won this bid, or if bidding has even occurred yet, but this is not great news people should cheer. That is not stable, reliable work.

Like I said at the top, this is the kind of thing people were trying to get away from. People wanted to have total control over everything, and to have a production pipeline that could be fed with great stories. There might be a glut of employed, skilled talent right now because of all these layoffs, but how does this entice anyone to enter this field in the US? There’s no way that I would recommend to anyone that they pursue anything involving computer animation. Will schools see a decline in animation students? Will all the laid off people pursue other (sane) lines of work?

Maybe people will still push to get in to this industry because they dream of working at Pixar or Disney Feature Animation? After all, Frozen is an immense success so it’s not like it’s impossible for companies to justify keeping staff.

There’s also the software side of this. Many of these studios employ people to make custom software that handles tasks better than off-the-shelf software does. Software development is an enormous expense, and many have lost their jobs already. Will this stifle innovation in this sector? If everything’s about a film deadline, and not a facility pipeline, then what time is there to really get anything done? Where’s the money to get it done?

What if we’re in some terrible cycle where the homogenous, myopic business grads will run companies into the ground, and we’ll see staff positions in the US? Probably not, because that’s not what happened to the 2D animation industry. Better living through restructuring. Always be cutting.

In the future, all the companies will exist merely as licensing entities with starving artists tripping over themselves to win fixed-bids. The budget for production will be dictated by market research of all the preceding franchise reboot attempts, minus a percentage to get additional savings — the IP guy wants to get a yearly bonus after all. The real innovators will be the ones that figure out how to make money licensing IP to other IP licensers and return year-over-year growth. Thank god copyrights will never expire so we have plenty of time to continue to work towards this utopia.

I’d like to close with this, emphasis mine:

DWA made the announcement of the re-org after the stock market closed. Wall Street reacted fairly to the news, with the company’s stock rising more than 3% in after-hours trading.

2015-01-23 07:11:00

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