In a recent piece in Variety, David S. Cohen writes about the VFX industry and ‘The Walmart Effect”.

I flashed on something outside the entertainment industry: the WalmartEffect. For a supplier, getting a contract to sell to Walmart can be both the best thing to happen to a company and the worst. I think the relationship between the studios and the visual effects companies is moving in the same direction.

Suppose you manufacture widgets in Los Angeles, and Walmart decides to carry your widgets.Walmart buys in enormous quantities, so getting your widgets into Walmart is a boon.

But Walmart insists you cut your prices year after year. At some point, you can’t cut any more and keep your L.A. plant open. So you decide to move your manufacturing overseas. Do a Web search on “Walmart” and “hollowed out” — you’ll find plenty of articles describing this effect.

Hollywood isn’t a single buyer with monopsony power, like Walmart, but the studios are constantly pressing vfx companies to cut prices and schedules while demanding ever more complex effects, in larger quantities. And we’re seeing the same result: California’s vfx industry is contracting, and work is shifting abroad to regions with major tax incentives or to lower-cost regions such as India and Southeast Asia.

Jeff Okun, a vfx supervisor and chair of the Visual Effects Society, said, “The bottom line is that all studios are correct: It’s a business, and they’re obligated to get things for the lowest price they can get. That turns things back on the visual effects industry. We sold ourselves too cheap, and we didn’t put any emphasis on the artist; it was all on the technology. So the perception is ‘You’re a dime a dozen. If you won’t do it at my price, I’ll find someone who will.’?”

Okun calls it “a failure of capitalism” but doesn’t see a way out of it. Nor do I.

First off, I’m really grateful for David and Jeff keeping this conversation going. We need more conversation — and quite a bit more action.

Second, I love politics but I don’t want to get heavy into that topic right now – but let’s at least provide some balance. Let’s just talk about the successes of capitalism for a minute…

• That terabyte drive you can buy for $80?
• That DSLR you can shoot a movie with that costs $1500?
• That green screen with two softbox lights that costs $200?
• That suite of filmmaking and effects software you can rent for $90 a month?
• That quad-core computer you can buy for $600?
• The scriptwriting software you can get free? That free video hosting service that lets people around the world see your work? That free service that lets you talk to people around the world? That free game development engine?
• That book – edited by Jeff Okun – laying out industry standard practices for doing VFX?

That’s all capitalism, too,

We all see things through out own prism and it’s easy to forget the bigger picture, even when it’s right at our fingertips. Be honest – when you hear about the next generation RED camera or amazing DSLR, are you considering the stress it puts on Kodak and Panavision or do your thoughts wander to making your own movie?

I’m old enough to remember when the cost of entry to doing visual effects are $10,000 or so…and THAT was a huge drop in price from $100,000 or so and THAT was a huge drop from it costing millions and millions…ya know, way back in the 1980s.

I don’t think Cohen is totally off in the Walmart analogy but it’s a glass-half-empty view. Let me suggest one that I think is equally true but looking at this from a ‘glass half full’

Let’s call it ‘the Democracy Effect’.

This is what happens when ANY endeavor becomes open to more people. It’s especially noticeable for creative ones. It happened to music; big giant expensive recording studios gave way to killer, affordable home recording. It happened to photography; costly darkroom equipment and byzantine manual cameras gave way to Photoshop and hi resolution digital cameras on your phone. It happed to espresso machines and pottery supplies and book publishing and computer programming and golf and a ton of other things.

And guess what? You probably LIKE those changes, right? I mean unless you owned a recording studio or film developing facility those changes were nothing but good for you.

Again – not to get into the political debate but if we’re going to be honest, capitalism produced those democratic changes, right? Hard drives and computer processors didn’t get cheaper because of government edicts. If we’re being fair, they DID get cheaper in part – but not totally – because of outsourced, mostly Chinese manufacturing. There were other factors, such as improved engineering, smarter retail strategies and increased demand due.

Is the world better off for this as a whole? I think so, absolutely. Don’t you?

What’s a visual effects facility or artist to do? Well — don’t complain because the business opportunities aren’t the same as they were in 1999. There are plenty of great, amazing opportunities RIGHT NOW.  Take advantage

This doesn’t mean that VFX artists don’t deserve the same basic employment rights that the rest of the entertainment industry has. They do. But meantime, welcome to 2011. It’s awesome.