Sunday, September 09, 2012

Possible Bankruptcy Looming For Digital Domain - What Will It Mean To All Of Their Operations? Potential Silver Lining? And A Michael Bay Statement...

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With a recent filing with the SEC, Digital Domain Media Group states that they are defaulting on a $35 million loan now, bringing their now owing number to $51 million plus another $16 million in interest and penalties. But further than that, it also told the SEC: "An inability to quickly access additional sources of liquidity to fund the company’s current operating cash needs would materially adversely affect its financial condition and would require it to seek relief or protection from its creditors."

The local Florida newspapers are tearing up not only the leadership of Digital Domain, but also of their political leaders who bought into the glitz of having a big piece of Hollywood in their backyard. DDMG had received promises of $135 million in cash, financing, land and tax credits from Florida and the cities of Port St. Lucie and West Palm Beach. Apparently DDMG only had $6.6 million in cash back on June 30.

It seems that Digital Domain's film school built in cooperation with Florida State University will be able to continue operation. Says FSU's Andrew Syder (Director of Digital Media Programs): "We’re in bed with Digital Domain. But if Digital Domain went belly-up tomorrow, we’ve designed our curriculum so we can still serve our students. Our students wouldn’t be left high and dry."

The film school is unique in that it allows the $28,000 / year program students to work for Digital Domain while learning. That option may now not exist if a bankruptcy ensues. Hopefully that's not the case.

Many well known celebrities have been associated with Digital Domain over the years. The company's website still lists James Cameron and Stan Winston almost as if they are still involved as founders (remember this t-shirt from 1996 when they were working on AVATAR) - clearly that's not true with Cameron busy with Lightstorm Entertainment, his world breaking dives and other projects, and the sad passing of Winston in 2008. Dan Marino was also a very visible investor in the company.

Here's a statement from Michael Bay on Digital Domain:
"For those people and press asking: I stopped being an officer or director of the company over three years ago, and have not owned stock in the company for some time. I have remained a loyal client and supporter of the company however. It has amazing people and talent, and it still can be a great company! During this difficult time, my thoughts are with the great people I've had the pleasure to work with at DD."

I have also received word from someone who works for Digital Domain and it's not looking like there is much silver lining to any of this:
"Things are up-side-down here. It looks as though the In-Three Re-Vamping-Expansion is going to be a bust. Cuts are coming across the board."

In-Three was a top tier 3D conversion specialist that Digital Domain bought out in 2010.

SAME DAY UPDATE: I just received a great email from Barry Sandrew of Legend3D. In it, he passes on his comments about the state of the industry and DD itself:

"At issue: Here is a company, DD laying people off while another, Legend3D is hiring like crazy. The question is… which is indicative of the current state of the industry? My message is that the industry is alive and well. Florida was a very unfortunate anomaly that is not representative of the Industry. Lots of talented people, many that had jobs and some that were promised jobs, are unemployed today because of DD closing down their Florida operation. I know of at least one family that sold everything and was driving out to Florida for what turned out to be a non-existant job. But fortunately, these people do not have to be unemployed. Legend3D is hiring to meet an increasing demand for both our expanding 3D conversion business as well as our StereoWorks service that offers both 2D and 3D post production and VFX.

It's important that people understand… DD has historically been and continues to be an exceptional, if not iconic VFX studio. Indeed, the industry would be negatively affected if DD were not here. Legend3D has worked closely with DD on several projects, the most memorable of which was Transformers: Dark of the Moon. The cooperation and professionalism from their very talented artists and management was instrumental in making that project a success. I believe it's positive that they are currently in reorg mode. The downsizing will be very difficult for many people but it will likely mean the long term survival and a healthy turn around for DD."

I'm uncertain as to where this leaves Prime Focus and their licensing of Digital Domain's (In-Three) 3D conversion technology. I've reached out to someone I know at Prime Focus and we'll see if everything's good on their end. Hopefully it's full steam ahead for them and that this potential bankruptcy doesn't affect other companies and individuals.

**UPDATE, Sep 12: I've heard from my friend Bobby Jaffe, CSO and Vice Chairman of Prime Focus and here's his comment on the situation: "Our agreement with DD is a perpetual agreement and forever unaffected by any changes to the management or financial situation at DD."

A silver lining? Potentially. Those unemployed artists can perhaps take solace in the fact that there are other companies hiring - and hiring many. Legend3D for example is currently on the hunt for 150 compositing and depth conversion artists, rendering technicians, software programmers and data managers for upcoming projects that they have secured from three major studios. Their timeline for hiring? The next 3 months. Perhaps this is the opportunity that many have been looking for and perhaps some good can come out of this bad situation.

I want to firmly state my opinion on this matter: DDMG's demise has nothing to do with 3D or conversion. 3D Conversion is very much alive and thriving. DDMG's condition is due to over zealous leadership and decisions that were made by many (including politicians that should have known better) that has caused these events to take place. Best of luck to everyone involved - I hope that you will land with your feet on the ground in a timely fashion!

Sources: DigitalDomain | ShootForTheEdit | South Florida Business Journal | Palm Beach Post | TCPalm

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