Last week I got word that Double Negative Singapore is laying off 80 staff — mostly foreign, senior personnel and artists. I also heard that Dneg London was laying off an additional 40 staff — at the same time its Vancouver location is hiring. While the company is more talkative about recruiting talent to Vancouver than its layoffs in Singapore and London, the word is that Prime Focus (who merged with Double Negative in 2014) is “restructuring” Dneg Singapore to a Stereo Conversion house. Which is odd as Prime Focus already runs a successful Stereo Conversion business in India.

This comes to many surprising as the Singaporean Dneg office was never tired of saying that not only they have long term plans of staying in Singapore but also they are training local talents. On the company’s webpage we can find a blog post advertising Dneg Singapore’s new Fast Track Training Program. The picture shows Dneg artists on their first day with their “nice Godzilla hoodies!”. Hoodies they most likely had to pay for, but the weird nerd-fashion side business of the VFX industry is a whole different matter.

What’s more interesting is that beside this program, Dneg Singapore showed no real effort to train or promote talent or take on regional work. Ex-employees told me that this program was intended to run for 6 weeks in two batches but only lasted for 2 weeks. Then a lot of juniors were let go shortly after the training prematurely ended. Those who weren’t let go returned to Matchmove. ILM in contrast has the jump program, is constantly developing local talent and also picking up regional work such as the Chinese movie “The Great Wall”, which also involves Matt Damon.

Dneg Singapore had hired foreign talent for every movie. The bulk of the Singaporean employees had been in minor roles such as Roto, Prep and Matchmove for many years with only a few making it to the promised land. By now you might ask why this is a problem? Well it isn’t really. But for the Singaporean government it is. Big foreign companies in Singapore (especially when they are subsidised) have to make sure to train local talent. There are reports that MOM (Singapore’s Ministry of Manpower) has this year identified 38 firms as requiring “closer scrutiny”, as these firms have been found to have a weak Singaporean core, and weak in commitment to fair consideration in hiring and developing Singaporeans. We don’t know if DNeg Singapore was one of them. But the rumor is that the government bond that brought Dneg to Singapore in the first place will soon be up for renegotiation. And who knows if the new deal will be met with the same favorable terms. By keeping the Roto, Prep and Matchmove team in Singapore (which consists mostly of local talent) under the guise of Stereo Conversion for the time being, Dneg Singapore avoids to pay a huge fine for breaking the bond nor are they violating any other government rule.

In recent years, the UK has overtaken Canada to be the top non-US country for the filming of Hollywood films. But Canada stays with its own very attractive subsidy system a very tough competitor to the UK. If a film production wants to qualify for a country’s subsidy program they not only have to do the principle photography at the subsidy location but also the post-procution.

Now with the Canadian dollar making record lows, Canada is getting more attractive for Hollywood and it therefore just makes sense for Dneg to shift and re-hire those artists in Vancouver. The VFX and film studios can now get everything up in Canada at a discount — even without those subsidies. In the good old days, Hollywood was shooting “Ben Hur” and “Cleapatra” in Italy mostly for the great conversion rate alone. Also, if one thinks that Western artists can be happy about returning to the West should think again. Singapore has very favourable tax rates. Considering that most senior artists will make roughly the same in Vancouver they would have to suffer a huge pay-cut under Canadian taxes.

And we should not forget Prime Focus’s and Double Negative’s announcement of the companies next expansion plans: the building of a brand new, world-class VFX facility in Mumbai. The goal of this office is to have the same exacting standards and pipeline tools as Dneg’s facilities in London, Vancouver and Singapore. Maybe so exactly that Dneg’s Singapore location might be completely redundant. Singapore subsidies don’t seem to be competitive enough anymore and Dneg seems to be ready to pull out of Singapore completely. For now they are merely leaving one foot in — just in case the tide turns somehow.

While it is of course always very unfortunate to see VFX artists losing their jobs — Dneg’s actions are from a business point of view also understandable. Double Negative just like every other VFX Studio is fighting for its survival these days. To my readers this kind of news should really come as no surprise. I am documenting in my book in great detail the race to the bottom and where the VFX industry might be headed. But when looking at Prime Focus year end results (released the day after Dneg’s layoffs) we can find more reasons for Dneg’s need to act fast. According to this paper Prime Focus’s year ended with a net loss of about $45 million USD. Point 13 of the same document is also interesting as it states: “On July 1, 2014, the group [Prime Focus] acquired one of the largest companies in the VFX business “Double Negative Holdings Limited” (“Double Negative“), pursuant to a Share sale agreement dated June 25, 2014. As a result of this transaction, Double Negative has become a wholly owned subsidiary of PFWNV with effect from 1st July, 2014…..”

This suggests that the announced merger between Prime Focus and Double Negative in 2014 was nothing but a clever marketing stunt. It seems that in reality Double Negative has been bought out by Prime Focus. Could it really be that this takeover got sold to the media as a merger only to not tarnish Double Negative’s brand name because this could give Dneg the stigma of another failed VFX company?

In contrast to Prime Focus’s $45 million loss, Disney is doing billions in profits. Lucasfilm’s Star Wars is predicted to make $2 billion at the box office this year. We can only guess how much more money Disney will make with its real business: Its IP licenses. Making VFX became a zero sum game. In my book you can find out how even the box office is not the business many people think it is. The real money made in the movie business today is with IP licenses. To me it seems that these days the only real money in VFX is to sell nerd T-shirts and hoodies to its production crews.