Digital Domain, the award-winning effects company behind such movies as “Tron: Legacy” and the “Transformers” films, recently touted its new animation and digital arts institute as a “pioneering public-private partnership” with Florida State University’s College of Motion Picture Arts.

The project has created an uproar among visual effects artists in Hollywood, who fear it will encourage students to work for free at Digital Domain’s planned visual effects studio in West Palm Beach, Fla.

The Digital Domain Institute, which offers a three-year diploma in digital arts along with a bachelor of fine arts from Florida State University, enables students to gain real world experience by working for college credit on some of Hollywood’s top films.

Currently based at temporary offices, the institute will operate out of a 150,000-square-foot educational and digital production facility that is scheduled to open by January 2015. The site, which will include a visual effects studio, will be built on land donated by the city of West Palm Beach, which issued $15 million in tax-exempt bonds to help finance the project.

Students pay tuition of up to $28,000 a year and can receive course credit through internships at Digital Domain — at least 150 hours over two semesters — that are voluntary. John Textor, chief executive of Digital Domain Media Group, said tuition fees are well below what other private schools charge.

“What’s interesting is the relationship between the digital studio and the college,” Textor said in a recent presentation to investors. “Not only is this a first ... but 30% of the workforce at our digital studio down in Florida is not only going to be free, with student labor, it’s going to be labor that’s actually paying us for the privilege of working on our films.”

Those comments have triggered a flurry of angry comments on Twitter and blogs from visual effects artists who view the move as a misguided effort to lower costs at the expense of the people who create dazzling digital effects that have become increasingly important to the commercial success of movies.

“It’s a reactive and myopic plan to a future that should contain far better solutions for everyone’s bottom line — the studio’s, the shop’s and the artist’s,” said Dave Rand, a veteran visual effects artist.

Another visual effects artist, who asked not to be identified for fear of damaging his career, said: “It’s a big topic of discussion ... actually the perfect analogy for the industry. We sell dreams. We create fantasy. But in the end, it’s smoke and mirrors.”

VFX Soldier, an anonymous blogger who operates a widely read website about the industry, also expressed outrage.

“A major [visual effects] company is now turning the routinely accepted practice of free labor into a major part of its business plan,” the blogger wrote in a recent post.

Textor said his comments were taken out of context, saying the institute would provide much-needed practical experience to students that would help them find jobs at a time when more visual effects work is moving offshore.

“Find me another visual effects company that is as committed to growing jobs in North America as Digital Domain,” Textor said. “If this is taking advantage of kids, I wish somebody would have taken advantage of me when I was in school.... For $28,000 a year, you get an FSU degree and get to work at one of the leading visual effects companies in the world.”

Digital Domain, founded in 1993 by director James Cameron and other investors, also operates facilities in Venice, Calif., and Vancouver, Canada, and it recently opened an animation studio in Port St. Lucie, Fla.

Florida State University officials, who will administer the institute, defended the unusual partnership with Digital Domain.

“Our mandate is to prepare students for successful careers in the motion picture industry, but our vision goes beyond that to give students opportunity to work on blockbuster films alongside the world’s top digital artists,” Frank Patterson, Motion Picture Arts dean at Florida State University, said in a statement.

richard.verrier@latimes.com

Times staff writer Rebecca Keegan contributed to this report.