Los Angeles Business Journal

Visual Effects Firm Sees Future in Diversification

ENTERTAINMENT: 3-D conversion and foreign markets lift Prime Focus. market By Jonathan Polakoff Monday, July 22, 2013

“It’s a very challenging business because of the cyclicality – that’s why we make recommendations of running it better as a business – more diversification so you’re not just waiting for the next big film,” Williams said.

Still, he said, for firms that have the capital to expand globally, there is plenty of opportunity.

“While there is some regional dislocation in the U.S. and particularly with California companies, overall the VFX business is a huge growth business,” he added.

Malhotra launched Prime Focus from a garage in his native Mumbai with the help of partners when he was 19 years old.

The company started as a postproduction services firm for Bollywood movies, TV shows and commercials. Its parent company is Mumbai-based Prime Focus Ltd., of which Malhotra is a large shareholder. Malhotra’s father, Bollywood film producer Naresh Malhotra, is chairman.

The parent company also owns Prime Focus Group, which does postproduction work for commercials and independent films, and Prime Focus Technologies, a licensor of content management software to broadcasters.

Prime Focus World is the largest of the three. It first expanded to London in 2006 to capitalize on a boom in postproduction work in the area due to generous tax incentives. It moved to Los Angeles in late 2007 to work on American studio movies. About 40 people work at the firm’s Hollywood headquarters near the 101 freeway.

Prime Focus also has 18 facilities in India that employ about 3,000 people, along with offices in Vancouver, Canada, and New York.

Bob Coleman, founder of L.A. effects talent agency Digital Artists Agency, said the international footprint gives the company the chance to benefit from a boom in overseas effects work as studios look to keep costs down.

“Prime Focus is unencumbered by the exodus of VFX work from Los Angeles,” he said. “They have a facility here but it’s a very small facility compared with their operations elsewhere in the world.”

It’s no secret that effects work is happening in places where the labor is cheaper and the governments are willing to offer financial incentives that California does not. Rhythm & Hues established offices over the years in India, Malaysia, Canada and Taiwan, along with its El Segundo headquarters.

But Rhythm & Hues fell prey to a cash crunch, even as the firm’s work on Ang Lee’s “Life of Pi” won an Academy Award.

Coupled with the collapse of industry titan Digital Domain some months earlier, the events led to a collective reimagining of how the effects industry could be sustainable. Both firms were purchased out of Chapter 11 bankruptcy protection for about $30 million.

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