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Digital Domain Rises Again

DigtialDomainDigital Domain, the pioneering VFX house co-founded by James Cameron, Scott Ross and the late Stan Winston, is re-emerging with a new owner after bankruptcy, according to reports by Variety. Last year, the U.S. branch of China’s Galloping Horse media company purchased 70 percent of Digital Domain’s visual effects business while the India-based Reliance MediaWorks bought the remaining percentage. Galloping Horse U.S., whose main asset was its stake in Digital Domain, was recently acquired by the publicly traded Hong Kong company Sun Innovation for $50.5 million. With its acquisition of Digital Domain 3.0, Sun Innovation intends to expand its reach, playing a significant role in the growing international film markets and developing new digital media experiences for consumers in entertainment, advertising, cultural and media environments worldwide. 

Digital Domain CEO Ed Ulbrich has been with the company since its inception, running the company’s commercials division, which Variety describes as “probably the only consistently profitable division the company has had since Ross, Cameron and Winston exited the company.” He’s now stepping down to move into a creative consultant role as Sun Innovation Executive Daniel Seah takes over as CEO. Ulbrich will remain as a producer on the Summit Entertainment sci-fi film Ender’s Game, of which Digital Domain has an equity stake. Based on a popular YA novel and starring Hailee Steinfeld and Harrison Ford, the film is scheduled for release this fall. 

Prior to this investment, Sun Innovation’s key businesses involved real estate and scrap metal, but the growing popularity of 3D films in China and other global markets made Digital Domain an attractive acquisition. A Sun Innovation filing from last June reports that the demand for 3D films has attracted more film studios and producers to engage in 3D films, which involves large production budgets for VFX products and, in turn, drives the rapid and constant growth of the VFX market. China’s Galloping Horse has a contract to use Digital Domain for all its visual effects for five years, and that contract remains in force. The Sun Innovation filing also states that the Galloping Horse/Reliance ownership implemented “a series of stringent cost-control measures” at Digital Domain, including the reduction in the number of unutilized production employees without jeopardizing the fluency of workflow; the dismissal of employees with unsatisfactory performance; and the implementation of stricter cost control on expenditures, such as equipment purchases and office supplies. The phrase “stringent cost controls” appears 10 times in the filing. 

Digital Domain’s recent feature film work includes Iron Man 3, Oblivion and the upcoming film Maleficent (starring Angelina Jolie). As the prices of big-budget blockbusters skyrocket for the major studios, the VFX industry has been under heavy pressure to cut costs. As a result, visual effects work has been rapidly migrating to countries like China and India, where skilled workers are much cheaper. This development will play a key role in Sun Innovations’ strategy for Digital Domain 3.0, as the company plans on having around 30 percent of its work with relatively low technological requirements gradually outsourced to China and India in the coming years.

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