New CEO Daniel Seah said he will lobby California lawmakers to create film incentives so that visual-effects work can stay in Los Angeles
For the past 20 years, Digital Domain has created on-screen magic by aging Brad Pitt backwards or sinking historic ocean liners, but a different kind of alchemy is needed to survive in the cutthroat world of visual effects.
After emerging from bankruptcy last fall, the Oscar-winning studio behind "Titanic" and "The Curious Case of Benjamin Button" finds itself with its second owner in less than a year — and it's looking to Asia for its salvation.
Hong Kong-based technology company Sun Innovation said last weekend that it had bought Digital Domain's former parent company Galloping Horse U.S. for $50.5 million. Reliance MediaWorks will continue to have a 30 percent stake in the company.
Rechristened Digital Domain 3.0, it also has a new CEO in Daniel Seah, who by his own admission has almost no experience in the world of visual effects or Hollywood. Instead, he boasts a resume heavy on investment banking and business development at companies like Barclays and ambitions to revive Digital Domain by focusing relentlessly on the most important emerging market for film.
"We saw this as a wonderful opportunity to combine the creative side of Hollywood with the Chinese market," Seah (pictured left) said. "The China market is a great bonus for us. There are great revenue opportunities, great margins and a huge marketplace of consumers."
Indeed, China is growing at a dizzying pace, eclipsing Japan last year as the second largest market for film, Analysts predict it will pass the United States as the largest source of box office revenue by 2020.
It has also worked assiduously to develop its own domestic market for film. Through the first half of 2013, the country's box office rose 36.2 percent to roughly $1.7 billion, with Chinese films responsible for more than 60 percent of those receipts.
However, Shea notes that many of these films still lack the technical polish of Hollywood offerings.
"The visual effects suck in China. It's really bad," he said. "They're trying, but we think the time is right for us to bring the knowledge and technology from the west to the east."
To that end, Seah said the company has already lined up its first major Chinese production, a big-budget historical romance called "1949." The film is directed by John Woo ("Mission: Impossible II"). and Seah describes it as the country's version of "Titanic."
In addition to feature films, Seah maintains that China offers opportunities to expand Digital Domain's commercial and gaming business, which the new CEO believes could rival feature films as the company's major source of revenue. Digital Domain made a stir at Coachella in 2012 when a "hologram" it created of the late rapper Tupac Shakur took the stage with Dr. Dre and Snoop Dogg. Shea said the company is looking at ways to apply that same technology to China's concert market.
Seah's plans extend beyond the People's Republic. The special-effects industry has been buffeted in recent years by a fixed bidding process that shrinks profit margins and studios' rabid pursuit of the kind of post-production tax incentives offered by countries like the United Kingdom and Canada. Because of those challenges, Seah believes it is critical for Digital Domain to diversify its sources of revenue.
He points to "Ender's Game," the upcoming futuristic adventure that Digital Domain co-produced, as a model for what he hopes to achieve. Seah said the company wants to field one co-production each year.
"'Ender's Game' is a milestone for us," Seah said. "We have received a ton of scripts and interest, and our team is just trying to figure out the next project."
Currently, Digital Domain has 500 employees and offices in Vancouver and Los Angeles. It will have a business development staff in China. Although more and more visual-effects work is leaving California for other countries that offer subsidies or cheaper labor, Seah said that he hopes to keep as many jobs as he can in the state.
"My No. 1 priority will be to save as many jobs as I can," Seah said. "Having said that, I have an obligation to turn this into the most profitable company in the visual-effects industry, and I have to be responsible to my parent company."
Seah said he hopes to persuade Gov. Jerry Brown and California lawmakers to expand the current system of tax incentives to extend to post-production work. He said that Sun Innovation has committed resources to lobbying the governor.
"We're moving people to Vancouver not because we want to," Seah said. "The real reason is our clients prefer it that way, so they can get rebates."
Although Seah comes from the world of international finance, not digital effects, he notes that he has been a board member of Digital Domain 3.0 since it was purchased out of Chapter 11. In that capacity, he said he was a close associate of his predecessor, former CEO Ed Ulbrich.
"I worked closely with Ed on every major decision since the bankruptcy," Seah said. "I was the bridge between Digital Domain and Sun and Reliance."
Seah is also surrounding himself with people who know the industry and Digital Domain's culture. As a sign of the importance of building both its features and commercial business, the company has promoted two veteran executives, Terry Clotiaux and Rich Flier, from executive vice presidents to presidents of the feature film and advertising and games divisions, respectively.
Seah has also been making the rounds to the people who write the checks in the industry. He said he has been reaching out to studios since getting the top job to let them know that Sun Innovation's purchase represents a new day for Digital Domain.
"We have a new parent company, so we have no more issues financially," Seah said. "The second message is that since I've become the new CEO, I've seen how important the artists are at Digital Domain, and I'm going to do whatever I can do to keep these great people and to try to save more jobs."