Opens f/x studio with T2 director James Cameron

Despite its recent and highly visible problems, IBM earlier this month finally announced its plans to build a visual effects company and digital production studio.

The new facility, rumored to involve a $20 million investment from IBM, is called Digital Domain and is being developed collaboratively by IBM with film director-writer-producer James Cameron, Oscar-winning special effects and character creator Stan Winston, and Scott Ross, former head of special effects for Industrial Light & Magic, a division of LucasArts.

If all goes as planned — contracts had not been finalized when Digital Media went to press — Digital Domain is expected to be in full production as early as summer. Winston and Ross will serve on the board of directors of the new venture, to be based in West Los Angeles, with Cameron as chairman.

Part of the plan. IBM will be equally represented on the Digital Domain board. According to Lucie Fjeldstad, IBM vice president and general manager of multimedia, who was instrumental in orchestrating the development of the digital production studio, it has yet to be determined who from IBM will represent its interests in this venture. It is likely, however, that she and Kathleen Earley, director of multimedia alliances for IBM, are in the running for the job. Both of them have spent more than two years developing a business plan and market strategy for IBM to enter into the DPS market.

Ross, who came to IBM and proposed the collaboration after he had met Earley at an IBM focus group more than a year ago, will handle the day-to-day affairs of Digital Domain as president and CEO. Cameron and Winston are expected to define the company’s creative vision and strategic direction.

No role in creative. According to the partners, it is likely that some employees from IBM will come on staff at Digital Domain to help fulfill the company’s technological vision, but the group emphasized that IBM Corporate in Armonk, NY, will not play a role in determining the creative direction of the new studio.

Equity in the company is to be divided among IBM, Cameron, Winston and Scott. IBM owns 50 percent, and the three entertainment industry figures own equal shares of the remaining half. Partners say that profits will be shared as well.

HEAVY ON SMOKE AND MIRRORS, LIGHT ON PLOT

As with many blockbuster special effects events, it was initially easy to get lost in the stars and glitz surrounding the Digital Domain announcement — held at the Four Seasons Hotel in Los Angeles, with CNN filming in the background — and miss the lack of real content or direction for this particular joint venture. But once you get past the smoke and mirrors, at the bottom of Digital Domain is IBM scrambling for a turn-around strategy in the wake of its crushing losses.

Throughout the announcement, both groups involved — IBM and the creatives — talked about the “perfect synergy” between the respective partners and evangelized a “ground-breaking” vision for Digital Domain and the future of digital technology. It’s too bad the two groups weren’t really discussing the same vision.

Facility vs. studio. Cameron and Winston pushed the notion of Digital Domain as a sophisticated, fully equipped digital production facility, while Fjeldstad and Earley drove home IBM’s dream of creating a new Hollywood studio, with IBM of course owning the hardware and software tools developed at the digital production studio — as well as owning digital rights to the content created at the studio.

Ross, who was and will remain in the unenviable position of acting as liaison between these two groups, did not say much during the press announcement.

SEPARATING REALITY FROM HOLLYWOOD HYPE

Initially, Digital Domain will be a production service facility, focusing on creating special effects and high-resolution moving images for commercials, movies and location-based entertainment attractions. (Members of the Digital Domain team declined to comment on prospective projects at this time, although they did say negotiations were in the works for several different ventures.)

According to Cameron, Digital Domain will provide an environment where even film directors who make only dramatic movies — i.e., sans high-tech effects — will come to use digital technology to avoid the great expense of a location shoot.

As an example, he cited Martin Scorsese, a well-known director of dramatic films such as Taxi Driver and Cape Fear. If Scorsese wanted to do an epic film on Napoleon, says Cameron, he might go to Digital Domain to create computer-generated backgrounds of “castles and hordes of cavalry” which would then be digitally composited with scenes shot with live actors.

IBM wants a film studio. In contrast, Fjeldstad focused on Digital Domain as Hollywood studio. She says the real goal of the DPS is to get out of the digital production facilities business as soon as possible and begin developing original content for new entertainment media and “next generation” software and hardware tools for use among the entertainment community.

Fjeldstad and Earley both said that IBM expects Digital Domain to produce tools that in the long run have benefits beyond the film industry. According to both, IBM hopes the DPS will generate sophisticated visualization products that will service the medical profession and the construction industry, too.

EVOLUTION MAY REQUIRE REVOLUTION

In addition to its desire to develop and own intellectual property, IBM clearly wants to acquire the ownership and distribution rights to as much digital computer technology as possible. And in the proposed Digital Domain partnership agreement, IBM could potentially do just that — if the company ever creates any tools.

Bizarre and ambiguous. The proposed agreement includes a bizarre and highly ambiguous term that states that ownership of new software and hardware products developed at Digital Domain will be decided by Ross on a case-by-case basis, with IBM getting “first right of refusal.” In other words, it is up to Digital Domain’s president to determine how long a technology developed at Digital Domain should remain proprietary and when to turn it into a commercial product. Once the decision to go commercial is made, IBM gets first chance to acquire the technology. No details were available as to how this might work if all parties involved didn’t agree with Ross’s timeline.

In addition to tools, IBM also wants to acquire the digital rights to content created at Digital Domain, so that it can produce interactive media titles and video games. Although neither Fjeldstad nor Earley would comment on the subject, it is possible that any such acquisitions by IBM might make their way to IBM’s newest multimedia division, Fireworks Partners. Fireworks’ charter includes the creation and distribution of interactive content, among other activities related to multimedia (see Vol. 2, No. 9, p. 15).

Cameron and Winston, on the other hand, seem to have a vested interest in keeping Digital Domain a digital production facility that produces visual effects. Both men already own entertainment-based companies that generate original content.

Cameron, who last spring signed an exclusive five-year, 12-picture deal with 20th Century Fox, owns a production company called Lightstorm Entertainment, which is based in West Los Angeles — just a few blocks from a space under consideration for Digital Domain. Similarly, Winston is the founder of a visual effects film company, Stan Winston Productions. Both companies would be potential clients of Digital Domain.

And since original content actually would be generated at both Cameron’s and Winston’s other studios, IBM might potentially be left without access to any intellectual property that its two creative partners generate.

ACCESS TO MONEY AND TECHNOLOGY

Under this scenario, the win for Cameron and Winston is obvious. The two have access to IBM’s seemingly deep pockets — if you believe the figures being bandied about the entertainment community and computer industry — as well as access to the most advanced digital technology in the world, regardless of computer platform.

As announced, Digital Domain is platform independent and offers the creative partners freedom to work on any computer system, including Silicon Graphics workstations and Apple Macintoshes as well as IBM systems. In fact, Digital Domain is not even obligated to use digital technology. According to Winston, Digital Domain will still use “duct tape and miniature creature models” — traditional methods for creating a special effect — when it is appropriate. “This is not about who has the biggest computer,” says Winston, “it’s about the creativity behind it.”

IBM’s PVS gains star quality. For IBM, however, this venture might very well be about who has the biggest computer. The IBM Power Visualization System, or PVS, which at it low-end configuration costs

more than $320,000, is a RISC-based computer system that has parallel processing capabilities for faster rendering times and provides gigabytes of storage space. Originally created for the scientific visualization community, the PVS is now catching on in the entertainment community.

IBM is making sure of it. In an obvious attempt to steal mindshare away from the film industry’s long-time favorite, Silicon Graphics Inc., IBM has been making the film industry aware of its new tools through equipment donations and technology trade agreements with companies such as Wavefront and Pixar. Both are rumored to have received Power Visualization Systems at no cost in exchange for commitments to produce technology that runs on the system.

IBM competes with customers. IBM also has some paying customers, including some of the largest established visual effects studios in Hollywood, including Boss Film Studios, R/Greenberg Associates’ Los Angeles office and Laser-Pacific Media Corp., a post-production company. Ironically, if Digital Domain opts to install a PVS in-house, it will compete with the companies that actually paid IBM for PVS machines in order to gain an advantage over the many DPS facilities now in existence in Hollywood. According to Fjeldstad, it’s not a conflict since Digital Domain’s goal is to get out of the effects business and create content and products.

It is important to note, however, that Fjeldstad’s vision of a Hollywood studio would be a near impossibility under the existing digital production facility plan for Digital Domain, which would place the DPS under constant production pressure to finish computer-generated visual effects for content projects generated outside of the company.

IS IBM STAR STRUCK WITH ITS OWN CREATION?

During the Digital Domain announcement, both Fjeldstad and Earley of IBM seemed bedazzled by their nearness to Hollywood. When questioned about what she sees as the big win for IBM, Fjeldstad replied, “Who can know what is next? This is a revolution.” She also made the statement that “this venture is more of a journey.”

But IBM is not exactly in a comfortable position for the ride.

To start, IBM’s involvement in Digital Domain has obviously jeopardized the good will of some of its paying customers. Digital Domain clearly trespasses on the established market of some of its newest clients — not a great idea for a company that is trying to transform its image after massive job cuts and earning last year the dubious distinction of posting the largest single-year deficit for any U.S. company in history.

It’s a little late. In addition, from a strictly practical business perspective, it is a little late for IBM — as well as Scott, Winston and Cameron, for that matter — to be getting into the DPS game. As reported regularly in Digital Media, every major movie studio in Hollywood, as well as many independent production companies, has either established or is planning to build in-house digital production facilities.

According to one Hollywood insider, Digital Domain “is going to have to hit the ground running in order to stay alive.” It remains to be seen if the company can do that.

Is cachet enough? IBM also needs to take a hard look at what it really gained by involving itself with Cameron and Winston. There is absolutely no question that both deserve the accolades laid at their respective doors. They are both extremely talented and powerful forces to reckon with in Hollywood and both have proven that they understand what motivates a huge majority of consumers to pony up their money at the movie theaters, with hits such as The Abyss, Terminator, Alien and Terminator 2: Judgment Day.

Certainly IBM has achieved a sort of Hollywood cachet through its alliance with both of them, but that is not going to help IBM or Digital Domain survive if there is no substance behind the relationship. The two must be more than high-paid figureheads, who use the facility as their personal digital technology lab.

Potentially in Digital Domain’s favor is Ross, who during his tenure at ILM worked tremendously hard to grow the company. He is credited with increasing the staff from 100 employees to more than 300, expanding the company internationally, introducing digital-based high-resolution film technology, furthering the use of computer-based 2D and 3D imagery and increasing revenues by three-fold.

If he can somehow bridge the gap between Cameron’s production facility of today and Fjeldstad’s Hollywood studio of tomorrow, Digital Domain might live longer than IBM’s initial investment and become a viable new entertainment studio. If not, Digital Domain may be destined to become a high-tech training ground for Hollywood directors who come to learn digital production on the back of IBM’s investment, then leave to do their real work somewhere else, unencumbered by rules about who owns what.

Janice Maloney