(Chinese Version)

From May 6th to 10th, Deng Lijun, popular Taiwanese diva singer Teresa Teng (Li-jun Deng), who had passed away 22 years ago, would “re-appear” on the stage in Taipei.

The show, titled “You Come Back Again: Teresa Teng Magic VR Concert”, attempts to bring her back to “life” by integrating facial expressions, capturing gestures, centering around the imagery “butterfly” and combing advanced special effect with special stage design.

The company behind the “rebirth”, however, is a special effect company called “Digital Domain”.

Established by well-known director James Cameron in 1993, Digital Domain participated in the production of several popular films, including Titanic, The Curious Case of Benjamin Button, Dead Pool, Pirates of the Caribbean, Transformers, etc. and its reputation is only second to Industrial Light & Magic.

Turning "virtual human technology" into an independent business model

“In 2008, Digital Domain already applied virtual human technology in the film The Curious Case of Benjamin Button,” Xie An, CEO of Digital Domain, told TMTPost. He revealed that 80 per cent of the protagonist Benjamin Button’s ageing process was produced through its “virtual human technology”.

Generally speaking, well-known special effect companies all have their own special technological barriers and specialized fields. While revenue margin in the film industry is generally only 20 per cent, it’s only 5 per cent in the special effect industry.

In this case, how did special effect companies manage to turn around the situation? “What a shame that a company as experienced end up only making films!” Xie thought, when he was first appointed as CEO of the company.

“I was still young. As the saying goes, a new broom sweeps clean, so I also wanted to show everybody that I could expand new markets for the company,” he recalled. Statistics suggest that Xie, born in 1984, entered Digital Domain in 2013 as Executive Vice President when he was just 30 years old.

Xie An, CEO of Digital Domain

At that time, Xie was rather too ambitious. For a while, he even called in all the managers and executives and together they considered if they could make games, films, TV series, or even create original IPs.

However, this was no easy task for a company that had been primarily focused on special effect for over two decades. “To a degree, I was like ‘the foolish old man who wanted to remove the mountains. I was so naïve,” he recalled.

One day, however, a senior executive reminded him that it was more appropriate to utilize the company’s resources in making “virtual human”.

During a rock music festival (called Coachella) in 2012, Digital Domain brought Tupac Shakur, popular American rap singer who’d passed away two decades ago, to “life” through its holography technology without warning, which brought the whole audience to tears.

Digital Domain referred to the business as “virtual human technology” and even divided it into independent business model, believing that it could determine the next direction of its development. To be short, “virtual human technology” manages to simulate virtual human image, including hair, muscle, skin, body gesture, etc. through holography and CGI technology with the help of visual effect artists and lighting engineers.

Xie told TMTPost that Digital Domain was the only company that could apply “virtual human technology” to practice. It is also thanks to Digital Domain that the late Paul Walker was able to “appear” in the film “The Fast and the Furious 7” say goodbye to his fans.

In 2013, Xie decided to apply “virtual human technology” in the Chinese music circle. During the “Jay Chou Opus Jay World Tour 2013” at Taipei Arena, Teresa Teng and Jay Chou together sang a couple of songs across time and space, including her own classic track How Would You Say and Jay Chou’s, including Wordly Tavern and A Thousand Miles Away.

The duet across time and space

Digital Domain even established a special “Virtual Human Agent Company” and has signed virtual portrait right with Teresa Teng and Anita Mui’s family. However, Digital Domain’s ambition is not limited to concerts. In its Performance Report 2016 issued on March 20th, Digital Domain revealed that it was considering applying Teresa’s image in films, TV programs and entertainment shows.

“If we can really combine virtual human technology with holography systems and images, wax museums will no longer exist in the future, ushering in an era of virtual human,” Xie predicted.

Can fan economy save the commercialization of VR?

Besides “virtual human technology”, Xie revealed to TMTPost that VR was another area Digital Domain was focusing on. According to the annual report, “VR and 360-degree video” has become the second biggest business of the company.

As a matter of fact, Digital Domain even invested nearly $180 million in the VR sector to acquire VR companies (including Immersive and Micoy) and related patents.

During the NAB SHOW held by National Association of Broadcasters at the end of this April, Digital Domain launched its VR content to terminal solution portfolios, covering processes including innovation, production and distribution.

Based on visual effects, Digital Domain integrated hardware, software and cloud services and included 360-degree cameras, live streaming technology, post-production and cloud-based VR distribution platform into its solution portfolios. In addition, Digital Domain also launched its VR content-based APP in the North American market. Besides VR contents, the APP also distributes contents from other platforms.

The platform strategy and the introduction of the above solution portfolios, Xie said frankly, to some extent, had to do with the problem occurred in the VR streaming of Wang Fei’s concert last December.

Since the number of tickets was limited, the concert was ridiculed by Wang Sicong, saying that “whoever bought the tickets are fanatic”, bringing the concert in the teeth of the storm.

Therefore, streaming should have been able to make up their regrets. Digital Domain took up the challenge and recorded the concert with its high-resolution 360-degree cameras, VR cameras and Zeus. Together with Tencent Video, Whaley VR, Digital Domain VR live streamed the concert.

However, the audience didn't seem to be satisfied. “At first, it looks great. After the concert, however, I don’t think it’s worth 30 yuan at all,” a fan commented.

Digital Storm also felt wronged by some audience’s complaint. “It’s not that there’s something wrong with us, but that some distributors don’t have proper technology,” Xie explained.

Although VR streaming didn’t work out fine, Xie came to learn what business path Digital Domain should adopt. “VR film and TV series have to follow the path of paid content and VIP membership,” he said.

The decision to do VR streaming has much to do with its understanding of the Chinese market. Although mainland China’s film fans used to be envious of special effect films, their attitudes have changed over the years.

After a thorough research, Digital Domain found that while American audience preferred grand narratives like the end of the day or Batman, Chinese audience likeo idol dramas and romance stories better.

Although streaming platforms haven’t revealed their specific number of audience, Digital Domain’s performance report suggested that over 100,000 spectators watched the concert. Suppose the VR ticket fee is 30 yuan each, the total ticket sales would be around 3 million yuan. In other words, Digital Domain wouldn’t have much left.

The quagmire Hollywood special effect companies are caught in

In recent years, Hollywood special effect blockbusters has basically monopolized the global box office. However, while special effect movies are so popular in the box office, special effect companies are facing unprecedented survival dilemma.

According to Digital Domain’s 2016 annual report issued on April 26, Digital Domain earned 760 million Hong Kong dollars in 2016, but lost nearly 500 million Hong Kong dollars. After analyzing Digital Domain’s profit composition, we find that "visual effects production", known for high input and low profit, contributed to 610 million Hong Kong dollars and still accounted for the vast majority (up to 80 per cent) of its income. Besides, North America remains the main source of its income.

In fact, failing to make ends meet has always been a major problem troubling lots of special effects companies. In 2013, while Ann Lee won four Oscar awards through the film "Life of Pi" (2012), the film’s special effect maker Rhythm & Hues Studios was on the brink of bankruptcy. While the film won the Best Visual Effect Award, nearly 500 special effects production staff were protesting outside the awards ceremony for being laid off without warning.

Rhythm & Hues Studios’s staff were protesting outside the award ceremony (Source: variety.com)

Similar things have occurred to Digital Domain. In 2012, Digital Domain filed for bankruptcy protection at the Delaware Bankruptcy Court due to financial problems. In September 2012, Galloping Horse once successfully acquired Digital Domain. However, by 2013, Hong Kong-listed Ao Liang Group acquired the 70 per cent stake Galloping Group America owned over Digital Domain with 392 million Hong Kong dollars.

Although the company was changed from hand to hands several time and its share structure has completely changed, the industry status it has not face hasn’t changed and the contradiction between high production costs and limited earnings hasn’t been resolved.

Due to the long production cycle and high labor cost, a wave of bankruptcy occurred among Hollywood special effects companies from 2003 to 2013 and over thirty special effects companies closed the door.

Last year, not only China's box office suffered Waterloo, the same thing happened in the global box office. According to the"2016 Film Market Statistics Report" issued on March 22nd by the Motion Picture Association of America, total revenue growth of the global film box office slowed down to only 0.5 per cent, while the total number of new films increased by 8 per cent the same year.

Although the North American box office hit a record high of $ 11.4 billion, the growth owed much to the 1 per cent growth of North American consumer price index, based on MPAA’s analysis. However, total box office last year fell by 2 per cent in Europe, Middle East, Africa and other regions, but 18 per cent in Latin America.

Although special effect companies generally won’t divide the box office, the gloomy box office performance is certainly not a good thing for the special effect industry.

Today, a special effect scene of high demand is often completed by several special effect companies together, so they often have to adopt the same software and technology, leaving no Hollywood special effect companies with any competitive edge. In recent years, as Japanese, South Korean and New Zealand and other emerging special effects companies rise with relatively cheaper labor, the days when American special effects companies can rest easy has gone forever.

The challenge special effect companies like Digital Domain are facing right not is to find new breakthrough to turn the tables.

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[The article is published and edited with authorization from the author @Li Chengcheng please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.