At the HPA Retreat a couple of weeks ago we caught up with Chuck Parker, CEO at Sohonet. We spent some time discussing current and emerging industry trends. Some of his insights were surprising, including the recent sudden drop in worldwide film production. Read on to hear more…
PVC: So I wanted to talk about some of the top trends happening in the industry. Let’s talk about virtual production first up:
There’s obviously huge excitement around it. Is it going to be a replacement for traditional VFX, or is it just a new tool and simply part of the solution?
Chuck Parker: That’s a good question. A couple of things: One, I think if you look at the last, let’s call it three years, we had the forcing function where everyone had an experiment with these things no matter what. Right before then The Mandalorian had come out and it was becoming quite a “thing,” because we had this massive climb in content between say, 2019 and 2021. Like a 20+% increase in volume of content. I think many people made these quick conclusions, “Virtual production’s better.” It should be cheaper. It should be quicker. And because so many people were running around in the marketplace, investing in it, and talking about it, and describing these new stages they were deploying, I think the world was drinking its own Cool Aid.
I think the practical reality is Virtual Production’s harder, right? I don’t think any filmmaker starts off with, “Hey, when I make this thing, I want to do it in a way I’ve never done it before. I want to use a workflow I’ve never tried.” So there’s that part of virtual production. And I will say that what I’ve seen from the periphery is that there’s a lot more planning in pre-production and pre-vis that has to happen to really make it work to be both cheaper and faster.
And very few filmmakers either have the knowledge and/or discipline to do it. Now, some people are doing it in spades, but at the same time, take the Lucas franchise. You have the Mandalorian, which is all virtual production, and then you have Andor, which isn’t. Both amazing content. I would suggest if you looked at either one of them from far, you wouldn’t be able to say which one was virtual production and which one wasn’t. Both produced on similar time scales, and I’m guessing—I haven’t seen their production budgets—similar budgets (I’m just guessing). I think the one big difference is the Mandalorian could be shot “locally.” And Andor in this case was shot in the UK. But I don’t know that you could say one is better than the other. So I think the filmmakers’ choices matter. Their style matters, right? I do think the promise is there that we can save money, but I think to get there you have to have the discipline.
On top of that, virtual stage space is somewhat limited. Let’s pretend that you have, I don’t know, a 26-week shoot. In weeks 18 to 20 you need a virtual production stage, so you dutifully go book it. And then something happens in your schedule…It is very likely because those virtual production teams are so expensive that you are unlikely to get in the next week—or the week after. Someone else has already booked it too. So that’s one of the challenges creating an issue, again the discipline has to be there to be able to hit your timelines to get into that stage.
PVC: Let’s talk a little about another big topic. Looming on everyone’s horizon is AI adoption. This last year we’ve already seen a situation where concept artists have had their jobs threatened by AI models like Stable Diffusion and DALL.E 2, and we’ve already seen the infancy of video generated from text, which has great potential for B-roll and the like. No one can fully predict where this is all going, just as no one could have really predicted social media and how that ended up working out. What do you see in terms of the first big areas where this is going to hit the media and entertainment sector?
Chuck Parker: That’s a really good question. I’d say a couple things. One, the doomsday scenario is probably not true in every industry, right? If you step away from media and you go to the law world…There was a view about five years ago that AI was going to come along on discovery and put all the lawyers out of work. The question came up, “How are we going to train lawyers if they could never do this first job?” The job of discovery.
What they’ve realized is something I think they call the iceberg principle, where you look at the problem as you see the market today and go, “If we solve these problems, then we won’t need these people anymore.” And what actually happens is that more of the iceberg is exposed and there’s more business opportunity.
So in that example, there have been bigger legal cases that people have gone after because it’s more cost effective now to do the big discoveries. Whereas before they would’ve said it’s just too expensive to do that. The same thing’s going to happen [in M&E]. There will absolutely be examples of labor being displaced. If you go ask most of the people in the room who are in the visual effects side, “Hey, if I could save you six hours a day in compute power, what would you do with it?” If there was a finance guy in the room, he’d say, “Let me save money.” The reality is almost everyone else in the room would say, “I’d get more detail, I’d get more bits, more hair, more this, more that.” And so I think this will be a way to reduce the cost of production to actually make the content that much better.
If you think about the evolution in the last, say, five years, we’ve seen “light” visual effects touch just about every TV show. If you think about the 2018 timeframe, there was TV which had no visual effects, all practical. The streamers at the time had mostly that kind of content. And then as they started making their originals, they started going, “Wow, we need to put actual visual effects in,” whether that’s just digital makeup or background scenes—very light touch stuff.
But today, in the 2,000 pieces of content that get made a year, visual effects is in just about everything. At all budget levels. So I think that’s what will happen [with AI]. I think you’ll see two things: I think you’ll see something like rotoscoping being automated by AI. And everyone’s going to say, “Oh, all the people in India are going to lose their jobs.” Well probably not, because they’ll figure out how to use that AI tool to make rotoscoping go that much faster. You’ll still need a human check at the end, but they’ll be able to do that much more, which means you’ll get more better visual effects at a lower cost in the production.
If we checked three years from now, I don’t think we’ll have fewer freelance artists. I also don’t think they’ll get paid more. There’s a different there. They have a somewhat—what do you call that? A systemic industry failure on their hands.
PVC: Let’s talk about career stability in general. We have a world with seemingly exponential growth and churn of technology. If you stop paying attention for six months, you’re out of the loop on half a dozen new technologies that affect you. In M&E we have a traditional studio system where people’s job descriptions are often based on specific union-assigned roles. Do you think there’ll still be the ability to specialize in the industry and stay in that niche?
Chuck Parker: I think you’re right in that we’ll have to constantly reinvent ourselves. I was talking to a studio exec in the production technology space last night over a drink next door and we were talking about Chat GPT.
And he’s probably my age, and he said, “Do I really have to reinvent myself again? I’m in my fifties. Can I get to the end of my career without doing that?” And the answer’s probably no. I know we’ve all said from the time we were actually at university or whatever, that it’s a lifelong learning journey and that we have to constantly learn new things.
I think the acceleration of that’s just going to get more extreme. I think there could still be many craft positions. On Monday you had Kathryn Brillhart get up. She’s the epitome of somebody who started off in one part of the industry—cinematography. She did amazing work and then people are asking her to help in other parts of production. And she was describing how she’s moved into visual effects supervision now and that kind of stuff.
And I think people who have a real passion about making and telling the stories are going to find ways to use all these changes to make their craft better. And for the few guys who are like, “Look, don’t move my cheese.” They’re probably going to pay the consequence.
And I’m sure unions will protect them. But at some point—think about it, the original concept of a VTR which is similar to the DIT, was someone to watch the VHS camera that was attached to the real camera so we could speed up looking at the thing without waiting for the overnight screen prints, right?
Somewhat of an antiquated concept, right? You would think in smaller shoots we could evolve around that. Now the reality is in a union world, that guy’s king. Yeah. Everything has to go through him. And meanwhile there might be technologies that could make video village that much more cost effective, efficient, all those things.
There’ll be those things where people don’t want to change, and I think we’re going to see that. We’ve always seen that. But I think we’ll see that over time somebody will invent some disruptive technology to, say, massively improve color grading or something like that. And there’ll be this slow transition of people who adopt it and make their color grading either that much better or that much more prolific in terms of volume.
And there’ll be people who go, “F— you, I’m not doing this.” But over time, if you don’t adopt and change with what’s happening, you’re obviously going to get left behind. So I think each person’s going to have to make their way. We don’t make black and white movies anymore. We don’t, we’ve all figured out how to continue to upgrade the craft.
I think the industry will get there. I think the majority of people will get there. I think people aren’t actually in this industry to make money. You’re in this industry because you have passion about storytelling. Even in my own company where we’re all technologists, right?
The guys who I hire, I can’t pay as much as Google, Apple, Facebook, etc. They all have such passion about our customers’ storytelling that they want to participate, even if they’re just doing the firewall, the remote collaboration tool, or their networking protocols. They want to be part of something that they think is special, right?
Rather than go work at a bank and make a lot of money.
PVC: That brings up another question. So we have a labor cycle where companies typically don’t have a lot of loyalty to employees, and then the employees don’t have a lot of loyalty to the company. Companies are resistant to paying to train employees who will just take their skills to a higher paying competitor. How do you as an employer deal with that cycle?
Chuck Parker: I believe in my heart of hearts that the only way to build a team is to have a good culture. And that culture is defined by what you think is important—the way you behave as a team and the way you operate as a team. Everything from compensation metrics—how people are rewarded—to non-monetary value: what the office culture’s like, how you behave.
Shit always breaks. How you behave at the worst moments for your customer, with your own team: Do you throw ’em under the bus? Do you set ’em on fire or do you prop ’em up and support ’em? I believe the contract with your team now has to be renewed constantly, right? So you want to provide a fair remuneration, a fair wage and everything else that goes around that.
At the same time, there has to be this constant two-way engagement, that both of you believe in the culture of this team that you have, right? Because when you think about it, the greatest opportunity for people to check out has been the last three years. All the quiet, quitting and all the other shit.
If you didn’t like where you worked, you could try to do the bare minimum and just drag it out until the consequence comes, right? The people who did that aren’t engaged with their team and culture. If you are, if you have a good culture and if you have the right rapport with team, then you wake up in the morning excited to go to work.
If you don’t have that, you’re the guy who lays in bed worried about what might happen. For me, when we think about our vision, even though we’re a technology company, it’s about revolutionizing the way storytellers create content. By making the collaboration more seamless and secure.
It’s a bold word, but the way I describe it to our team members—especially new people who are joining—is it’s what gets you out of bed, right? And if you have a shared passion and good team culture, and share your values and norms, then you’ll stick together and you’ll figure out comp.
If you don’t have that, comp doesn’t matter unless you’re really just going to pay stupid money. And then while people will stay and take your money, they won’t give you their best because they’re not happy. I think for me big companies lose sight of that. Small companies can’t lose sight of that.
That natural, weird, somewhere around 125 people, human teams break down. And you need other structures. I think big companies forget that all the time. None of us want to spend eight hours a day doing something we hate. Nobody. Not at home, not at work.
PVC: Let’s talk cloud-based workflows. Amazon and Microsoft would love the industry to be doing everything in the cloud. But is that really affordable and pragmatic?
Chuck Parker: So, a few things to unpack. one I believe that wherever the content is being worked on, the workflows need to be as close to it as possible. So I do think it is more efficient to have, maybe not one central repository for the industry, but let’s say metros: LA, New York, Toronto, Montreal, Vancouver, Atlanta, Chicago, etc.
And then having compute power that has low latency so that you can do all your operation in that location is an important part of the challenge. In my opinion it’s about embracing the workflow as cloud first and not the cloud as an afterthought.
We have remote workstations as part of the workflow here today. But what doesn’t happen is when we shoot on set, we take the source camera files, right? Somebody makes a proxy of them and sends them into the post process through editorial. And then they go through the agony of, “How do I get these really big source files off set?”
Because they’re big and we need those for the effects plates. And they have to go back at the same place. They have to be prepared. And so you start having two workflows right away. And then they go all over the place. And we’re trying to constantly marry them back together and ensure they come back there together at the end.
In our current world everything’s cludgy. Because we don’t start with, “Let’s take these really heavy files and go to one place and have the workflows emanate from there.” You’re constantly trying to put it in the cloud, take it back out of the cloud; egress sucks. And it so that’s one part of the challenge.
PVC: Does that get solved by more bandwidth?
Chuck Parker: No, it’s not a bandwidth issue. In my personal opinion, it’s a workflow issue. You’ve got to decide that you want to have your editorial start in the cloud, maybe with the same exact dailies company and the same post company, but instead of pushing it up as an afterthought and then pulling it down to go to audio, then pulling it down again to go to VFX, you have to bring those workflows together from a common origin point, right? That’s one part of the equation. The other part of the equation is that cloud is not cheaper in the long run.
It’s only cheaper in the short run. Yesterday the guy at Avatar mentioned that they bought all their cameras. And everyone laughed, “Of course you did, you have more money than God. But they were also spending 10 years making a movie—why would they rent? That would be ridiculous. They could have bought the cameras many times over with the rental costs.
And the most reason why people rent Avids, cameras, and all the gear is because they only need it for a limited period of time. It doesn’t make sense. Pilot, whatever. So if you’re a visual effects company and you’re going to stay in visual effects, you have this capacity issue where you know it’s cheaper if you build your own private cloud storage because you can sweat the assets for say, five years.
When AWS, Google, or Azure or claim that they are sweating their assets over three years, they’re probably actually sweating it for 18 months in terms of the pricing. Because they have massive scale in purchasing power. And that’s why if you get AWS’s margins in that business, they’re off the hook. They’re insanely good. Even though they are cheaper than others, they still buy at scale. So I think that doesn’t get solved by our industry. We are—relative to say, healthcare and finance—tiny.
PVC: So we’re pawns in a bigger game when it comes to this stuff.
Chuck Parker: We aren’t big enough to wag that dog. If healthcare and finance stood up and said, we want to be able to such and such, they will probably listen, because they spent a ridiculous amount of money, but we don’t.
And we have these weird workflows. Everyone else has small data packets, but millions and billions of them. And we have really big data packets and a lot fewer of them. And so we don’t look like them. Our workloads don’t behave like them. It’s not going to get better. But for it to work each player in a chain has to make those assessments.
Do I buy X percent of the capacity in my private cloud? And then when I’m out of capacity, how do I build in the capability to burst out of that, into a public cloud to use those resources and pay the higher fee? Because I only want to use it for three months. And that’s a good model.
PVC: Let’s talk security. I’m always curious about security because it seems to me that for all of the talk about the security technology, it comes down to basic human behavior. At the beginning of the project, everyone’s super careful, and then by the end of the project people are just throwing stuff on Dropboxes and unencrypted FTP servers. So you’re dealing with creative people that don’t want to be hassled. How do you even systemically make that work? Like, how do you force people to be security conscious?
Chuck Parker: First, your security awareness training has to be evergreen, right? No matter what company you’re in, no matter what you do, phishing attacks get tougher and tougher, right?
For me, the biggest risk of my team isn’t the guy designing a workflow. Because it’s ever present in his or her mind. It’s the guy processing invoices, because it’s not ever present in their minds. I do believe that if security isn’t practical, “no friction,” creators will ignore it.
They’ll find ways around it. I tell my team all the time, “No filmmaker shows up on set saying, ‘I wish I could try a new tool.’” They certainly don’t show up on set and say, “How do I latch down security?” They just don’t. The weird part about the chain of security in production, is that there are people who whose cost benefit analysis is, if there’s a leak, the value of their IP gets degraded.
So you think about American Gangster and the Wolverine thing and all the leaks that have happened where something’s got out and their box office was never as big as they thought it was going to be. And then there are a lot of people in the chain who, if there’s a leak, will ‘never work in this town again’ classically, right?
Or have legal damage and liability clauses that force them to behave differently. So if you think about the incentives in the chain, a company like ours is highly incentivized to not get it wrong. Because if we’re shown to be negligent, the penalty literally could be bankruptcy. It’s that kind of penalty.
PVC: And even just from a sense of customer security…
Chuck Parker: Yeah, “You’ll never work in here again.” At the same time, who touches the content? The people on the production. And who are they employed by?
They’re employed by a company that’s going to go bankrupt at the end of the production, meaning they don’t have a long term job. And guess what? You can’t sue an individual for $10 million that they ‘screwed your movie.’ So it’s not the producer and director who are security conscious. They’re focused on making their content. They don’t want friction in a way. They need someone to help them look out for themselves, but we are a freelance industry. We hire lots of dudes. They bring their own gear. They show up on set. And these are the guys who when they have fatigue don’t have a disincentive. Meaning if they screw up they will absolutely lose their job on that production, but it’s very unlikely that they will lose their career.
They’ll just be working somewhere else. You aren’t going to sue the bejeezus out of them. So the weird part is, the highest risk are the people who are given the keys to everything. It’s an asymptotic model. It’s all the people who have the pain—the guys who own the IP, Disney or whomever. The producer, the director, they share their IP getting crushed. All the vendors share the risk of getting sued out of existence. But it’s actually the freelancers who don’t really have a negative consequence who are the greatest risk.
PVC: So…what’s the answer? What are some strategies to deal with that?
Chuck Parker: Listen, I actually [agree with Movielabs’] CSAP thing…What should happen is we should talk about four things.
Identification, right? For me, identification is how do we know Jimmy’s Jimmy? Is it his passport? An ID.me type of thing? Is it companies like entertainment partners who pay everybody to think they know who you are? Because, you have 50 different email addresses, right?
Then there’s authentication. So you come to use the service and then we have that space—SSL, two factor authentication and all this other stuff, right?
But then it’s on to authorization. And where most workflows and tool sets fall down is they build authorization for one project and they forget that Jimmy works on this project and his role is such-and-such, but Jimmy also works on that project with the same email address, but he’s got a different role and a different set of priorities. And so that’s more complicated.
So you have to authorize people for the correct role, for the correct project at the right workflow. And that sounds simple. It’s the right way to go, but there’s a lot of work. And again, people are still the problem.
PVC: So much easier just to give the freelancer access to everything than to be unlocking another directory for them every five minutes.
Chuck Parker: Yeah. And you should forensically watermark everything, but that’s expensive. It costs money. So I think the right way to solve it is that zero trust approach. I think it’s probably a three to five year journey for industry.
Soon enough you’ll stand up on stage and the outlier will be the guy who doesn’t do that. The tech tool that doesn’t do that. And the majority of the tools will have embraced identity management and authorization and that whole long arc. But it’s going to take time to get there.
I was talking to a customer about this the other day who said this: “It’s hard to just hit send on something. I have to watermark it, I have to da, da, da, I have to log in. Can’t I just have access to it?”
And then the another person said, “This tool has all the right security features to protect our content. How do we make those default steps more efficient? And so there’s two different problems. One guy is trying to say, ironically, the process of security is his. But he blames it on a tool. The other wants to embrace a process security, but wants a better ux, a better, a better flow. And I think it starts with those people.
They’re the guys who are working on the content every day and they’re the guys who that have that asymptotically poor sort of relationship with being late—not lazy. Lazy is bad word. They’re taking the path of least resistance. And I used to say—I was in the army when I was a young man. The easiest path is always mined. If there’s an open field over there, it ain’t because they want you to drive right up, right? And I think that’s a challenge. I think, you have to ingrain security consciousness into everything.
And there are companies that do that really well, right? There are productions you and I don’t hear about until they come out. That happens a lot. And those people embrace it. They make people sign lots nondisclosure agreements. They put the fear of God in them, right? And I promise you, on Avatar they had super high security.
But I think it’s a culture. It’s about saying the shit’s important. Now at the same time, we got to reduce friction. Because you can’t have security impinge on creative input. It’s about story telling. They’ve got to be able to tell the story. So how do you help them be a little more secure and at the same time, not stop the creative process?
PVC: Tough challenge. Anything else you want to look at?
Chuck Parker: We talked a little about AI and GPT, et cetera. Remote workflows. I think the biggest trend we’re going to see…I’m sure you’re aware that the production volume is down right now in a big way, right? In 2021, the industry produced…We only track things above 5 million bucks. Essentially US, Canada, UK, Ireland, Australia, New Zealand. So we don’t even track Western Europe.
In 2021 there were like 2,400 pieces of either episodics—not individual episodes, but series—or features. In 2022, that number came down 40%.
So you had Netflix report bad earnings in April. For us, because we do a lot of offline and online production, we touch like 400 or 500 productions a day. We just saw this massive drop in pipe. Pipe being people calling us going, “Hey, in two weeks we might need this.” That’s a pipe signal.
And it just went to the floor. And we were like, “Something’s weird.” We thought our system was broken. That our algorithm was wrong. We were turning the data upside down. We started asking around the industry. In the beginning, everyone was, “No. It’s temporary.”
And then it was, “Whoa, whoa. What’s happening?” You know what I think it is? It’s the debt. So Netflix in April goes, “We are no longer going to directly fund productions. We’ll buy your piece of content if you’ve made it, but you’re going to have to go back to the old model where you raise money.
“Make your thing and near the end, we’ll buy it. For a higher price, but we’ll know it’s in the can.” It is the worst time in the world to raise money. So what appears to be happening is all the tier ones—the really big productions—are somewhat unaffected.
The tier twos are affected a little bit more, and then the smaller stuff—whatever you think that is, it is really difficult for them to raise money. And so you’ve had this massive drop in volume. Massive.
60% of the content in our industry right, is made by the big guys and 40% is made by everyone else. 40% of the industry now has to go raise their own money. So I don’t think that’s going to get solved immediately. So all the discussions about how do we save money, I think it’s super, super real.
PVC: But the streamers’ model is to ensure there’s enough novel content each month to keep me with my personal preferences from cancelling my subscription. Won’t that demand more content in the long run? Especially niche content that caters to specific groups of consumers?
Chuck Parker: Maybe. And again, they’re all reacting to their shareholders. So you can’t have Iger step in and go, “Oh yeah, we’re just going to spend more money and lose more money.” That’s not going to happen. So he’s talked about cutting back volume on certain things.
And I think you’re right. It’s a bit like when Orange is the New Black came out for Netflix, right? And you had House of Cards right before that. And so there were two niches now that Netflix saw. They have all of that cheap content that people had already seen somewhere else, Friends etc. But they made House of Cards that you could only get on Netflix and maybe some people subscribe just for that. And then there was Orange is the New Black, a completely different demographic. And you start thinking, “How many of these do they need?” To your point is it 10 different niches they’ve got to solve? 15? 20? Who knows?
And then by country you saw them do that. They exploded into, I don’t know, Scandinavia and all kinds of foreign markets. And we started seeing all that reverse with content in Scandinavian, but with English subtitles. But I think you’re right. There’s some equation: What is the right amount of content to satisfy, to keep you and I from leaving the five different services? Because we all have Amazon Prime, Netflix, Hulu, and Disney plus. So what is the right equation to keep us engaged?