A clear vision for the visual effects industry (2)

The progress of movie productions is influenced by many elements. Even if the film producer has promised you the date when shooting will be completed, or everything has been confirmed in documents, you cannot rely on it at all, Wu said.

"For instance, one of our projects was scheduled to be finished in the post-production stage in 2011 but shooting has yet to begin," he said.

Some directors have very high requirements for their work's post-production, which obliges us to form a temporary artist team tailored for the specific film. The members of such teams are always the top talents in some sub-field within the special effects realm.

However, the surging labor cost for these cutting-edge artists is not the only element that squeezes visual effects companies' profits.

"After you have assembled the temporary team you have to be responsible for it financially until the end of the project, which means you have to continue to pay them even if production is prolonged beyond the agreed time because you cannot afford the risk of dropping a specific artist from your team," Wu said.

Despite all the negative elements, Wu said he's quite optimistic and confident about his company's prospects because China's movie industry is fast approaching its best times.

The company began to work with the directors of a new generation on middle- and low-budget film productions in 2011 on productions including Shang Jing's Dinner Party in a move to diversify its portfolio as well as lower the risk of losing money.

"At present, in this country, visual effects companies' revenues largely depend on orders from films that have a high-budget for post-production. If they lose a deal of this kind they will suffer significant financial loss, said Shao Gang, consulting director of EntGroup Consulting, a Beijing-based entertainment industry consultancy.

"This is a product of the shortage of such movies in the domestic market, resulting in fierce competition for such orders among visual effects rivals," Shao added.

The cost of post-production takes up about 10 percent of the total investment of a big-budget film in the domestic market, far less than Hollywood counterparts, said Wu.

"In the past we mainly worked with A-list directors, such as Zhang Yimou and Feng Xiaogang. In the future we will expand and strengthen our partnerships with other young directors with potential," he added.

Shao said: "This could help them to balance their business and reduce cash-flow risk."

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