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The Closing of Arc Productions...

You wake up to a sunny summer morning.  Brush your teeth, comb your hair, go through your morning ritual in preparation for another day of making cartoons.  You hop on a bus, get off a few stops early to grab a coffee and some Tim bits (or whatever pastry you're into).  You turn the corner to your job and instead of an open door, you see a letter taped up front.  The letter states that you no longer have a job.  That the place you've been working at for the last 6 months (maybe a year) is having difficulties.  

You sip your coffee.  It tastes bitter.  You're wondering what to do next.

Arc Productions - one of the largest animation production companies in Toronto - has filed for bankruptcy.  550 people have lost their jobs.  It's a sad day in the animation industry all across North America.  Due to financial difficulties, despite receiving millions in Canadian Tax Credits; Arc could not keep the doors open.  

Some of the award-winning projects done at Arc Productions

Some of the award-winning projects done at Arc Productions

I've been working on an audio podcast about running an independent animation studio over the last week.  One of the points I make is that running a studio, whether small or large, is not for the faint of heart.  While some in the industry will start the trolling about bad business practices, pour management, greed... And while some of that may be true, the reality is that there are many contributing factors to a studio's downfall.  There is the art side to animation.  Creating, designing and dreaming.  Then there's the business side.  Dealing with the government, people, overhead, licensing fees, contracts, clients, distributors and more.  It's far from simple and many times those who criticizes about what executives do, don't always see the forest for the trees.   

I can empathize with Arc.  I hesitate to share my own experience of coming close to closure, but I also feel compelled to shed some light on some of the issues studio owners face in trying to keep the doors open.  Earlier this year, I had to give my first round of layoffs.  It was the second most painful experience of my life.  

We're a relatively small company, and I'd been working with folks for a good solid 3 years.  I did everything that I could to keep the salary wages steady even though the budgets for jobs continued to get smaller and smaller with each year.  These were television and commercials projects who's dealings are often times in the millions who hire on producers to find production companies willing to do it for pennies.  Unlike our Canadian and international friends, we don't have tax credits to attract business.  And we're too small to get the kind of credit lines most other studios would get.  We get work based on the quality of work.  We keep the business funded by being frugal, smart, and not spend crazy.  But in this international industry, clients want more for less.  If you're not willing to take the hits, someone else will.  It's an incredibly competitive market place, not just from competing studios, but sometimes with clients as well.

Studios are usually paid once a project has been completed.  That could be weeks, months, or even years before a studio sees a check.  In order to keep the people who work for said studio happy and pitchfork free, a studio will often go to the bank, get a line of credit or loan or credit card in order to fund the project while the client barks demands at the studio all while trying to keep the same schedule.

But that's not how we work.  

We ensure a pay as you go method in order to keep the project moving.  If a client doesn't pay, we'll put our pencils down until they do.  It's bitten us in the ass a few times, but fair is fair.  In this case, the client had a pressing deadline to meet for network.  We did what we could to keep the machine going.  When we finished, we sent in the invoice and waited.  After 30 days, we called.  Nothing.  60 days, 90 days.. Nothing.  We have smaller projects coming in, but it's not enough to cover all the expenses.  We start dipping into our savings.  Then the client makes a small payment, but by this time, it's too late.  The damage has been done.  

And while my instincts were to keep on going, the numbers never lie.  The decision was an objective one, but I took it personally.  The decisions before were "layoff staff and restructure" or "shut down completely."  I went with the first option, not because it was the easiest - no, far from it - but because I wanted to make sure that there was a place that could continue to give opportunities to people and push our agenda of pushing hand drawn animation.

I could have delivered the message via email or taped a sign to the door.  The day I hit the reset button was a day full of heartbreak and pain.  Making that decision has an impact on people's lives.  Some will understand, others will forever blame and hate you for it.  Some, who you might have built a close bond with, will never want to speak to you ever again.  We restructured in order to better fit the market, the client's needs, and more importantly, our own.

In the end, we recovered much faster than we anticipated working with much better and understanding clients, and an even more dedicated team of artists and animators.  

There is nothing more upsetting than when an artistic and creative business closes it's doors.  It's a place where creative people come to dream, laugh, learn, fall in love, build their lives around.  

Whatever the reason; we feel for everyone at Arc.  

The only thing to do, is move forward.