Digital Domain Media Group (DDMG), the parent company of visual effects studio Digital Domain, filed for Chapter 11 bankruptcy protection 9/11. The filing listed debts of $214.9 million and assets of $205 million. Digital Domain, founded by James Cameron, Scott Ross and the late Stan Winston in 1993, has long been one of the larger visual effects studios serving Hollywood. It won Academy Awards for its work on “Titanic” and “The Curious Case of Benjamin Button.” It also has a thriving business creating visual effects for ads.
Searchlight Capital Partners, a private investment firm founded in 2010, will pay $15 million for Digital Domain Productions, the main operating unit, Digital Domain said. The financing would allow Digital Domain Productions and Mothership Studios in California and Vancouver to continue to operate and honor client contracts. Employees at Digital Domain’s Venice, CA HQ and its branches in Vancouver, Canada and the San Francisco Bay Area will retain current salary and benefits. In the Ch. 11 filing, the company announced the closing of facilities in Port St. Lucie, FL where about 300 employees would be let go.
Digital Domain has worked on more than 90 major motion pictures, also including “Pirates of the Caribbean: At World’s End,” “Transformers,” Star Trek” and “X-Men: First Class”.
Digital Domain said the sale to Searchlight, which manages more than $860 million, was subject to potential other bids, as required by the bankruptcy code, reported The Chicago Tribune/Reuters.
“We’re excited. This is really like a new chapter, a Digital Domain rebirth. We’re back,” Ed Ulbrich, CEO of new entity Digital Domain Prods. told Variety. “For me it’s a thrill, a relief. It’s been quite an emotional roller coaster the last few weeks. It’s great to be back doing what we do and focusing intently on that business.”
Digital Domain specializes in creating realistic computer-generated human characters, said in June it planned to produce virtual Elvis Presley likenesses across various platforms, including live shows, TV and online.
Digital Domain raised $42 million in an IPO in November, 2011 but said last month that it was looking at strategic alternatives and had hired Wells Fargo Securities LLC as financial adviser.
Shares have plummeted in recent months as the company’s financial woes deepened. CEO John Textor, who led the purchase of DD by Wyndcrest Holdings in 2006, resigned 9/7 after the company defaulted on some loan payments. Textor led DDMG’s shift to Florida and spearheaded its animation studio, Tradition Studios, the acquisition of 3D conversion pioneer In-Three and an educational initiative with Florida State U.
DDMG’s original plan had been to pursue government contracts and subsidies, and it accepted $20 million from the State of Florida, as well as local subsidies. The total government subsidies it received are a reported to be $130 million. The State of Florida and the City of Port St. Lucie will likely be among the creditors seeking repayment during bankruptcy. Florida Gov. Rick Scott’s office announced 9/10 there would be a state investigation into the $20 million DDMG subsidy.
RBR-TVBR observation: While the closest Digital Domain came to working with websites was via digital ad creation and manipulation, more and more companies providing content in the internet space five-10 years ago now facing financial woes. Content providers like websites providing original content and their byproducts (i.e. newsletters) have come to realize free doesn’t work, as there is not enough ad dollars to sustain their corporate structure. Companies like the Wall Street Journal and Gannett Digital have and continue to put up paid walls to compensate for not scoring enough ad dollars to make it free. The companies that also have a print product are caught between a rock and a hard place trying to transition subscribers to digital via paid subscriptions. Print and mailing costs are well ahead of what can be charged for subscriptions, in many cases.