How Pixar, Dreamworks, Lucasfilm and others kept wages artificially low

pixar

In case you’ve missed it (we did), there’s been a major war raging over wage-suppression practices by Apple, Google, Intel, Adobe, Intuit, Pixar, Lucasfilm/ILM, Dreamworks and other tech-powered giants in Silicon Valley.

Here’s a taste of the scheme:

Pixar and Lucasfilm had a longstanding, secret agreement to control their computer specialists’ wages and mobility by not recruiting each other’s employees, and by agreeing not to “bid up” salary offers should an employee be considering both companies. [Pando]

Despite a settlement in the class-action lawsuit originally filed in 2011, information from the case continues to roll in (thanks in large part to the reporting of Pando).

Cartoon Brew sums up some recently revealed information:

[Pixar President Ed] Catmull’s deposition and emails from the lawsuit confirm that he was instrumental in operating a secret wage-theft cartel that violated the Sherman Antitrust Act. But it’s even worse than you think. The cartel orchestrated in large part by Catmull robbed potential wages and job opportunities from thousands of animation industry workers at other studios, including DreamWorks, Lucasfilm, Robert Zemeckis’ ImageMovers, the now-defunct Orphanage, and Walt Disney Animation Studios.

Sound too bad to be true? Read the emails, letters and transcripts yourself.

Why does it matter?

If you’re thinking, “So what? What’s the big deal?” then you’re missing the fact that by preventing competing studios from offering higher wages, the interests of a few people were denying better opportunities to literally hundreds of thousands of people. From a more philosophical point of view, Pixar, Lucasfilm, Dreamworks, et al were obstructing the healthy competition of an open marketplace.

During a deposition hearing, Catmull seemed to suggest that it would be bad for the industry as a whole to allow for greater wages:

CATMULL: Well, them hiring a lot of people at much higher salaries would have a negative effect in the long-term.

Q: On pay structure?

CATMULL: Well, I’m just saying that if they — I don’t know what you mean by pay structure. The — for me I just — it means the pay. All right? If the pay goes way up in an industry where the margins are practically nonexistent, it will have a negative effect.

While the short-term effects of higher wages might result in diminished profits, the long-term effect would be organically achieved equilibrium and fairer wages for all, as dictated by unobstructed market forces. The market corrects itself. Unfortunately, it can only correct itself if it isn’t being rigged.

The problem spreads far beyond the animation studios mentioned above, though. To get a sense of the enormity of the issue, check out Pando’s ongoing coverage.

Thanks to the nudge from Jose Diaz. Header image from Jason Pratt.

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  • So much for Creativity, Inc. and all the capital he’s built on “creative leadership.”

    • Darrell

      Halfway through Creativity, Inc and now I think I’ll burn the fucker.

  • Bob LaRob

    Just to play devils advocate:

    What if the silver lining is that by keeping wages from spiraling out of control, we’re actually keeping jobs in the country? I can surmise that once wages reach a certain point (let me put up an arbitrary 80-90k salary) maybe it would be VERY tempting to look to hire an animator in Thailand for a third of the American wage. Long story short, what if there’s more to this than just what’s on the blogs? I’d be interested in hearing what Ed Catmull has to say and from other industry professionals on the merits and drawbacks of exactly what was done. Keep in mind we don’t have any details of exactly what was happening.

    • WAKE UP PEOPLE!

      Isn’t that what they are doing already? And most of those animators aren’t even close of getting 80k 90k. This is all a matter of greed, because in this system nothing is ever enough for the executives.

      There’s a lot more to it than that blog post, so just give it a try and look into. It isn’t so hard to see that what they are doing is illegal and unethical. Just ask any employee in that industry that is not an executive and you’ll see that the situation is not healthy. Just plain depressing.

      They are actively driving away the jobs from US or any other country you can think of, that has a VFX or Animation company by lobbying for tax credits in other countries. Vancouver, BC is currently paying 60% of the productions costs to the studios. You know the DISNEYS, DREAMWORKS, 20th Century Fox, etc etc. But they aren’t benefitting either the tax payers or the people actually making the movies.

      So, by actively driving the jobs to another country that offers them a better tax credits in the form of subsidies not only are they only paying for 40% of the production for whatever low pay they can think of because they control the wages. By driving the jobs out it only brings the wages down, because they can get cheaper labor if you decide you don’t want to move to Vancouver right away because of you know, the family and kids, and mortgage and blah blah.

      Oh but now they are lobbying Obama and congress, so they can increase the amount of film subsidies to match the % that other countries are offering by justifying that because other countries are doing it we have to do it so we can bring the jobs back, and be considered heroes. Except in that deal they would make the US tax payers do the same. Pay for more than half the production while keeping everyone wages down and making in even moreeeeeeee money for the executives.

      It’s actually kind of a beautiful plan. So why does it matter to every artist that doesn’t work in those companies? Because if not even Pixar will pay you what you should be making then forget about Buck, PSYOP, or any of the other hot mographs house to do the same.

    • Hey Bob,

      I appreciate you trying to look at this from all the angles. There’s always more to a situation than meets the eye — or blog, in this case. But I urge you to read through all the emails and memos here:

      http://pando.com/2014/07/07/revealed-court-docs-show-role-of-pixar-and-dreamworks-animation-in-silicon-valley-wage-fixing-cartel/

      The bottom line is that what these companies did is illegal.

      It violated the Sherman Antitrust Act, an act originally passed in 1890. We can probably come up with a lot of sound “business logic” to justify the behavior, but the fact is these companies broke the law. That’s what Judge Lucy Koh ruled, and that is clearly what happened.

      Your argument, though, is an interesting one. It’s essentially the line of thinking that the VFX industry has employed over the last 20 years. It’s also not exactly an example anyone would want to follow.

      If you’re not sure about that, just take a leisurely stroll through this website to see what damage has been done:

      http://vfxsoldier.wordpress.com/

      • If they broke the law then it just goes to show, the law was there to protect a free market approach. And they broke it to make even more money.

        I’m all for people making money. And making a lot of it. But I’m not for people breaking the law, and directly hindering others from their financial success.

      • Steve Harpster

        To Bob’s point, which is an interesting one, I remember when Disney and Dreamworks and Sony were giving huge bonuses and stealing talent from one another in the late 80’s and 90’s when there was a boom in traditional animation. Then the bottom fell out of the market. The movies were over saturating the public and the cost to make them was too high for what the production was. Not saying what they are doing is right, but it might be to protect the industry too.

        • Steve Harpster

          Okay, now I just read the article http://pando.com/2014/07/07/revealed-court-docs-show-role-of-pixar-and-dreamworks-animation-in-silicon-valley-wage-fixing-cartel/
          posted by Juicysauce and it is pretty damning. I understand that poaching each others workers hurts the industry as a whole, but that is how the free market works. What they are doing is just screwing the talent on purpose for their own benefit. Hope they get what they deserve.

          • PR

            poaching each other’s workers doesn’t “hurt the industry as a whole” at all. it creates competition in the industry, ensuring employees are paid what they’re worth, and that talent is free to be spread around and learn from each other. artists being exposed to More artists only encourages their personal growth, turning them into better more experienced employees with more varied ideas. these cycling employees would be the ones who don’t stagnate in one place and would help make the production that much better. with better ideas (and more money in the bank), some of these employees might even branch out, starting their own studios, bringing the audience an even greater array of content.

            competition means, the employees win, the employers win, and the audience wins. the industry as a whole THRIVES because of competition. the only people hurt are the ones stagnating while the world around them evolves. by fixing wages, these stagnant monsters have essentially locked themselves into a model of success with minimal effort on trying “bold new ideas” and “risky capitalist ventures.”

    • JR

      Also, there’s no theoretical lower limit that magically makes companies decide to keep jobs in the US. Even if you end-up paying animators artificially low wages here, the sweat shops overseas are still going to be able to undercut any bid by a significant margin. It’s like blackmail: the more you give, the more they take.

  • what’s is that “industry where the margins are practically nonexistent,”?
    sorry, I’m not an english speaker, maybe I’ve missed something.
    Don’t these big guys make a lot of money?

    • Chix

      “marginally non existent” means the companies can offer as high as they can to get the talents from other competing companies. No limitations, no benchmark, If I want you, I can pay you whatever makes you happy :)

  • Of all genres, animation has continued to provide the best returns on investment.

  • Julian Potgieter

    People who work on any project in any industry, should receive equitable compensation for there effort, this is a shocking real life story of industry legends who should have known better. Artists and animators should do more to protect themselves in this industry, where it seems creativity is exploited.

    I cannot believe how naive I was to think that these giants of the vfx industry have been involved in price fixing to this extent, this is indicative of the decay of the current system where profit is placed before real support of the workers who make it all happen.

  • It would be interesting to see what would happen if salaries did spiral out of control. But inhibiting a free market approach is definitely not the answer. ESPECIALLY that almost all films include expertise from the people that this directly hurt.

    I’m all for people making money. And if studios put up their money for projects, they should reap benefits. They are taking the risks. They deserve the lion’s share.

    But interestingly, they are biting the free market system, which has been the very hand that has fed them.

  • James

    “It would be interesting to see what would happen if salaries did spiral out of control.”

    Salaries wouldn’t spiral out of control. That’s the whole point of a free market. A cap would naturally be reached that reflected the market demand — a “fair market salary” would be defined. And the market forces that defined that “fair market salary” would take everything into account — competition amongst studios for talent as well as the possibility of outsourcing work to people overseas.

    Artificially creating a “fair market salary” by agreeing not to compete and by sharing information among HR departments (they are all in constant contact, and you cannot apply to a competing studio without your current employer finding out) is illegal.

    • Brilliantly put, James.

    • Imagine if animators and creative workers made as much as their A-list actor counterparts. Or as much as an athlete. As a matter of fact a single character (like buzz lightyear) is worth more over time than an actor making $20 million in one movie deal. Imagine the team of animators who bring a character to life split that same $20 million. It’s also up to the creative people to start thinking differently and not accept such things, stop thinking in terms of salary.

      • PR

        amen to that

    • Well said, James!

    • Tibor

      Disagree. Look for example to futball team players. Or hockey, or whatever else. Their sallaries are astronomical. They are an example of “sallary spiral”. It is a different field of jobs, but this is an example of open market, where clubs draft players for money which are sometimes bigger than budget of some small countries. If the sallary of VFX or other employee is too low there is still possibility to change the job. If they do not, then they probably do not need it.

  • Ever wondered why actors in films make millions, while their animator counterparts are making much less, here’s the answer. Really sad. Animators and artists need to stop thinking in terms of Salaries and start thinking in terms of points and signing bonuses.

    • LG

      Excuse my ignorance but what do you mean by “points”?

    • JR

      That’s not a great analogy — the number of actors who can carry any given movie and make it successful is much smaller than the number of animators available to contribute to that movie. Scarcity of talent = dollars you can command in the market.

      That said, the reason animators make much less than they would normally get on a truly open market is due to the illegal activity that’s been going on to suppress their wages. Nobody is going to pay an animation lead 10 million and a share of the box office because animation leads are not the same as leading actors and actresses; however, animation leads would likely command about 3x more than they currently make without the illegal wage fixing activity.

  • CliffD

    Well, that’s weird. I’m sure all these facilities are on the right side of the social issues (homosexual activism being the big one right now) …so don’t they get a free pass?

    Better be careful with that paragraph about “unobstructed market forces” and the market correcting itself. These days that kind of hateful extremism is likely to be labeled as right-wing Racism™.

  • GuerillaOntology

    Capitalism is precisely why “free markets” don’t work. When you quantify value in dollars and make profit your motive for working, you create distortions. Within any market system, greed is dysfunctional motive for doing anything.

    Ultimately, all these companies were doing is ensuring a robust return on investment for their shareholders, at the expense of the workers who MAKE their business function. It’s a self-defeating practice, and to what end? For the sake of more paper bills delivered to investors who already have an abundance of paper bills to invest. It’s absurd.

    • Bill

      Go live in a communist country then.

    • Cliff Daring

      If you’re so opposed to capitalism and free markets, then you should be just fine with what these VFX houses were doing: deciding how much someone else should earn and how much is “an abundance”. That’s what happens in the “some are more equal than others” realm of communism, socialism, and Hope™ & Change™.

      Look at the cronyism practiced by the federal government right now, granting ACA waivers to companies who are politically favored. That isn’t free market, and it’s a disaster.

      The term “fair” in regard to wages is in appropriate. For instance, “fair” up here in the Dakotas when it comes to oil field work is very high, because the work is very demanding and difficult, requiring enticement to bring and retain good workers. As a result, everybody else has to pay their workers (no matter the field or type of business) in order to recruit and retain them instead of losing them to the oil fields. “Fair” is what is required to get and keep good employees.

      You can always unionize, but then you’ll watch your job go to Korea. That’s what happened to the skidsteer manufacturing plant here. They got all the concessions they wanted, until they “collective bargained” themselves right out of a job. They were making just about the best wages in town, and kept asking for more out of “fairness”. Finally the company left. There’s only so much they could bear.

      Companies are NOT in business to provide for employees. They exist to provide goods or services at whatever profit they need to earn to be sustainable. “Profit” is NOT a dirty word. It’s what makes the world go ’round. Self-interest is NOT selfishness, either.

      As far as the “free markets” go, of course there will always be bad apples. Guess what? There are laws to keep things in check, and these guys got caught breaking it. In that respect, I’d say the “free market” capitalism system has WORKED, in that the perpetrators have been identified and punishment will be doled out.

  • Mike

    No one forced you into working for one of these companies. If their wages are too low, or you think they’re not paying you what you deserve, go work for another company. If you can’t find anyone who is willing to pay you the amount you feel you deserve, you’re probably not worth that much. It means there’s other people with same skill sets or better that is willing to work for less.

    Make yourself indispensable, irreplaceable. Then you will get the pay you feel you deserve.

    That’s how A list actors get paid so much.

    • Jeremy

      People who are suggesting artists protect themselves by not accepting lower wages than is fair clearly don’t have a good grasp of the situation. If you don’t accept lower wages, then you don’t get a job… And most studios are in areas where you can’t afford to not have a job (ie Los Angeles, London, Vancouver, Toronto, San Francisco, new York, etc).

      It doesn’t matter how much you are worth, as much as how many employees the given studio is hiring that time around. Unlike most industries, artists aren’t given enough time to prove their worth, since generally every studio goes through a layoff period, and hiring period each year, and only keep a skeleton crew employed. The ones who don’t are part of this wage limit scheme.

      Aside from an almost nonexistent chance, the only two choices are to accept lower wages and work 60 to 80 hour weeks during the busy season to make up for the inevitable layoff, or to accept lower wages, and work for one of the large studios that are a part of the wage limiting scheme.

      What’s worse is that now all the studios are moving out to different countries, which makes ever buying a home, settling down a family, or any other of the number of things people in other industries are able to do, almost impossible. Due to studios moving across the world, and the nature of the hire-and-fire direction smaller studios generally need to take to have any legitimate profit margin, there are fewer and fewer options for a working artist; let alone an artist just entering the industry.

      • Jeremy

        I almost forgot…

        The post production industry also has no union fighting for them to keep wages fair. While there are maybe 20 to 30 unionized animation studios, none are applicable to compositors, lighting artists, visual effects artists, etc. That is – about 50% of the workforce on most of the superhero, Sci fi, fantasy, action, historical movies that have been released in recent years. That’s not even considering stereography artists for any film that is converted to 3d.

    • @Mike…
      I don’t normally like to sound rude, but to you have SERIOUS reading comprehension abilities?!

      “if you don’t like it go and find another job” does not apply in a MULTI-COMPANY WAGE SCAM!
      Because you go to apply at another company, and find the wages are the same, what you wind up doing is going “Would I rather starve, or keep working my skill?”

  • Find more references

    This lawsuit was filed by Silicon Valley’s software engineers who frequently are not on contract nor have a union to negotiate wages: http://www.nytimes.com/2014/03/01/technology/engineers-allege-hiring-collusion-in-silicon-valley.html?_r=0

    Here is a link to class action lawsuit (to read with your own eyes, not a summarized version cherry picking content): http://www.scribd.com/doc/201651711/October-24-2013-Class-Cert-Order

    List of unionized animation studios: http://animationguild.org/studio-list/