R/vfx - Technicolor Creative Studios issues profit warning and stock loses

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" The reasons given were high attrition rates, inability to hire staff and low efficiency in the 50-60% range, leading to quality issues and delays in deliveries. "

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Also really dying to know how efficiency is measured.

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Definitely not in terms of fiscal responsibility or profit margin…

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This didn’t work??? What the heck?! I was sure this would work! How could the RAG status system NOT work?

[edit]: The more I think about it actually, the fatal misstep in this was not calling it the RGB status system. They were thiiis close, just one letter off.

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Technicolor was an American company (“Tech” comes from MIT – the Massachusetts Institute of Technology).

A little over 20 years ago Thomson SA (French) bought Technicolor.

Eventually Thomson SA dropped that name and rebranded their whole business as Technicolor.

In May of 2021 Technicolor split off MPC, The Mill, Mr. X & others into a company known as Technicolor Creative Services SA (Euronext Paris: TCHCS).

With that taken care of, Technicolor transformed what was left of the company into Vantiva:

that company is one giant game of musical chairs where they buy and sell and rebrand and restructure all the while trying to squeeze every nickle out of overworked employees to me its like watching a giant dramatic soap opera.

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According to the conference call, they measure efficiency by the number of days they charge for artists to do the work divided by the number of days the artists actually take to do the work. So they think it takes someone 5 days, but it takes them 10. That’s 50% efficiency.

The last question of the conference call by a fairly well-known hedge fund manager was pretty surreal…

(did my best to transcribe)

“Thank you. I’m still not sure if I fully understand it. But, I’ll let other people ask a question. I mean it’s hard to believe just one bad month is basically destroying 2 years of profitability……I think…I think this isn’t the last that you’ll guys will need to explain. I think we’ll need to see much more materials and details for people to be comfortable again with the prospects of the business.”

I worked there for 13 years. I loved it. And I loved the people there. It changed my life in so many ways. But the number of people that are incredibly amazing that are no longer there is staggering. I can name 50 senior-level people from all sorts of departments that combine to almost 1,000 years of collective experience at this company that are now other places having new adventures with old friends.

The number one reason for the reduced guidance on the call according to their CEO and CFO was attrition of senior-level creatives impacting their ability to do the work. 30% yearly attrition is mind-boggling. That means 1 in 3 people leave each year. Also according to the CEO, a majority of those creatives left for smaller companies that offered work-life balance.

Fail Oh No GIF by The Great British Bake Off

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“The number one reason for the reduced guidance on the call according to their CEO and CFO was attrition of senior-level creatives impacting their ability to do the work. 30% yearly attrition is mind-boggling. That means 1 in 3 people leave each year. Also according to the CEO, a majority of those creatives left for smaller companies that offered work-life balance.”

Did they try to give some hint as to how they were planning on addressing this? Or do they feel like a burnout factory is still a winning ticket and they need to double down? I can’t imagine that they won’t try to address this in some significant way, but it seems like it’s been going on for a while without much meaningful change (from my understanding).

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If memory serves me right their plan was to increase management training and engagement. It was also discussed at length that they will be increasing operational oversight to manage KPI (key performance indicators) to ensure that projects return to the 60-ish% efficiency they are targeting. Also mentioned was the return to office initiative which they believe was partially responsible for a slight reduction in turnover the past month.

So they are not bidding appropriately. Please excuse me, I must find a fainting couch.

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Sounds like maybe the person(s) handling the bidding had some pressure from above to make the bids low in order to secure a high volume of jobs. 60% consistently is pretty abysmal.

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“'We lose money on every job, but we make it up with volume!”

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Reminds me of my slogan — “I’m slow, but I’m expensive!”

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Yeah, 60% is (as a former owner of a small studio) horrifying.

They should follow Elon’s model and send an email ‘click here to sign up for extreme hardcore schedules to get a passing grade, otherwise you know where the door is’. See what happens :slight_smile: (they’re still counting at Twitter how many didn’t click that link, seemed like more than they thought). Improving work-live balance has been a trend across many industries in the last few years. So this should not be a surprise.

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A quote from Alan’s link at the top:

“Clients have lost confidence in their ability to deliver in the MPC and Mill VFX divisions.”

100% truth. Just wrapped a three-month project born from Mill’s inability to deliver.

Time for this Conglom-O to go away.

Could this at all be related to small boutique shops doing exceptional work, taking good care of clients, and steadily taking jobs away from a cold behemoth doing nominally acceptable work based off spreadsheets? Nah.

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Was at the mill 20 years. It was the best of times, it was the worst of times.

The debt from Technicolor combined with mills own, plus a pandemic on a diversified company which relied on dvd sales for profits was a precarious house of cards. I understand the motivation of the investors and bean counters. I’ve studied for an MBA doing many case studies on the mill.

It’s not a very profitable industry. The wholesale injection of Technicolor management changed the whole culture very quickly*. And having so much management who didn’t understand how that industry worked, cost lots of money and didn’t generate money was crippling especially since it was riddled with debt. On top of which, the whole organisation is so siloed and no-one seemed to be working together for the common good. It was always very cliquey but it definitely got worse, in recent years, to its own detriment. The fact that so much talent fled, is in many ways, a reflection of that.

Sometimes I wonder if the fate awaiting TCS will be like Rhythm and Hues.

*Christian Roberton seemed to be popular with Technicolor C suite. My personal view on that was probably because he was ruthless. He seemed to have no empathy outside his own career.

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To me it’s just incredibly sad. The Mill was (for me at least) the pinacle of VFX. Getting to work there meant that you were surrounded by the best people in the world doing the best work in the world.

I have zero doubt this will force a sale of a few of the entities that make up TCHCS but there’s been so much attrition there that all you’re really buying is a name, the talent has long since gone.

I did nearly 15 years there and it was bittersweet to leave but absolutely the right decision, I haven’t looked back for a single second and now I get to work with all the people that made the place what it was again.

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