Friday, August 05, 2016

More on the Arc Situation


The Globe and Mail has an article behind their paywall about the Thursday court proceedings relating to Arc.  I can't quote from it extensively due to copyright, but I can summarize it.

While I was quick to say that without knowing specifics, it was not fair to blame Arc's management for the shutdown, it's now clear that the management was aware of the situation for at least five months and did not do enough, if anything, to fix it.

In December of last year, Arc made an agreement with Grosvenor Park Media Fund LP giving Arc access to up to $45.3 million.  $17.5 million of that went to repay Callidus Capital Corp, a previous lender.

On Feb. 8, 2016, Arc defaulted on payments to Grosvenor.  Grosvenor twice signed waiver agreements allowing Arc to pay later and extended another $4.6 million in credit.  At this point, Arc convinced the producers of Blazing Samurai to make their $1.05 million payment due to Arc to Grosvenor instead.

Arc again defaulted on payments to Grosvenor in May and July.  In the first six months of 2016, Arc ran a $9.2 million dollar loss.  It was also behind $250,000 in rent, $2 million for office renovations and $1 million in payroll.

On July 26, Guy Collins of GFM Films, international rights holders to Blazing Samurai, sent an email to Grosvenor saying he was concerned that Arc had stopped production on the feature.  Arc was trying to get an early payment for moneys due in August from GFM.  GFM indicated that they would not be paying any more money.  With no promise of revenue for Arc, Grosvenor called their loan and forced Arc into receivership.

This does not make Arc's management look good.  Defaulting on loan payments while continuing to hire and increasing expenses is not the route to success.  While I only know what was in the article, the logical thing to do would have been to cut expenses to the bone, eliminating anything not directly related to completing paying projects.  Had they been seen to do that, Grosvenor might have been even more forgiving than they were.  Arc's management had 5 months to fix things and didn't.  What's worse, it doesn't appear that they tried all that hard.

24 comments:

Anonymous said...

Damn, what happened to the 28m left over after Grosvenor bought in??

Anonymous said...

"Attributing it to gross mismanagement may also be wrong."

bullseye!

Anonymous said...

I guess you should have known more of the facts before you wrote the article earlier this week. Those who worked at Arc or who have worked there in the recent past have more knowledge about how poorly the studio was run and your earlier article was a slap in the face to them.

Anonymous said...

"Those who worked at Arc or who have worked there in the recent past have more knowledge about how poorly the studio was run and your earlier article was a slap in the face to them."

bullseye!

Mark Mayerson said...

There was never any intent to slap anyone in the face. The initial post was to counter the knee jerk condemnation of the management before the facts were known. In my defense, nobody provided the financial information revealed in the Globe and Mail article. I would be surprised if any of the artists were privy to that information. Now there are names, dates, and amounts that make the picture a lot clearer.

Anonymous said...

Well, former employees - spill the beans. We feel for you and want to support you through having proper information.

Nick Hendriks said...

I understand that people are upset, but Mark doesn't deserve to be raked over the coals for providing a pragmatic interpretation. And he is right - there were a lot of pitchforks being waved around before any real facts came to light. Never mind he was more than willing to adjust his opinion in light of new evidence.
Thanks for your level-headed articles, Mark.

Nick Hendriks said...

And this is not to belittle the anger and concern felt by the people affected by ARC's closure. That's totally valid. I'm just saying that Mark doesn't deserve to be the target of those negative feelings just because he's reporting on it.

Ron said...

Great job Marc.
I assure you, you weren't slapping anyone in the face with your previous article, you stayed objective, and gave Arc management the benefit of the doubt. Well written, well informed.

Anonymous said...

and so..........can we wave the pitchforks again?

Anonymous said...

New Logo, the move, hiring... spending spending spending it seems... people working OT non stop... catered food, new computers for every person hired. I was surprised on all the treats we got too. All the pumping up the workers... It was kind of overboard and kind of like what's happening now. Pretzels, parties, beer, donuts. I can only say if it was all about the work it would have been still really awesome at Arc, needless spending. The projects were amazing and gave a lot us animators an experience we always dreamt of. The reasons why we fell in love with the animation industry in the first place. So sad it ended this way.

animator and studio owner said...

I dread to weight in on this, given that I own and operate a competing studio not a block away, but I would like to give some advice to anyone choosing a studio: use your intuition. You are artists. You chose this life because you want to create, not attach yourself to a hollywood star. I will tell you one thing: choose a place to work that will NOT promise you glory, that will not pay you extravagantly, treat you like a rockstar and make everyday a party. Creating honest art is hard work. I can be incredibly difficult and require huge sacrifices and it can be incredibly rewarding and... if you're lucky... from time to time you will have a blast and then you will look at your work, knowing that YOU and YOUR contribution was what makes it sing, and you will feel connected to something that is more than you, your supe, your director or your boss could ever hope to dream of creating on their own. Then you will know that you're home. And now that you've found home, don't get too cozy!!!

Anonymous said...

Just wanted to post some support here for Mark as well.
I do very much appreciate being able to come here for some information, as well to gather some opinion and feedback from other people in the industry, in the comment boards.

diane aarts said...

I second this.

Anonymous said...

Nice self-serving soapbox. Artists/production staff deserve to be paid a fair salary. And with the expectation that management does not have their heads up their collective asses. That is all you needed to say. Everything else you wrote blames artists/production staff for choosing ARC. Don't lecture employees about their choice. Makes you sound like a pompous studio owner..

Anonymous said...

I also own and run a studio. Everyone who works hard and has talent should expect what they deserve. To say that Artists should not expect a good and fair compensation worthy of their talent, or to be treated with the respect they deserve isn't right. Sorry to say. A well run studio that manages their finances properly and runs lean corporately (easy to spot) should be able to provide these basic expectations. However, if it seems that the studio you are working for is poorly run and wasteful of resources it may be time to move on. Very sad for the the ARC employees. Plenty of work on the west coast right now! Best to everyone effected by this.

Anonymous said...

either. asking artists to sacrifice their time, and hard work with little compensation at your company, for the good of your company is not "honest art".

Anon said...

My intuition tells me to NEVER work some studio owner who tells the artists to make huge sacrifices and get paid shit for the sake of being "connected" to the awesome "honest art" we create. Give me a break. I CHOOSE this life to make money, not to be treated like some third world factory worker so cut the BS. It's studio owners like you that makes this industry unbearable.

Anonymous said...

....i will retype the first part:

whatever you wrote is disillusioned BS aimed to take advantage of artists. i have worked at various studios in the city and most recently at arc. we were hardly "paid extravagantly", but fair compensation. we were expected to work hard and arc has been one of the few studios in the industry that recognized good artists and artists' growth were worth investing in. in fact, many enter arc and leave with better portfolios and able to obtain way cooler jobs in feature animation studios. it is sad this happened to arc, especially now other competing studios, who had difficulty retaining employees can use this to justify their own unfair treatment of artists.

i dont understand what your idea of "honest art" is either. asking artists to sacrifice their time, and hard work with little OR NO compensation at your company, for the good of your company is not "honest art".

Anonymous said...

"Plenty of work on the west coast right now!"

FYI we have the same financially inept & unaccountable producers/PM's over here (Van). I wouldn't move out here unless you hear from a friend, or a friend of a friend, that everything is what the producers say it is. Best of luck, choose wisely.

Anonymous said...

I'm not sure who the studio owner is... but if its the one I'm thinking of about a block away from Arc, then I think people are misinterpreting what he said. This other studio, let's call it not-Arc, did very similar work. Its true that artists did not make as much money, but overall, your hourly rate ended up being higher than at Arc because you worked less hours per week. I was impressed by what a lean and efficient studio it was. Leads at not-Arc were focussed on making the pipeline more efficient and finding better, faster ways to do things, so that you could go home at a decent hour. Meanwhile, at Arc there was too much politicking to actually improve the workflow, and they believed the only way to get things done was to make artists work long hours. So you actually made a lot more sacrifices at Arc than at not-Arc in terms of the stress and overtime, on shows that were of pretty much the same calibre.

Anonymous said...

No one said there isn't inept producers on the west coast - simply stating there is lots of work. But yes - always do your homework to minimize risk.

Anonymous said...

The people I feel the most sorry for are the international production staff at Arc who were relying on this job to last until they got Permanent Residency and could stay in Canada. If Arc sponsored their PR or their PR was reliant on having a job, they're now screwed. I know at least 20 people from Arc who face deportation in a month or so if they don't find a new job at a studio in Ontario that can sponsor them to extend their work permit. I feel very sorry for them, and their lives really will entirely change due to this situation.

Anonymous said...

I myself faced the same situation when I lost my job in another country (im Canadian) and I had to leave within two weeks of losing my job. So, it is not lack of sympathy, some of those you speak about are friends of mine, but this is part of being in this crazy industry. It is a tough lesson.

Best of luck to those affected!!