The secret behind “Avatar” and Twilight’s “New Moon”

NEW DELHI, India — When 33-year-old Namit Malhotra started out in the special effects business with three of his buddies back in 1997, there was every reason to believe that these back-of-a-cocktail-napkin entrepreneurs would crash and burn.

Though his father was a successful cinematographer, Malhotra was just 19 years old. He and his pals didn't have an MBA or a year of experience between the bunch. And Malhotra himself had to enroll in a technical school to learn the basics of computer graphics.

“On the technology side, we were totally fresh, so it meant that we had to learn as a matter of survival,” Malhotra said.

Fifteen years later, Prime Focus Ltd., the company that Malhotra started with his friends, is more than surviving. The firm is steadily climbing the ladder to the top of the visual effects industry. Malhotra's staff has increased from four college-age kids to more than 1,200 post-production pros. After selling equity to a couple of top Indian entertainment firms to finance acquisitions, the company now boasts four studios in India, another in London, and two more in the U.S. And last year, the firm earned 3.67 billion rupees ($80 million) in revenue. But Malhotra's biggest strides have been creative.

Prime Focus played an essential behind-the-scenes role in two of the biggest Hollywood blockbusters of 2009 — Chris Weitz's "New Moon" and James Cameron's "Avatar." The company established itself as one of the cutting-edge firms in the visual effects business by producing about 10 percent of James Cameron's path-breaking 3D superhit and a whopping 80 percent of the shots for the second installment of the Twilight franchise.

“'Avatar' obviously is the biggest of all,” Malhotra said. “We've done some exemplary work in 'GI Joe' and 'New Moon' as well. But when you're working on 'Avatar' as one of the top five vendors you have got to a lot more credible space than working on just any movie.”

The London Stock Exchange-listed company's portfolio of work runs the gambit from "Avatar" to top Bollywood hits like the Amir Khan starrer "3 Idiots" to Splinter Films' DVD release of a live performance by Beyonce. The company already owns the lion's share of the Indian post-production and visual effects market, and the international business is expanding rapidly.

The future looks even more promising. Capitalizing on India's low cost base, Prime Focus aims to use its so-called “worldsourcing” model to grab an ever larger slice of the international visual effects market, as Hollywood simultaneously ramps up its use of computer-generated imagery to boost the global box office and tries to slash production costs to boost profits.

“We've gone out and set up the base for operating in all these developed markets, so now we find ourselves in the zone where we can push for building scale through our global operation,” Malhotra said.

While other entertainment sectors suffered a rough year, India's animation and visual effects industry grew more than 20 percent last year for the second year in a row. And according to PricewaterhouseCoopers, that growth is slated to continue. The consultancy's most recent report on the global entertainment industry forecasts that India's animation and visual effects industry will grow 22.2 percent a year between now and 2013, to reach Rs. 42.5 billion ($925 million) from a base of Rs. 13.0 billion ($283 million) in 2007.

“India has a talent pool for getting into these technology intensive businesses, and of course the cost is low,” said Smita Jha, associate director of the entertainment and media practice at PricewaterhouseCoopers. “That's one basic factor that's propelled the growth.”

Of the two fields, animation has received the lion's share of media attention because the number of video games and animated features produced every year makes it much larger than the VFX business. But VFX is growing in importance. Today, a host of Indian companies like Prime Focus, VCL, Crest and Rhythm & Hues are working on major Hollywood projects, and as much as 60 percent of animation and VFX revenues come from international projects. And while the biggest reason remains the conventional outsourcing model — whereby filmmakers slash costs by sending the grunt work of the special effects trade to Indian animators — Prime Focus' pioneering work on "Avatar" shows that's changing, too.

“Gradually over time, people have learned the ropes and they're not just operating on a low-cost, high-scale model, but they're actually creating IP [intellectual property] work,” said Jha.

Prime Focus created the holographic table on the Earth invasion force's mother ship, with which the main characters bring up a three-dimensional display of the planet's alien natives' “Home Tree.” Prime Focus also created computer-generated helicopters, buildings and natural terrain for several important sequences. About 90 designers from the company's Los Angeles, Vancouver and Winnipeg offices worked on the project, under the direction of top producers in the L.A. office.

Similarly, for "New Moon" Prime Focus contributed key visual effects, including various elements of the scenery and atmosphere and the "Diamond Skin" effect on Edward and the other vampire characters. About 45 designers from the Vancouver and L.A. studios worked on "New Moon," with Vancouver doing the heavy lifting to create the Forks High School, the cliffs and other computer-generated elements of the Washington State locale.

“We never wanted to be a low-end outsourcing company,” Malhotra said. “We haven't tried to be a low-cost supplier. We are working at the highest creative end of the business.”