I have been in the visual effects business for over 20 years. The relationship between studio and vendor is the same as client and contractor. I moved up through the ranks on the vendor side and in the beginning, money was good for the vendor. But as the software became less proprietary and less specialized, the vendor began to get squeezed. Competitors would innovate and slash prices or move to a low cost region or tax credit region and slash prices again. Soon bankruptcies became almost a monthly occurrence as one wrong move would put them under. Still to this day, the margins are razor thin on the vendor side. But lets not forget, the studio side takes huge risks when spending millions of dollars on a property in hopes that movie goers will flock to it and buy tickets.
Assets vs liabilities:
If you ever read Rich Dad Poor Dad, you’ll know he teaches Assets vs Liabilities. “Assets put money in your pocket and Liabilities take money out of your pocket.” A successful business, rental properties, dividend paying stocks, and many other assets put money in your pocket. While a vehicle, a vacation, or even the home you live in are liabilities… they take money out of your pocket. This is a foundational principle for anyone to understand if they are to become financially free. Most people think the house they live in is an asset. Some people even think their car is an asset. To learn to make money work for you instead of the other way around, you have to always keep this principle in mind. You can see a very quick explanation by Robert Kiyosaki himself at this link.
Job vs Money Making Assets:
In my paid courses, the goal is to learn to budget your employee income to purchase assets and not liabilities. If you want a liability, you need to think about buying an asset to pay for that liability. For instance I bought a rental property that not only pays all of the expenses for the house, but the extra income pays my car payment, the insurance and gas. Now I have a house and no car payment! Most people would have put that money toward the car instead of a downpayment on a rental property. Most people budget to save money for a car, a vacation, or even a down payment on a house to live in. But this doesn’t get you ahead. It just keeps you slaving away for more money for more liabilities.
Vendor vs Studio
Just as an employee works for money, so does the Vendor in the VFX industry. They don’t own any assets. The assets they create are owned by the studio. The studio uses their money to work for them as a rich person uses their money to purchase money making assets. For instance, a studio purchases a property and finances the creation of the film. Once the film is complete it is an asset that then brings in money for the studio. And this property can continually bring money in for the studio every month as it works its way through the theaters, then Bluray and DVD sales, then a streaming service, TV On Demand, etc, etc. The Vendor on the other hand bids on the work to be done for a specific amount and if they are awarded the work, they get paid for the completed project. But nothing after that. Its exactly the same as an business vs employee relationship. The best vendor business model is one that also owns its own intellectual property (IP). They have assets they can keep them going, even through the rough patches while continuing to do service work during dips in their own production.
Build Your Finances Like a Studio
And thats exactly how people should build their finances. Save to buy assets that bring in money until your monthly expenses can be covered by your money producing assets. It takes the guess work out of saving a finite amount of money for retirement or saving fiat money that loses value through inflation. My new course, How to Budget Like a Hollywood Producer is ready for prime time. I will be launching an amazing introductory offer for that course or an even better offer to purchase both that course and my residual income course. Together they will set a foundation for saving to buy assets that make more money and so on until you can become financially free.