As the storm of the credit crisis continues to rumble through the business world, many digital artists are concerned about how it will impact the CG industry. History has never before seen financial turmoil on a global scale, and the chances of surviving in such a rough climate appear bleak. But is it all bad? Or could it be an ideal environment in which to thrive?
This article will try to highlight some of the realities of the 'crisis' we are experiencing without the doomsaying that is all too frequent at present. I'll be discussing what this means to you as an artist and what, if anything, you need to do to 'survive'.
What is the credit crunch?
The credit crunch is believed by most analysts to have started in the US. US banks loaned money to people with poor credit histories, packaged these up along with other fixed assets into portfolios - called collateralized debt obligations (CDOs) - and then sold these CDOs on to investors around the world.
As house rises fell and interest rates rose, many borrowers were unable to pay back their debts, resulting in severe losses for investors who then backed off from investing in further CDOs. Unsure of how many bad loans were on their competitors' books, banks stopped lending to each other for fear that they would not get their money back. In effect, the banks had taken huge risks to make a quick buck by lending more money than they actually had. When people found out, they lost confidence and the knock-on effects were soon felt by investment banks across the world.
Since then, several huge, long-standing banks across the globe have collapsed, been taken over or nationalised, and business outside the financial industry have also been badly affected by the financial crisis.
How will the CG industry be affected?
The CG industry is a relatively young market and has certainly never experienced conditions like this before. What we can say, after witnessing the collapse of several financial superpowers, is that just because a company is big, doesn't make it safe.
What tends to happen during a recession is that time speeds up. Companies that rest on their laurels or that take poorly calculated risks would, under normal circumstances, probably die a slow death - a bad economy merely accelerates the process. On the flip side, companies that make good decisions can find themselves in an ideal position to leap past their troubled competitors.
So, what about the CG industry? Well, it's probably going to be a bit of a mixed bag.
The good
Overall, the CG industry might not be a bad place to be, simply because so much of it is so closely linked with the entertainment industry. Many are comparing the current global economic downturn to the Wall Street Crash of 1929, when rather than being hit along with everyone else, Hollywood actually entered a sort of golden age. Indeed, the evidence suggests that history may be repeating itself:
"...you would think that in the coming recession cinema -- a luxury if ever there was one -- will be among the first industries to be badly hit. Yet this summer, box office receipts were up significantly in the US, Australia, here [Ireland] and Britain (where attendances are at a 40-year high), and if the lessons of history are anything to go by, Hollywood may be among the rare beneficiaries of the economic slump."
People, it would appear, still want to be entertained during troubled times. And if the Great Depression is anything to go by, entertainment becomes even more important:
"During the Great Depression, the down-and-out took to the theaters in droves, willing to spend a quarter per person to forget about their troubles for a few hours."
Computer games also appear to have benefitted from the economic slump. According to a report by Daily Game, sales are, so far, up on last year. And this makes sense - 40 hours of game-play is pretty good value for money.
The bad
It's certainly not going to be an easy ride. Let's face it, all businesses are connected to the banks, most of whom have been shocked into a coma-like state and are struggling to pluck up the courage to lend to anybody. The effect of this 'drying' of liquidity sources may mean we see many companies in the CG industry being forced to cut costs to release capital. And those who do well out of the poor economy will put greater pressure on their competitors.
Young start-up businesses will probably find it more difficult to borrow money as bruised investors are less willing to lend in bad times.  But as this article puts is, they shouldn't be - it is an ideal time to invest:
"Everyone knows you're supposed to buy when times are bad and sell when times are good. But of course what makes investing so counterintuitive is that in equity markets, good times are defined as everyone thinking it's time to buy. You have to be a contrarian to be correct, and by definition only a minority of investors can be."
However, those start-ups who are good enough to get their investment may find themselves in a better position to set up a business. With other companies struggling, there's less competition.
The ugly
Ultimately it will boil down to the quality of the business or the individual. For individuals in the CG industry, it's more important than ever to show your worth, as employers and customers look for ways to cut costs. For businesses, it's the decision making. Companies that make bad decisions are in danger of going bust, in turn creating an ideal environment for the good-decision-making companies to thrive.
It's really just a stretching of asset value - employees who don't add too much will become 'unnecessary expenses', those with talent will become essential assets. Your concerns as an artist should be what they always are - to produce great work for which there is a demand.
Recessions aren't the time to be just a hard worker. You need to shine.
