India's Tata Elxsi is opening its first visual effects studio in Los Angeles, part of a growing effort by Indian production companies to capitalize on shrinking Hollywood budgets.
Tata Elxsi's visual effects and animation unit, Visual Computing Labs, will open a 45-seat studio in Santa Monica on Dec. 7, executives said Tuesday.
"There is definitely heavy pressure on visual effects margins," said VCL chief operating officer S. Nagarajan. "People are reconfiguring their operations to take advantage of the benefits offered by different parts of the world. We think it's an opportunity."
Chief among those benefits is price: Special effects projects are up to 40 percent cheaper in India than in the U.S., largely because of low-cost labor.
India's rise comes at a difficult time for U.S. special effects outfits, some of which buckled as the 2008 writers strike cut productions and the financial crisis curtailed financing.
Indian visual effects studios have long struggled for credibility in Hollywood, which has tended to parcel out only basic technical chores, reserving high-end creative work for reliable, homegrown firms.
VCL's entry in Los Angeles is an attempt to narrow that gap in skills, trust, and quality.
The Los Angeles studio will have three permanent staff to start, all Hollywood veterans: two-time Oscar winner Joel Hynek, Tricia Ashford and Treva Blue.
Other employees will be contracted on a project basis.
Up to 90 percent of visual effects work, depending on the nature of the project, could be outsourced to VCL's India studio, resulting in significant cost savings, executives said.
"In any project there is a lot of work that can be done at a lower cost in India," Dev said. "It makes sense for us to go there right now when there's not a lot of money to come by."
He said the company doesn't have immediate plans to hire any Indians in its L.A. office. "It's important not to overemphasize the Indian element of what we're offering," he said.
Tata executives would not say how much they invested in the new studio, except that they spent $5 million on new equipment, some of which will be used in India.
Because Hollywood pays so much more than Bollywood, VCL's new venture could help boost Tata Elxsi's revenues to $300 million to $400 million in the next few years, executives said.
Tata Elxsi's net revenue for the fiscal year ended in March was 4.2 billion rupees ($90.6 million).
Dev said VCL's contribution to Tata Elxsi's total revenues could rise from less than 10 percent to as much as 30 percent in the next three years. The bulk of revenues now come from Tata Elxsi's product and industrial design units.
In 2008, VCL made "Roadside Romeo," an animated feature for the domestic market produced by Walt Disney Pictures and Yash Raj Films. It was widely regarded as a critical success but a commercial flop.
It has done effects for "Terminator: Salvation" and "Spider-Man 3," among others.
Executives said the company is now working on special effects for five domestic feature films and a new Indian animation, "Arjun: The Warrior Prince," based on the ancient Indian epic, the Mahabharata.
They also said they hope to sign a significant deal with a U.S. movie company within a month.
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