Question: An article in the Wall Street Journal discusses the visual effects industry, which is made up of firms that provide visual effects for films and

An article in the Wall Street Journal discusses the visual effects industry, which is made up of firms that provide visual effects for films and television programs. The article notes: "Blockbusters ... often have thousands of visual effects shots. Even dramas and comedies today can include hundreds of them." But the article also notes that the firms producing the effects have not been very profitable. Some firms have declared bankruptcy, and the former general manager of one firm was quoted as saying, "A good year for us was a 5% return." If demand for visual effects is so strong, why is it difficult for the firms that supply them to make an economic profit?

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