NFL’s Dan Marino Loses Millions: Why Did Digital Domain Go Bankrupt?

Digital Domain Media Group (NYSE: DDMG), the visual-effects company founded by James Cameron in 1993, filed for bankruptcy protection on Tuesday as the company shut down its facilities in Port St. Lucie, Fla., and laid off most of its nearly 300 workers there. With a mere $50,000 left in the bank, the Oscar-winning company, headquartered in Venice, Calif., could not meet payroll last Friday.

Searchlight Capital Partners, a Private investment firm, is planning to purchase Digital Domain's production business for $15 million upon court approval.

Among the major investors who lost millions in the company is NFL Hall of Famer Dan Marino, who owned 1.6 million shares in Digital Domain -- or 8.6 percent of the company -- when it went public in November 2011. According to Gossip Extra, those shares were worth more than $14 million at their peak price, about $9.20 per share, when the stock jumped in May. Today, they're worth about $850,000.

So what happened to a forward-thinking company that just this past April was making headlines for creating a hologram of the late rapper Tupac? According to analysts, it may simply have grown too big, too fast.

First off, Cameron hasn't been involved with Digital Domain since the late 1990s after it won an Oscar for "Titanic." When the filed for Chapter 11, it was $14 million in the whole. What's worse, it reported $50.7 million in losses through June 30 following two years of ambitious undertakings that were not paying off fast enough.

In 2009, Digital Domain launched its Port St. Lucie operations, which included a new animation outfit Tradition Studios. Tradition spent more than a year developing its first feature film, "The Legend of Tembo," which wasn't due to hit theaters until 2014. Digital Domain also recently opened a for-profit animation college in West Palm Beach called the Digital Domain Institute.

If all that weren't enough, the company had also been ramping up to take over a 150,000-square-foot complex in Abu Dhabi, where it would employ some 500 people. The company also has studios in San Francisco, Vancouver, Mumbai and others, not to mention having its hand in China's Beijing Galloping Horse Film Co.

In the end, however, visual effects -- time consuming, labor intensive -- do not yield the kind of quick profits the company needed. "Special effects is a low-margin investment so they tried to leverage their expertise," Tony Wible, an analyst with Janney, told Reuters. "The problem is that the investments were costing more than they were able to bring in."

Digital Domain said it will still operate its studios in California and Vancouver. The future of its for-profit college, however, remains in doubt. On Thursday, South Florida Business Journal reported that the Digital Domain Institute in West Palm Beach has suspended its classes indefinitely.

Meanwhile, the company's chief executive and chairman, John Textor, has bitterly resigned, citing a "profound disagreement with the decision to close our animation and visual effects studio in the wonderful community of Port St. Lucie, Florida."

In his letter of resignation, posted last week on the Florida website TCPalm, Textor called the decision "not only unwise, but also without compassion."

"The people of Florida welcomed us with open arms and we certainly owed them greater consideration," he wrote.