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Digital Domain, the award-winning visual effects company behind the blockbuster Transformers films and Tron: Legacy, is expanding into the Middle East with plans to open a 150,000-square-foot production studio in Abu Dhabi in 2015.

Parent company Digital Domain Media Group, of Port St. Lucie, Fla., said Sunday night that it was partnering with Abu Dhabi government-backed media and entertainment company twofour54 to build a studio that would create English- and Arabic-language animated movies targeted at Middle Eastern audiences, as well as produce visual and 3-D effects. The project also would include a media school run by Digital Domain, similar to one it operates in West Palm Beach, Fla.

The studio will employ more than 500 people and cost more than $50 million to build. The government of Abu Dhabi, the capital city of the United Arab Emirates, will partly subsidize the project. The investment is part of an effort by Abu Dhabi to further bolster its goal of becoming the entertainment hub of the Middle East. Game publisher Ubisoft, Fox International Channels and the Cartoon Network already have offices in Abu Dhabi.

Using money from the oil boom, Abu Dhabi and its smaller neighbor Dubai have in recent years made deals with such Hollywood studios as DreamWorks Animation, Universal Studios and Warner Bros. to build theaters, theme parks and other facilities as well as to finance movies.

The latest deal comes as California visual effects companies have been expanding abroad to tap low-cost labor and attractive film tax credits to produce effects more cheaply. Abu Dhabi announced over the weekend that it would begin offering a 30% rebate toward qualified production costs. Since its founding in Venice in 1993 by director James Cameron and other partners, Digital Domain has opened offices in Florida; London; Vancouver, Canada; and Mumbai, India. The effects company also is teaming up with Chinese production outfit Beijing Galloping Horse Film Co. to form a 3-D production studio in China.

There is tremendous opportunity to produce original entertainment content for Middle Eastern audiences worldwide, and to bring the Hollywood work and our own original productions here as well, said Digital Domain Chief Executive John Textor. Pairing the school and the studio enables us to help the Emirate to build a sustainable creative industries base.

Wayne Borg, chief operating officer of twofour54, called the project a significant event in the evolution of the media industry in the Middle East, noting it will enable young Arabs to develop skills and careers in an area of the media industry that has simply never existed in the region before.

Digital Domain also is producing its own movies, including next years live-action release Enders Game, a sci-fi feature starring Harrison Ford, and an animated movie called The Legend of Tembo.

But the company, in which Cameron no longer holds a stake, has struggled financially. It posted a loss of $14.8 million in the first quarter, compared with a loss of $39.1 million a year earlier, while revenue in the quarter dropped 19% to $31 million. Executives cited higher costs from opening a new animation facility in Florida this year and having fewer major film projects.

Textor recently created a stir over remarks he made about the companys new animation and digital arts institute, an unusual public-private partnership with Florida State University. The project has caused an uproar among visual effects artists in Hollywood, who fear it will encourage students to work for free at Digital Domain's planned visual effects studio in West Palm Beach.

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Digital Domain to open animation and visual effects studio in Abu Dhabi