How did such a major VFX house lose its footing?
When the movie “Life of Pi” won the Oscar award this year for best visual effects, it was more than ironic that the visual effects company that helped the film win had filed for Chapter 11 bankruptcy protection only a week before (on February 13). Adding insult to injury, when Bill Westenhofer, VFX Supervisor on the film, began to speak about the plight of Rhythm & Hues — the El Segundo, CA-based visual effects company that is responsible for VFX work in another of this year's nominated films — his acceptance speech was cut short by the sounds of doom from the theme from “Jaws.” Producers of the Academy Awards telecast said the speech was running long.
During his acceptance speech, Westenhofer said, “We want to thank all the artists who worked on this film for over a year, including Rhythm & Hues. Sadly Rhythm & Hues is suffering severe financial difficulties right now. I urge you all to remember ... " then he was cut off by the orchestra playing the ominous music from “Jaws.”
In any event, an industry that serves as the foundation for many different types of projects that use visual effects can't seem to make a successful business anymore. In business since 1987, Rhythm & Hues is the largest VFX and CG animation studio in Los Angeles (and among the top eight such companies globally), where it maintains a 135,000-sq-ft facility. The company has contributed to more than 150 feature films and has received numerous industry awards and accolades for its work, including Academy Awards and Technical Achievement Academy Awards in 1994, 1998, 2008 and 2010. In addition to films, the company also produces visual effects for commercial advertising, cinematic game design, and special venue and theme park films. It has created filmed attractions for several of Disney's and Universal's theme parks around the world, as well as filmed attractions installed in Las Vegas.
“What I was trying to say up there is that it’s at a time when visual effects movies are dominating the box office, but that visual effects companies are struggling,” Westenhofer, who shared the award with Guillaume Rocheron, Erik-Jan De Boer and Donald R. Elliott, said later that night. "I wanted to point out that we aren't technicians. Visual effects is not just a commodity that’s being done by people pushing buttons. We're artists, and if we don't find a way to fix the business model, we start to lose the artistry. If anything, 'Life of Pi' shows that we're artists and not just technicians."
Even Ang Lee, who won the Best Director Oscar for the film "Life of Pi," chimed in, stating "It’s bad news that visual effects are too expensive and I'm aware of Rhythm & Hues' (situation)", he said.
So, how did such a major VFX house lose its footing? After all, Rhythm & Hues has found itself in such dire financial straits despite having worked on several films major motion pictures, including “The Hunger Games,” “The Lord of the Rings" trilogy and the first “Harry Potter” film. According to Variety, the industry is plagued by the current fixed-bid business model, which limits profitability on a project, and the fact that freelance VFX artists must continually move from place to place around the world to find work.
Making their voice heard, a group of about 400 visual effects artists gathered outside Dolby Theatre that Sunday evening to proclaim their unhappiness with how VFX artists are treated, both financially and in the workplace. Protesters reportedly gathered on a street corner near the Dolby Theater and held signs that read "Will matte paint for food," "Respect for vex" and "We want a piece of the Pi."
One of the protesters, Nancy Evans (who said she left the visual effects business a few years ago), told Variety, “If these companies are getting subsidized by taxpayer money, where is the money going? If it's not going to artist salaries and it's not going to the effects companies, where is it going? It seems to me that's a continuation of expressing money from working people to wealthy investors.”
Rhythm And Hues said it is desperately trying to keep its doors open and continue to work with clients like Warner Brothers, 20th Century Fox and Universal Studios. In a statement, Lee Berger, President of Film Division at Rhythm & Hues, said "all of the company’s offices remain open, our clients are aware of the process; we have obtained commitments for financing to complete projects in house at the quality level the studios have come to expect. Following the filing, Rythm & Hues will be seeking to secure financing for future growth. I believe that we are going to come out of this situation stronger, more efficient, and as prolific as we are now.”
The company maintains offices in Mumbai (India), Hyderabad (India), Kuala Lumpur (Malaysia), Vancouver (Canada) and Kaohsiung (Taiwan) and might have become too unwieldy to control costs. The company boasts 1400 employees and its revenues routinely topped $100 million annually during the past five years. A bankruptcy judge has allowed the company to accept loans from Warner Brothers, 20th Century Fox and Universal Studios totaling $20 million (Universal Pictures and 20th Century Fox lent Rhythm & Hues up to $17 million) in order to continue working.
According to Deadline.com, production on Warner Bros’ “Seventh Son,” Fox’s “Percy Jackson 2,” Universal’s “R.I.P.D.,” and Warner Bros’ “300: Battle of Artemesia” has been halted, while other work may have also been affected. VFX company Prime Focus, based in India (with offices in London), had been in talks to buy Rhythm & Hues, but, according to media reports, it could not secure financing in time. That deal looks to be on hold indefinitely, if it is completed at all.
In addition to its Oscar win for “Life of Pi,” Rhythm & Hues was also nominated in the same best visual effects category for its work on “Snow White And The Huntsman.”