The Breakdown

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Winning an Oscar in bankruptcy: Rhythm and Hues and the visual effects biz one year later

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At the Academy Awards show in 2013, the Oscar for achievement in visual effects sparked a bit of controversy. In accepting the statue, visual effects supervisor Bill Westenhofer tried to tell the world his company had declared bankruptcy just two weeks earlier.  

“Finally, I want to thank all the artists who worked on this film for over a year, including Rhythm and Hues,” Westenhofer said as the orchestra loudly played theme music from "Jaws" over him.  “Sadly, Rhythm and Hues is suffering severe financial difficulties right now. I urge you all to remember…”

Then Westenhofer's microphone was cut off.

RELATED: KPCC's coverage of the 2014 Oscars

El Segundo-based Rhythm and Hues had been doing visual effects since 1987 and employed more than 700 people.  But just before filing for bankruptcy, the company laid off more than 250 people in a matter of hours. At that time Christina Lee Storm was running the lighting department.

"Because the studio’s a family, you’re telling some of your family, you have to leave," Storm told KPCC. 

As employees started to pack up, Storm and a colleague began filming the sad occasion.  They produced a short documentary called “Life After Pi” and released it this week online. It points out that in the last 10 years, 21 visual effects companies have closed or filed for bankruptcy. 

"We sort of found ourselves at ground zero of yet another visual effects company going under," said Rhythm and Hues art director Scott Leberecht, who directed the documentary. "I felt like we had an opportunity to try and understand."

In the documentary, artists explain that despite being a key part of a film like Life of Pi, companies like Rhythm and Hues almost never get to share in the box office take.  Rather, they receive a set amount for producing a certain number of shots.  That approach might work for a contractor building a house with blueprints, but visual effects specialist Dave Rand said it doesn’t for a film whose script and vision are constantly evolving. 

"When you’re creating those huge fluid dynamic simulations like we did on ‘Life of Pi’, and they want to change this wave from going that way to this way, or make the rain go completely  differently, that’s a lot of simulation time just to make the change," said Rand in the documentary. "Then it finally gets shown to the client who says, 'Why’s it even raining in this shot? It’s not supposed to be raining in this shot.'"

Asking for extra money because of the time it took to make the changes is tricky for the visual effects firm — partly because a competing firm is usually waiting in the wings, ready to take over.

"You’ve got just too many people out there who can do this work," said Ed Ulbrich. "It’s become commoditized."

Ulbrich is the former CEO of Digital Domain, a visual effects firm that director James Cameron helped start in 1993. It went bankrupt in 2012 and was then bought by two companies — one from China, one from India, and subsequently acquired last summer by a Hong Kong-based firm.

"We’ve become manufacturing, and it’s very tough place to be," Ulbrich said.

And like in manufacturing, a lot of visual effects production has moved off shore to India and Asia, where the labor is cheaper. Or to places like Canada and the UK, where governments are offering studios generous tax incentives to make movies. Ulbrich said the visual effects industry is really just fighting capitalism.

"If I can get goods for substantially cheaper at the same quality someplace else because a foreign government is going to kick in some money, I’m shopping there," said Ulbrich. "I get that. At the same time, it’s killing our industry in the U.S. — specifically in California."

Now some visual effects artists are looking to fight back. A group known as the Association of Digital Artists, Professionals and Technicians (ADAPT) intends to head to the U.S. court of international trade to challenge foreign governments over the film subsidies they provide. Its argument is that “visual effects shots” imported from other countries where subsidies exist undercut the industry here and therefore should be subject to tariffs.

One thing is clear to many visual effects professionals, including former Rhythm and Hues employee and "Life After Pi" producer Christina Lee Storm: the current business model is broken.  

"I worked, really, ready hard, I won an award, but I still am not sustainable,” said Storm.

"Life After Pi" is the first chapter of a longer documentary called “Hollywood Ending” that delves into the larger, complex challenges facing the U.S. film industry, according to the project's web site. 

For its part, Rhythm and Hues was purchased at a bankruptcy auction by an affiliate of Prana Studios.  The company currently employs 300 people in Los Angeles, as well as Vancouver and India. It recently completed visual effects work on "Winter's Tale," "The Secret Life of Walter Mitty" and "X-Men: Days of Future Past."

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