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Disclaimer: I may be vague about some issues in this post and my responses because I am obligated not to discuss matters my employer hasn't shared publicly. Sorry if that means I dance around a few things, particularly including future plans.
This week, the same week as winning the BAFTA award for visual effects, four Visual Effects Society awards, and a week before competing for the Academy Award, all for Life of Pi, my employer, Rhythm & Hues Studios, is filing for Chapter 11 bankruptcy.
Note: For more about my day job, these earlier blogs will fill in some details:
Milestone: 15 years in animation and visual effects
Visual effects: fluids and nightmares
In a week or two, I'll have been with Rhythm & Hues Studios for six years. In that time, I have worked on four feature films and numerous television commercials and special-venue projects as a digital lighting artist and generalist technical director.
On Sunday night, as I was having dinner with some old friends from my old WoW guild who live nearby, I started seeing people from work tweeting and posting on Facebook that they were receiving calls to tell them not to come in to work on Monday because their services were no longer needed. Initially, the stories seemed to indicate that everyone was being called, but despite fretting over it for several hours, I did not receive a call. So, not knowing what to do, I showed up as usual the next day.
That Monday, the company announced that they had laid off a large number of employees and would be filing for Chapter 11 bankruptcy today, Wednesday. They also indicated that they had made arrangements to continue operations to finish certain projects currently in-house and attempt to continue to find new work.
Under U.S. bankruptcy law, there are a few different types of filings. Generally, Chapter 7 and Chapter 13 filings result in a company's assets being sold and operations ceasing. Chapter 11 is a different process, supervised by the courts, that discharges many debts while allowing the company to either restructure or find new ownership to continue.
So, as of right now, I'm still going to work (a lot of it, almost 60 hours a week), and our project is expected to continue to completion. However, what happens after that for the company, and for me, has yet to be worked out.
Rhythm & Hues is one of the oldest and best-respected visual effects houses in the world, having been in business for just over 25 years, and having been privately held and run by its cofounders during that entire time. You'd think there would be a lot of anger directed at management for getting us into this situation, and in some quarters there is, but among the people who have been around a while, the personal loyalty people feel to the cofounders, who have run the business in a generous and ethical way for many years, is staggering.
Unfortunately, in a Chapter 11 bankruptcy, those cofounders' ownership stakes, and quite possibly their role in the company, will be wiped out. While many of us still have jobs, they stand to lose everything.
How did we get to this point? Over the past several years, the business of visual effects has been under constant pressure from the motion picture studios. They depend on such work to make their movies, and in fact 49 of the top 50 grossing films in history have depended on significant visual effects to get there, but the motion picture studios routinely play visual effects houses off against each other to induce them to take work at a slight loss. The visual effects houses have no pricing power, because there's always one slightly more desperate who does slightly less good work a few blocks down the road. Complicating the situation, some localities (both U.S. states and outside the U.S., such as British Columbia, Quebec, and the U.K.) have put in place tax rules that allow movie studios (not the visual effects houses) to receive huge payments for bringing their visual effects work to those areas.
So, now, many of my old friends, highly skilled technicians, are unable to work consistently here in the U.S. and have resorted to traveling all over the world to wherever their next job might be, without any ability to put down roots anywhere. Bouncing between Vancouver, London, and New Zealand every six months may sound like an exotic and thrilling lifestyle, but it's draining, destroys families, and leaves people with little chance for any stability.
Furthermore, the fact that most other countries in the world have more rational health care systems than the U.S. means that there's an additional financial benefit to employers not to do the work here. The U.S.s failure on this one is all our own fault, but that's a discussion for another time.
So, I don't know what's going to happen to me a few months out. I know that I'm respected for my skills, and depending on how the bankruptcy goes that might give me the opportunity to remain at Rhythm & Hues a while longer, though probably under new ownership, but I may as likely wind up out of work, uninsured and probably unable to get insurance for my health, and competing against all my former coworkers and the unfortunate 500 or so being laid off this week by Dreamworks Animation for a handful of positions in the area.
So sad that Rhythm & Hues goes through this on the eve of what might be a second Academy Award win in five years for their fine work.
 
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I should point out that I am far more fortunate than some at this point, and I will probably land on my feet even if things go badly. I posted to share the larger picture of what's going on because I think it's a travesty.
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I just saw Life of Pi this past weekend... amazing work from you guys. It was one of the most visually stunning movies I've seen in forever. Sad to see this happen, hopefully the company/you land on your feet.
Good luck at the academy awards!
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Thanks, Aike! An Academy Award win, if it happens, would be a huge boost to everyone's spirits, and possibly our future prospects.
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Wow, that's rough. Very interesting blog post, though - I love the insight into a world I've not the slightest idea about. I wish you the best in the coming months.
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As an animator in Vancouver, this news makes me very sad  Lots of friends being laid off.
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Over the past several years, the business of visual effects has been under constant pressure from the motion picture studios. They depend on such work to make their movies, and in fact 49 of the top 50 grossing films in history have depended on significant visual effects to get there, but the motion picture studios routinely play visual effects houses off against each other to induce them to take work at a slight loss. The visual effects houses have no pricing power, because there's always one slightly more desperate who does slightly less good work a few blocks down the road. Complicating the situation, some localities (both U.S. states and outside the U.S., such as British Columbia, Quebec, and the U.K.) have put in place tax rules that allow movie studios (not the visual effects houses) to receive huge payments for bringing their visual effects work to those areas.
This is so, so sad. There must be some regulation or something... so depressing to see the massive media conglomerates/producing companies just playing visual studios off of one another like that. Just makes me mad to think about that. People working for so little yet doing so much.
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Very sad news, I hope that through the Chapter 11 the company is able to move on.
I think your concerns regarding the founders are slightly misplaced, it's still unfortunate that they are going to lose a lot of stake (if not all) in their company, but they understood they were responsible, and they are just hoping that their company can live on even if they're no longer such a big part of it. It seems to me like you'll be able to keep your job through it if you want to, however it might not be the best option financially. When companies dissolve or restructure the competition frequently looks to poach talent, this happens in all industries and vfx is no exception, so moving to a different company might not be a bad idea, with your experience you can practically make them bid for you, just be aware that if they think that you're forced into changing jobs they will low-ball you on compensation, so make it known that you don't need the job and they'll have to sell you harder.
On February 14 2013 12:57 Aerisky wrote:Show nested quote +Over the past several years, the business of visual effects has been under constant pressure from the motion picture studios. They depend on such work to make their movies, and in fact 49 of the top 50 grossing films in history have depended on significant visual effects to get there, but the motion picture studios routinely play visual effects houses off against each other to induce them to take work at a slight loss. The visual effects houses have no pricing power, because there's always one slightly more desperate who does slightly less good work a few blocks down the road. Complicating the situation, some localities (both U.S. states and outside the U.S., such as British Columbia, Quebec, and the U.K.) have put in place tax rules that allow movie studios (not the visual effects houses) to receive huge payments for bringing their visual effects work to those areas. This is so, so sad. There must be some regulation or something... so depressing to see the massive media conglomerates/producing companies just playing visual studios off of one another like that. Just makes me mad to think about that. People working for so little yet doing so much.
The salaries are actually pretty decent, the problem caused by forcing companies to bid against each other for jobs hurts the companies and their owners/shareholders directly, and their employees indirectly.
I'm a few terms away from finishing a degree in animation and visual effects, but I will more likely end up at a game studio than a visual effects studio due to my computer science background making me more valuable to them (though studios that have their own in-house engineering teams e.g. pixar would find similar value).
As such, I find it sad that the big production companies are able to bully around the small independent vfx studios so easily, it seems to me that there should be laws protecting them like you find elsewhere (other countries, other industries).
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Thanks for your thoughts. I am concerned for all of us, not just the founders, but it's a shame that they won't likely come away with anything after putting 26 years into building a business that has been remarkably successful for most of that time.
As for my own plans, nothing here should be construed as a statement with regard to my personal intentions, other than that I intend to remain at least long enough to finish my work on my current project. In visual effects it's considered very bad form to quit mid-project barring exceptional conditions (like having no prospect of getting paid.)
Edit: Any medium to large sized studio benefits from having employees with strong technical backgrounds. To someone coming into this industry now, I would say that your best bet is to work for companies that own their own content.
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Sounds like big layoffs in 3D-animation in general. But isn't it supposed to be growing exponentially right now - it seems to be everywhere nowadays? What could be the underlying reason - better software drastically reducing the number of people needed to make the same thing; or really the market for 3D is shrinking? (I can't believe it.)
In any case, good luck to you and everybody else in the company. That's super sad that people can just be left out after so many years of successful work. Pretty cruel situation.
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On February 15 2013 10:44 figq wrote:
That's super sad that people can just be left out after so many years of successful work. Pretty cruel situation.
Creative destruction! yay capitalism! mcdonald's is always hiring!
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On February 15 2013 10:44 figq wrote:
Sounds like big layoffs in 3D-animation in general. But isn't it supposed to be growing exponentially right now - it seems to be everywhere nowadays? What could be the underlying reason - better software drastically reducing the number of people needed to make the same thing; or really the market for 3D is shrinking? (I can't believe it.)
In any case, good luck to you and everybody else in the company. That's super sad that people can just be left out after so many years of successful work. Pretty cruel situation.
A big problem in vfx these days is as the op stated, there's basically 8 film studios with all the loot and they pit guns for hire such as R&H and others against each other and take the lowest bidder for the work. Theyve basically been squeezing these independents for a good while now and its very unfortunate..
As for the industry itself, theres tons of CG work to be had.. more and more every year. The problem is becoming is it going to be a sustainable endeavor for the companies and subsequent employees to maintain a profitable business and career if it keeps up as is. Doing a job like the op does requires someone highly skilled and very specific and should be compensated accordingly for such.. especially when these days, as he cites, the work can be grueling and long.
Really terrible to hear the news about R&H.. I've had the opportunity to tour there, thought it was a very nice atmosphere. Everyone I've met that has worked there has spoken highly about their experience due to the morals and ethics they've stood by since their inception. Perhaps something as big as this will turn the tide a bit in the way companies and houses deal with the business side of things. Hoping nothing but the best for you and your coworkers in the meantime!
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sorry to hear about all that happening
as for -- ooh!
go work for valve!
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Here's a small update:
I'm still employed at Rhythm. The court has approved a loan from two clients, which will be used to meet payroll and keep the doors open to finish their projects currently in-house. A future beyond that depends on finding a buyer, and I am hopeful that'll happen quickly and smoothly.
I don't know if my position will still be here at the point of a sale, or after. I don't know if I'll find something else to be doing. I do know that I have plenty of work to do for now! 
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Woohoo! Gratz Lysenko! Any news on what's happening with the company?
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Yeah, good to see the shout-out there, I remember this
Really hope something can be done.
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was reading a thread about this on reddit
http://www.reddit.com/r/movies/comments/1969o6/more_than_400_vfx_artists_protest_at_the_oscars/
from my uninformed point of view, this post seems to make sense regarding the state of the VFX industry
Since some people here don't fully understand the situation, I will try to provide some insight.
VFX studios are having a very difficult time making profit on movies they work on, even if that movies goes on to make millions or over a billion dollars. VFX studios make 5% profit on a GOOD year, but most of the time breaking even or even losing money on a job. This in turn has a very negative effect on vfx workers working at those companies. The entire fault does not lie with movie studios or vfx studios, but both contribute to the bad state of affairs in different ways.
The most noticable, is that other countries offer tax subsides that do not allow even competition. If a VFX studio in California bids on work for a set price, then a VFX studio in Vancouver can bid that very same price AND offer a 30-35% (not sure of exact figures) tax rebate on that work, but the VFX studio doesn't get that money, the movie studio does. So they (the movie studio) automatically get 30% of their VFX paid for by tax payers instead of out of their already wealthy pockets. The California VFX studio therefore cannot compete with this situation, so fair competition is impossible.
Low rung jobs such as roto/paint fixes are being outsourced to China and India by movie studios because they can get the work done far cheaper there.
Movie studios put vast pressure on VFX houses to lower costs AND do more work at those costs. They also put huge pressure on VFX studios to open offices in subsidized locales so they (the movie studio) can take advantage of tax breaks. Most VFX studios who refuse or can't afford to offer a subsidized location don't get the work and go out of business. However, movie studios expect the VFX studio to take care of all the costs of moving to the new country themselves. And still have the nerve to ask for cheaper labor.
In addition to movie studios asking for more and cheaper work, they want it done in less time. VFX on a movie used to be 1 year long, and now they are trying to take the process down to 6 months or less. Because of this...
VFX studios often have their staff put in TONS of overtime. 10-12 hour days are a norm, and during crunch time 16 hour days, heck, spending the night at the studio, is not unheard of and in fact common. These horrendous hours can last 3-6 months, 7 days a week. On top of this, several VFX companies are not paying for that overtime, because movie studios refuse to pay for the extra hours (remember they are putting on the pressure for cheaper), even though they have insane deadlines for VFX delivery.
Every other movie trade except VFX has a union to prevent such gross injustices. VFX artists don't have a stable 9-5 full time job. They are just temp contract workers, jumping company to company, project to project. As such, they do not have portable benefits, as other unionized trades in filmmaking do.
Artists are too afraid to speak up against these injustices because they'll just kick you out the door for causing too much trouble, because there are 100 dumb young kids who would jump at the chance to work on a Hollywood movie for peanuts. Without a union, they don't have much leverage.
VFX studios are too chicken to take a stand against the movie studios, because really, they only have about 5-6 clients such as Paramount, Universal, 20th Century Fox, Sony, etc. If a VFX studio stood up to one of these companies about their unfair practices, they'd get black listed as trouble makers and never asked to work again, thus driving them out of business. Likewise, if a VFX worker complains to a supervisor about unfair hours and no overtime pay, he is similarly black listed to not be hired again on the next project.
This is just a handful of problems, but I feel the major ones. VFX artists in Hollywood are treated like shit. VFX artists have a huge passion and love of their skill and trade, and because of it are taken advantage of. It's time for them to stand up and just be treated like decent hard working human beings.
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Whoa, that all makes a ton of sense. That's just so depressing...I wish something could be done and I really hope the word gets out about this. VFX work can be absolutely incredible, and it's saddening to see studios getting taken advantage of in this way. Definitely an evil of capitalism rearing its head here.
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udgnim, yes, I agree 100% with that Reddit poster.
Aerisky: While for the U.S. to adopt protectionist policies would probably be in my personal interest, the truth is that my company could probably remain competitive over the long run if only treaty-violating subsidies weren't in place in various places around the world.
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Huh, really. In that case, I think rectifying the unjust subsidies would be a good place to start. I wouldn't necessarily be in favor of heavily protectionist policies, yeah, but there is clearly something wrong. You guys do deserve some better treatment though, especially after the kind of exploitation involved with margins being cut. You see this happening in tech (especially low-power hardware) or ostensibly video game companies as well afaik. Hope this gains traction.
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A typical case is Quebec, which refunds 60% of all compensation expenses as a refundable tax credit (meaning that even if a company pays 0 taxes, they get that money back in cash.) So, studios require VFX companies to move to Montreal and pass along that 60%. There's no way to compete with that on price alone.
This is not good for the taxpayers in those places either. British Columbia has had a very generous program for a while now, and last year that program wound up paying out $500 million to the major film studios. BC is considering eliminating this program, and needless to say, their artists aren't happy.
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EPT
