Rhythm & Hues went bankrupt - what's wrong with VFX industry ?

So, digital domain went down recently, now Rhythm & Hues.

What lessons can we learn from these misfortunes? What’s wrong with current VFX industry if they have to agree to have only 5% profit margin.

It used to be a tech market, where a project would cost based on expense of materials (models, film etc.) and knowledge of use (very specialised).

Then computers.

Now, no cost barrier (Blender free…).

Then Internet.

So not as much knwoledge required or at least access to knowledge easier/cheaper to come by.

Democrotisation of Market, anyone can bid, lowest bid wins.

Studios need to consider, insurance against completion costing more and if it costs less than lowest industry rate.

EDIT: I should add that with LOTS of VFX schools comes LOTS of grads, market saturation = lower cost of hire. Buyers market.

What happened is satellite production offices in Guatemala willing to do the work for 1/2 price. There really isn’t a good solution. As long as the cost of living is high in the US, and the access to high quality 3D training is cheap, there will always be someone who can do your work more cheaply than you can. If there is an agreement in all of Hollywood to focus on streamlined production with as little waste time as possible, and to only hire from countries who pay their workers what you would expect skilled technicians to be paid, then it might be mitigated. But really, what are the chances of that happening?

Well, Google moved production of its tablets back to US. I’ve heard Apple is getting ready to do the same. So, maybe new people behind movies production, who are less greedy, could solve the problem. Also, coastal areas are not exactly cheapest in terms of cost of living in US. Maybe moving CGI production off the coast could bring costs down?

Maybe going streaming instead of DVD/Blu ray and monetizing on ads could curb piracy and help revenue.

Btw, I don’t know of any studio in USA using Blender for VFX. I also don’t know of any studio in the world using Blender and delivering Hollywood quality VFX shots.

There is a Screen Actor’s Guild as well as other trade unions in Hollywood productions, except there isn’t one for VFX, so they take the short end of the stick. Situation is bad all the way around, with workers working overtime for free, as well as no benefits. There is a facebook page that has started back up concerning this topic.

Problem is that unionization is often the worst solution. Immediate results but then it gets quickly out of hand. I have seen SAG enforcers threaten and bully indy film makers here in Los Angeles. Sets get destroyed, some SAG operative fills gas tanks with water or slashes tires, ridiculous fees and fines all over the place and even no say in which political agenda the union starts to fund.

It is not the right solution and only makes it worse in the long run. In fact part of the problem is the result of unions thinking certain key people demand far more profit than the rest, directors, producers, actors…and yet far more people with more hardened technical skill sets which work far more hours get the change.

We need policies in place to decentivize sending labor out of the country or to those not on board with fair wages, and we need to accept the fact that in great economic recessions…two industries last the longest…entertainment and education. This causes an oversaturated market in talent, aka those who target what they perceive as a safe industry… which results in a lot of debt for students who end up working cheaply just to pay off the loans.

Bad situation all around.

This is kinda a sad story - a film getting an oscar for best picture and no official statement about what is happening in the field. Great that Ben Affleck a was able to push out a comment to the friends in Iran considering that the movie he directed is very inaccurate and more an action thriller.

I understand that the Oscar is about the establishment and celebrating each other however at one point they should have maybe considered honoring also those people who make those movies possible.

You bring up some key points. College debt is a critical problem for the US because education here is treated as a product you can buy. Paying for it does not even guarantee quality. I am debt free and hold two degrees a design diplom Germany and a Masters in Fine Arts fromt the USA. I am actually not against tuition fees but the way how it is done in the US is plain wrong. England or Australia for example charge tuition however graduates only have to pay it back when they also reach the income level to do so and there are as far as I know no interest fees on this. It is plain governmental. This also requires that universities make sure that their academic education is professional and that they graduates can get jobs with what they teach. That I really miss here.

But also in Germany FX jobs etc are an issue. Once upon a time web design became the hit and quickly companies hired media workers (3 year apprentice in media design) for the labor work while academic designers are only hired for concept generation.
However because healthcare is treated totally different there unions are not really that of a need. And considering that in the US they still have a employer sponsored benefits approach the unions I think sometimes are needed. But if they for once would finally modernise the US medical insurance system to bring it on the same level as other industrial nations maybe this fight between unions and companies can be put to rest more.

I feel pretty sad for those who are in that industry in CA and are put onto the street. Profit is made enough to share it in a good manner so those companies could survive as well. At the end this might only backfire or maybe because film is not really a manufacturing industry it does not matter.

I’m withdrawing this post since, once I read the rest of the postings, I see that others have covered what I was going to say more than adequately.

Here’s a related link that I happened to come across recently:

Also, you can find another interesting article (and comments), from the main page here:

Fantastic article.

Also, I agree that VFX should be taken away from the coasts. The cost of living is simply too high for studios to both pay their workers a living wage AND bid low for projects.

Too many VFX companies maybe. If the are too many suppliers than the odds tilt in favour of the buyers. Let the market take its course and let some of the companies fail.

This is the free market at work this is what happens in every industry out there. Most big VFX movies like the avengers, avatar etc come out of the Hollywood and you have studios from all over the world not just Hollywood bidding for those few jobs. Those kind of economics are f**ked up and favour who ever is producing the movie.

Yes and no. CA in deed has a ridiculous high price tag for living such as rent. And maybe in this industry being next door is not as important as in manufacturing where neighbor suppliers can be a great benefit.

However the transition of work labor also in this area to low cost countries is a problem for the home economie.

Thats I think where the American philosophy of survival of the fittest can result into the parents eating their own offspring. Most of my design faculty I know quite often complain about the competition from overseas and of course their extreme low price tag compared to the us.

But it seems that the hollywood industry itself and the way it is set up needs some adjustment to be competitive and survive.

According to the reddit post from someone in the biz http://www.reddit.com/r/movies/comments/1969o6/more_than_400_vfx_artists_protest_at_the_oscars/ (at the top) it’s partly globalisation, partly exploitative working practices in the USA and abroad (e.g. India), partly companies underbidding one another, partly production subsidies which apply in some countries and not others which prevent say Californian effects houses from competing on even terms with someone in Vancouver, partly production companies wanting more effects at better quality for the same amount of money, and partly workforce over-saturation - so many people want to be in VFX or animation or games at the moment so big companies can exploit the fear of existing employees losing their jobs to someone more eager and exploitable.

It’s a perfect storm of mid-sized problems that add up to something much worse in combination.

I don’t think the fact that some 3D software is free or low-cost really plays much of a role, and if someone is saving money by using Blender instead of Maya or whatever, that’s a perfectly reasonable way of cutting operating expenditure. Making your employees work hundreds of hours of unpaid overtime for fear of being sacked and replaced is not.

Yeah you can talk about deincentivising post-production to foreign countries, but looking at it from an Australian perspective it seems like the only way Australians can afford our own post-production companies (e.g. Animal Logic and Iloura) is with Hollywood picking up the tab, and that’s kind of weird and sad.

OK, without getting too political, I’m going to have to step into the union issue. The actions SaintHaven describes are illegal & not tolerated. Using unacceptable behaviour like that to exclude unions from the solution is unfair and, frankly, dishonest. Unions are at their most beneficial in situations like this, where an employer wields far more power in the labour market than the employee. It’s the reason why the Screen Actors Guild (and similar organisations) were put together in the first place - producers making huge amounts of money by exploiting actors without paying them fairly.

With that said, unions will only be part of the solution for VFX is if (& only if) the other essential elements of making a movie combine to ensure the VFX people are included. There is already the ability for outsourcing VFX overseas (with negligible added hassle) and so the only way producers & studios are going to stop that practice is if the elements of movie-making that cannot be outsourced to the foreign market (e.g. the actors, the writers, etc) stand with the VFX folks. Like when the writers guild went on strike and the directors & actors stood with them.

Hoping that this is direct enough without being too political to pass muster with the mods.

I guess that all I meant with regards to Blender being free-ware, was that there is a steady drive to input cost minimisation. That is cost of manufacture decreases all around, with labour technology and software. Look at the app market for mobile devices, pro-apps cost $5! That is market pressure and Blender plays some small role in that pressure.

Listening to the Down in Front podcast http://downinfront.net/forum/viewtopic.php?id=1268 it seemed that the market will sustain small to medium sized shops or in-house studio shops. The smaller outfits can leverage off site render tech (farms etc.) and time sensitive licensing from software vendors. Check out fxguide’s interview with Atomic Fiction http://www.fxguide.com/fxguidetv/fxguidetv-160-flight/ and how they ramped up for production of the movie Flight.

Perhaps studios will retain a core team with many more contractors, but how will they retain a skill set in such a fluid market…

And here in Canada, the only way we can have a film industry is to attract Hollywood productions to our cities. As an actor, I find that not just weird, but sick.

I thought it was disgusting how Bill Westenhofer’s speech was cut off at the oscars when he started to talk about Rhythm & Hues. To add insult to injury, they played the friggin Jaws theme as well as cutting off his mic!


Here’s an open letter to Ang Lee from a disgruntled VFX artist:

It all reminds me of the IT Crowd episode where a new piece of software is developed by the IT guys. The company CEO thanks everyone in the company, apart from the IT department, the people that actually built the thing.

Sad state of affairs…

I dont think it would need to apply to all foreign countries, but rather those who can pay their people peanuts and have horrible work conditions. I dont think we should be passing up vfx houses in certain “key” nations such as australia, the UK and such. I mean its not like you charge or expect much less than those in the US, however I do think it should also be encouraged for other major nations to create and establish their own film industry instead of relying solely on Hollywood as well.

I honestly hate how expensive it is to live here in Los Angeles and California in general, but if you are in this line of work its also the best place to be for work related options. When jobs are lost here, a lot of people get screwed and with already super high unemployment theres very little to do if that happens. We also have another problem here, which is mexican nationals coming over the border and getting the low paying jobs, which keeps them low and also means if you dont speak spanish or are over qualified (which happens way too much) you cannot get hired for non industry work.

Again its just a crappy situation all around.

And there’s the rub: Hollywood has trained people around the English-speaking world to watch their crap and piled so much money into making said crap that it’s really hard for other countries to start up their own film industries to compete - few other countries take their movie industry seriously enough to put up that kind of money so they can’t very well compete on spectacle.

Believe me, i’d rather not rely on Hollywood for my entertainment - it’s annoying how little Australians see themselves in the movies and on TV. But you have to understand that the USA does things like get Australia undercut its local content requirements as part of free trade agreements so Hollywood has better access to our media. Hollywood is an entertainment media foghorn in the English-speaking world with the world’s most powerful government on-side.

The most expensive movie ever made in Australia, for instance, was made for AU$130mil - and that was not only co-financed by a USA studio but also had enough tax rebates to bring the final spend in under $78mil. Closer to this forum’s topic, Happy Feet (the first CG feature film in Australia) was made for $100mil but again, co-financed by the USA. A more typical in-country budget for Australian movies is less than $10 million.

As for film industries in other countries… that’s kind of already happened. Bollywood, for instance. And Nollywood. You might not know about them because they don’t necessarily make movies for English-speaking audiences, but they’re definitely out there.