Business
3:43 am
Tue March 19, 2013

Visual Effects Firms Miss Out On A Film's Success

Originally published on Tue March 19, 2013 4:20 pm

Hollywood studios are demanding more and more visual effects to make blockbuster films. But the artists who create this movie magic are protesting that they and their entire industry are in deep financial trouble. Even the most celebrated visual-effects companies face the risk of going under, and there are calls to revamp the way they do business.

The visual-effects community is still buzzing about Oscars night, when Life of Pi won four Academy Awards, including one for visual effects. In accepting his award, visual-effects supervisor Bill Westenhofer tried to explain that the company that helped create the film, Rhythm & Hues, had just declared bankruptcy. But the ominous theme song from Jaws drowned out the rest of Westenhofer's speech.

Some saw the Jaws theme slap-down as an insult to the army of more than 600 visual-effects artists around the world who toiled for years to create Life of Pi's vivid, computer-generated Bengal tiger, orangutan and meerkats — not to mention a living, heaving ocean.

Rhythm & Hues hopes to be rescued in today's court auction, even while the movie has earned nearly $600 million at the box office worldwide. The profits made by Hollywood studios rarely trickle down to the visual-effects companies.

"We're like a big mom-and-pop shop, so we can go to the edge of the cliff so many times when it comes to finances," says Lee Berger, president of Rhythm & Hues' feature-films division in explaining the company's bankruptcy. "But you can only go over once."

Visual-effects artists say the business paradigm for their entire industry is flawed. Here's how it works: The six major movie studios contract with effects companies on a "fixed fee" model. That means there's a set price for creating shots for a movie, no matter how many months or years it takes, no matter how many changes the director asks for.

So if a visual-effects company is asked to redo a sequence 80 times, "they're eating the cost of those extra 79 tries," says Variety features editor David Cohen. Cohen says the visual-effects vendors end up losing money for their painstaking work, and don't even get a cut of the profits in the end.

"They don't really have any recourse," says Cohen, who has written about the visual-effects industry for 13 years. "You can say, no, we're not going to do it anymore. This is the shot you asked for; pay me, buddy. But you'll never work again."

David Rand, a senior visual-effects artist at Rhythm & Hues, says part of the problem is that the creative teams are left to interpret vague assignments.

"We end up in this kind of spin cycle, trying to guess what the director will like," says Rand, "just to have them say, 'No, that's not what I said. We want it like this now.' It'll go and go, and it starts to cost. And pretty soon you see the visual-effects shop is paying for the movie. ... And then we watch the movie go on to make hundreds of millions of dollars of profit."

Rand says another problem is that Hollywood studios are constantly chasing tax subsidies offered by other countries. Visual-effects companies end up losing work to international firms, or have to cut their fees.

To try to compete, Rhythm & Hues opened production offices in Mumbai, Kuala Lumpur and Taiwan. But the company still had to lay off hundreds of artists in its L.A. studios. The Universal, Fox and Legendary studios, which refused to talk to NPR for this story, loaned Rhythm & Hues $20 million to finish movies they contracted for. Now, the company is frantically trying to wrap up those projects.

In a small, windowless office, Rand is at his computer, trying to perfect a sequence for the upcoming movie The Seventh Son. He says he's worked for five other visual-effects companies that folded — with almost all of them still owing the artists money. Rand says a union for the artists — and trade associations for the companies — may be the solution.

Rand and other visual artists protested on Hollywood Boulevard on Oscar night. They've also been posting green screens on social-media sites to show what movies would be like without visual effects. They're protesting grueling working conditions — countless all-nighters with no overtime, no benefits or retirement plans.

Visual-effects veteran Scott Ross says it's an often thankless, profitless pursuit.

"There are these incredible artists that are digital gypsies that fly around the world," Ross says. "That really messes with their families. And they wind up working in sweatshop environments. And ultimately, the companies they work for are going out of business."

Ross says that the business model has always been bad, and now it's even worse. In the 1980s, Ross ran Industrial Light and Magic, which did effects for the Star Wars, Indiana Jones and Terminator blockbusters. Ross also founded and was CEO of Digital Domain, responsible for effects on Titanic, among other movies. After Ross left Digital Domain, the company went bankrupt. It's now owned by a Chinese company.

Ross says that in the past 30 years, the visual-effects business has grown into a global enterprise — while still operating like a small cottage industry.

"I don't want to make studios out to be big bad ogres, because they're not," Ross says. "They're just running a business, buying the best products for the least amount of money. Unfortunately, the visual-effects industry is not running a business. What it's been doing is saying, 'Oh, gosh, do I get to work on Star Wars? Gosh, I get to work on Avatar.' So the people that run these companies really are not business people."

Rhythm & Hues is now hoping for a new owner, which could possibly be a South Korean company that promised to continue operations.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

STEVE INSKEEP, HOST:

The film "Life of Pi" earned four Oscars this year, including one for its computer-generated imagery. But the company responsible for the movie's visual effects - Rhythm & Hues - is now bankrupt. It's going up for auction in court today.

As NPR's Mandalit del Barco reports, Rhythm & Hues' troubles point to problems facing the entire visual effects industry.

MANDALIT DEL BARCO, BYLINE: Visual effects supervisor Bill Westenhofer tried to bring up Rhythm & Hues when he accepted his Oscar award for "Life of Pi."

(SOUNDBITE OF ACADEMY AWARD BROADCAST)

BILL WESTENHOFER: (Talking over band) Sadly, Rhythm & Hues is suffering severe financial difficulties right now. It...

(BAND PLAYING LOUDLY)

DEL BARCO: He didn't get very far with the speech. And some took the "Jaws" theme slap-down as an insult to the army of more than 600 visual effects artists around the world that toiled for years to create the film's vivid, CG Bengal tiger, orangutan and meerkats, as well as the ocean.

(SOUNDBITE OF MOVIE, "LIFE OF PI")

SURAJ SHARMA: (as Pi Patel) I am on a lifeboat alone with a tiger. Please, send help.

DEL BARCO: Now, it's Rhythm & Hues hoping to be rescued - even while "Life of Pi" has earned nearly $600 million at the box office worldwide. Lee Berger is president of the company's feature film division.

LEE BERGER: We're like a big mom-and-pop shop so, you know, we can go to the edge of the cliff so many times, when it comes to finances, but you can only go over once. And that's what happened when we had to, you know, go into bankruptcy.

DEL BARCO: Visual effects artists say the business paradigm for their entire industry is flawed. Here's how it works: The six major movie studios contract with effects companies on a fixed-fee model. That means there's a set price for creating shots for a movie, no matter how many months or years it takes; no matter how many changes the director asks for.

DAVID RAND: Pretty soon, you see the visual effects shop is paying for the movie.

DEL BARCO: David Rand is a senior visual effects artist at Rhythm & Hues.

RAND: And then we watch the movie go on to make hundreds of millions of dollars in profit.

DEL BARCO: Rand says another problem is that Hollywood studios are constantly chasing tax subsidies offered by other countries. Visual effects companies end up losing work to international firms, or have to cut their fees. To try to compete, Rhythm & Hues opened production offices in Mumbai, Kuala Lumpur and Taiwan. But the company still had to lay off hundreds of artists in its L.A. studios.

Universal, Fox and Legendary studios, which refused to talk to NPR for this story, loaned Rhythm & Hues $20 million to finish movies they contracted for. Now, the company is frantically trying to wrap up those projects.

RAND: This little spirally gag that marries into this gag here...

DEL BARCO: In a small, dark room at Rhythm & Hues, Rand works at his computer, trying to perfect a sequence for the upcoming movie "The Seventh Son."

RAND: You just saw a girl that's got some evil spirits coming out of her.

DEL BARCO: Rand has worked for five other visual effects companies that folded - almost all of them still owing the artists money. He says a union for the artists, and trade associations for the companies, may be the solution. He and other visual artists have been posting green screens on social media sites, to protest their grueling conditions - countless all-nighters with no overtime, no benefits or retirement plans. Visual effects veteran Scott Ross says it's an often thankless, profitless pursuit.

SCOTT ROSS: There are these incredible artists that are digital gypsies; that fly around the world, that really mess with their families, where they wind up working, you know, in sweatshop environments; and ultimately, the companies that they work for are going out of business.

DEL BARCO: In the 1980s, Ross ran Industrial Light and Magic to produce the "Star Wars," "Indiana Jones" and "Terminator" blockbusters. Ross also founded and was CEO of Digital Domain, responsible for "Titanic," among other movies.

After Ross left, Digital Domain went bankrupt, and it's now owned by a Chinese company. Ross says in the past 30 years, movie visual effects have grown into a global enterprise while still operating like a small, cottage industry.

ROSS: I don't want to make the studios out to be the big, bad ogres 'cause they're really not. They're just running a business - I want to buy the best product I can possibly buy, for the least amount of money. Unfortunately, the visual effects industry is not running a business. What it's been doing is saying, oh, gosh, do I get to work on "Star Wars"? Gosh, I get to work on "Avatar." So the people that run these companies are really not business people.

DEL BARCO: Rhythm & Hues is now hoping for a new owner, possibly a South Korean company who promised to continue operations.

Mandalit del Barco, NPR News. Transcript provided by NPR, Copyright NPR.