Did Hollywood Secretly Want the Current VFX Dilemma?

The bankruptcy of visual effects behemoths Digital Domain in September 2012 and the ironic Rhythm & Hues in February this year (they went bankrupt despite their BAFTA and Oscar wins for The Life of Pi) have left both the VFX industry and the movie-going public scratching their heads wondering what happened.

And the convenient microphone snub against R+H's Bill Westenhofer for bringing up the company's financial woes during the Oscars didn't help.

In fact it sparked a firestorm of protest -- not only outside the building that night, but also across social media, with people changing their avatars to the simple green chromakey color (which is used to create the visual effects in most movies) in honor of an industry that's been silently suffering behind the scenes for years now.

Those closely involved in the VFX industry have blamed the big production companies' gluttony of film subsidies (a.k.a. government funding) and forcing VFX companies to "race to the bottom" by undercutting each other, which begs the question: has Hollywood secretly wanted this all along?

The green avatar was the rallying cry that woke the neighborhood.

Thursday, March 14, 2013 was "Pi Day," a solidarity movement in which VFX employees held town halls in Vancouver and the Bay Area, as well as Wellington, New Zealand and in the U.K. to discuss the state of the industry and what needs to change.

The movement successfully raised awareness of the industry's financial challenges. Most of the major entertainment news outlets have been closely following the events of bankruptcies (The Hollywood Reporter, TheWrap, Los Angeles Times, Doddle.com, Variety), bringing even the most clueless layman up to speed.

And things look dire from here.

The industry is scrambling to empower itself.

According to TheWrap's article, the VFX community is divided three ways on a solution: start a trade organization, unionize, or boost subsidies to lure the bigwigs back to California.

Some of the larger companies like DDMG and R+H had to build satellite offices in other countries to remain competitive, especially with places like British Columbia budgeting $423 million in subsidies for 2012-2013, according to anonymous industry insider VFX Soldier.

Even here in the U.S., California's still hurt city. TheWrap reported New York offers $420 million in production tax breaks compared to California's $100 million in annual tax credits.

One visual effects executive explained: "If we didn’t have an office in Canada, we'd be out of business. Los Angeles is a ghost town for visual effects. So few movies shoot in town anymore and studios would rather give work to a foreign company and get a credit -- even if the finished product is lower quality."

The push for trade organizations and unionization stems from Hollywood's love of free labor. Like the film industry in other states (including here in Florida), free labor from college interns beats even cheap labor. Former Digital Domain CEO John Textor said as much in April 2012.

But if it can't score free labor, Hollywood has already made it clear that it'll keep it cheap.

So in the name of efficiency, VFX contracts inward and goes east.

Both Digital Domain Media Group and Rhythm & Hues share one thing in common in the wake of their bankruptcies: Asian buyers.

And we've learned from the outsourcing business world that the East offers much cheaper labor, which means greater profits.

Los Angeles Times reported that Reliance MediaWorks, part of an India-based conglomerate, and Galloping Horse America, an arm of a Beijing-based media company, purchased DDMG. JS Communications of South Korea is currently the most likely bidder for R+H, according to Variety, and will file an asset purchase agreement by March 19, 2013.

As for contraction, the most notable gasp-inducing merge was Disney's ILM acquisition. George Lucas' monolith VFX house was its own staple, so his choice to sell it raised eyebrows -- and blood pressure.

Mergers inevitably equal layoffs...

and many VFX workers from ILM, F+H, and DD now find themselves adrift as freelancers, which complicates things further. Variety reports that independent contractors working for DD who received payments as far out as 90 days before the bankruptcy have to actually repay the company's unsecured creditors under pain of litigation.

The VFX industry is hemorrhaging, and Hollywood is watching.

Time is on the bigwigs' side.

They're clearly aware of the scrambling act in the industry and know it will take some time for the workers to calm down long enough to come up with a solution, and even more time to implement it.

In the meantime, they'll continue to leverage the college interns and cheaper eastern labor, reap the profits and box office prestige, while silencing the people who try to shine any light on the gritty details (just ask Westenhofer, or anonymous industry law blogger VFX Law, whose boss found out about his/her blog and had it shut down completely).

So with Hollywood as risk-averse as it already was, is this the break it's been waiting for?

And if it is, how long does it expect this to last before enough VFX employees say "enough" and force them back into the pre-VFX ages?

What direction do you think the VFX industry should move in? Leave a comment below.

Image taken from VFX Soldier blog.


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About the Author: Mellissa Thomas is a freelance writer, blogger, web content writer, copyeditor, proofreader, and authors three blogs: E.i. Geek (Blogger), her writing blog Mellifluity Inc. (WP), and The Tenderfoot Files, the online platform for her 5-ebook suspense series (WP). 

She has also self-published two books: a weekly devotional entitled From a Babe: A Weekly Devotional, and the first ebook of her 5-ebook series, Abstracted: Episode 1 of the Tenderfoot Series.
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