VFX Studio Rhythm & Hues Files for Bankruptcy

Prominent visual effects studio Rhythm & Hues won the BAFTA Award for Best Visual Effects for its work on Ang Lee‘s Life of Pi on Sunday, and on Monday, the studio filed for Chapter 11 protection.

Just last week, Rhythm & Hues was given an infusion of $20 million by three major studios – Universal, Twentieth Century Fox and Warner Bros. – to keep it afloat through April. At that time, R&H was expected to be sold to an Indian effects company, Prime Focus, but that deal fell through, and now the studio has publicly announced it has been forced to reorganize. Buyers are still circling the troubled studio, but for now, it has become the latest victim in the increasingly tough visual effects industry.

Visual effects sell at the box office, but instead of reaping financial rewards, effects companies responsible for some of the most arresting eye candy on screen find themselves victim to increasingly diminishing profit margins as they struggle to underbid the competition. As bigger tax incentives get doled out to movie studios by governments around the world, VFX studios are forced to establish a broader global reach, which increases overhead and staffing costs. In many cases, just one moved start date or tax return that doesn’t come through can put an effects company in dire straits.

Rhythm & Hues was hit hard by canceled and delayed projects, and reports that DreamWorks Animation is poised to lay off as much as 25 percent of its workforce after losing money on last year’s animated film Rise of the Guardians have sent shockwaves through the effects industry. If such well-established and respected companies are so susceptible, then nobody is safe. After all, projects frequently go to the lowest bidder, and big budget productions are susceptible to shifting release dates and delays making larger effects houses like R&H feel the strain.

In recent years, roughly half a dozen visual effects companies have been forced to shut down. Others have bowed to the financial pressure and put themselves up for sale; last September, Digital Domain was acquired by Galloping Horse America and Reliance Mediaworks for $30.2 million after filing for bankruptcy.

Rhythm & Hues employed more than 1,400 staff worldwide, many of whom were let go on Monday. Those that remain will continue to work on projects that were lined up before the company fell on hard times. The company was established in 1987, and its founder, John Hughes (not 80′s film writer/director John Hughes), is considered a giant in the visual effects industry. Many in the business are taking the company’s fall as a sign that something has to change; too many VFX companies are just one canceled project away from following in R&H and Digital Domain’s footsteps.

Rhythm & Hues won Academy Awards for Best Visual Effects for both Babe and The Golden Compass. It’s nominated for Best Visual Effects Oscars again this year for both Life of Pi and Snow White and the Huntsman, and is widely expected to win the award for Pi. Some of the studio’s bigger blockbuster work includes The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, the first three X-Men movies and X-Men: First Class, The Hunger Games and its forthcoming sequel, Catching Fire.

via The Wrap