The solutions in the VFX industry seemed so simple:
Open facilities in cheap labor locations and send as much work as you can there! Oh, and do co-productions too!
Well, one of the pioneers in doing just that has been Rhythm & Hues. It was one of the first VFX facilities to open in India and many other cheap labor locations. Hell, even Scott Ross once speculated that it was the likeliest survivors in the industry given how much work they do in India.
So imagine everyones’ surprise today when The Wrap broke the news:
After April, the company is expected to be sold to an Indian company, Prime Focus, two of those individuals said. If Rhythm & Hues, which employs roughly 1,400 people, cannot find a buyer and is forced to close, it would be the latest blow to a struggling visual-effects industry, hit hard by the vagaries of tax credits offered by governments around the world.
I can’t tell you how upset I am to hear about this news. The work on Life of Pi was spectacular and will probably win the VFX Oscar.
How could this have happened?
Last October Variety had an article about Rhythm looking for a partner to invest $20M after a substantial round of layoffs. I speculated on twitter that the company may be the next to go into bankruptcy after DD. I also pondered why an investor would want to put $20M in Rhythm with all the liabilities after Digital Domain was sold for $30M minus all of it’s liabilities.
Unfortunately that speculation turned out to be partially true with Variety reporting that the company was on the verge of bankruptcy and an investor “spooked” by the DD news.
Many recent rumors of Prime Focus purchasing Rhythm have turned out to be true. What’s sad about that is Rhythm generally treated it’s Indian workers well, while Prime Focus has an indentured-servitude-like program which was identified on this blog after a number of Indian VFX artists emailed me.
Live By The Subsidy, Die By The Subsidy
There’s no denying that one of the major blows in both DD and Rhythm’s situation is the studio-mandated chase for subsidies. Rhythm President Lee Berger alluded to it in an interview he did with Adrian Mcdonald:
More interesting yet, Berger said Rhythm & Hues could often match a bid from Vancouver for the same money even using his California artists. “But what has happened in recent years with many studios,” Berger said, “it’s easier to understand the tax credits than it is to understand a discounted price.”
So like other VFX facilities, Rhythm is forced to spend capital on opening a facility in Vancouver to ensure the studios get that subsidy check. This is the problem with subsidies: No matter how efficient or talented you are, you are at the mercy of the next government willing to stupidly hand out free money to the studios.
The irony for Vancouver and the #savebcfilm supporters is that the subsidies they passionately advocate for are also part of the very mechanism killing facilities that have tried to open there.
It’s eerily similar to the recent gun debate in the US: Like gun advocates, VFX facilities are mistakingly assuming that engaging in an escalating arms race will lead to better protection for themselves. Unfortunately, all they have done is mutually assured their own self destruction.