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UPDATE, 1:38 PM: Rhythm & Hues confirms Deadline’s original reporting that it will be filing for Chapter 11 tonight. Here’s the statement just released by President of Film Division Lee Berger:
“Tonight R&H is filing for Chapter 11 reorganization in the U.S. Bankruptcy Court and hope to be in front of a Bankruptcy judge in the next couple days. In the meantime, all of our offices remain open, our clients are aware of the process; we have obtained commitments for financing to complete projects in house at the quality level the studios have come to expect. Following the filing, R+H will be seeking to secure financing for future growth. I believe that we are going to come out of this situation stronger, more efficient, and as prolific as we are now.”
PREVIOUSLY, SUNDAY PM: Oscar-nominated, VES-winning and Annie Award-winning animation studio Rhythm & Hues will be formally filing for bankruptcy Monday morning, Deadline has learned. Within hours of winning the BAFTA for Special Visual Effects for Life Of Pi, the financially troubled company informed employees around 9 PM Sunday of the upcoming Chapter 11 filing, insiders say. Many Rhythm & Hues employees were also told by management not to show up to work Monday. On Friday, the company, headquartered in El Segundo, preceded its bankruptcy filing news by announcing to workers that paychecks would be delayed indefinitely.
While the paperwork has not been formally filed, it does seem like Rhythm & Hues is at least partially shuttering. Sources tell Deadline that production on contracted work for Warner Bros’ Seventh Son, Fox’s Percy Jackson 2, and Universal’s R.I.P.D. has been halted, while work on Warner Bros’ 300: Battle of Artemesia may have also been affected. The three studios attempted to keep Rhythm & Hues alive with a joint $21 million infusion before VFX company Prime Focus stepped in as a potential buyer. That deal is now uncertain.
The veteran VFX house (Babe, The Golden Compass) is nominated for the Academy Award for Best Achievement in Visual Effects for its work on Life Of Pi and Snow White And The Huntsman. On Tuesday, Rhythm & Hues nabbed four top prizes at the 11th annual VES Awards for Life Of Pi, where director Ang Lee accepted the VES Visionary award by paying tribute to his VFX team.
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Shame on you Hollywood!!
Sadly, no one raised a peep when Orphanage closed in San Francisco three years ago. They did a great job on the “Matrix” trilogy, “Fantastic Four: Silver Surfer”, “Iron Man” and “Iron Man 2″ and several “Pirates of the Caribbean”. That was the beginning of the end as far as I can see.
Nor did anyone say a thing when Asylum F/X went under about 18 months ago….
It’ s a sad remembering of the MeteorStudios story back in 2009 here in Montreal. Same tactics, same business different people
It’s so unfortunate. With full respect, I hope the continue making amazing art and comes back stronger than ever.
it’s insane! companies are dropping like flies and still no one does a thing. this industry is rotten to the core. one can only hope this will come back and smack the studios in the face.
now i am off to file for unemployment
I am confused. How does a COMPANY that gets a ton of work from MOVIE STUDIOS go bankrupt? Why does this happen so often? DIGITAL DOMAIN also filed for BANKRUPTCY a while back.
This happens because studios don’t pay enough for the visual effects. And visual effects houses try to underbid each other because they think if they take a hit on one movie that the continued business they will get from that relationship will make up for it. And it rarely does. Also, when a studio makes a movie, they reap the profits & residuals. VFX don’t see any residuals. They really should. Much of Life of PI was CG and yet R&H can’t keep its doors open. I hope that maybe this will make studios take notice that they are crippling and industry that it NEEDS. Audiences want the magic of VFX. I guess we’ll see where this goes…
Yes, the studios have long had the VFX companies locked in a proverbial “race to the bottom” and the companies are (as expected) bottoming out. Once the VFX houses were resorting to “buying work” — i.e., taking work for LESS than it cost them to produced it — just to keep cash flowing, the writing was on the wall.
In the VFX world they have a nasty little thing called subsidies. Basically corporate welfare. Its a super complex issue. The vfx artist have no union and are pushed to unhumanly standards in order to get all this beautiful vfx work in a short period of time at a high level of scrutiny. If you cannot keep working the 90+ hour weeks and stay productive you could possibly be blackballed. Just absolutely no workers protection for the vfx artists of today. Pay scales are screwed and they outsource more and more to countries where the labor is cheap but the quality impaired. I suggest checking out the site below for more in detailed info. A lot of vfx guys are afraid and some unwilling to unionize despite the shrinking pool of jobs.
http://vfxsoldier.wordpress.com/
shame on local 700… there is no reason that vex people are not protected by the editors guild… another epic fail by MPEG
IMHO you can’t blame the MPEG. The way I see it the bulk of the VFX industry is not protected today because at the time the unions were first courting all of the big VFX studios in SoCal, and the VFX houses (and their artists) still had some leverage, the artists didn’t think they needed protection. The top (mentor) artists were making a lot of money, thought they would be protected by their talent, and didn’t want to be slotted into a union matrix.
How awful that this should happen when they are winning such well deserved accolades for Life of Pi. I hope that Academy voters reward them with their deserved win; it will be a bittersweet swan song.
It sad to see a company like this going Down…. No one is Safe, talent is
not enough. Can anything save them?
When the people finally wake up and stop this madness? The Tax return outside USA is killing the full Post Production industry.
The Studios don’t worry yet but you are the next ones.
Government have to put IMPORT TAX to protect hard working Americans or in next 5 years Hollywood is History.
It’s called protectionism, Tom, and does not work, apart from flying in the face of various, oh I dunno, WTO and other agreements. It would be also interesting to see how work commissioned overseas would count as an import. You might as well try to ban U.S. companies from exporting work. Going down this route would only lead to everyone else putting up trade barriers as well. I have had many people in the post production business tell me the root cause is the studios and production companies demanding more and better every time, which sets the VFX people in an ever upwards “arms race”, but wanting to pay less and less each time too. Of course, Rhythm & Hues might have had their own unique problems. I feel most for those who have worked hard, done great things and are not even getting their paychecks.
Protectionism doesn’t work? Since when?
Since the Opium Wars.
You are wrong. It is not just American companies that are suffering. VFX houses all over the world are suffering. You should blame the behaviour of the studios for forcing companies to undercut each other and ending up taking on films that will give them little profit.
Amen! The demands of the large studios for cheap labor in such an instensive and artistic part of the film process is unconscionable! These films make mega bucks for the studios and they “ain’t got no respect for the artist!”
WHERE IS LOCAL 700???? Epic MPEG fail
the chilling part of this notice is the “employee checks are delayed indefinitely”. How the hell does a company of this size go this far that they can’t clear the last week of checks for the employees?????
Well I have friends who worked at R&H. The projects get rushed by the studios and they have to work what they call 12′s/7′s : Twelve hours a day, seven days a week in order to make the studios deadline. And the workers are mostly on wage, so 84 hours weeks, with time and a half for most of it, and double time for some of it (more than 8 hrs on a day were you’re getting overtime already), the workers get a crapload in overtime. they get like 109 paid hours a week.. and the company runs likes this for 3 to 5 stints.. because the studios demand unreasonable deadlines.
So those last paychecks are going to be hefty.
Cheap producers and execs who enjoy squeezing vendors to the point of bankruptcy should be called out and blacklisted on a website. Vendors should make a pact to screw over shortsighted douchebags on the list any chance they get.
We know who they are … they are our clients. These people are hired consistently by the studios for “controlling” the vendors. And when they have shown that they really know how to squeeze ’til it hurts – they are promoted to work AT the studios.
So no one should be focused on making a profit on their business?? You want to blacklist anyone who makes money? Well, if management at R&H would have been thinking about making a profit, maybe they wouldn’t wouldn’t be bankrupt now….and dont forget: THE EMPLOYEES of the company bankrupted the golden goose….
This is what I have been saying for your, soon as an ***wipe walks in the room you know its a Stiff artist, you ask them to go and carry on the meeting. Do that for a wile and you will get the money going the right way. I have Back balled some myself as an onset contractor, with a word to others saying “Name = Bad news”
FOX needs to save this company–especially with all the rumors of James Murdoch coming to the US–this is a great opportunity for him to look business-savvy and save a bunch of jobs in the process It’s shameful if this company is allowed to die in the wake of Pi.
The VFX workforce should’ve unionized when they had the chance. Now it’s too late. Eventually all these companies are going to either close or consolidate until there’s only a couple left handling a VFX duopoly.
Producers used to brag that they weren’t doing their jobs right unless they bankrupted at least one studio doing VFX work for their film, such was their goal to have these studios bid each other into the ground. Now they’re going to have to lie in the bed they made. Let’s see how they like it once they lose the bidding model and are stuck with a fixed-pricing system courtesy of an international duopoly. That’ll wake Hollywood up real damn quick.
Laughing out loud at your silly comments…you couldn’t be any more wrong than you are….
No doubt R&H management deserves some of the blame. I also think they own an India subsidiary.
Apparently they pay health to folks who are short term, ‘stealing’ quality talent from smaller places. Sure, globalization is a significant cause. But blame the central banking elite for that.
You, sir are on the right track. Look at R&H’s health plan, 401(k) plan, and other goodies given to the employees and you’ll see the exact reason for their demise….go to the “free Erisa” website and see the amount poured into the employee benefits. You can look them up. Way more than any other company of its kind….
Tariffs are by no means prohibited by the WTO, and I would argue strongly that massive government subsidies, especially on service work, almost certainly is. Foreign governments are typically returning to the studios 30% of all expenses paid in Canada, Australia, and to a lesser extent in London.
“It’s called protectionism, Tom, and does not work…”
I can understand that point of view: There is a downside to being overly protective of your markets. But “protection” should not be confused with “protectionism.” We can point fingers in all sorts of directions, but if you have no backbone nor will to succeed, you will certainly lose to those who do.
The bottom line: protection”ism” doesn’t work, but neither does failing to “protect” conditions in which talented companies like this can succeed. We should have the courage and the will to protect what’s valuable — not just throw it into the jungle and say “whatever happens, too bad.”
This is not a flat world. It is full of competitors who are more than willing to steal technology, markets, and abuse workers to achieve their objectives. That is not a standard we ought to aspire to nor remain passive about. Shame on us if we do.
Ummm, what you stated is still protectionism. Which is fine, because protectionism can work, we just can’t have a wholly closed off economy.
Ummm, what you stated is still protectionism. Which is fine, because protectionism can work, we just can’t have a wholly closed off economy.
their work on PI is amongst the best I’ve ever seen. This is tragic.
This is just another in a series of sad stories about how the STUDIOS are creating this crisis. One of the few industries in which the US excels and leads is being eroded and destryed from within by the short sighted choices made by studio executives to save money. When will the importance of VFX in a film be recognized and treated with the same level of respect and compensation that the other trades are? DoP’s, Directors, Production Designers, even talent are all treated more fairly and with more support than we have ever been. This must change to avoid the eventual failure of projects, companies and lives from off-shoring the work. The best talent, technology and infrastructure lives HERE. Stop crushing it, Studios! (and start enabling level-field competition, Government!)
So, so wrong. Sure, the studios want product at the best possible price, but the prima donnas in the VFX industry made their own bed. Working for that level of salary and benefits, you all should have known it was simply unsustainable.
Showbiz1 you obviously don’t work in this industry as an artist otherwise you’d realize what’s actually going on. If you do then you must not make enough to support yourself in LA.
From Feature to Commercial houses everyone is undercutting themselves trying to get the next big movie. It’s driven by the Feature film Studios and Ad Agencies looking for the cheapest price and it wont end till there isn’t a house left that can deliver to the level of quality that we’ve become accustomed to.
You’re upset that R&H pays benefits? You must be a producer cause your mentality only looks at the short term, like every producer I’ve ever worked with. Benefits used to be a staple in this country, now it’s next to impossible to get health and 401K. Giving these benefits to artists that work nonstop for you is a great compensation for their work. It’s how you get the best talent to hang around for the next big feature. Cause you may not realize this but even in this industry finding good talent is a hard thing. You take care of that talent when you see it. The high salaries of this Talent isn’t outrageous, it’s damn right smart. The cost of reinventing the wheel because you don’t want to keep the top talent is more expensive then 5 times their salaries. Their experience and troubleshooting will save Hundreds of man hours and thousands of render hours. In the end making the difference of an outrageous amount of OT and pushing deadlines or delivering on schedule and on budget.
In the end, VFX is not going to change. It’s going to leave LA and it wont come back till other countries start raising taxes above what California State is at. With our major budget issues, I don’t think California is ever going to lower those taxes. In effect, VFX isn’t going to be around in LA for much longer. Small commercial houses will still need a couple of vfx guys, but even then they’re dropping like flies. It’s time to evolve out of being an artist on the box.
This is absolutely surreal. Most of us in the vfx industry are now jumping from one sinking ship to another and we have been for the last couple of years. Let’s be honest; we all saw this coming but what were we to do? Our talent and ability are so specialized that trying to transfer those skills into another industry is quite difficult. You spend years developing your technical and artistic ability and strive to be a part of the most challenging and rewarding projects that will hopefully boost your career to the next level. It feels now as if we’ve all been climbing an Everest-like mountain and when we finally reach the summit we find that the peak was just an illusion all along. If this trend continues then in five years the historic Hollywood sign should read “HOLLYWOOD was here”. R&H is one of the few great visual effects houses that still hires large crews in Los Angeles and even they have remote studios all over the world. If a giant like this could fold then anyone could, will or already have. I can’t believe that only 3-5 years ago finding work in Los Angeles was a breeze. Now even the
If being at the top was lonely before then whoever is still there now is in for a rude awakening that the mountain that they fought so hard to ascend now has no base. I wish everyone good luck in their endeavors and sincerely hope that this doesn’t spell the end for post production in Los Angeles and the rest of the US.
Dreaworks 25% layoffs, digital domain closed, sanzaru games layoffs, rhythm and hues closes!!! Man it’s really bad out there!!
R&H, They didn’t build that!!!!!
I have known John Hughes for over 35 years. He is the most honest, ethical hard working “bosses” this business has ever seen and I expect the last of his kind. I am a little amazed how some of the commenters just cut and paste their pet agenda as the cause of the problem. The closest to accurate (in my opinion) is the producers/clients wanting more for less each time. 30 years ago standard mark up was 35% today you struggle for anything above 15% and it is common for studios to “buy” jobs for the prestige and hope of future profitable work. This kind of competition used to be contained to individual cities in the US but today it is a global economy and you compete with 3rd world wages. I’m afraid that unions, tariff and taxes will not have any positive effect on the problem. To simplify it you start your business when you are lean and hungry. No wife no kids no mortgage. You build your company, start paying a good wage, benefits, etc. eventually it is a costly successful business. Then some one who is lean and hungry comes along, maybe this time in south east Asia and the cycle starts over. It is a shame and I have the utmost respect for what John was able to accomplish and for how long he was able to grow and be successful in a competitive business for over 20 years. This company was not owned by a giant parent company it was agroup of partners and what they did was amazing. This won’t be the end of the line for these people.
Very well said!!!
Very interesting and thoughtful analysis. Too bad I don’t really know anything about this business. Now I understand a little bit……. Wish I had an answer…….this is what’s happening to many small businesses, all over the world, but especially in USA and Europe.
PERFECTLY STATED!
R+H have 2300 people on payroll. Allowing for their Indian units I suspect their weekly payroll is $2.5m a week. Factor in the rest of the overhead a company of that size will have and you have annual operating costs of $200m+ Thats 3 event shows a year plus smaller films, plus commercials.
its well known a few films they were counting on were delayed at production stage and this caused the cashflow spike. I know of several other “name” VFX houses that are surviving hand to mouth…
As a Film Producer I can farm out basic FX shots like Clean Up and Roto to inhouse teams that I set up in an office who can work at 2K file size off laptops with Shake, Nuke and Maya for 15% of the costs of doing it at a big house. Unless I am on an FX heavy picture I wont go near the big companies.
R&H *had* 1350 people on their payroll as of last Friday. The rest of your statement lacks any credibility if you don’t have the first fact correct.
Turning everything over to an established union like IATSE was never the answer and still isn’t. However, VFX artists are in need of some sort of collective bargaining mechanism. A guild of some sort, perhaps? I always hoped that the VES might evolve into some sort of an advocacy group for VFX pros… I realize that that’s never going to happen, but artists are being treated more and more like factory workers and something’s got to give or we can kiss Hollywood goodbye forever.
well now you are screwed.. Local 700 could have helped… and i blame the union for not organizing the VFX workers.. It would have made the union stronger and you guys from being so screwed. Collective bargaining does work. Local 700 isnt great but it is all editorial has, might as well embrace it. This already happened when film died and the asst jobs went to the labs. The union failed to protect asst editor jobs . BUT at least producers cant work us 24/7 without pension, health and welfare and OT.
Post supervisors should be in the MPEG that way we could all work together instead of being screwed by producers. Most former assistant editors went into VFX because crews shrunk to 1 from 15 …on big films. Anyhow… good luck , I got off that sinking ship after 18 years. The unpredictablitly and lack of respect for my craft from producers drove me away, Sadly, I once loved editorial, now I never look back.
Its funny reading these comments. R&H was always one of the worst run companies in business, in any industry, in any country. I did business with them for a long time and know the way they have always operated. They gave people “just-out-of-their-parents-basement” a high paying job, overly fat benefits, and no responsibility to their work; a genuine “nanny state” environment. The union would have made it worse. All this whining about the union, or Bush, or the state of the industry, or the big bad people with money is just that; whining by people with no clue about how to run a business. I’ll never forget when Hughes asked me what I thought about unionizing his employees against himself; a very funny day and story that has endured for several years.
I once worked @ R&H and I am saddened by this news. I hope the are able to survive this and continue on with the work that they do!
Showbiz1
After reading your posts responding to many of the comments on this article, it seems obvious that you have been a client between the studios and the facilities. And while I would agree with you that anyone whose only concern is the bottom line would never condone the policies R&H had in place. You are missing the point. R&H created something incredibly unique for this industry – a facility that put the care and well being of their artists first. It was from this stance that they attracted the most talented artists (even with the crazy concept of proprietary software), created some of the finest VFX in the business – and how year after year the studios (and apparently clients such as yourself) kept coming back. They were one of the most reliable houses left. Of course this structure was very difficult for them to sustain. There were many years where our pay was deferred or they had to have layoffs, but it was always done in ways that kept the core philosophy intact and kept them alive. They would have had to close their doors years ago if they betrayed this core concept and turned into the widget-factory that so many clients believe it should be.
So I agree that this collapse was inevitable, but only because the studios have made it impossible to pay a competitive wage for skilled artists – no matter where they are in the world. Smaller companies have fallen that much faster precisely because of this issue. R&H tap-danced as fast as it could to stay afloat, but even they have now succumbed to the void.
The saddest part of this story is not that yet another studio has closed, but that finance has finally won out over art. The true “race to the bottom” is in the quality of the work. “You get what you pay for” has never been more true than it is right now in this industry. With R&H, DD and possibly Sony, going away, ILM now folded behind the curtain of Disney, and even the once thriving London hub of houses paring down – where will the next 1,000+ shot show find a home? Will you really be happy with the work you get from the 10+ boutiques you will now need to parse that show out to? Even if they hire “the guy who used to animate at R&H” – the sum result from R&H will always be greater than the individual parts.
You have nothing of substance to add to this discussion and your inane crypto-rebuplican bullshit couched in outright lies about talking to Hughes is transparent. Kindly fuck off.
All this talk about how unions could have prevented this is hilarious. If employees at a vendor like R&H unionize, those costs would have to be passed on to clients. And the clients, the studios, will just take more work overseas where unions aren’t an issue. The studios have no obligation to work with a unionized VFX vendor.
Unions only offer protection when the union members work for the productions. If you are a camera operator or editor working for a show, your union can protect you. If you are a union member working for a random VFX company, your union can’t do a damn thing to prevent the show from taking work to India or China.
I don’t understand why this basic fact eludes everyone.
Now…if the VFX houses formed a trade organization, to protect themselves from the studios, that might work.
Either way the work’s overseas.
VES wanted to be the organizing source, but it wasn’t meant to be….
It seems odd: Companies do great work but can’t survive? Why? Costs too high? Revenue too low? Cash collection cycle too long? Competition from alternative sources (offshoring) or alternative technology? Customers not willing to pay a fair price for the quality that they demand? Other unreasonable customer demands (e.g. short timetable)? Under-bidding fixed price work to get the job and then unable to deliver? Problems estimating the time required to do a job, leading to cost overruns? Management should at least offer an honest explanation to employees about why they are not getting paid for work already performed. Glad I’m not in this business. I’ll bet the stress is a killer.
R&H is one of the world’s most amazing studios! Never had the opportunity to work but it still is certainly a dream! From what I have heard from my friends in India unit and abroad, it’s one of the best places to work! Hope they can be saved.. They have turned VFX around completely.. Shouldn’t be taken over! Not atleast by Prime Focus!
A business sector that has no competitive barriers of entry and little employee loyalty is a recipe for disaster. Bottom line.
VFX at the studios is now the domain of Production, not Post. Production is not facility driven for Labor acquisition. Producers hire crew and there is no mark up, the business is temporary. The post people shake their heads at the production people’s decisions when dealing with VFX. 25 years later they still make the same mistakes.
Post Production has always required Vendors to provide infrastructure and talent, and while that approach is changing it is still largely how post is managed. So post people are used to negotiating with companies with the idea that the want to keep the deals tight but the also want the vendor around the next year. A healthy vendor is more valuable in the crunch times as we have all learned the hard way.
Production people drive down cost with macro decisions that affect the entire unit. They bring this approach into managing VFX deals and then wonder why they have a problem.
Want to start to solve the problem? Make VFX a function of Post. It’s where it’s going. Look at ACES work flow. Desktop filmmaking will continue to shrink production jobs, all the work will shift to post anyways.
R&H said goodbye to people that had worked there for 13 years by shedding a bullshit tear (John Huges) and getting them to work the weekend knowing full well that they would not get paid for it. SCUM.
you have either never worked there or have only been there the last 12 months. Mr. Hughs puts his employees ahead of his family, I worked at R&H and I will personally lose because of this filing, but I hold no ill will towards John or the other partners, they did what they could given the nature of the biz.
Thank you for 13 years of gainful employment, I will forever respect John for the man that he is.
Ouch….