Not all those gathered in Hollywood last month just prior to the Red Carpet proceedings on Oscar Sunday (3/2) were there to star gaze. Some 500-plus folks were on hand to instead voice their concerns and call attention to factors that are hurting the visual effects industry and the many talented artists in that discipline trying to make a living in California. Organized by the Association of Digital Artists, Professionals and Technicians (A.D.A.P.T.), the protest drew assorted visual effects professionals and their supporters from other industry sectors.
A similar protest took place right before last year’s Oscars but this time around there was a significantly larger turnout. Ironically the 2013 Oscar ceremony sparked the making of a documentary short, Life After Pi, which was released online this past February and showcased on a website (HollywoodEndingMovie.com) which carried a message urging VFX artisans to join the recent pre-Oscar protest in Hollywood.
Life After Pi covers the massive layoffs at Rhythm & Hues, which declared Chapter 11 bankruptcy in January 2013, a mere 11 days before that studio won the Visual Effects Oscar for the Ang Lee-directed Life of Pi. Some 45 seconds into his Oscar acceptance speech–just when he was about to address the hard times suffered by Rhythm & Hues–Bill Westenhofer, VFX supervisor at the studio and on Life Of Pi, was cut off as the orchestra began to play the ominous theme from Jaws.
Sharing the backstory of Life After Pi, its director/editor Scott Leberecht–who continues at Rhythm & Hues as an art director–recalled, “When that first round of 254 layoffs happened, I can’t tell you how much of a shock it was to everyone. For a week we were walking around in a daze. Then the Oscars happened. Everyone knows what took place on stage that night with Bill Westenhofer. It snapped everyone out of the daze and got people thinking about what they could do to address the situation.”
Leberecht and his then Rhythm & Hues colleague, manager of digital production Christina Lee Storm (who’s now at non-profit industry organization Act One), did just that, deciding to make a documentary filmed largely at the company’s former El Segundo facility during the weeks following the bankruptcy filing. Life After Pi shows the impact of layoffs and labor uncertainty on people and their families.
Artisans at the studio shared their thoughts and feelings. The documentary captures executives talking openly about what happened and why they think it happened. And the significance goes beyond Rhythm & Hues, affirmed Leberecht, noting that some 20 VFX houses–most of them in California–have closed or declared bankruptcy over the past decade.
These include accomplished shops–Rhythm & Hues, for example, which managed to survive after its bankruptcy declaration, is a three-time VFX Oscar winner, the first coming for Babe in 1995, then The Golden Compass in 2008, and Life of Pi in 2013. (Following its bankruptcy declaration, Rhythm & Hues was acquired in March 2013 by a company with ties to VFX/animation house Prana Studios, which has offices in L.A. and a subsidiary in Mumbai, India.)
Now Leberecht and Storm hope that Life After Pi will serve as a bridge to a feature-length documentary they are looking to raise funding for that will delve more deeply into the erosion of the movie business, including VFX, in California, particularly Los Angeles. The title for that planned longer form documentary is simply Hollywood Ending.
FilmL.A.
Independent research conducted by FilmL.A., the regional film office serving Los Angeles City and County, chronicles that erosion, including the downward trend in the VFX industry. Released last month, the FilmL.A. report refuted a widely held belief that while California may lose out on principal photography due to runaway production, the state is still the beneficiary of the bulk of postproduction and visual effects work.
FilmL.A. found that the U.K. and Canada have both usurped California (and the United States) as global centers for VFX work. This is a concern for California because the biggest budget features spend much of their production budgets on postproduction and VFX.
An analysis of the 25 live-action movies with budgets over $100 million reveals that approximately half of the total jobs on these movies went to VFX artists.
Both the VFX industry and the major VFX companies themselves have gone global, according to FilmL.A. Historically, the bulk of the VFX industry and the major VFX houses were concentrated in Southern California, but this is no longer the case.
Most of the major VFX houses now operate with multiple satellite locations all over the world. The hot locations for VFX work are all outside of California (and the U.S.). FilmL.A. cited Vancouver, Montreal, London, Singapore, India, Australia and New Zealand as just some of the locations booming with growth while California’s VFX sector withers away.
As an example, FilmL.A. noted that Industrial Light & Magic (ILM), the largest remaining California visual effects company capable of employing 1,000 effects artists, opened a Vancouver office in 2012 and hired roughly 100 VFX artists to work on several contracted projects in British Columbia. In January 2014, ILM announced it would double the size of its Vancouver workforce from 100 to 200 employees.
ILM also confirmed it was opening a facility in London to perform work on big-ticket features, first The Avengers: Age of Ultron, followed by the forthcoming Star Wars sequels, which will film primarily in the United Kingdom.
While ILM insists it has no intention of eroding its core workforce in California by opening branches in Vancouver and London, most reported growth at the company, stated the FilmL.A. report, is occurring overseas in incentive‐rich destinations, instead of in California.
Animation is also being impacted. In 2012, DreamWorks Animation announced plans to open a studio in Shanghai, China, with the formation of Oriental DreamWorks, a joint venture with two state-owned Chinese media companies. Roughly one-third of the work on 2015’s Kung-Fu Panda 3 will occur in China, and Oriental DreamWorks’ first original animated movie will follow in 2017.
DreamWorks’ chief executive officer Jeffrey Katzenberg remarked that the size of the studio in China could eventually surpass DreamWorks’ headquarters in Glendale, Calif., which employs more than 2,000 people.
According to the FilmL.A. report, it appears that job growth is happening in the animation world but it’s happening in places like China, not California.
Stakes rising
Meanwhile incentives are being enhanced significantly overseas, a prime example being the U.K. where the VFX Oscar-winning Gravity was largely shot, with Framestore, London, lauded for its VFX work on the film.
In fact, some refer to the U.K. VFX community as being in the midst of a renaissance, growing a pool of talent and resources that, coupled with U.K. incentives, have proved too alluring to resist for Hollywood movie/TV studios on both creative and business fronts.
U.K.’s revised tax relief incentives took effect April 1. Now the U.K. offers a 25 percent credit on the first $33 million of film budget expenditures that qualify for the tax incentive and 20 percent thereafter.
Previously such projects were eligible for “only” a 20 percent rebate.
In addition, companies don’t have to spend as much in the country to qualify for rebates. The minimum expenditure requirement–including money spent on postproduction–has been reduced from 25 to 10 percent of qualified production costs; this provision is designed to make the U.K. a more attractive co-production partner and to enable projects to more easily tap into the U.K.’s visual effects and postproduction sectors.
Additionally the overall program’s points formula has been revised which makes it easier for films to be classified as British in order to be eligible for the production incentives.
The U.K. tax relief program has no budget cap on films and incentives can be offset by above-the-line costs such as the salaries of actors, writers and directors.
California
Assorted industry organizations, including unions and guilds, are advocating that California expand its incentives program in order to be more competitive in the world marketplace.
The current California Film & Television Tax Credit program is funded at $100 million annually. Credits can amount to 20 to 25 percent of qualified production expenditures. But excluded from tax credit eligibility are those films with budgets of more than $75 million, as well as all television commercials.
Demand for the program far exceeds the $100 million annual allocation of tax credits. For example, the first day of eligibility for the program in fiscal year 2012-’13, 322 projects applied for the incentives. Of these applicants, only 28 were selected with the rest put on a waiting list. Still, even with restricted access to the incentives, the program in its first five years has funded some 270 projects, generated $4.75 billion in economic activity and more than 50,000 jobs for skilled workers.
Proposed legislation has surfaced that, if passed, would broaden the funding and scope of California’s program. The proposal–Assembly Bill 1839 introduced by California Assemblyman Mike Gatto (D-Los Angeles) and Raul Bocanegra (D-Pacoima)–would increase the tax credit allocation to as much as $400 million a year to better compete with tax subsidies in other states and countries.
The bill would also extend the program until 2022 and expand eligibility to include bigger budgeted movies and all TV series while providing a special incentive for shooting outside the typical Los Angeles-centered areas.
On March 25, AB 1839 cleared its first legislative hurdle, passing by a unanimous bipartisan vote in the Assembly Arts, Entertainment, Sports, Tourism and Internet Media Committee.
The bill would next need to pass the Assembly Revenue and Taxation Committee and eventually the full Assembly, then the State Senate, and be signed into law by Gov. Jerry Brown.
It’s difficult at this time to gauge prospects for the bill’s ultimate passage though at this stage it seems the Assembly is receptive to the legislation. Industry groups have been lobbying legislators in both state houses as well as Gov. Brown to secure their support.
Two-fold problem
However, Leberecht cautioned the industry at large that the VFX community faces a two-fold problem.“
“One,” he said, “is that the subsidies and tax breaks being offered by other states and countries are drawing business away from California. We’re losing business and jobs and that will continue unless we can figure out how to level the playing field in terms of incentives.”
Still, correcting that will not be a panacea, contended Leberecht who noted, “The other problem is the relationship between visual effects houses and the movie studios–it’s a flawed business model where visual effects houses are expected to deliver no matter what, even if there’s a major change in creative vision or eleventh hour changes. There are overages for clear changes–adding 100 shots, for example–but problems occur when for instance we’re being inadvertently used to design the work, debating over the color of the sky, resulting in a process that costs time and money that aren’t recouped.
First it’s supposed to be orange, then purplish orange. We’re going through colors, changing them constantly because they don’t know what they want. Once they finally know, we have spent a week for a shot that should have already been done.
“And the power of the visual effects vendor is almost zero,” affirmed Leberecht, explaining, “It’s so competitive. Nobody wants to make waves for fear of not getting the business. What many don’t realize is that this jeopardizes even the vendors in a well subsidized region. A lot of people in Vancouver and the U.K. where incentives are strong now probably feel safe. But if they watch our documentary, they should be more concerned about the business models and what that will ultimately mean for them.”
