‘Life After Pi’ (Main feature continued)

Rhythm & Hues visual effects artists layered digital muscle, skin and fur to create the lifelike tiger in “Life of Pi”

Rhythm & Hues visual effects artists layered digital muscle, skin and fur to create the lifelike tiger in “Life of Pi”

On Feb. 25 of this year, a 30-minute documentary on the rise and fall of Rhythm & Hues was uploaded to YouTube. Produced by former R&H manager of digital production Christina Lee Storm and directed by longtime and current R&H art director Scott Leberecht, “Life After Pi” provides an easy-to-digest overview of the collision of fixed bids and subsidies that led to R&H’s bankruptcy. The film juxtaposes emotional interviews with company founders, including Goldfarb, against footage of employees before and after the layoffs.

“You get the wind taken out from under you,” Lee Storm said. “You’re hoping you’re doing really great, solid work. [But that success] didn’t attract more work [to R&H]. It’s really sad.”

According to industry trade publications, R&H filed for Chapter 11 with $27.5 million in assets and $33.8 million in liabilities. In the run up to the end, Legendary Pictures, 20th Century Fox Studios and Universal Studios loaned R&H about $20 million to keep payroll going long enough for the effects house to wrap production on films in progress.

Soon after the bankruptcy, Santa Monica-based 34×118 Holdings — a subsidiary of Prana, a computer-animation and visual-effects company based in Los Angeles — beat out rivals Prime Focus and the Chinese company Brave Vision to purchase R&H.

Faceless studio heads are deaf and blind to how fixed bids and production delays are killing visual effects houses in this cartoon by Jesse Toves featured in “Life After Pi”

Faceless studio heads are deaf and blind to how fixed bids and production delays are killing visual effects houses in this cartoon by Jesse Toves featured in “Life After Pi”

Current spokespeople for Rhythm & Hues, which reportedly employs 300 people at offices in India, Vancouver and El Segundo, declined to have company leadership speak on the record for this story.

By the time R&H was taken over, even its top competitors were in dire shape. Digital Domain co-founder James Cameron had left the company years before it was acquired by a Chinese company in late 2012, and financial troubles at George Lucas’ Industrial Light and Magic were curtailed when Disney bought out Lucasfilm for $4 billion. Digital Domain is now headquartered in Vancouver and ILM in London.

Computer graphics supervisor Tom Capizzi, 55, was among the 256 laid off at Rhythm & Hues. Today, he remains unemployed.

As early as 2012 —while R&H worked to establish an effects house for “Life of Pi” in Taiwan — Capizzi could see dark clouds swirling on the horizon, only this time it wasn’t a studio assignment on his computer monitor.

A former lead digital artist at Rhythm & Hues, Capizzi had worked with the company since 1996 on many high-profile jobs: “X-Men 2,” “Daredevil,” “Stuart Little,” “Hunger Games.”

But when R&H started missing payroll, “I noticed something was dramatically wrong,” he said.

Capizzi contemplated jumping to Disney, where an exciting offer awaited to oversee “Wreck-It Ralph.”

Thanks to R&H’s “extremely generous vacation plan,” the visual effects veteran had racked up plenty of unused paid vacation.

“I could have taken a whole year off,” he said. But as a divorced dad with children to support, “I was just working through one show onto another.”

Instead of leaving R&H and taking the vacation payout, Capizzi accepted what he called “a sideways promotion.”

Shortly after losing his job, Capizzi lead a class action lawsuit on behalf of laid-off employees.

In September, “We came up with a settlement of $3,000 to $4,000 [per employee],” Capizzi said, with some employees, depending on their seniority, getting more. Checks were cut in January.

Despite the lawsuit, Capizzi emphasizes his high regard for namesake founder John Hughes.

Capizzi said Hughes managed to set aside millions in reserve to guarantee staff payroll despite the loss of huge annual research and development tax credits in 2009.

“John Hughes protected that so everyone would get something,” said Capizzi, who received an additional $11,725 through that set-aside. “To his credit, I’m still living off that.”

‘So it doesn’t happen again’

Caprizzi’s admiration for Hughes and the days of Rhythm & Hues past is also common throughout the interviews in “Life After Pi.”

Founded in 1987 by Hughes, Goldfarb and four others, R&H quickly ascended as a leading progenitor of visual effects for movies, television and commercials, animating everything from the talking pig in “Babe” to those ubiquitous Coca-Cola polar bear spots.

The company relocated in 1995 from a small building in Hollywood to much bigger, Playa Vista-adjacent digs on Jandy Place (just south of Jefferson Boulevard), where it remained for 15 years.

“The building in Playa Vista had a central corridor along with a big stairwell so you’d run into people there,” fostering better communication on projects, Goldfarb said.

A Rhythm & Hues company photo from happier days

A Rhythm & Hues company photo from happier days

R&H was such an informal and personable company, Goldfarb said it was only after being pressed by a reporter that he learned his actual title — vice president in charge of software.

“They really fostered an environment to celebrate the artist,” Lee Storm said of her higher-ups, who rewarded employees with catered lunches and company barbecues.

In 2010, R&H moved to a facility in El Segundo that foreshadowed a change in company culture, Goldfarb said.

“What bothered me was the building itself — six floors with a small footprint. Employees are very reticent to move from one floor to another,” Goldfarb said. “The perks went away because we were bigger. You don’t have any room to have lunch together.”

Lee Storm, who joined the company in 2008, held on a bit longer than Capizzi but soon resigned and moved on.

Goldfarb survived the February 2013 layoffs, but two months later his contract was not renewed. Hughes was also let go from the company he founded.

“The documentary does a pretty good job,” Goldfarb said. “It’s very hard to express in words what it was like walking through the hallway, people alone in their office where they once had co-workers. Morale had sunk.”

What Goldfarb will miss most, he said, is “the people, of course.”

The makers of “Life After Pi” say their documentary “was never intended to reflect badly on the new owners or the new operators of the company. The intent was, let’s freeze this moment so we don’t forget it. So it doesn’t happen again,” Leberecht said.

Many R&H workers who lost their jobs to the bankruptcy have vilified “Life of Pi” director Lee for his apparent apathy toward the industry’s plight, but Goldfarb said it is unfair to single out Lee.

“It could have been any project.  When [Lee] spoke it was absolutely the norm to think of visual effects as post-production and to think of post-production as not part of production.”

Former R&H staffers have listed several films with production delays that set the company back, including “The Seventh Son,” the “Percy Jackson” sequel and “Marmaduke.”

Playing with a stacked deck

What happened to R&H essentially happened to California’s entire visual effects industry.

“It was the perfect storm of underbidding subsidies, the fixed bid and outsourcing,” said Scott Squires, a 20-year ILM visual effects supervisor whose experience runs the gamut from “Close Encounters of the Third Kind” to “Transformers: Dark of the Moon.”

With so many movies dependent on effects today, Squires sees the studio-effects house relationship as “directly inverse — basically every movie coming out has visual effects, even independent movies,” he said.

Compounding the demand for effects-driven films has been the rapid rise of the foreign box office, a once-afterthought market that now routinely overshadows domestic revenue.

Every visual effects job starts with the fixed bid — the visual effects house’s initial budget estimate.

“[The studios] take that number and shop it around to try to get even lower and lower,” Capizzi said. “Their attitude is, ‘If you don’t do it, we’ll take it elsewhere.’”

When projects stall, initial budgets fall apart.

“‘Life of Pi’ was delayed. It goes on hiatus for four months, then we pick it up again,” Lee Storm recalled. “Continuity, quality is interrupted. There is a specific group of people who can do, for example, water. They got placed on other films.”

Making matters even more difficult, studios often greenlight films before scripts are finalized. When test screenings reveal story problems, visual work stops for months before resuming, Leberecht said.

Now there is less time to do more work; significant extra work, which studios do not remunerate.

Overages do not always stem from stalled projects or overhauls. Sometimes it’s as subtle as “replacing a sky,” Leberecht said.

Before computerized digital effects, back when Squires ran his optical house Dreamquest in the late 1980s, work “was on a rate card. Every specialist was so much per hour. If they wanted three more weeks, it will cost you more,” he said.

Studios thus scheduled their release based on the time needed to create the effects.

Today, it’s the other way around.

“They could double the amount of work and your deadline still doesn’t change,” Squires said.

By the mid-1990s, tax subsidies began rolling in as Canada started offering big money, as did the United Kingdom — including for the first Harry Potter film in 2001, which snagged the U.K. seven more Potter films.

As technology improved and got cheaper, with less overhead and capital investment required, more players entered the game. Competition grew — both among effects houses vying for work and among states and countries offering ever-increasing subsidies.

With the rise of expensive “sure bets” such as Marvel movies, “Lord of the Rings”-level fantasy franchises and young adult book adaptations led by “Twilight” reaping in billions, the summer blockbuster season became all year long. Thus, studios are lured by subsidies outside California to offset monumental budgets.

“If Vancouver trims back its subsidies and they’ve got 3,000 effects workers there, now they’re losing the work and 3,000 workers are unemployed,” Squires said. “That’s what we call a race to the bottom.”

Hollywood has suffered a brain drain as visual effects talent leaves California to chase work elsewhere.

“All these people out of visual effects school with the promise of jobs, there’s not enough work and you’re going to be a migrant worker. Don’t plan on buying a house,” said Squires.

Brighter days ahead?

For now, it appears Hollywood’s visual effects industry is not unlike the digital Richard Parker, adrift in an eternal sea of uncertainty.

“A lot of people are out of work … running out of money, and it’s very bad,” said Goldfarb.

Conversely, Goldfarb believes many of these unemployed talents now “have an opportunity for movement when things are shaken up.”

After a year off, Goldfarb is starting Santa Monica-based Blackthorn Media, a content and visual effects company involving several ex-R&H people.

“What we hope [‘Life After Pi’] does is create more dialogue and discussion on the state of things,” Leberecht said.

Leberecht and Lee Storm intend to keep that conversation going by incorporating their film as one chapter in a larger documentary about globalization’s impact on Hollywood’s future and “how we’re paying for it,” Lee Storm said.

ADAPT founder Lay, who worked for Digital Domain until last fall, bills himself as one of the boots on the ground fighting to combat his industry’s dysfunction. Author of industry blog vfxsoldier, which he ran anonymously until outing himself last November, Lay led a demonstration of 600 people outside the March 2 Academy Awards.

Lay and ADAPT are challenging subsidies in the U.S. Court of International Trade, with the goal of levying mandatory duties at producers taking subsidies. He’s been heartened by recent developments.

Last month, the Motion Picture Assoc. of America submitted documents to the court that, while trying to strengthen anti-piracy laws, deemed electronically transmitted digital products no different than imported tangible goods. Lay argues on his blog that should the Tariff Act apply it would include anti-subsidy provisions imposing duties on imported effects work, thus discouraging studio outsourcing.

“It bolstered our case incredibly,” Lay said.

Also boosting ADAPT’s cause is an increase in skepticism about film production subsidies.

While negotiating an extension of North Carolina’s subsidy program, state legislators conducted a study that calculated economic benefits below MPAA figures, and similar scrutiny occurred in Oklahoma.

“Never have I seen the media more interested questioning these programs,” Lay said.

Lieu, meanwhile, is looking to keep the film industry at work locally, citing a recent report commissioned by Otis College of Art and Design that found creative industry jobs and spending were force multipliers in generating local economic activity.

“We’re branded for our movie and TV industry, and it’s something we need to keep here in the Golden State,” said Lieu. “Ultimately, what the [Otis] study shows is that for every dollar you spend, you get much more getting back.”

Rhythm and Hues continues to work on major studio films but has also expanded its focus to theme entertainment and intellectual property creation, recently winning a technical achievement award for proprietary technology.

Goldfarb and Capizzi declined to speculate on R&H’s future.

“I don’t know much about the company,” said co-founder Goldfarb. “The Rhythm & Hues I knew is no longer.”