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Rhythm & Hues To File For Chapter 11 Bankruptcy Today [UPDATED]

Animation studio Rhythm & Hues began informing its employees tonight that they will file for Chapter 11 bankruptcy protection on Monday. According to a report on Deadline, the studio can no longer pay its employees, and some employees are being asked not to come into work on Monday at the studio’s West LA headquarters.

On Monday afternoon, the LA Times reported that 200 people will lose their jobs due to the bankruptcy. The company employs 1,400 people at its studios in LA, Canada, India, Malaysia and Taiwan.

The legendary CG animation studio has been in business since 1987. They have been responsible for such projects as Babe, Scooby Doo, The Golden Compass, the Coca-Cola “Polar Bear” commercials, and Disney’s Animal Kingdom attraction “It’s Tough to be a Bug.” The studio won a BAFTA yesterday for its visual effects work on Life of Pi.

The company had been struggling financially in recent months, and had expected to be acquired by Indian company Prime Focus. Variety notes that while the Prime Focus deal has fallen through, “several buyers reported interested in acquiring the company out of bankruptcy.”

On Monday afternoon, Rhythm & Hues Feature Film Division president Lee Berger released the following statement:

“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.”

If your job has been affected and you would like to submit news confidentially, please contact me HERE.

[UPDATE 2—Monday evening]: The most comprehensive article about the current situation at Rhythm & Hues is this Variety piece by David S. Cohen.

[UPDATE—Monday morning]: The VFX Law blog has a good primer that explains how the bankruptcy affects employees and what workers’ rights are in such a situation.

  • Oh. Oh no. First Dreamworks, now this?

  • greg manwaring

    Wow, wow, wow. Sad news. Does this mean that the Indian studio won’t be acquiring them, or that this is temporary until they do??

  • So, first R& H outsourced some of their work to an Indian company, and now they’re being BOUGHT by an Indian company?

    • Anonymous

      R&H never outsourced work to any Indian Company.. They merely opened up branches in other countries keeping its LA crew intact and fully supported as a direct result of the expansion..

      • JohnV

        “Opening up branches in other countries”…. that’s called outsourcing.

        • occoris

          Outsourcing is hiring another company entirely to do your work, wether it is in another country or not. opening other branches is just opening other branches.

          • Jason

            No it’s still outsourcing. Third world wages for first world work. You’re arguing semantics.

          • AmidAmidi

            Jason – Actually it’s not outsourcing. It’s called offshoring:

          • john

            does it matter what it’s called? i have to agree with jason, the key here is: “paying third world wages, for first world work.” How is this any different from some young and hungry college kid willing to work for “free” to get “exposure.” all it does is damage the industry.

  • 2012 was a horrible year for gaming studios and vfx. Looks like it spills over into 2013.

  • JWLane

    Anyone who follows markets and global trade (reads financial pages) is probably only surprised that it took this long for labor fallout to start. Control of intellectual property has been the main driver of job security in the west, in regard to major media groups. But, for the last 10 years, Virgin (Branson) to Disney has been moving to a lower cost model in east and south Asia.

  • wever

    …… didn’t they just get a new CEO!??!


  • Nik

    Wow…and they’d just gotten so much good PR from “Life of Pi.” A shame.

  • Yoram Benz

    First DD in Florida, then Dreamworks and now this! When you have such creatively successful studios go bust it shows there is something very wrong with how this industry is ran!

    • JohnV

      It goes to show that the wrong people are in charge… Idiot business executives who have no idea how the industry work, are making stupid decisions…. and who suffers? The artists. Good luck guys!

  • JK Riki

    Is there more information on why they were struggling financially? I’d think with such big (huge, really) clients that it would be difficult to suddenly go bankrupt. Just curious if there’s a postmortem of sorts, as I’d very much like to be sure not to do similar things with my own studio. The more info you have the better.

    Thoughts and prayers to the employees who will now be back in the big pool of folks trying to find jobs to further their careers.

    • VFX artist

      I worked for in the movie industry as a compositor for a few years and left for a vast number of reasons. One of them is that they are providing an ever-shrinking pay check. The studios shoot themselves in the foot by participating in the underbidding. Of course the clients can go some place else to find work but if the industry sets standards for services they provide they really don’t have to go through this. In Hollywood the VFX industry is one of the last that hasn’t been unionized and continues to suffer from it. With that said I’ve moved on and have no more breath to waste on the subject. People will forever continue to wonder why these companies go bankrupt/ move to India without having set standards. Stop getting pimped!

  • Stuarts_friend

    While R&H did do the cays in Stuart Little the majority of the work – including Stuart was done by Sony Pictures Imageworks

  • ??

    This industry needs some serious regulations … How can a studio as busy as R&H go out of business like that? Is it the constant underbidding?

    • Regulation isn’t the answer.Friends tell me they almost always underbid work . If they can’t pay rent, they go out of business and the work goes to another company. Artists can work for that company. There isn’t a net loss of work. It sucks that people get laid off, but that’s how business works.

      • Evo

        That’s how poorly managed business works….

      • But that other company that the work goes to, if they don’t get paid enough they get shut down too and then the cycle begins again. Doesn’t that indicate that there’s a larger problem here? Yes, competition is a big aspect of our economy, but if people let prices go too low then it hits a point where it becomes unreasonable.

        • I feel if companies stopped underbidding work, the film industry would still pay. This industry needs to stop eating it’s own tail. It’s not like large studios won’t be making block buster films full of special effects, there will always be the work, we just need to charge more for it.

    • MCee

      It’s because the clients are paying less but demand the same high quality. There’s always someone out there who’s willing to do the work cheaper. RH has no choice but to accept the client’s demands or face losing the job.

      It’s a stupid game of “Guess what our budget is”. The client will call for a job but will claim ignorance of how much they can afford. RH will put in a bid, then the client says it’s too high. Then it gets boiled down to a price that’s barely worth the job.

      And no, it’s not that simple by refusing the job at the price offered. RH still has overhead to pay. And we all know that low paying work is better than none at all.

      It’s happening across the board. Classic case of Hollywood (Disney, Warner Bros, Universal, Sony etc..) screwing everyone over with empty promises.

      • I’m a little surprised to learn this, considering that R&H offers quality higher than most CGI studios. (especially when it comes to animals. And animals are damn hard to get right, so that there says something special about the studio) I mean, it’s not like there are tons and tons of studios that offer the super high quality that moviegoers have come to expect, especially when it comes to really big films like The Avengers and The Hobbit.

        A lot of the films done by R&H heavily feature animals which, like I said, are hard to pull off. I always kind of figured there wasn’t enough competition to drive prices so low that these big studios working on a lot of blockbusters can go out of business. Moviegoers have high standards and expectations for CGI these days so it’s not like the big Hollywood films can go to just any small, inexperienced studio, right? But I guess I was wrong in my assumptions.

  • M.R. Horhager

    Horrible news…best of luck to our friends who were working at the studio.

  • e

    I have a question… after seeing first dreamworks and now rythm and hues have difficulty operating with their budget how is it that all these studios have trouble, is the system flawed are these normal occurrences is the business model changing or unsustainable because everything is becoming more expensive or is the margin for error smaller than most businesses. what makes this field so consistently volatile. I understand it is expensive to produce animation, but it is also well paid i imagine. where is the gap coming from…perhaps because there are so many out there that the market is watered down…these are just some thoughts/qusetions i thought i’d throw out considering the bad news we just got

  • Oh, that’s terrible! I wonder why this happened? The studio has done a lot of big, and good, movies, you’d think they were doing well. It especially sucks to have this happen now, just when they were receiving all this praise for Life of Pi.

    • Jason

      Praise doesn’t pay the bills. Awards mean nothing except as a form of navel gazing. Until VFX benefit from their hard work aside from a one time flat fee, they’ll always be on the brink of disaster.

      • I know, I was just saying it sucks. So, what should special effects companies do to avoid these problems?

        • Jason

          Start a Guild to avoid killing each other by underbidding.

          • That sounds good, I guess. I don’t know a whole lot about the industry, unlike a lot of people here, so I can’t give many suggestions myself. But from what other people are saying, the problem does seem to be that bigger studios can get away with underpaying because the CGI studio knows that they can go somewhere, and it’s either take the cheap work (and risk dying slowly like R&H) or refuse and die immediately. A guild can work.

  • anonymous

    This is so sad. My roommate just moved out so she could be closer to her job here… :(

  • hahaha

    there are few people at my work who used to work with people were working at R&H. they told me that life of pi finished a long time ago (few years ago) and after that there hasnt been much work for them. that is why they are struggling now. and generally there are not enough movies to keep them busy. and constant underbidding war to third world countries. it is just sad that general 3D industry in the world is kind of struggling, when pixar and dreamworks make so much money. it almost seems like “if you are not as big as them, dont bother.” kind of situation. and it feels like this kind of “art” is being sold to “made in china” commodities made in factories…

    • Sean

      Life of Pi did not finish a few years ago.

  • e

    ah thanks rob

  • feep

    We’re in the third industry crash. Right now. F*ck.

  • Call it what you will

    “Merely opened up branches in other countries”…. That logic comes from the same mouths that called the Layoffs at Dreamworks, “Transitioning Outside the Company”
    BullSh|t management doublespeak.
    R&H Had an Indian Office. It took jobs away from artists here in the US. A Rose by any other name, its still outsourcing.

  • S_e_a_n

    Perhaps California is becoming too expensive for business? Employees have to be paid twice as much just to survive. States with no state tax like Texas

    have an advantage. Lower cost of living, and without the burden of a 10% tax on top of everything else, seems to be a good way to keep overhead more manageable.

    Good luck to all of those who lost their jobs!