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Rhythm & Hues Files for Chapter 11, will it affect summer films?

Old 02-11-13, 05:10 AM
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Rhythm & Hues Files for Chapter 11, will it affect summer films?

Oscar-Nominated VFX House Rhythm & Hues Filing for Bankruptcy

As noted in the article, employees are not being paid, and have been told not to come in on Monday (2/11/13). Also of note, three studios tried to prop it up with $21 million while it was supposed to be acquired...

Films that work has already been halted:
RIPD (7/19/13)
Percy Jackson: Sea of Monsters (8/16/13)
Seventh Son (10/18/13)

Film may be affected, not confirmed:
300: Battle of Artemeisa (8/2/13)

Personally don't care about any of them outside of RIPD, but it will be interesting to see if street dates have to shift if a new VFX companies have to be brought in.

fitprod
Old 02-11-13, 05:28 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

I'm actually looking forward to Percy Jackson: Sea of Monsters.

But don't most film productions use multiple VFX companies at once? I doubt this'll have a huge impact. The studios will simply have to renegotiate with the other VFX houses on the payroll to pick up the slack.
Old 02-11-13, 07:03 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by RocShemp View Post
I'm actually looking forward to Percy Jackson: Sea of Monsters.

But don't most film productions use multiple VFX companies at once? I doubt this'll have a huge impact. The studios will simply have to renegotiate with the other VFX houses on the payroll to pick up the slack.
Yeah of course they do... But if Rhythm & Hues is in the process of doing specific critical VFX, such as creatures (their speciality), it could possibly muck up production schedules, especially since all the summer picks already have VFX houses currently booked.

Even if/when they moved VFX work from one house to another, they'll probably have to start from scratch, since Rhythm & Hues' VFX work/files are their property... Most likely the core creature designs would probably belong to the studio, but the work done by Rhythm & Hues would not.

fitprod
Old 02-11-13, 07:07 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by fitprod View Post
Oscar-Nominated VFX House Rhythm & Hues Filing for Bankruptcy

As noted in the article, employees are not being paid, and have been told not to come in on Monday (2/11/13). Also of note, three studios tried to prop it up with $21 million while it was supposed to be acquired...

Films that work has already been halted:
RIPD (7/19/13)
Percy Jackson: Sea of Monsters (8/16/13)
Seventh Son (10/18/13)

Film may be affected, not confirmed:
300: Battle of Artemeisa (8/2/13)

Personally don't care about any of them outside of RIPD, but it will be interesting to see if street dates have to shift if a new VFX companies have to be brought in.

fitprod
What does RIPD stand for?
Old 02-11-13, 07:14 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by Ash Ketchum View Post
What does RIPD stand for?
RIPD (R.I.P.D.) is based upon a popular graphic novel about a group of un-dead police officers which look to find their murderers. The graphic novel was originally written in 2001 by Perter M Lenkov of Hawaii Five-O, CSI: NY and 24 (Season 4) fame.

It stars Ryan Reynolds, Kevin Bacon, Mary-Louise Parker and Jeff Bridges. It's a fairly big tentpole feature from Universal, from the director of Red.

fitprod
Old 02-11-13, 07:26 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by Ash Ketchum View Post
What does RIPD stand for?
Rest In Peace Department
Old 02-11-13, 07:45 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

I don't think this will cause much of a problem. Sucks though, they did great work with Life of Pi.
Old 02-11-13, 08:50 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by RichC2 View Post
I don't think this will cause much of a problem. Sucks though, they did great work with Life of Pi.
Depends how far into VFX work they are for those films. R&H uses some proprietary software. I know the business has been headed toward each facility having open architecture so all facilities that have to take or farm work can do so, but it may affect some of the films if they have to rewrite that and redo shots.

The VFX business is volatile for the artists, but not for the studios that nickel and dime them and option to take business to the lowest bidder (which more times than not is overseas)
Old 02-11-13, 08:52 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by devilshalo View Post
Depends how far into VFX work they are for those films. R&H uses some proprietary software. I know the business has been headed toward each facility having open architecture so all facilities that have to take or farm work can do so, but it may affect some of the films if they have to rewrite that and redo shots.

The VFX business is volatile for the artists, but not for the studios that nickel and dime them and option to take business to the lowest bidder (which more times than not is overseas)
Fucking WETA!
Old 02-11-13, 09:29 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by RichC2 View Post
Fucking WETA!
Yeah, I have a lot of friends that had to MOVE to New Zealand in order to find work. And if it weren't for Peter Jackson at the time, pretty much forcing all his work through there and being able to guarantee top dollar, I'm not sure how they would fare. And with the Hobbit and future Avatars, they SHOULD be secure for a while. The exchange rate is slightly favorable if paid in NZ dollars.

R&H has 4 locations worldwide. Imageworks wants to move artists to Vancouver. Dreamworks has laid off workers this past week and Digital Domain continues to struggle.
Old 02-11-13, 09:42 AM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Sony Imageworks can go ahead and die. I detest their work. So much is meh from them.

Talking about Effects studios..how is ILM doing? Still them and Weta fighting for King of the digital SFX crown, right?
Old 02-11-13, 12:33 PM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

This was posted by someone in the know yesterday, I believe.

http://vfxlaw2012.wordpress.com/2013/02/11/rh-fallout/

If you have been directly affected by this sad news, my heart goes out to you and your family.

Let me answer some legal questions that may be on the tip of your tongue

Iíll also offer an opinion based on my producer and studio experience.

What happens next?

Tomorrow morning Rhythm and Hues, owned by John Hughes, is expected to file Chapter 11 bankruptcy based on the sources reporting. Unlike Digital Domain, R&H is a California Corporation, and has been since 11/24/1987. R&H is also privately owned, which means that public information about the proceedings will be more limited.

What is Chapter 11?

In summary, Chapter 11 bankruptcy allows a business owner to keep the business in tact, while discharging debts and paying off others. For example, a business owner is legally obligated to pay off certain debts that include alimony, child support, taxes, fines and government loans. A trustee then balances assets and liabilities and creates a repayment plan for submission to the bankruptcy court. An approval of the plan by the court results in an order listing which debts will be discharged and which debts will be honored. During the period between the submission of the trusteeís petition and the final court approval of the Chapter 11 bankruptcy filing, all creditors must stop any attempts to collect the debt owed to them.

Since Chapter 11 bankruptcy is designed to pay creditors back via the sale of certain assets and the ongoing operations of the company, the success rate of Chapter 11 filings is considerably low, with estimates as low as 10% for completion of the process. In many cases, the motivation to continue operations diminishes to the point where the companyís ownership seeks greener pastures, leaving the company in the hands of the trustee for the court.

What does this mean if I am a paying client?

The studios who have contracts with R&H will respond immediately. What will happen tomorrow morning, or more likely what already happened this weekend, is that current clients were given some sort of written notice. The studios were obviously aware of R&Hís struggles, and the fact that Prime Focus fell through leaves them little choice on what to do next. The studios will now demand direct access to the books of R&H, and proof that they can make payroll. Without an immediate investor, and if cash on hand is limited, the studios will have no choice but to pull the work immediately.

If the work gets pulled, the breach of contract is on R&Hís part, and most likely the studios will want any outstanding invoices expunged in exchange for the costs associated with pulling the work and sending it elsewhere. The vulture like companies that are floating nearby waiting for work to drop in are already hard at work. Sales teams and EPís at facilities hoping to pick up work are going to pitch hard to get anything that comes out of R&H.

The only way to prevent this kind of full-scale disaster would be for an investor to immediately infuse cash into R&H. A loan from the studios may be a good temporary solution, and they may prefer this option over pulling the work. That kind of decision is left up to the executives at the studio level- not the VFX executives- the actual heads of the studio. It is most likely the case that R&H will be allowed to fail, but I am merely speculating on that possibility.

What does this mean if I work at R&H?

This all depends. Reports on VFX Soldier indicate that people in El Segundo are being asked not to come in, but possibly not every single person is being told this. It will absolutely not matter what you have or have not been told, because within a few days the entire picture will be quite clear. Either R&H has cash on hand and will continue operations while it tries to sort out debts, or it will cease operations and employees will be left holding the bag.

If you are an employee, know your rights. You have the right to collect any debts that are owed to you, and a class action law suit will likely happen if there is any chance of a cash infusion with signs that the workers will not be paid. However, any attorney who represents such a class will settle for less than the employees are actually owed- if in fact it can be settled- and the attorneys will keep 1/3 of the winnings in court. You will likely never see a dime from R&H, and if you do, it will not be the full amount owed to you unless R&H is able to secure funds and pay employees in full.

I take note that R&H is supposedly calling individuals and letting them know their paychecks are not coming. This is the worst sign of all. When a company loses itís human resources, it effectively diminishes itís value to investors to a point that it becomes difficult to sell. Itís like having a plant and no workers. Without workers in place to finish jobs and guarantee new work will be completed, it will be difficult for an investor to see any value in anything other than IP the studio owns and hard assets such as real estate, hardware, and other similar materials.

Should I keep going to work, even if I have NOT been called?

Yes, you should continue to go to work as normal, but no, this is not the time to stick it out for the greater good of the company. If there is any hint that you are not going to get paid for your time, you need to ask the company to lay you off effective immediately. Start looking for another job right away. You will NOT receive unemployment if you quit your job. It is imperative that you DO NOT quit, but rather allow the company to lay you off and force you to be out of work.

What if I am owed a paycheck or I have unused vacation pay due?

Unfortunately Chapter 11 protects the company and you are now considered another debt on the list. Also, and more unfortunate, employees are often not the priority for a company in Chapter 11, as they are not the main creditor. DO NOT count on getting any paychecks, and DO NOT count on getting an unused vacation pay, sick pay, or any other accrued time off.

If you have a 401K plan or other retirement plan you can roll it over to an IRA. A plan administrator can help you do this- your retirement money is 100% safe and yours and nothing can take that away from you.

What do we do now?

These last few years have proven to be exceptionally hard on VFX workers, and I do not see this trend letting up anytime soon. For starters, other companies are also nearing collapse, and there are just as many that work job-to-job with no guarantee of future work.

As VFX artists, it is time for you to consider the possibility of working together to form an international guild that will give you leverage against the major studios.

For those of you deeply affected, and those of you who are brave enough, now is a great time to pick up a sign and march outside the big studio gates around Hollywood, showing your displeasure. This is not a story of a ho-hum VFX company going broke. Life of Pi was extraordinary, and without R&H an important part of the VFX industry will be deeply missed.

If anyone has any legal questions that I can answer about this situation, feel free to post them on this blog and I will answer publicly.

For those of you not rocked by this news, you are living in denial- now is the time to wake up- the wreckage is all around you.

VFX Law, out.
Old 02-11-13, 12:41 PM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

They've been trying to unionize for years and the studios laugh it off and outsource the work anyway.
Old 02-11-13, 04:22 PM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by devilshalo View Post
They've been trying to unionize for years and the studios laugh it off and outsource the work anyway.
That's the story of any below the line talent, post-production grunt work... Unionization will never happen with all of the cheap international staffs. As soon as they do it, more of the work goes overseas.

fitprod
Old 02-11-13, 04:43 PM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by fitprod View Post
That's the story of any below the line talent, post-production grunt work... Unionization will never happen with all of the cheap international staffs. As soon as they do it, more of the work goes overseas.

fitprod

Which sucks, because a lot of houses that started out here in L.A. have branches in India and elsewhere overseas. I never considered VFX artists below-the-line, because they make lots of money in the field. They don't necessarily do grunt work. Even special make-up fx folks have a union.
Old 02-11-13, 10:55 PM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

Originally Posted by Why So Blu? View Post
Which sucks, because a lot of houses that started out here in L.A. have branches in India and elsewhere overseas. I never considered VFX artists below-the-line, because they make lots of money in the field. They don't necessarily do grunt work. Even special make-up fx folks have a union.
I don't want to get this into a union/politics discussion, but I'm sort of curious when the last union was established in the film industry. Besides the unions attempting to get a piece of the reality television crews, has there even been a truly new one formed in the last 20 years?

I'm using "below-the-line" in the definition of Hollywood, which basically means anyone that is not a star, producer, writer or director. Post production people, excluding specific editors and musicians is considered below the line.

fitprod
Old 02-11-13, 11:10 PM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

I'd actually like to know the answer to your question.
Old 02-11-13, 11:30 PM
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Re: Rhythm & Hues Files for Chapter 11, will it affect summer films?

On a good note for those that were laid off:

Reel FX Extends Lifeline to Ex-Rhythm and Hues Artist

Of course this was not done for the Dreamworks people who were just laid off... So I'll take it with a grain of salt. (I'm been around this town too long not to be cynical about the business.)

fitprod

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