Rhythm & Hues Attorney: ‘It Was Just the Perfect Storm’

Rhythm & Hues Attorney: 'It Was Just the Perfect Storm'

Bob Baradaran said the company was more interested in quality than profits

Bob Baradaran, managing partner at Greenberg Glusker and longtime attorney of beleaguered effects shop Rhythm & Hues, told TheWrap that the company was the victim of a “perfect storm” that swept the Oscar-winning studio into bankruptcy last year.

“It was just the perfect storm of the technology being available globally and labor costs in the U.S. being higher than in other jurisdictions,” Baradaran said. “Studios want to keep their budgets in line, but they still want to make all sorts of changes and do different things with their movies, but they don't want to pay for them.”

Instead, it is vendors such as Rhythm & Hues that shoulder many cost overruns on projects, because unlike other production industries such as cinematography or editing, visual effects companies are asked to submit fixed bids. They are not paid hourly rates for their work.

Also read: YouTube Documentary ‘Life After Pi’ Chronicles Collapse of Rhythm & Hues (Video)

Baradaran worked with Rhythm & Hues for eight years and was one of the attorneys tasked with helping the company file for Chapter 11 protection. He spoke to TheWrap nearly a year after Rhythm & Hues filed for bankruptcy and was sold in auction to Prana Studios.

Rhythm & Hues was considered a leader in the field with its work on films such as “Babe,” “Superman Returns” and “Life of Pi.”

“A wonderful company went bankrupt and the short term effects are that the cost of making equivalent quality products will likely rise for the studios or they will not make products that are as good,” he said. “They will sacrifice quality for lower cost.”

Studios looking to economize have increasingly shipped their work overseas to countries such as Canada and the United Kingdom that offer tax subsidies or India that boast cheaper labor.

“Rhythm & Hues amalgamated wonderful talent right here in Los Angeles and that comes at a cost,” Baradaran said. ”I don't believe that level of talent exists offshore.”

Also read: Rhythm & Hues Sells to Prana in Turbulent Auction

Baradaran said it was “heartbreaking” to see the company fail because he had great respect for the company's founder John Hughes and the way he took care of the roughly 700 men and women who worked at Rhythm & Hues. The problem was not profligacy, he argued.

“The company's motivations were ‘lets take care of our people’ and ‘lets do excellent work,'” Baradaran said. ”They were working at cost. They weren't running the company to make big profits.”

Fourteen days after filing for bankruptcy, Rhythm & Hues won an Academy Award for Best Visual Effects.

“To do ‘Life of Pi’ with the same quality would have cost millions more,” Baradaran said. “This was a company that did not want to sacrifice quality.”

The failure of Rhythm & Hues galvanized visual effects workers, leading to a protest outside last year's Oscars that drew 500 people, and scores of articles and blog posts about the dire state of the business. The publicity it generated stunned Baradaran.

“It's very difficult to explain how a company that was at the pinnacle of its creativity and was creating excellent products and winning Oscars at the same time was going through a dissolution or bankruptcy,” he said.

 

 

  • Barry

    This is a highly reductive and inaccurate description of events. Rythym and Hues went out of business because its owners were poor business-people. Irrespective of cheaper labor and subsidies overseas, if their quality was indeed higher, they were fools to agree to a fixed-bid on something as complex as an FX driven feature. This is a common issue among VFX vendors and any business which locks itself into a fixed bid without being able to accurately forecast costs will and should go out of business.

    • Truth

      you can only forecast for a time frame which u think u can do it in but if the production house, keep the movie on hold for 6 months u can't account for it and if u can then u are god.
      You are saying a product is 10k worth with profit, the vendor predicts that he would not be able to sell it for 2 year so he charges 30k for the same product :) would u buy the product from such vendor …. if u would i would love to have ur kind of foolish buyers :)

  • Dave Rand

    So Barry, the dozens of other VFX shops that went under in California were also just poor business people …must be some form of mass hysteria or something….someone should do a study. Yeah right… Fixed bids hurt the global industry, the artists, and the entire creative culture, that combined with subsidies wiped out Hollywood VFX. Rhythm was just the Alamo of the free standing shops.

    We all work for the same oligopoly that controls the world's movie screens. They have so much leverage that they are able to get global taxpayers to pay for their movies while they enforce a bidding model on anyone who wants to “play” that destroys any bit of cumulative talent and keeps the pockets of talent fighting and in a weakened state. When they fail…and they all eventually do….they end up paying for the movie…then they can't pay the artists and the artists end up paying for the movie…then we all pay to go see the movie. ‘

    All the while 49 of the top 50 running films of all time are VFX films.

    If the owner of a prize race horse caught the trainer beating his stallion to death…he'd be fired on the spot.

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  • Lori

    From the article:

    > Studios looking to economize have increasingly shipped their work overseas to countries such as Canada and the United Kingdom that offer tax subsidies or India that boast cheaper labor.
    > “Rhythm & Hues amalgamated wonderful talent right here in Los Angeles and that comes at a cost,” Baradaran said. ”I don’t believe that level of talent exists offshore.”

    A lay reader might assume that R&H existed entirely in California, but in fact they had facilities around the world — including subsidized Canada and cheap-labor India and Malaysia. I don't know the numbers, but I wouldn't be surprised if the majority of their employees were outside the US. They were leaders in taking advantage of subsidized and low-cost locations, widely recognized as both doing it earlier, more extensively, and much better than others. And as for the talent comment, R&H made many statements over the years that their India facility was truly operating as an equal to LA, and indeed it was much better integrated (same pipeline, same work) with its LA office than the remote offices at other VFX companies, which often use foreign facilities for very restricted lower-skill tasks.

    I'm not saying that subsidies and offshoring aren't legit problems in VFX, they clearly are. But the R&H situation is MUCH more complicated and nuanced than this article lets on. It is simply not a case of US-only studio losing out to offshoring.

    • Truth

      Ya that's true that R&H was taking all the help from the incentives overseas in form of subsidies or cheap labor but never did they cut down jobs in U.S neither did they reduce the quality of work Infact the employee count in U.S rose since they started going global. It was just to be competitive to do what they love the most.

    • Nobody

      Even though RNH had studios setup in India and Malaysia, the majority work force was in LA. But the very fact that RNH had studios in cheaper countries made it survive for longer than it should have without compromising on quality. Any studio that had to shut it doors faced the same problem in the end, RNH was in no way an exception. In fact I know lot of studios outsource work to cheaper countries just to get the work done. It's just not made public.