The End of Technicolor and Jellyfish Is Implosion of Long-Suffering Visual Effects Industry | Analysis

At the 2013 Academy Awards, visual effects supervisor Bill Westenhofer, accepting the award for Rhythm & Hues’ work on Ang Lee’s “Life of Pi,” approached the microphone. “Sadly, Rhythm & Hues is suffering serious financial difficulties now,” he said. “I urge you all to remember …”

Then they started playing John Williams’ ominous theme from “Jaws.” The camera cut to Nicole Kidman, who was seen mouthing the words “poor thing.” Had Westenhofer been able to finish his speech, it would have highlighted the deep schism between the visual effects and animation that audiences love and the financial realities for those who create them. Eleven days before the Oscar win, Rhythm & Hues had filed for Chapter 11 bankruptcy.

But what happened to Rhythm & Hues wasn’t a one-off; it was a warning shot. Twelve years later, two VFX and animation houses have shut their doors in a matter of weeks: Technicolor, whose studios like MPC and Mikros worked on “Dune: Part Two” and “Napoleon,” and Jellyfish Pictures, which supplied DreamWorks Animation with work for “Kung Fu Panda 4,” “The Bad Guys” and more recently “Dog Man.”

The same forces that undermined the financial stability of Rhythm & Hues – namely the compressed timelines and race-to-the-bottom bids – have persisted over the last decade. Only now the outlook is worse, exacerbated by an even more unstable industry and the looming threat of artificial intelligence.

These are studios that had big projects in the works that are now adrift – but it doesn’t come as much of a surprise. A recent increase in demand thanks to effects-heavy streaming product, combined with studios chasing overseas tax incentives and cutthroat practices that pit effects houses against one another have led to the loss of hundreds of jobs and institutional expertise.

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On Feb. 24, the France-based Technicolor, which includes visual effects house MPC and animation studio Mikros, filed for voluntary administration in the United Kingdom and began receivership process in France. That was just a week after the company announced its plans to close its U.S. offices. In closing its doors in the U.K. and American offices in Los Angeles, New York and Chicago, the company eliminated 440 jobs, and thousands of jobs may still be at risk.

In the memo that Technicolor released to staff at the start of their closure, Technicolor Group CEO Caroline Parot wrote, “The Group has been experiencing difficulties linked to a variety of factors and has not been spared from external headwinds: the difficult operational situation resulting from post-COVID recovery, a costly and complex separation from the previous group followed by the writers’ strike leading to a slowdown in customer orders causing severe cash flow pressures.”

Jellyfish Pictures, based in London but with outposts in Mumbai, Toronto and Sheffield, expanded with brands Jellyfish Animation and Jellyfish Originals for kids and family content. The studio had a unique foothold, providing feature animation for the aforementioned DreamWorks projects, along with others, and also high-grade visual effects for everything from “Star Wars” streaming series “The Book of Boba Fett,” HBO’s “Watchmen” and Netflix’s “Stranger Things” (for their supersized fourth season) to live-action movies like “Matilda the Musical” and the “Fear Street” trilogy (both for Netflix). They also contributed to the visual effects for “Star Wars” entries “The Last Jedi,” “Rogue One” and “Solo.”

According to reports, the studio had been struggling with investor issues in the U.K. and has described the closure as a “temporary halt.” When and if they will resume operations is unclear, with many employees currently looking for other jobs. Also unclear: how many employees this impacted. But last year the company expanded its footprint in India and hired an additional 400 staffers.

What makes the situation with these companies even more galling is that they were in active production on some of the world’s biggest movies. MPC was responsible for the animation in Barry Jenkins’ “Mufasa: The Lion King,” which has earned more than $700 million worldwide and is still in the domestic top 10.

What’s ailing VFX?

Rhythm & Hues was for decades the best in the business. Since 1987 they had created visual effects for over 145 films and employed thousands of artists and technicians. They had reached the pinnacle of their creative power. A video essay put out by the British Film Institute’s Sight and Sound remarked how “Life of Pi” “can be seen as the film Rhythm & Hues has been building up to all these years.” And just like that … they were gone.

As recently as the 1980s, more than one effects house would handle the demands of a movie’s workload. James Cameron’s “The Abyss,” for instance, required the talents of Industrial Light & Magic, then owned by George Lucas, and DreamQuest Images. There would typically be one or two studios attached to a project, with the main studio leading the way (and sometimes given a special credit).

All of that has changed in the year since, with multiple vendors bidding for work, with the lowest bidder always winning. For Marvel Studios’ “Captain America: New World Order,” which was released earlier this year, nearly a dozen effects houses are listed (including luminaries from heavy hitters like Scanline, Industrial Light & Magic, Digital Domain and Wētā FX), along with houses responsible for pre- and post-visualizations.

Part of this has to do with the sheer volume of visual effects – at the Hollywood premiere for the Russo Brothers’ new Netflix film “The Electric State,” they ballparked that 80% of the movie is pure animation. There is no way that one studio could handle that. The Russos’ last Marvel Studios movie “Avengers: Endgame” had 2,500 effects shots.

There is also the influx of streaming content, which has paired visual effects houses like ILM with top tier television like “Severance,” which had a rumored $20 million per-episode cost. There’s an increase in demand, with the studios bidding on these projects having to go lower and lower to get the job.

Studios chasing tax incentives will often rely on effects houses that have outposts in cheaper places – Industrial Light & Magic’s main office is in San Francisco, but they have satellite studios in London, Sydney, Vancouver and Mumbai. (They also had a Singapore studio that recently closed.) Wētā FX is in New Zealand. DNEG, a favorite studio of filmmaker Christopher Nolan, similarly has offices around the world.

Kerry Conran, a visual effects pioneer and the director of the cutting edge “Sky Captain and the World of Tomorrow,” told Inverse in 2022, foretelling a looming disaster in the industry, “It’s that cliche: Fast, cheap, and good. Pick two. Productions expect you to deliver on all three, but that doesn’t exist.” It can lead to a lot of problems.

In an exposé in Vulture around the release of “Ant-Man and the Wasp: Quantumania,” the Marvel production was described as “severely understaffed while facing an unrealistically short deadline.” In another article, an artist is quoted as saying that a “light week” while working on a Marvel Studios project totaled 64 hours. In order to get a project done, the money firehose magically opens up. Unlimited paid overtime is not uncommon for giant animated projects. As the old saying goes: Do you want it good or do you want it Tuesday?

MPC currently has “Snow White” and “Mission: Impossible – The Final Reckoning” opening in the coming weeks. Mikros was responsible for the animation in “Teenage Mutant Ninja Turtles: Mutant Mayhem” (animation had not started on the movie’s sequel, slated for 2026) and had contributed to the “SpongeBob SquarePants” movie “Plankton: The Movie,” which just premiered on Netflix. Jellyfish Pictures, based in the U.K., had just released “Dog Man” and did animation for Netflix’s “The Twits,” currently scheduled for release later this year.

With the industry already creaking under unhealthy demand, the closure of these studios will create even more pressure for those animation and visual effects houses that are still standing. One studio we reached out to wasn’t all that concerned by Technicolor’s closure.

Perhaps that’s because artificial intelligence is fast becoming a tool that studios are learning to use, with experts believing generative AI systems like Runway are on the threshold of being ready for major studios to use.

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