Rhythm & Hues auction won by Prana Studios (UPDATED x2)

March 29th at 4pm PDT
TheWrap has an updated report from after the hearing today. The issue with the breakup fee and JS Communications heated up and won’t be decided now until April 22nd. One gem from the article:   “Evan Jones, an attorney for JS Communications told Judge Neil W. Bason that the auction was not done in good faith, labeling the sale as a bag of “smelly goods.”

According to analysis by The Hollywood Reporter, the deal is valued at $17.8 million, which includes a $1.2 million cash payment, assumption of loan obligations and contractual liabilities.

Variety also has a wrap up which includes:  “The new owner of record for R&H is  34×118 Holdings Inc., a Prana Studios affiliate. Allan Soong of Deliotte CRG, will serve as chief restructuring officer of 34×118. Lee Berger will be president, Erika Burton co-president, and Gautham Krishnamurthy is CTO.”

Variety’s David S. Cohen also tweeted the text of a congratulatory press release from Prime Focus on the sale (this is a first – a press release from a losing bidder).  Excerpt: “While the financial fates of various companies can rise and fall, we can’t lose sight of people being our core strength. We sincerely hope that the sale brings greater stability to Rhythm & Hues, its artists, employees, and staff, and to the VFX community in Los Angeles and around the globe.”

March 29th at 1pm PDT
TheWrap reports that the approval of the sale has been delayed and will likely not happen today. At issue seems to be objections from two bidders, Prime Focus and JS Communications and also from Side Effects Software.

Rhythm and Hues has been sold at auction following bankruptcy to Prana Studios. The auction was scheduled to conclude Wednesday but complications kept the auction going until Thursday night, with the final hearing scheduled for Friday at 10:00am. Reported bidders included Prime Focus, China Lion (although they denied this on twitter), Psyop, and others. South Korean firm JS Communications was originally the stalking horse bidder but pulled out of that status before the auction. Apparently one of the complications that delayed the auction was an attempt by JS Communications to collect fees usually reserved only for the stalking horse bidder.

pranaPrana describes themselves on their website:
Prana Studios Inc. is an artist-driven, full-service 3-D animation and visual effects studio with production offices in Los Angeles, CA, USA and Mumbai, India. We develop content and create state of the art visual imagery for full-length feature films, short-form media, and special venue attractions. Our creative skills range from visual and story development to final post, including complete CG and stereoscopic animation and image creation.

Credits for Prana include: Great and Powerful Oz, Hitchcock, The Watch, John Carter, Tron: Legacy, Transformers: Dark of the Moon, Tinkerbell and the Lost Treasure and is currently providing exclusive CG animation production services for Disney’s 3D feature film PLANES, set for global theatrical release in summer 2013.

Prana is a Sanskrit word that translates to: Vital energy; life-breath. Wikipedia compares it to the Chinese Qi (or Chi):  Concepts similar to qi can be found in many cultures, for example, prana in Hindu religion (which includes the Vedantic philosophy), mana in Hawaiian culture, lüng in Tibetan Buddhism, and Vital energy in Western philosophy. 

David S. Cohen from Variety has been actively following every step of the process, reporting every update via his twitter account @Variety_DSCohen. He has complete details in this article:

The last line of the Variety article is: “All of R&H’s facilities outside the U.S. are owned by subsidiaries that were not part of the bankruptcy.”  This single line at the end of an article spawns a lot of questions. fxguide is anxious to see the final court documents to see if they define exactly what was purchased by Prana. R&H famously uses proprietary software, who owns that, is it licensed to these subsidiaries and where is future development done?  What is the relationship between the Los Angeles property and the subsidiaries – both Prana and the subsidiaries operate facilities in India, will there be consolidation there? Assumedly the subsidiaries are owned by combinations of previous ownership of R&H and outside interests, the technicalities of that and decisions of what work gets done where seems complex.  VFX Soldier points out that investors in Prana include “Mukesh Ambani who owns Reliance. Reliance Mediaworks owns a stake in Digital Domain making R+H distant cousins if bankruptcy proceedings follow through.”

The Hollywood Reporter article can be found:


R&H filed for bankruptcy in in early February. A month prior to that Life of Pi  was nominated for the best visual effects Oscar. The film went on to win that award, the British Academy Film Award as well as winning in four categories at the VES Awards. The timing led to a protest outside the Oscar ceremony in Hollywood with almost 500 artists taking to the streets demanding “A piece of the Pi” (fxguide story). This protest was born on social media, Twitter and Facebook allowed artists to share ideas and organize the event. A group calling itself VFX Solidarity saw 70,000 people join their Facebook page in only a few days.

vfxtownhall panel
vfxtownhall panel

This social media engine has continued beyond the Oscar protest organizing a town hall meeting on March 14th, taking advantage of the dates numeric similarity to 3.14 calling the event – VFX Town Hall on Pi Day.  More than 250 people attended in Hollywood and the organizers masterfully integrated simultaneous events in San Francisco, Vancouver, Austin, New Zealand and more all connected by a Google Hangout with the whole event broadcast live on YouTube and made available for replay afterwards. fxguide story 

If you work in visual effects you probably found your Facebook wall and Twitter feed filled with green icons. In solidarity artists world wide changed their icons to green screen color representing what a film looks like without visual effects.  The movement has even been dubbed “green spring”.

The underlying message of the movement has been that the business model visual effects companies operate under is not working. We have seen too many companies struggle, go through Chapter 11 and even close in recent years due to the fixed bidding, price undercutting and limited clients (6 major studios). Visual Effects facilities can be financially devastated by delays to schedules, changes to edits, changes in creative direction… all often without corresponding changes in compensation. For many years artists were protected from this but as the squeeze continued and film studios transitioned to corporate ownership the last place to squeeze has been artists. Combine that with tax incentives and subsidies used to lure production and post production to locations around the world and we have seen vfx artists become digital nomads. Dave Rand, one of the vocal spokespeople for the movement, has personally worked at five companies that have folded.

One of the consequences of all this upheaval is that the clients (the studios) have now become intimately involved with the financial information of several vfx facilities. In addition to the Digital Domain and R&H bankruptcies ILM was recently sold to Disney as part of the Lucasfilm sale. There is hope that these deep looks at the financials will show the studios just how perilous the existing business model is, that it really jeopardizes release dates of tent pole movies that they depend on. At the vfx town hall Dave Rand made the point that if visual effects worked more sanely, interactively and collaboratively with the filmmakers the studios could see costs more contained as much of the existing model encourages waste and crisis.