Rhythm & Hues Wears Prana

An affiliate of LA-based and Indian-owned Prana Studios (Disney’s upcoming Planes), 34×118 Holdings Inc.,  won the intense bidding war on Friday for Rhythm & Hues at a cost of $17 million, according to Variety. Backup bidder is Brave Vision (a Chinese company led China Lion’s largest shareholder Jiang Yanming). Prime Focus came in third.

Prime Focus and stalking horse bidder JS Communications failed in their bids to contest the sale. Prime Focus contended that it was not allowed to throw in a final bid and JS argued that its $425,000 break-up fee was being jeopardized.

Jeff Okun, VES chair and SVP of Prana, said in a statement,  “While remaining a stand-alone company focusing on cutting-edge visual effects and innovative technology, R&H will be complemented by Prana’s world-class long-form animation….With the additional support of our strong investor group, we are confident R&H will continue to be the innovative quality leader in our field that they’ve been for 30 years.”

However, while the future of the artist-friendly R&H might be more financially secure in the hands of Prana, its identity will now change into an even greater global company, since it’s expected that at least 80% of its work will shift to Asia. A new studio in Taiwan is already ramping up with the hiring of 200 artists. The downside is that it will be a loss for the local economy, including talk about the closing of the El Segundo headquarters. Fundamental VFX reform is still needed and maybe it will have to start with the filmmakers that care most about the quality of the craft to prevent the killing of the golden goose. A trade association for VFX studios is still a strong possibility, though unionization of artists and tax subsidies seem less likely. But the business model definitely needs to change to make it more profitable and artist-friendly.

Meanwhile, as Variety points out, R&H would have to generate more than $100 million in revenue over each of the next three years to repay its loans, which would be a challenge given the razor thin profit margin of VFX studios (roughly 5%).

But, like Pi, R&H has weathered a storm and now is in a much stronger position to face the new storms that lie ahead.

Posted on by Bill Desowitz in 3-D, Animation, Movies, Oscar, performance capture, previs, Tech, VFX, Virtual Production

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