H'wd VFX shops facing crisis (TIME)

By Nancy Tartaglione

Time today has a look at a crisis hitting Hollywood's visual-effects companies. Just as VFX artists - the folks who make superheroes fly and cities crumble - are helping to propel box-office hits, global competition, the hangover from Hollywood labor strife and a lack of negotiating power with studios are seeing many VFX firms closing up shop or outsourcing to stay afloat.

The VFX business should be thriving. Nine of the 10 highest-grossing movies worldwide in 2009 relied heavily on special effects, making the industry more central to Hollywood's business model than movie stars. "It's no longer about Tom Hanks or Tom Cruise," Scott Ross, a former CEO of Digital Domain and general manager at ILM, tells Time. "It's about flooding New York or creating blue people."

But in the past 15 months, companies including Disney's ImageMovers Digital, C.O.R.E. Digital Pictures and the Orphanage have closed.

The root of the industry's problems is in how the companies were formed, says Time, most of them in the 90s, when cash flowed freely and shops were treated like high-tech training grounds for directors and artists.

But with the rise of economic mobility and with technology getting cheaper, small shops can get up and running with just $20,000 worth of hardware and software.

Still, the writers' strike and the threat of an actors' strike in 2009 slowed the green-lighting of new films - a blow from which some companies haven't recovered. "We're starting to see even more dire competition, and it's getting harder to keep shops open," Ross says.

See Time for more.