The visual effects (VFX) industry has long been a paradox—essential to modern entertainment, yet often on the brink of financial collapse. The recent shuttering of Technicolor’s VFX divisions, including the legendary MPC and The Mill, is the latest and perhaps most glaring example of an industry that creates billion-dollar blockbusters but struggles to sustain itself.
Despite breathtaking technological advancements and an ever-growing demand for high-quality digital content, VFX companies—especially the larger ones—are facing an existential crisis. But why do the biggest players in the field keep falling? The answers lie in the industry’s flawed financial model, relentless race to the bottom on pricing, and the unsustainable working conditions that have plagued VFX houses for decades.
Unlike Hollywood studios, which reap massive profits from their films, VFX studios are typically service providers locked into fixed-bid contracts. This means that regardless of how much extra time or resources a project demands, the studio gets paid the same. If a film goes through extensive revisions—which is common in Hollywood—the VFX studio absorbs the cost, leading to budget overruns and financial strain.
For major VFX studios like MPC, which worked on Oscar-winning films such as The Lion King (2019) and Life of Pi (2012), delivering high-quality work on a tight budget is expected. However, even delivering award-winning effects does not guarantee financial stability. The profit margins in VFX remain razor-thin, and any delay, underbidding mistake, or contractual obligation to perform additional unpaid work can send a company into a downward spiral.
One of the biggest disruptions in the VFX industry has been the competitive chase for tax incentives and subsidies. Countries and cities around the world offer VFX tax breaks to attract film production work, forcing studios to set up shop in multiple locations to remain competitive.
While this may sound like a strategic advantage, it actually creates instability. A company like Technicolor had facilities in multiple countries, including Canada, the UK, and India, chasing tax breaks and cheap labor costs. But as soon as incentives shift elsewhere, or if a government cuts funding, the work follows, leaving costly infrastructure behind.
Smaller, more nimble VFX companies have a better chance of survival because they can adapt quickly. Large studios, however, struggle to pivot when a region’s tax incentives dry up.
Beyond the financial instability, the human cost of VFX work is another major factor in the collapse of large studios. The industry is notorious for intense crunch periods, with artists working grueling hours under tight deadlines. Yet, because of the way contracts are structured, many VFX artists don’t see fair compensation for their overtime.
MPC Vancouver, for instance, was suddenly shut down in 2019, despite having just delivered the groundbreaking visual effects for The Lion King. Reports surfaced of artists working extreme overtime, sometimes sleeping under their desks, only to be laid off with little warning. Such conditions make the industry unsustainable, leading to high turnover rates and burnout among the best talent.
With the closure of Technicolor’s VFX operations, the industry faces a turning point. If even the biggest players can’t survive, what does that mean for the future of VFX?
Some argue that a shift toward artist-owned, boutique VFX houses is the solution. Smaller studios have more flexibility and can push back against exploitative contracts. Others believe unionization, similar to what happened with the Writers Guild and SAG-AFTRA, could finally give VFX workers leverage to demand better pay and working conditions.
There’s also the role of artificial intelligence and real-time rendering, which could disrupt traditional VFX workflows. Tools like Unreal Engine and AI-assisted compositing could allow studios to produce high-quality effects faster and with fewer resources. But whether this will help VFX companies stay afloat—or just further squeeze margins—remains to be seen.
The demand for high-quality visual effects isn’t going anywhere. Audiences crave immersive, visually stunning films, TV series, and advertisements. However, unless the financial model changes and VFX companies start getting paid their fair share for the work they do, we’ll continue to see giants fall—no matter how many Oscars they win.
