Life After Pi Excellent Case Study on Contract Necessities

If you were ever under the impression that winning awards yields to more business, the story of visual effects house Rhythm and Hues may change all of that. Two years ago they won the Oscar for best visual effects for their work on “Life of Pi.” Just 11 days earlier they had filed for bankruptcy.

“Life After Pi” is an award-winning documentary short about what happened to this successful Vfx house; a compnay that had lasted for twenty-five years and was instrumental in the effects of some of the biggest blockbusters in the past two decades.

The Lesson for Professional Creatives

I highly suggest watching the 30 minute film when you get a chance. But I wanted to highlight the part of the story that is at the crux of the situation, and is a crucial lesson for all you professional creatives.

In short, R&H had opened-ended contracts with major studios. Basically, R&H would agree on a certain scope of work and the studio would pay them a contractual amount that for some reason I still don’t understand, could not change. This was called a “fixed bid.” Even if the studios came back with a change in the scope that required more work, R&H could not charge any more money.

Imagine being hired to shoot a video for a client for $10,000 that involves two full days of shooting with a Canon C300 and editing one 3-4 minute promo. What if half-way through the shoot the client decides they now want to shoot with an Arri Alexa for five days and on top of that want extensive motion graphics, and two additional videos to boot. Let’s say these changes skyrocket your costs to $15,000, but you still only get $10,000. That in essence is what happened to companies like R&H.

Your contracts need to have stipulations on exactly what your deliverables are. Furthermore, there needs to be a “change of scope” section that makes it clear that any significant change in scope from the client will yield additional costs on their end. This may seem basic to many of you, but you’d be surprised at how many people new to a creative services business like video production or brand development, that will have nothing in their contracts about revisions (i.e. how many and/or how many hours of revision changes), then end up putting in almost as many hours on client revisions as they did on the original drafts, eating up any profit they had on the job.

More From the Makers of “Life After Pi”

Apparently this film is just the beginning of a feature documentary about the changes happening in Hollywood that are causing people to leave. The movie is “Hollywood Ending“. Looks pretty interesting. I’m looking forward to what’s coming next.

Do you have any “war stories” about contract lessons you learned?

5 thoughts on “Life After Pi Excellent Case Study on Contract Necessities

  1. I would go a step further in terms of contracts and add that it’s usually a bad idea to begin work on a project without a deposit, even if it’s just rough mock-ups or storyboards. Even if you’ve signed a contract which obligates the client to pay a deposit, wait until you get it to start working. I recently had a project go sour midway through. The client signed a contract agreeing to a 50% deposit up front, but the job was a rush job so I started work without receiving the deposit. After the project went south I was unable to recover the deposit to pay for work completed because the client refused to pay.

    Having the client show money up front ensures that everyone has skin in the game and makes it costly for anyone to pull out of the project.

    Great article Ron, and I 100% agree with your assessment of the VFX industry. Those shops are filled with super talented and create people but are ran in a totally non-sustainable way. A sad reality but one we can learn from.

    1. Thanks for the comment Chris. I agree with about getting payment up front. A necessity in about 90% of the cases.

      The odd thing about the VFX industry is that the other parts of Hollywood don’t work like that. Everyone on set is paid by the hour so studios and producers are watching the clock and being mindful. Imagine if DPs, Grips and sound guys all worked on a “fixed bid.” Seems like there’s got to be a way to make changes in the system.

  2. There’s a great video by Mike Monteiro that talks about the importance of having an iron clad contract with your client so when they decide to change the terms mid project or announce it wasn’t what they wanted or even go out of business, you can get paid.

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