In a further blow to Southern California's visual-effects industry, Sony Pictures Imageworks is moving its Los Angeles-area headquarters to Canada.
One of Hollywood's leading visual effects companies said Friday that it will move into a new facility in Vancouver that will accommodate up to 700 employees. It isn't clear how many of the company's 270 workers based in Culver City will lose their jobs, though some will be offered a chance to relocate.
The announcement was met with dismay in Southern California's beleaguered visual-effects industry, which has been buffeted by the effects of outsourcing and runaway production.
Although the visual effects industry was pioneered in California, local companies have had an increasingly difficult time competing with rivals in Canada, Britain and India that benefit from tax credits or cheaper labor. More than half a dozen California visual-effects houses have shut down or filed for bankruptcy in recent years.
"These are middle-class jobs that President Obama has said are part of an American success story and now they are packing up and leaving," veteran visual-effects artist Dave Rand said. "At this point, visual-effects artists are shellshocked."
The potential layoffs at Sony Pictures Imageworks follow some other high-profile changes for the industry. The parent company of Digital Domain, a Venice business co-founded by director James Cameron, filed for bankruptcy protection in 2012. And Oscar-winning effects house Rhythm & Hues also filed for bankruptcy last year after laying off 250 employees.
The Imageworks move will enable Sony to cut costs by capitalizing on incentives that aren't available in California.
"Vancouver has developed into a word-class center for visual effects and animation," said Randy Lake, an executive vice president at Sony Pictures Digital Productions. "Expanding our headquarters in Vancouver will allow us to deliver visual effects of the highest caliber and value to our clients."
Film companies operating in Vancouver and the province of British Columbia can recoup as much as nearly 60% of what they spend on hiring local workers. Those incentives have made Vancouver a major draw for film and TV production and a hub for post-production services.
Unlike California, British Columbia awards tax credits for post-production work even on movies that don't film in the province. California's film program also excludes large budget movies that require the most visual effects work. A bill to expand the program was recently approved by the Assembly.
"The trend line for all of this happening is not going to turn around unless California is going to bring filming back," said Paul Audley, president of FilmL.A. Inc.
One group of visual-effects artists, however, opposes the bill. It is seeking to challenge the legality of all foreign film subsidies before the U.S. Court of International Trade.
"These subsidies are incredibly damaging to the industry here," said Daniel Lay, author of the VFX Soldier blog, who is organizing the challenge. "The expectation now is that you have to keep moving around and chasing your job."
Imageworks had been taking steps to shift more work to Vancouver, where it opened a satellite office in 2010. The company this year moved about three dozen workers to its Vancouver studio. Last year, employment at that production office swelled to 350 as the team worked on "The Amazing Spider-Man 2."
The Vancouver team recently completed work on "Edge of Tomorrow" for Warner Bros. and will lead Sony's current and future projects, including Disney/Marvel's "Guardians of the Galaxy" and Sony Pictures' "Hotel Transylvania 2," the company said.
The relocation comes as Sony Pictures faces pressure to reduce expenses throughout the studio.
Sony Pictures executives outlined $250 million in planned budget cuts after some high-profile misses at the box office last year. Those cut have included layoffs in March at the studio's Culver City headquarters and at international offices.
Founded in 1992, Sony Pictures Imageworks is known for its visual effects and character animation on such movies as "Men in Black 3" and "Oz the Great and Powerful." The unit also does work for Sony's animation division, which will remain in Los Angeles.
In 2007, Sony Pictures Imageworks opened an office in New Mexico to take advantage of film rebates in the state. But Sony closed that office five years later after film production slowed in that state.