Why is Québec losing its visual effects?

A tax credit cut for the VFX and animation industry exacerbated mass layoffs that were already affecting the industry. Many artists now face the uncertainty of moving to another country for work or returning to university to change careers.

By Natalia Rivero Gómez

In the middle of the night, in the desert of Arrakis, Paul Atreides — the main character of Frank Herbert’s sci-fi novel Dune — runs, trying to escape from Shai Hulud, the giant sandworm venerated by the Fremen.

A dust cloud surrounds the worm behind Paul. He stops running and turns to face the creature chasing him. The giant worm rises from the sand and opens its mouth — a massive hole with millions of needle-like teeth.

This creature took months to create. DNEG and Rodeo FX, two of the many visual effects (VFX) studios in Montréal, worked with Québécois filmmaker Denis Villeneuve to recreate the environments, humans, and creatures — like the giant sandworm — for the screenplay adaptation of the 1965 novel.

The visual effects team won an Oscar at the 2022 Academy Awards for their work on Dune.

Last week, DNEG Montréal announced it would drastically reduce its VFX department due to a lack of projects. Other VFX and animation studios in Montréal faced similar situations, laying off some of their artists. Some studios offered part-time work or cut up to 25 per cent of their employees' salaries — sometimes voluntarily, sometimes not — to keep as many artists employed as possible.

The animation and VFX industry was already going through a rough time after the pandemic and the 2023 actors' and screenwriters' strike when, in May, the Québec government announced a sudden change in the tax credit for animation and VFX in the province.

“Québec’s government just cut the ground from under our feet. It was like, ‘You're down; let's just kick you one more time,’” says Veronique Tassart, Director of Mergers and Acquisitions Transitions at Cinesite, a studio based in Montréal with its head office in London.

The tax credit is an incentive launched in 1998 to attract filmmakers. When they hire a studio in the province to do animation or special effects for a movie, they receive 25 percent back on their investment.

This means that for each dollar granted in tax credits by the government to a production company, the VFX industry put $6 directly in Québec's economy.

Starting May 31, Québec’s Finance Minister Éric Girard set a limit on the amount of money companies can receive from the tax credit. Previously, it was based on the total value of a contract; now, it is calculated based on only 65 per cent of the contract's value, making Québec less competitive than other places with higher tax incentives.

“I know the government wants to compare us to Ontario, Vancouver, or BC. But the fact is, our clients are not going to Ontario, and they're not going to Vancouver; they're going to other countries altogether, like France or Australia. So, it’s not just Québec, it's Canada that is losing money from outside clients. It’s terrible for the employees because we can't provide stability for them when we don’t have any contracts,” explains Tassart.

Ten days after the announcement, VFX and animation studios tried to propose different measures to government officials that wouldn’t affect the industry and its artists as much, but their efforts were unsuccessful.

According to Moshe Lader, senior lecturer in economics at Concordia University, the cut in tax incentives is due to Québec’s structural deficit.

“They're starting to try and find where they can cut back money and so they've cut back the subsidies in the VFX industry. They've also cut subsidies back for electric vehicle purchases. They're retrenching in a lot of places, VFX is just one of them,” explains Lader.

Many artists are now facing the uncertainty of moving to another country to find work or returning to university to change careers.

A poster circulated among VFX and animation workers raising awareness about Quebec's change to a tax credit that promoted the industry. PHOTO: Courtesy Mathieu Chatelier

“I want to spend the rest of my life in Québec, but with the recent changes, a new question arises: Will I be able to continue my life here, or will I have to choose between staying in Québec and working?” says Matthieu Chatelier, compositing supervisor and affiliate professor at Université du Québec en Abitibi-Témiscamingue.

After hearing the news of the tax incentive cut, Chatelier got together with some of his colleagues from the VFX community in Montréal to act.

They created an event on LinkedIn and Facebook called “Le Québec n'a plus d'effet(s) / Québec has lost its effect(s),” a sit-in at Montreal's City Hall organized in just two weeks.

“People spontaneously offered to help. The community was present, and it felt like it was responding to a need from those who had not been heard until now,” explains Chatelier.

With this event, the VFX community aimed to shed light on the difficult situation most artists are facing and how the tax credit cut adds more obstacles to their chances of finding work.

An analysis by the Québec Film and Television Council (QFTC) shows that 50 per cent of the 8,000 employees in the VFX industry were unemployed before the tax credit cut. The QFTC forecasted that two out of three people would be laid off in August.

The VFX community invited Québec Premier François Legault, Finance Minister Éric Girard, and Minister of Higher Education Pascale Déry to the sit-in.

“The idea was simple: to have the government meet the men and women who make up the industry and make them realize the impact that these changes have on their lives,” explains Chatelier.

700 people attended the sit-in, but none of the government officials showed up. 

Workers in the VFX and animation industry protested the tax credit cut at a sit-in in front of Montreal's City Hall on June 16, 2024. PHOTO: Mathieu Chatelier. 

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Apart from the tax credit cut, the lack of jobs in animation and VFX is related to the major streaming platforms. Netflix, Amazon, Disney+, and Apple are cutting their budgets for creating new shows or movies exclusive to their platforms, leading to less work for artists.

During the COVID-19 pandemic, there was a boom in streaming, and the high demand for content continued after the pandemic. However, these platforms soon realized their business models weren’t profitable for various reasons.

First, users binge-watch the shows they are interested in and then cancel their subscriptions. Second, people tend to have an average of four streaming platforms: Netflix, Amazon, Disney+, and a fourth that other companies are competing to fill. Third, placing ads on streaming services is not as straightforward as on TV because users have to pay more to avoid them, and many aren’t willing to do so. And fourth, creating exclusive content is very expensive.

For example, Disney+ started to turn a profit this year for the first time by cutting costs on producing new shows for the platform after losing billions of dollars. Instead, the company added movies to its catalog after they finished playing in theaters, such as Inside Out 2.

In addition to the decline of streaming services, the Hollywood strikes  made things even tougher for animators, VFX artists, and studios in Montréal and around the world.

During the strikes, artists had even less work or none at all. Many studios cut salaries or put employees on vacation to keep them employed as long as possible.

Since September of last year, recovery has been slow, partly because Hollywood decided not to film many projects this year due to a possible strike by mechanical and lighting workers this summer.

“A lot of big companies tried to maintain a good face through that, so they didn’t end up making a lot of cuts. But behind the curtain, everyone was bleeding,” says Sébastien*, a former VFX employee at Rodeo FX who prefers to remain anonymous.

“Now the atmosphere is not great. There are many smiling faces trying to show that everything is fine, but what people are experiencing is real.”

In Montréal, artists are being hired on three- to four-month contracts, if they are lucky enough to find a position. It’s cheaper than hiring someone permanently.

In other cases, after being fired, artists must leave the country because they have a closed work permit with the studio.

Workers in the VFX and animation industry protested the tax credit cut at a sit-in in front of Montreal's City Hall on June 16, 2024. PHOTO: Mathieu Chatelier. 

Nowadays, VFX and animation are nomadic careers.

During the pandemic, many companies accepted remote work, allowing artists in Montréal to work for studios in Western Canada, Europe, or the United States. Now, companies are requiring employees to work on-site.

“VFX people are moving from country to country to find a job,” explains Isabelle Lecompte, international representative for the International Alliance of Theatrical Stage Employees (IATSE).

“We’ve worked on many blockbusters, creating visual effects and animation for films seen everywhere on Earth. All the knowledge and people who have built the industry in Québec are leaving,” says Chatelier.

“We [VFX artists] are passionate individuals who want to keep their passion alive. We're still trying to do what we can to make our industry survive or at least do something and not see it fade away.”

In February, the Tribunal Administratif du Travail du Québec officially recognized that workers at DNEG Montréal had formed a union with the IATSE, which has represented animators in the United States since the 1950s.

Canadian animators and VFX workers hadn’t had representation in the densely unionized entertainment industry before. DNEG is the first VFX studio in Canada to unionize.

Even though Montréal is now at a disadvantage due to the tax credit cut, the province still has some advantages, such as a favorable exchange rate, an ideal location in the Eastern time zone for dealing with studios in Europe and Hollywood, a relatively low cost of living, and a pool of talent.

Additionally, Montréal is known in the film industry for its innovations in cinematic technologies. Many software programs used to create computerized visual effects and animations were developed in the city.

For example, Softimage, the program that brought dinosaurs to life in Jurassic Park, was created in 1986 in an office on Saint-Laurent Boulevard.

Many other shows and movies had their VFX done in Montréal, including Avatar, The Hunger Games, almost every Marvel movie, and Game of Thrones, to name a few.

“It's still a fun industry that I like. I really like my job. I like the people I work with. I don't think it's going to go back to what it was before, but I really like to think it's going to stabilize back. I think it's going to get worse before it gets better,” says Sébastien.

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