The global visual effects industry has been through a rough couple of years. Studio shutdowns, layoffs, and the ongoing debate about working conditions have reshaped the landscape internationally. Australia’s VFX sector hasn’t been immune to these pressures, but the local picture is more nuanced than the global headlines suggest.

The Global Context

The VFX industry globally has been dealing with a confluence of problems. The streaming boom that drove demand for visual effects content has cooled, with platforms cutting budgets and ordering fewer projects. The Hollywood strikes of 2023 created a production gap that rippled through VFX pipelines. And the persistent structural problems of the industry, particularly tight margins and unsustainable working conditions, haven’t been resolved.

Several major VFX studios internationally have downsized or closed. The oversupply of VFX capacity that was built during the streaming boom is now creating pricing pressure that makes it harder for studios to maintain profitability.

Australia’s Position

Australia’s VFX sector operates in a different market dynamic. The Location Offset (16.5% rebate on qualifying Australian production expenditure for foreign productions) and the PDV Offset (30% on post-production, digital, and visual effects work done in Australia) continue to attract international work to Australian facilities.

These offsets make Australian VFX competitive on price, and the quality of local talent is internationally recognised. Studios like Animal Logic (now part of Netflix), Rising Sun Pictures in Adelaide, and various mid-size houses in Melbourne and Sydney continue to attract international projects.

However, the industry’s dependence on these offsets is a double-edged sword. Any change to the offset structure, which is always a possibility given the political nature of tax policy, would significantly impact the sector.

What’s Changed Locally

Several things have shifted in the Australian VFX landscape over the past year. There’s been some consolidation, with smaller studios either being acquired by larger ones or shutting down as project volumes decreased. The freelance VFX workforce in Australia has grown as studios shift toward project-based hiring rather than maintaining large permanent teams.

AI tools are beginning to enter VFX workflows, though the adoption is more cautious than the hype suggests. The main areas of adoption are in pre-visualisation, rotoscoping assists, and some procedural generation tasks. Full creative VFX work remains human-driven, and the artists I’ve spoken to are sceptical about near-term AI replacement of skilled VFX work.

Some Australian studios are investing in AI integration for their workflows. A number have worked with Team400’s AI team and AI consultants in Sydney to evaluate which AI tools genuinely improve efficiency versus which ones are just vendor hype. That kind of structured evaluation is important in an industry where tool adoption decisions can significantly impact both workflow and workforce.

The Independent Film Angle

For Australian independent filmmakers, the VFX landscape changes are actually mixed news. On the positive side, the availability of skilled freelance VFX artists has increased, which means indie productions can access talent that might previously have been locked into studio contracts. Rates for freelance VFX work have come down somewhat as supply exceeds demand.

On the negative side, many indie-friendly mid-size VFX studios that handled the smaller, more creative projects are under financial pressure. If these studios close, indie filmmakers lose the kind of VFX partner that will take on a challenging creative project at a rate that fits an independent budget.

The DIY VFX route has become more viable thanks to tools like Blender, DaVinci Resolve Fusion, and HitFilm. For simple compositing and effects work, a skilled filmmaker can achieve acceptable results without a VFX studio. But for anything complex, professional VFX support is still essential.

Training and Workforce

One area of concern is the VFX talent pipeline. Several Australian universities and training programs that fed the VFX industry have scaled back their programs in response to industry uncertainty. If and when demand recovers, there’s a risk of talent shortages.

The workforce conditions in Australian VFX studios have historically been better than in some international markets, but there’s ongoing pressure on working hours and employment stability. The shift toward project-based freelance work creates flexibility for studios but uncertainty for workers.

Looking Ahead

The Australian VFX sector will continue to be shaped by the international production environment, the offset policy settings, and the technology evolution including AI. For local filmmakers, the practical advice is to build relationships with VFX artists and studios early in the production process, be realistic about what VFX work costs, and explore the growing ecosystem of freelance talent for smaller-scale projects.

The industry is in transition, but Australian VFX talent remains world-class. The challenge is sustaining the business structures that support that talent.