The L.A. visual effects industry has had some rough years, marked by the offshoring of work and the bankruptcies of industry-leading firms.

But one local effects shop, Hydraulx, is expanding its L.A. operations. The company’s co-owners moved the firm into new $10 million headquarters in Playa Vista last year and in recent months have also launched a soundstage and equipment rental business at the location, called Hydraulx Filmz.

Greg Strause, who co-owns Hydraulx with his brother Colin, said the expansion fell into place thanks to the large new building and also the millions of dollars of digital filmmaking equipment that the brothers have amassed over the years.

“We’re taking advantage of stuff we bought five years ago – things like lenses – and we’re seeing a return on the investment,” Greg Strause said. “It’s added cash flow for us.”

It’s also a hedge against the vagaries of the effects world, which has become more challenging as work moves from away from Los Angeles to states and foreign territories that offer tax incentive programs for effects work, or countries where wages are lower than in the United States.

The plan is to rent the L.A. production space and equipment for everything from small-budget music videos to studio action movies. The brothers, who are also movie directors and producers, plan to shoot their own material there, too.

Already, the space has been used for projects including “Hercules,” an MGM and Paramount Pictures co-production that stars Dwayne Johnson and is scheduled to be released July 25. The producers of the movie were on deadline and needed 3-D shots of a crowd along with related visual effects within a tight turnaround time of 16 days.

Staying competitive

The expansion comes as the effects industry has consolidated and moved away from Los Angeles.

In the past year, Digital Domain of Venice and Rhythm & Hues of El Segundo were both purchased out of Chapter 11 by Asian firms. Also, Sony Pictures Imageworks announced it is moving its headquarters from Culver City to Vancouver, British Columbia. In an example of large-scale consolidation, Prime Focus World of Hollywood merged last month with Double Negative of London and then announced this month that it will acquire Reliance MediaWorks of Mumbai.

Craig Darian, chief executive at soundstage owner Occidental Entertainment Group Holdings of Hollywood, said the recent expansion of Hydraulx makes sense given the challenges in the effects industry. He also believes doing equipment rentals on top of renting production space is a good move.

“The whole visual effects world is becoming extremely difficult because of globalization and it’s making it difficult to compete in California,” he said. “The equipment and other services create ancillary sources of income that are necessary to compete in this market.”

Hydraulx has felt the impact of the effects industry’s runaway from Los Angeles. The firm has had to open offices in Vancouver, London, New Orleans and New York, and also has had to rely more heavily on contract workers rather than full-time staffers to preserve margins. The company has 40 full-time employees and hires up to 100 additional contract workers for projects.

Hydraulx is profitable, Greg Strause said, and was able to finance the recent expansion primarily with profits from the visual effects business.

Filmmaking direction

The Strause brothers launched Hydraulx in 2002 after a previous effects venture they were involved with fell apart. The company has since done effects work for movies such as “Pirates of the Caribbean: On Stranger Tides” and “Looper.”

The firm specializes in complex effects such as replacing the head of a stunt double with an actor for an action sequence as well as computer-generated animation of the destruction of buildings by tornado. The company can bill as much as $200,000 for a five-second shot. By staying in the higher end of the effects world, Greg Strause said the firm is relatively safe from competition from countries where artists can work for less money but are trained to do rote work, such as removing a cable from a shot.

But it was the brothers’ experience as directors that really led them into the soundstage business. They first directed “Aliens vs. Predator: Requiem” for 20th Century Fox and then did science-fiction film “Skyline,” which was released by Universal Pictures in 2010. They were able to use much of their own equipment, but realized that having a soundstage would also be an advantage.

“We still had to drive to Hollywood and rent someone’s stage,” Greg Strause said. “Wouldn’t it be convenient to have our own?”

The plan came together last year after the brothers bought the company’s new headquarters in 2012. The building has 22,000 square feet that can be used for shooting and features a green screen that is 25-feet tall. Other elements include hair and makeup rooms, equipment storage rooms and space for visual effects workers. Clients pay between $4,000 and $25,000 a day to shoot there, depending on the complexity of the project and how many cameras are needed. The firm’s equipment includes unusual lenses that can produce a “lens flare” effect – the light is suddenly scattered in circles or bursts across the screen, as well as camera rigs that can shoot in ultra-high definition and 3-D.

The other part of the Strauses’ strategy is owning the content they create. The brothers are planning to go into production on a sequel to “Skyline” later this year on their soundstage.

“Ownership is the model,” Greg Strause said.

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