"The irony is not lost on any of us up here that in a film whose central premise is to ask the audience [whether] what they believe is real or not real, most of what you see is — well, it's fake," Bill Westenhofer said on Sunday, after winning the Oscar for Best Visual Effects for his work on the film Life of Pi. As Westenhofer continued, the theme from Jaws swelled in the background, his musical cue to end his thank-you speech. But Westenhofer wasn't in the mood to stop. "I want to thank all the artists who worked on this film for over a year, including Rhythm and Hues. Sadly, Rhythm and Hues is suffering severe financial difficulties right now. I urge you all to remember —" Westenhofer's mic was cut off.

Even as digital visual effects become increasingly essential to big-budget filmmaking, television, and advertising, many top firms in the effects industry are struggling. Winning an Academy Award for visual effects has nearly become a kiss of death. Rhythm and Hues filed for Chapter 11 bankruptcy on February 15, laying off 254 of its 718 employees. Shortly before the Oscars, Pixomondo, lead producer for last year's visual effects winner Hugo, announced it would close its branches in London and Detroit. Last year, Digital Domain, which won an Oscar for visual effects for Titanic, went from IPO to bankruptcy within 10 months. Even when effects-heavy films succeed, like this summer's The Avengers, the artists who put in the digital work often get left out of the financial afterparty.

In Hollywood last night, nearly 500 visual effects (or VFX) artists gathered to protest the state of the industry. Put simply, they were worried about keeping their jobs. VFX is one of the few nonunionized parts of the film industry, leaving workers little recourse when jobs disappear. "When you meet other people in the filmmaking industry — editors, actors, etc. — to the person, every single person [is] amazed that VFX doesn't have a union," effects artist and protestor Austin Brown told The Verge. "It's not talked about; nobody thinks about it. It's so far into the process, that everyone's gone home" when VFX is doing its work.

Because it's typically done in post-production and because it's digital, visual effects work is increasingly separated out from the rest of film production and farmed out all over the world. Since the work can theoretically be done anywhere, countries and provinces like British Columbia offer subsidies to local effects shops, often as much as 30 percent of operating costs. When voters see the price tag, which can run to hundreds of millions of dollars for a successful program, the initiatives are often axed, and studios are forced to move to the next film-friendly municipality. The result is an industry of itinerant shops, operating on razor-thin profit margins and counting on subsidies to stay in the black.

"The next place to be is Montreal," another source told The Verge. After that, who knows.

Russell Brandom contributed to this report.