A funny thing happened during the Oscars, but it wasn't anything that came out of Seth MacFarlane's mouth. Rather, it was a moment during Life of Pi VFX supervisor Bill Westenhofer's acceptance speech for Best Visual Effects that quickly became emblematic of the problems currently plaguing the Hollywood special effects industry. The traditional time-to-end-your-speech music began playing just as Westenhofer thanked his family, and right after he said, "Sadly, Rhythm & Hues is suffering severe financial difficulties right now. I urge you all to remember…" – his mic went dead.

What he was getting at – before the theme to Jaws played him off – was that Rhythm & Hues Studios, the company responsible for so many of those boy-on-a-boat shots in Life of Pi, had just filed for Chapter 11 bankruptcy less than two weeks prior. The studio was the latest casualty of a trend that's been plaguing the VFX industry in recent years: an outflow of work to countries with better tax incentives and the subsequent shuttering of U.S. effects studios – an issue that had already inspired a protest before the Oscar ceremony with nearly 500 participants in attendance. (Sample slogan: "I want a piece of the Pi too.")

Thus Westenhofer's speechus interruptus became incredibly resonant for the VFX pros whose struggles he was trying to share, inspiring outcry across the industry, social media protests, and even potentially a walkout.

"At first it was shock, then anger," Rhythm & Hues senior visual effects artist Dave Rand, who worked on Life of Pi and helped organize the protest, told Wired. "I was in Hollywood a block away from the Oscars eating dinner after the protest and I saw what was happening [during the speech]. Even the top PR guru in LA couldn't write that stuff. It was just unfolding before our eyes in what I like to call our own Silver Linings Playbook."

The Visual Effects Society, a non-profit group for VFX professionals, issued a call to arms after the incident at the Oscars, asking California Gov. Jerry Brown and the state Legislature to increase incentives for the special effects industry and calling for effects artists to attend a "VFX Congress" to look for solutions in a field where – as VES chair Jeffrey Okun told Wired not too long ago – "we’re literally losing the smaller-to-midsize company on an average of about one a month."

"We are at a tipping point in our industry – no matter where you live or work. It has become painfully obvious that while profits abound for producers and distributors, our budgets are being squeezed to the point of jeopardizing our jobs and the quest for a reasonable lifestyle for VFX artists," Okun said in a message to VES members.

A Facebook group called VFX Solidarity International, which advertised the original protest at the Oscars, garnered more than 60,000 "likes" and encouraged supporters throughout the industry to change their Facebook and Twitter profile picture to a green square (an homage to the green screens VFX artists have to fill in). On Wednesday there were reports that some feared mounting anger in the VFX community could prompt a guerrilla cyberattack, though that seems unlikely.

There is even talk of a massive walk-out for all VFX workers on March 14 (aka 3/14 or Pi Day). Social networks have also been flooded with images and videos showing what films would look like without their VFX work (spoiler: pretty boring and with more green than the U.S. Mint). Supporters created a Tumblr dedicated to such images, and even Patton Oswalt got in on the action with a profane tweet.

"There is just a lot of anger and frustration out there and it has taken tangible form at this time. Add to this heated time what occurred on the Oscar broadcast when Life of Pi wins the award and the team is effectively censored from making any statement about our plight," said Okun.

So what exactly is causing this plight? To borrow an old South Park trope: blame Canada. (And New Zealand and the U.K., among others.) Visual effects are costly, time-consuming processes and studios are out to get as much bang, literally, for their buck as they can. And provinces in America's hat give out sizable tax incentives to movie studios that get VFX work done by firms within their borders. (British Columbia alone gave out more than $400 million in film and television incentives in 2012.) In order to compete, VFX houses in Southern California have to charge way less, leading to slim-to-none profit margins.

Consider the scenario Okun laid out for KCRW using a film he worked on recently as an example: If a studio is used to spending $3 million on VFX and getting $1 million back – like it would with tax incentives in Canada – then that means they'd expect an American VFX studio to match the price – and do more work for less money.

This can lead to a pay-it-backwards approach where firms end up using their next project to finish paying for their last one, an untenable solution that has lead to studios shrinking or shuttering left and right. Digital Domain Media Group, the outfit co-founded by James Cameron that produced the infamous 2Pac hologram that performed at Coachella in 2012, filed for bankruptcy in September before being rescued by new Chinese and Indian owners. Just before the protest at the Oscars news broke that Pixomondo, the house that did VFX work on Hugo, would be closing offices in London and Detroit.

The bigger problem facing the industry, though, is that it's really hard to figure out who's at fault or how to fix the problem. Hollywood brought in $10.8 billion domestically last year, and with the success of films like Avatar, The Avengers and The Hobbit there's clearly going to be demand for films heavy in visual effects for quite some time, so the work and funds should be there, it's just about figuring out who gets them. It would be easy to blame studios – if not Canada – but they're just trying to get the best deal.

>'I consider myself somewhat shell-shocked; I've been on the staff of five places that have closed without paying me.' Rhythm & Hues senior visual effects artist Dave Rand

The finger could also be pointed at California for not having greater tax incentives, which, of course, VES would like to see. But even if that could help some in the community have doubts, and Governor Brown has already said, "We're not going to have a race to the bottom where the state is supposed to pay for every private sector job we want to attract." There are also talks of visual effects artists, who aren't in unions like many behind-the-scenes teams in Hollywood, forming a guild or having the VFX vendors form a trade organization, a move that could at least give the firms still standing some leverage.

But there also could be some benefit in changing the culture of how hired-hand VFX artists are integrated into filmmaking. In a perfect world, said Rand, VFX houses would embed with studio productions from the beginning and work with the filmmakers, instead of coming on after the movie is shot. It's a process he believes would be far more cost and time-effective than sending months' worth of work to a director only to be asked to do it all over again. (It's not a bad idea – it works fine for Pixar. And Lucasfilm/ILM. And Disney, which now owns both of them.)

But Rand says he'll go along with whatever solution works. "I consider myself somewhat shell-shocked; I've been on the staff of five places that have closed without paying me, so my thinking may not be the clearest." Another option would be to take the industry's plight all the way up the flagpole. That's on the table too – one of those online petitions to the Obama Administration has been set up, asking the government to "end the export" of American VFX jobs.

Then, there's the possibility of that Pi Day walkout. And while that's more of a means than an end, it could prove effective. As Drew McWeeny at HitFix pointed out in an open letter to Hollywood earlier this week, most of us still remember what happened when the Writers Guild of America went on strike. We got Dr. Horrible's Sing-Along Blog, but not much else. Perhaps a walkout would remind studios of those dark days, and help them imagine a world where the Na'vi are a just bunch of folks in blue face paint. Or, as McWeeny puts it, "If you try to do the same thing to the VFX industry, you are going to lose."

As for Westenhofer, he did eventually get to finish his speech, telling reporters backstage after his win that he was trying to shine light on the fact that "at a time when visual effects movies are dominating the box office, that visual effects companies are struggling ... Visual effects is not just a commodity that’s being done by people pushing buttons. We’re artists, and if we don’t find a way to fix the business model, we start to lose the artistry."