The continued downturn of the advertising industry has forced f/x powerhouse Industrial Light & Magic to shutter its separate commercials division.

ILM expanded into the advertising arena in 1989, forming Industrial Light & Magic Commercial Prods. to specialize in the production of live-action commercials as well as ads with f/x.

Until last week, the division had been run by its own set of staffers, reporting to Lucas Digital topper Jim Morris. Animators within ILM supplied visuals to ad spots while working on feature films.

Fewer than 20 full-timers

The entire division employed fewer than 20 full-time staffers, relying upon freelance producers to oversee productions when needed. Layoffs are likely, but not for some time, as the division is still wrapping up work on its clients’ ad campaigns.

Company also repped directors for commercial work, including Joe Johnston (“Jurassic Park III”).

While ILM said it still plans to offer its services to advertisers, it no longer plans to run a separate arm to focus solely on commercials production. In the future, ads will be produced through ILM.

Where it once supplied ILM with nearly a quarter of its revenues, producing roughly 65 spots per year, ILMCP had not been financially profitable over the past two years and was recently struggling to keep its pipeline busy with work.

XM, Gatorade among clients

Its largest spots included XM Satellite Radio’s recent campaign, Reese’s “E.T.”-starring spots, Alcatel’s ads featuring Martin Luther King and Lou Gehrig, Gatorade’s “Raptor vs. Raptor” campaign, as well as commercials for First Union Bank, Pontiac, Nissan, BMW and Budweiser.

Other f/x shops, including Digital Domain and Rhythm & Hues, have generated additional revenues from commercial work by offering their computer-animation services to the advertising industry. They also have suffered, not only from the advertising biz’s strike in 2000 but from the dropoff in commercial productions in 2001.

“We’ve had a great run in the commercial business, but given the current slump in the advertising industry and our interest in wanting to focus our resources on feature effects and digital animation projects, we felt it was the best move for the company to make at this time,” Morris said. “We expect to continue to work on an informal basis on commercials for our key advertising clients and also commercials that are related to tie-ins to inhouse movie projects.”