U.S. invasion

will get okay

Canadian distributors fear the future is worse than grim. A total loss of $75 million annually in revenues for four Canadian distribution companies is what some industry sources estimate is at stake. That’s approximately 25% of Canadian distributors’ annual revenues of between $250 million and $300 million.

Canadian sub-distributors say they stand to lose these substantial sums if Polygram Filmed Entertainment and Turner Broadcasting receive approval from Investment Canada to open their own branch plant distribution operations in Canada.

Turner’s application to the federal watchdog is currently under review.

pfe, with a Toronto-based office set up for video distribution since last September, is rumored to have plans to take the 15-staff office into full operation as a branch plant imminently.

According to a submission made to the federal government by the industry, the losses break down as follows: Turner deals account for about $60 million in Canadian distribution business annually and Polygram tallies at about $15 million.

The Canadians who stand to lose the most if the deal goes through are Astral Communications, Alliance Releasing, Malofilm Communications and Cineplex Odeon Films.

Astral recently signed a two-year agreement for home video rights to distribute Turner Home Entertainment’s RKO Pictures, pbs and cnn libraries in Canada.

Alliance Releasing distributes New Line and Fine Line (both owned by Turner) in all media in Canada. Under this agreement, Alliance distributes films with significant box office performance such as The Mask ($15.9 million) and Dumb and Dumber ($13.5 million).

Malofilm Communications has an output arrangement for home video rights on some Turner titles, and Cineplex Odeon Films distributes Gramercy Pictures product (jointly owned by mca and Polygram) theatrically.

Prospects of grave losses for cof are subdued for now with news the distributor has just signed a one-year agreement with PFE Canada president Darryl Iwai to distribute Gramercy films. The deal, effective immediately, is for cof to distribute theatrically pfe’s side of Gramercy product in Canada. The difference this time around is pfe will be doing its own marketing, with newly hired marketing director Judy Holm (formerly of CFP Distribution).

Turner spokesperson Claudia Coles says her company’s initiative will not affect existing agreements with any Canadian distributor. ‘In its simplest form, Turner is looking to take over the distribution of the television programming entities in place at mgm. We now want to try and do that ourselves, which makes perfect business sense given our company’s growth.’

Word is that Turner also plans to handle Castle Rock television product in Canada through the new office.

With regards to Astral and Malofilm, Coles claims ‘they are unconnected to the business in hand,’ which is licensing programming for television. ‘It’s actually much ado about nothing,’ she says.

Coles is not at liberty to discuss future plans for the operation should it receive the go-ahead from Investment Canada.

Whatever Turner and pfe’s intentions, the heart of the issue is not deal-making but policy, says Canadian Association of Film Distributors and Exhibitors’ Dan Johnson.

‘The economic ecology of distribution (in Canada) is already very fragile. To have it damaged further by a lack of government action will have a catastrophic long-term impact on the film industry,’ says Johnson.

Armed for battle

So, almost a year to the day of Viacom International’s application to Investment Canada to open a Canadian office, Canadian film distributors are once again armed for battle with the federal government. The aim is to change or remove a piece of distribution policy which allows American companies to establish their own startups in Canada.

The Canadian Film Industry and Investment Canada policy, issued by the Tory government in 1988 reads in part:

‘Investment to establish new distribution businesses in Canada will only be allowed to importation and distribution activities related to proprietary products (whereby the importer owns world rights or is a major investor).’

Johnson says Heritage Minister Michel Dupuy is onside, but the real responsibility lies with Industry Minister John Manley. cadfe is presently lobbying Manley and the federal cabinet on behalf of its members.

‘I’m not convinced the minister of Industry has spent enough time on this to grasp some of the wider implications for our industries,’ says Johnson, adding that this distribution policy is tied to the same policy which allowed Viacom to take over Paramount Canada.

‘It isn’t about promises Viacom or Turner or Polygram makes. It’s about what leverage does the government have to protect the Canadian film industry? And the answer is just about none.’

Gord Haines, coo of Alliance says, ‘We are disappointed and somewhat frustrated by the federal government’s inability to deal with these issues. And specifically, we urge them not to exacerbate the problem further by permitting any additional non-Canadian distribution activities.’

If the policy has been in place for seven years, why all the excitement now? Johnson figures that while the federal government is responding to the cultural backlash created by the Viacom decision, it’s a good time for other American companies to move in.

Johnson also sees a window of opportunity that may be closing. He says if the government’s delisting of Country Music Television and recent stand for the magazine industry – ‘by taxing Sports Illustrated into extinction’ – are any indication, federal cultural policies may in fact be changing for the better.

‘The question now is: are they prepared to act in the Canadian film industry in sufficient time to prevent our industry from being decimated?’

The solution, says Johnson, is to stop startups altogether and subject takeovers to proprietary requirements already in place. ‘And in terms of Turner and Polygram,’ he says, ‘we want a moratorium on these transactions.’

One industry source says without protective policy in place, the only leg Canadian distributors have to stand on is their expertise in the market.

‘It’s why Miramax signed with Alliance instead of distributing through their Disney operation: they get good distribution here,’ he says.

pfe’s move to hire a marketing director with Canadian expertise is another way to bridge the market gap, and it is a model many of the American studios have followed with success.

Iwai says the size of his company, for the time being, doesn’t warrant setting up a separate distribution arm with sales and booking functions but it does make sense to have his own marketing staff in place. On the subject of plans for the future, Iwai would only say, ‘We’re here to help develop the Canadian film industry and work locally.ÉThere is a structure in Canada and we will utilize those Canadian resources.’

If Johnson’s lobby efforts are successful and the distribution policy is amended, what about fallout in cross-border relations?

Johnson says Canadians have to stand up to their American neighbors. ‘Our members only look forward to action on behalf of the Canadian government and refuse to be intimidated into silence by any apprehension of adverse consequences,’ he says, adding:

‘We can’t protect our culture unless we are prepared to stand up.’

Americans abroad

Partly because there’s a whole lot of banking going on, London, Eng. is a mecca for u.s. offices, and outside of l.a., it’s where you go for worldwide presales, companies like j&m and Majestic.

Telefilm Canada’s Bill Niven says the explosion of specialty films over the past several years is also credited with companies like Miramax, FineLine and Turner’s recent London presence. Their activities included scoping out European product and talent and now it’s evolved to the stage where Samuel Goldwyn’s Betsy Spanbock, who went to London from l.a. last year, is looking at scripts and initializing production from there.

As Niven puts it, ‘Rather than going for a slice of the pie, they are increasing the pie.’

u.k. distributor, Michael Myers of First Independent, says the u.s. presence has had no affect on his company: ‘They have offices here, but they’re still working through local distributors.’

The Sales Company’s Carol Myer says the offices opened by u.s. companies are not distributing. Myer can’t remember when a new distribution company opened up in England, though she can recall quite a few going bankrupt, and thinks it would be a welcome addition.

On the topic of trade paper reports that more u.s. companies are looking at handling things themselves, Myer believes the clawback of package deals could be favorable for independent filmmakers as sub-distributors cast about for new product.