The Canadian home video market has been a consistent source of revenue for the past several years and, in good evolutionary fashion, Canadian production companies have adapted their own divisions or mechanisms for getting at it. For many companies, home video makes up a substantial part of their revenue base, and while some have official video divisions, many access the market through output deals or deal on a per-title basis.

The entire Canadian video market, including sell-through and rental figures, is worth about $2 billion annually. Millard Roth, head of the Canadian Motion Picture Distributors Association, says from 1989 to 1994, his members’ gross revenues from home video sales to wholesalers grew by 127%. From 1993 to 1994, revenues rose about 25%, and so far this year, Roth says they are tracking at about a 17% increase.

Last year, video represented about $435 million in terms of sales to wholesalers. Roth says while he doesn’t expect the next five years will produce the growth rate that has occurred in the last five, most companies are looking towards ‘very healthy growth.’

Astral

Part of broadcast and entertainment company Astral Communications’ distribution division, Astral Video has a number of deals with the likes of Turner Broadcasting for its RKO Pictures library, the NHL Players Association, for which it distributes skills and tips videos to stores, and Nu Image, with which it has an output deal for new product.

Astral also has a separate division devoted to distribution of Barney videos in Canada.

Astral Home Entertainment, Canada’s largest home video wholesaler, accounts for about 40% of the total wholesale market.

Dan Lyon, vp of distribution at Astral, says about 50% of gross revenues for the distribution arm are generated by home video. According to Lyon, there are typically three types of arrangements governing home video deals between distributors and producers: a distributor can pay a royalty of about 20% to a producer and all costs are borne by the distributor; a distributor can earn a commission of about 20%; or all costs can be recouped and revenues split equally.

Malofilm

Yves Dion, president of Malofilm Distribution, the largest independent video distributor in Canada, says over its 14-year life span, the company’s success has been derived from its relationships with u.s. studios and its strength in marketing.

Video sales make up about 65% of Malofilm’s bottom line, or about $20 million yearly, and revenues are expected to increase.

‘Altogether there will be an increase,’ says Dion. ‘We’re increasing our catalogue and we’ll add about two output deals per year.’

Malofilm currently has a number of different output deals with companies like Paramount, Republic, Turner and Time Life to distribute their titles in Canada.

In terms of Canadian product, Dion says it’s hard to identify a benchmark for success for a Canadian title. Whereas an average Canadian drama released theatrically will do anywhere between 2,500 and 5,000 units in video rentals, high-profile talent will increase this figure several times.

In the case of Highlander iii, a Canada/u.k. coproduction, the commercial nature and identifiable names associated with the project helped it gross nearly 20,000 units. u.s. titles will do anywhere from 500 units to Pulp Fiction’s 70,000 units, a Canadian home video record.

Dion says it’s difficult to ballpark average sales levels for Canadian titles in the u.s.

‘It’s hard to judge percentages,’ he says. ‘Some Canadian titles aren’t released in the u.s. The percentage of u.s. sales is sometimes a bit better on Canadian films because of the efforts we put into theatrical marketing campaigns here.’

What constitutes a successful title depends on the minimum guarantee paid for a film, says Dion. Promotions budgets for videos also vary dramatically according to the theatrical success and star power of the film, and can be anywhere from $15,000 to $100,000. He says Canadian videos account for not more than 5% of space on video store shelves.

Dion says for a typical release in Canada, Malofilm will average about 10% to 12% of the total volume achieved in the u.s. rental market, and occasionally, a hit-level 25%-30%.

Where output deals tend to be comprehensive arrangements, many companies opt for individual deals based on specific properties.

Cinar

Cinar Films’ home video arrangement allows the company to combine the resources of Sony Music Canada with its own.

‘We decided not to create a distribution service per se for our video within the company,’ says Louis Fournier, Cinar’s vp sales and marketing. ‘That’s why we went into this partnership with Sony Music Canada.’

Fournier says that after years of guarding the Cinar library and fielding offers from distributors wanting to acquire certain titles, the company opted for an output deal with Sony. The advantages, he says, are that Sony has an established sales force, relationships with retailers, the means for duplication at its disposal, and all other necessary infrastructure in place.

‘They’re not releasing every title, it’s more like a relationship where they become our video distribution arm,’ says Fournier.

Cinar works in conjunction with Sony in designing sleeve covers to create a Cinar/Sony Wonder branding. ‘We want to create an awareness of a quality product that bears those names,’ says Fournier.

In addition to generating revenues, Fournier says video and the distribution arrangement help to create a base for merchandising and licensing. ‘You know that in video you have awareness,’ he says. ‘But also the distributors are spending dollars marketing the product. The rest becomes a factor of visibility and desirability.’

Cinar’s Bunch of Munsch series achieved gold and platinum video sales levels, which in Canada are 5,000 and 10,000 units, respectively, and its Busy World of Richard Scarry has also reached gold levels.

According to Hasanain Panju, Cinar’s vp finance, last year the company realized about $500,000 in revenues from video sales. By the end of this year’s third quarter, the company had already shown $1.1 million in revenues from video. Panju says revenues from home video together with music account for about 50% to 60% of the bottom line before taxes.

Cinar has also entered into deals with distributors like Polygram and Australia’s Roadshow where rights for shows are sold on an individual basis.

Portfolio & Paragon

Portfolio Films made its entrance into the home video market by launching three titles from its Groundling Marsh tv series through an exclusive u.s. chain, Amazing Space, a children’s theater and play area that will open at Bloomington, Minn.’s Mall of America on Nov. 10. Portfolio produced an interactive film for them this summer. It is currently negotiating a major distribution deal on a home video title for the u.s.

Paragon Entertainment is another company that negotiates with various distributors on a deal-by-deal basis. The company has just signed one such agreement worth over $1 million with Polygram for its Kratts’ Creatures children’s series.