‘Around the world, one of the first questions a Canadian selling a product will hear is, `Who is buying it in the United States?’ ‘ says Robert Morrice, senior manager, entertainment software, Royal Bank of Canada.

Programs can be financed without the u.s. sale, but it remains the favored ‘seal of approval’ almost everywhere in the world.

In dollar terms, the u.s. market represents anywhere from 40% to 60% of a program’s worldwide potential and, like it or not, our European coproduction partners often see Canada as an opening round conduit to the u.s.

Ted Riley, president of Atlantis Releasing, says distribution is playing an ever greater role in program financing.

With the decline of Canadian incentives, Riley says revenues from the u.s. syndication market are essential to new shows like Psi Factor and Sinbad. ‘Presale financing is typically better than coproduction financing because it is straight revenue and not investment,’ says Riley.

Filmline International president Nicolas Clermont says virtually no one outside the major film studios can produce without international cofinancing.

Clermont says the classical approach uses the treaty coproductions, but the alternative, which works well for many Filmline projects, is ‘to have privileged relationships with partners in key territories.’

For Clermont (Silent Trigger, Rainbow), the American market is the kingpin.

‘The secret for me is to have a certain amount of the budget covered with a u.s. deal, in tv or feature films. Every time you are able to generate between 30% and 50% of your budget in the u.s. you may be certain your project will be profitable. Sometimes you start with that (the u.s. sale), sometimes you finish with that, each project has a different (more European, or more North American) life.’

The brass ring

Says Morrice: ‘If you can say you are on network tv in the States, or a major studio is opening your feature film, it adds tremendous value. Obviously, there are very few Canadians dealing with thisbut that really is the brass ring.’

That’s not to say hbo and Showtime pictures do not command good prices in foreign markets, they do, he adds.

According to Riley, ‘Germany is the hottest market in the world right now (and) the British market is heating up somewhat. The Italian market should heat up now that there has been an election. But there is still a problem in the French market (lack of available series slots and language rule restrictions for coproduction).

‘But the main coproduction partners for Canadians continue to be the Americans,’ he says.

TV movies

On the world stage, Canadian companies increasingly face off against consolidated media giants.

This reality no doubt was a motivator for Atlantis to sign a partnership agreement with a leading German distributor/broadcaster. The new match gives the partners added leverage in Hollywood, says Riley.

Atlantis and Tele-munchen Gruppe will invest in the acquisition of third-party tv movies, with the big German outfit investing in Atlantis fare as well. And because the two companies share the risk, they also share the up side, says Riley.

‘It’s getting very competitive in the tv movie business. We do need that kind of leverage,’ he says.

In the past, Riley says 125 to 150 original tv movies were licensed annually by the major networks, but with newer players in field like Fox and Family Channel, Showtime, USA Network and Lifetime, the bidding is more competitive, he says.

‘The tv movie market has not experienced the same downturn as the series market. There is always room for tv movies,’ says Riley. ‘As result, there are six or seven companies around the world with deep pockets bidding for these movies coming out of the American system, including Saban, Hallmark, Polygram, Hamden (with the former w.i.n. catalog). ‘So we needed the leverage of a foreign entity to make sure we are competitive.’

Riley says a good tv movie can generate from $900,000 to a $1.2 million in worldwide earnings, not counting the u.s., while a typical u.s. network series can earn anywhere from $400,000 to $600,000 or more per episode worldwide (outside the u.s.).

U.S. syndication

A deal with CBS/Maxam Entertainment, a u.s. syndicator, to produce Psi Factor, hosted by Dan Aykroyd, resulted in Atlantis holding on to world distribution rights.

All-American Television and Maxam have picked up approximately 50% of the cost of Sinbad and Psi Factor, respectively (the current hourly range is $350,000 to $400,000).

‘Prices were much higher in the past, but that’s the Canadian advantage,’ says Riley. ‘At the end of the day, this (arrangement) allows us to control the worldwide market, and we can produce it in Canada and make a Canadian show out of it. It makes for a nice symbiotic relationship between an American syndicator and the Canadian production company.’

European partners

Filmline projects, produced at a rate of some $50 million per year, have been cofinanced with players such as Gaumont Television and Teleimage in France, Screen Partners in the u.k. and Mediaset (formerly Reteitalia), the new Sylvio Berlusconi company in Italy.

And because these larger media companies typically have investing partners in other territories, these agreements open additional distribution potential, says Clermont.

Typically, Canada brings in a quarter of the budget, and in Clermont’s case, shortfalls were covered by a German bank, a role the Royal Bank plays today.

U.K. features

Simon Perry, chief executive, British Screen Finance, the agency which is also responsible for the administration of the European Coproduction Fund (u.k.), says compared to Canada, the u.k. has almost no government incentives for film and tv production.

bsf emphasizes new homegrown talents, first and second feature projects, with an annual grant of over $3 million from government. The actual yearly spending (due to private equity financing) is more in the range of $10 million. The cap is 30% of the budget and return on investment is close to 50%, says Perry.

‘Television is a very booming business in this country. There are heavy taxes on the itv (commercial companies). The bbc in a limited way, Channel 4 in a robust way, and itv hardly at all, finance feature films. The motive isn’t always commercial, they can do it for prestige, or brownie points or Oscars, or whatever,’ says Perry.

He ranks France, Germany, and perhaps then Canada, as the u.k.’s top coproducers, adding that coventuring with the u.s. ‘is really a presale because it is not possible to coproduce with the u.s.’

‘What interests British producers most about Canada,’ says Perry, ‘is the money, it’s as simple as that. But we all know that the money comes with strings in terms of Canadian content.’

The stand-in

‘Canada being a North American country can quite usefully stand in the u.s.,’ he says.

Perry says Love and Death in Long Island (a coproduction feature from Imagex in Halifax) is a fair example of current British thinking on Canadian coproduction.

The Canadian option works ‘because (the film) is half set in (the u.s.), and to get a presale from an American company with a first-time director is impossible. The film couldn’t be entirely financed out of the u.k., and to the extent that the film needs to look like it is set in AmericaCanada does splendidly well. This is not very good news for people who care about Canadian culture, because Canada is being used as a background.’

The problem with the u.s., says Perry, is that the distributor always insists on controlling the picture, including making key casting decisions.

‘We are always thinking of the world market, not just the u.s.,’ he says.

Some 70 independent feature films are produced annually in the u.k., with budgets for coproduced features in the $2 million to $8 million range. About half are coproductions.

Euro feature coproduction

The European Coproduction Fund (u.k.) was established in 1991 with an annual government grant of us$3 million. Total spending is in the $4.5 million range. The fund is restricted to features (with a 30% cap) coproduced with European Economic Area partners.

‘If the budget isn’t too high, European partners (rather than u.s. distributors) tend to be the partners of choice because there is a great interest and appetite for British films in the rest of Europe,’ says Perry.

The coproduction fund finances about a dozen features a year, and this represents about 25% of all u.k. feature film coproduction activity.

The Producers Alliance for Cinema and Television, the principal u.k. producers association, has as many as 400 active members, most based in London, but Perry says a small film fund has been set up in Glasgow as well as a new fund in Merseyside (Liverpool).

In France, the cnc’s new leader Marc Tessier is changing the way the institution finances and qualifies the production of films by the French industry. The cnc felt foreign-initiated projects profit immeasurably from the financial support available through the cnc. Also, French production costs are high, making it difficult for foreign partners to bring the 20% minimum contribution to the table.

In an effort to rectify the situation, Tessier has appointed a committee to reform the approval process that triggers access to production financing.

Ireland

Perry says an attractive tax break system is fueling Irish film production and coproduction (section 35’s tax advantages are based on direct spending in Ireland). ‘It makes Ireland very much a coproducer of choice for us,’ he says.

In a recent example, he says, Dublin was used as a stand-in for Liverpool in the ’50s.

A word of advice to Canadian producers: ‘I think making relationships is what coproduction is all about. And I think Canadian producers need to come here to see how life looks from a British producer’s perspective. It is very, very different.’

Very, very spoiled

According to Perry, ‘Germany is the most subsidized country in the world, France second, and Canada is probably third. So you are, you know, very, very spoiled compared to British producers. Producers (in the u.k.) have to get 70% and probably more of their money from commercial sources.’

Perry says a reduction in ‘artistic contribution’ in coproduction and more emphasis on financial reciprocity is a welcome development, ‘because the best films come from one place and have a strong cultural voice.’

Financial coproduction projects have been done with Germany and the Netherlands (typically with a one-year turnaround). Happily, the Dutch entry was Antonia’s Line. The reciprocal Welsh film, House of America, is being shot/serviced in Alberta. Perry says the weather is so bad the film has to be shot in black and white.

U.K. TV

The most profitable production houses in the u.k. are largely focused on tv, says Bob Linnell, a former Telefilm Canada deputy director and London director. Linnell operates a busy London-based coproduction/coventure consultancy with about a dozen or so ongoing Canadian clients, and others serviced on a project basis.

u.k.’s private broadcasters, Grenada, London Weekend Television and Carleton, operate large production affiliates, but the big story is Channel 5, which begins broadcasting in January ’97. The last free terrestrial network in the u.k., Linnell says Channel 5 ‘will change Britain even more than the British realize, similar to Global’s entry in the Ontario market.’ Channel 5 will go head to head with commercial itv ‘entertainment’ programs.

Channel 5 will be supplied by 40 indie producers.

The Pearson Group, Channel 5’s owner, is also the owner of Thames Television, the u.k.’s leading indie program supplier. Canadian producers in the entertainment and drama sector should be talking to one or both, says Linnell.

(Perhaps the best contact for Channel 5 is Peter Wagg, the new Los Angeles-based head of production for Pearson. Wagg’s credits include Max Headroom.)

One point bears repeating, says Linnell: ‘At this time the British market is a small market, basically a 40-channel environment, but the four main channels have about 80% of viewing. Broadcasters are very wealthyand they don’t need partners to make their own productions.’

Consequently, there’s not the same drive for coproduction.

‘The (acquisition) motive is purely quality and whether the program will appeal to the audience.’

He says Channel 4 and BBC 2 have special mandates and will more buy more risk-taking projects such as John Greyson’s aids musical Zero Patience.

All the u.k. specialty channels (Fox, Nickelodeon, BSkyB) are scrambled and available in only 20% of the 26 million households.

Canada’s forte

‘Canada has done well on u.k. tv in three series formats: popular children’s programs, especially animation from Nelvana, Cinar and Lacewood; ‘edgy’ teen drama series like The Kids of Degrassi; and more recently, family fare like Due South,’ says Linnell. There is also a wide range of time slots for one-off docs, he adds.

‘Canadian family material hasn’t transcended. Channel 4 bought two years of Avonlea, but that was about it,’ Linnell says. ‘u.k. family programs are defined differently.

‘The best success recently has been Due South, run at 8 p.m. by the bbc. A bbc presale was probably crucial. Alliance’s e.n.g. didn’t take off but Due South has really worked quite well, purely because of Paul Gross playing this marvelous caricature Canadian character.’