Sandra Richmond is a member of the KNOWlaw Group of the Toronto law firm of McMillan Binch.

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Just as the funding envelopes for the 1996/97 program closed, the Canada Television and Cable Production Fund released the 1997/98 Licence Fee Program guidelines that will govern how the money is to be spent next year.

The new guidelines replace the 1996/97 transitional guidelines, which had amended the old Cable Production Fund guidelines. The lfp guidelines were developed after extensive industry consultation and are more generous than the cpf guidelines, reflecting the new Department of Heritage money available to the industry.

The most important changes – to the licence fee thresholds and the fund contributions – suggest increased support for broadcasters and regional producers, but there are a number of other significant policy adjustments.

Licence fee threshold

The licence fee threshold for all Toronto and Montreal productions remains the same as under the transitional guidelines – 20% of the budget for drama and 15% for all other genres.

However, the lfp guidelines have reduced the licence fee threshold that is required for regional productions to 15% of the budget for drama and 10% of the budget for all other eligible genres.

Low- and high-budget productions

The lfp guidelines apply a lowered licence fee threshold for documentaries and children’s programs with budgets less than $250,000, where a licence fee of 10% of the budget will trigger eligibility.

Big-budget programs also get a break, with the threshold being reduced to $150,000 from the $170,000 required under the transitional guidelines.

Threshold for ‘Super Canadian’ MOWs

The lfp has just published an amendment to the new guidelines that permits a licence fee threshold of $100,000 per hour for highly Canadian programs. This lower threshold is intended to apply to those few projects that are licensed by a private broadcaster and that:

(1) have achieved 10 out of 10 Canadian content points; and

(2) are filmed or taped entirely in Canada; and

(3) are based on a Canadian historical event or are adapted from a published literary work written by a Canadian.

Interestingly, an original contemporary Canadian story would not qualify for this lower threshold.

LFP fund contribution

Rather than providing matching funds based on the licence fee, as under the transitional guidelines, the lfp will now top up the licence fee with a flat contribution of 15% of the budget.

However, all regional productions will receive an additional 10% regional bonus (up from the 5% regional bonus under the transitional guidelines).

A reduced regional bonus of 5% is available for coproductions between a regional producer and a Toronto or Montreal producer, as long as the regional producer is a genuine partner.

In addition, there is a 5% bonus for all French-language productions. Note, though, that this bonus is available only for productions that are produced solely in French and have no English presales.

Caps on LFP contributions

For series with less than 22 episodes per cycle, the per-series cap remains at $2.5 million for regional productions, but is reduced to $2 million for Toronto or Montreal productions. For series with 22 or more episodes per cycle, the per-series caps are $3.5 million and $3 million, for regional and non-regional series respectively.

Note that the cap applies to a series as a whole and not to individual cycles. Therefore, a producer may apply for more than one cycle of episodes in any fiscal year.

The fund has established a new per-project cap for feature films and mows of $750,000.

Benefit of new guidelines

Broadcasters will benefit from both the lower thresholds and the top-up approach to the fund contribution. The lower thresholds mean broadcasters can help some producers qualify for lfp funds with lower licence fees than were previously required.

And the top-up approach means that, once broadcasters meet the lfp threshold, they do not need to increase the licence fee to attract increased matching funds from the lfp.

This presents a bit of a double-edged sword for producers. The lower licence fee thresholds will allow access to the lfp for productions that might not otherwise have qualified. They will encourage more regional production, more low-budget drama and children’s programming, more big-budget projects and more ‘identifiably `Super Canadian’ ‘ productions.

However, producers still need to finance the entire production. And while broadcasters may be willing to increase licence fees to the threshold levels, there is no incentive for them to pay more than the threshold amount, as there was under the matching funds approach.

For regional producers and producers of French-language productions, the fund bonuses will certainly help to address this problem. However, because the regional bonuses are such an advantage, the lfp guidelines take a stricter approach to defining ‘regional program.’

To qualify as a regional program, principal photography must take place in the regions. In addition, the regional producer must:

– be based in the region;

– have actively developed the program;

– have creative and financial control of the program;

– own at least 50% of the copyright in the program; and

– have a share in the distribution rights to the program

In order to determine whether a producer is regional, the lfp will be looking not just at the producer and its parent company, but also at whether any person who directly or indirectly owns or controls a significant interest in the applicant is based in Toronto or Montreal.

For producers from Toronto and Montreal, the guidelines do not necessarily offer improvements over the transitional guidelines and may, in fact, be less generous. Unless the producer can qualify for the French-language bonus or one of the lower thresholds, the producer must meet the same threshold as previously and yet will receive a decreased fund contribution (from matching contribution to a flat 15% contribution).

International treaty coproductions

The lfp will apply to Telefilm-approved international treaty coproductions that are at least 65% Canadian-financed. To trigger funding, the producer must have an eligible licence fee that is the threshold percentage of the greater of (1) the Canadian budget and (2) the applicable level of Canadian participation, as certified by Telefilm.

International coproductions cannot take advantage of the lower regional thresholds, which means the applicable threshold percentage is 20% for drama and 15% for other genres. For big-budget productions, however, the eligible licence fee need only be the lesser of $150,000 per hour and what would otherwise be the licence fee threshold.

International coproductions are not eligible for the regional bonus or the French-language bonus.

Other notable changes affect the eligibility requirements and the fund contributions.

Eligibility requirements

– The amount of ‘ineligible’ financing that will disqualify a production has been reduced from 65% to 50% of the production financing and/or interim financing. An ineligible person includes an entity that would not qualify on its own for the lfp, such as a non-Canadian production company.

– The definition of ‘documentary’ has been made tougher. To qualify as a documentary under the lfp guidelines, a program must meet all the listed criteria, not just most of the criteria as was required under the transitional guidelines.

– The ‘live’ programming exemption from the closed-captioning requirements is now limited to programs that are live-to-air, and then only for the initial play. Any subsequent plays are to be closed captioned, as are all live-to-tape programs.

– Only programs in French, English and aboriginal languages are eligible.

– The exception to the requirement that a program be at least 30 minutes has been restricted so that it applies only to programming shorts for children, rather than all programming shorts.

– Programs that are coproduced by publicly funded broadcasters are now ineligible for the lfp. Previously this applied only to programs produced by such broadcasters.

– As before, applicants to the fund must be situated in Canada. However, under the new guidelines, not just the parent company but also any person who directly or indirectly controls the applicant must be situated in Canada.

Fund payments

– The lfp contribution is paid in two equal installments after the interim review and final review (rather than in installments of 75% and 25% as under the transitional guidelines).

– The new guidelines have reinstated the requirement for a minimum of 80% to be spent on drama and children’s programming and a maximum of 20% to be spent on other programming.

Carry-over policy

A number of producers who submitted applications for the 1996/97 lfp, and who had arranged to start principal photography before March 31, 1997 in accordance with the transitional guidelines, found that the funds had been allocated before the reviews of the applications were completed.

Those producers will be able to resubmit their applications in the next lfp fiscal year, despite the general requirement that applications be filed before commencement of principal photography.

These applications, like all other applications to the 1997/98 lfp, may not be filed before April 1, 1997 and must be filed before March 31, 1998. In addition, the resubmitted applications will have to conform to the new guidelines and will be treated on a first-come, first-served basis with all other applications.

Our next Binchmarks will take a look at the guidelines for the ctcpf’s Equity Investment Program.

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice on any particular situation.)