If Nelvana, Canada’s robust leader in the mad, mad worlds of animation production, distribution, and licensing, had been faint of heart, the year 2000 would surely have incited a corporate swoon. Coming off a strong start at natpe, the international tv market held in January, Nelvana’s pulse fluttered short months later as some of Canada’s public entertainment companies saw their stocks fluctuate unpredictably in the wake of the Cinar debacle.

Nelvana co-ceo Michael Hirsh says the bad news at Montreal’s Cinar jolted blood pressure for the compact group of pubcos, and made it hard for them to raise money on the public markets. By the end of 1999, Hirsh recalls, ‘the industry was shaken up by the scandal over writers credits at Cinar. People were concerned about how that would shake down in terms of pressures on government agencies, whether we would get a feature film fund, and what the impact on our industry would be.

‘We began [2000] with a very strong natpe, and shortly thereafter there was a second shoe problem at Cinar – which was the Cayman Islands money questions.

I think that had a much bigger impact on the public companies in Canada in this sector than the first issue of the writers, because Cinar had bounced back after the writers thing, as a stock.’

Hirsh says investors visited discomfort over Cinar on others: ‘Whether it’s Alliance Atlantis or whether it’s Nelvana or whether it’s Telescene or Salter Street, all the players started to get hammered in the marketplace through the year.’

Got good vertical?

You got game

But if it faltered even a little, Nelvana never lost its way because Hirsh says this already diversified entity knew it could continue to grow if it became part of a vertically integrated company. So Nelvana took much more seriously a rather long courtship by Corus Entertainment, a mindset that precipitated Corus’ $554-million purchase of Nelvana, which closed earlier this month.

Certainly, says Hirsh, market uncertainty for independent pubcos supports ‘the convergence theory, which is, ‘become part of the vertically integrated sector that’s not got the same negative impact as our colleagues in Montreal.’ You do that to facilitate growth.’

Looking at major 2000 trends, Hirsh reflects on the proliferation of entertainment dot-coms, a wave evident at natpe.

‘The dot-coms still had lots of financing, they had a lot of cash and were starting to acquire product. But, by the time you got to this fall, the market had crashed for them and a lot of them had gone through their cash.

‘Some of them had wisely realized they needed to hang on to their cash so that trend is greatly diminished. I think it’ll come back at a point where the dot-com businesses are more realistic from a business plan point of view where there are actual income streams that justify the business plan.

‘The interesting theory that was driving the dot-com business as late as mid-year was that you had to be first in a category. So you had a lot of companies that wanted to be providing short-subject content and their theory was that this industry would belong to them because they were the first on the Web with their site and therefore they were always going to be there.

‘I think what long-term players in entertainment know is that it’s not necessarily about being first, but it’s about [producing] the content that people want at any one time. People can drift off a tv station if it’s not providing the shows they want and it’s the same rule with websites. If you’ve got the content the way that Nelvana does as a content provider, and if you’re a broadcaster like a ytv you’re going to have the best kids site in Canada and you’re going to get the most traffic. It’s not going to go to a new dot-com that has to spend $10 [million] to $100 million a year advertising their site.

‘mipcom was very successful for us in the direction of demand for programming, which was very high.’ Although buyer buzz has suggested appetites are sated for animation programming, Hirsh counters: ‘That’s been the buzz for a long time, but it’s never negatively impacted us. In part, we went to mipcom with the Corus offer for Nelvana [known to the] public. It’s a very interesting thing on a worldwide basis, the stronger you appear as a company, the more successful you will be.’

RTV deal

Nelvana doesn’t just produce, of course, and has continued to secure its future as a distributor.

‘One of the other factors that made a difference in 2000 for Nelvana was rtv. That was the deal that we announced at the end of ’99, which had an output deal with rtv where they picked up distribution rights for certain programs and guaranteed picking up a certain number per year.’

Hirsh says he wouldn’t be surprised if there was truth to the rumors suggesting German buying power is declining, but says even if this proves true, it won’t affect Nelvana. ‘We got a multi-year deal. I think one of the significant differences between rtv and perhaps some of their competitors is that they worked hard to secure [programming] shelf space, and they’ve secured shelf space on rtl, which is the number-one German broadcaster for children’s programming. So that makes them a good long-term partner.

‘One of the things we’re exploring together [Nelvana and Corus] is the opportunities for partnering in channels and starting channels and creating channel blocks around the world. Anybody who’s in the international distribution business has to be always looking at the alternative forms of distribution.’

Meantime, Hirsh advises producers not to discount the importance of building a strong presence on Canadian tv. Why do so many seem to dis Canada?

‘I don’t understand it ’cause Nelvana is probably – I don’t want to sound boastful – but I think we are the most successful Canadian distribution company around the world. Our shows are in 160 countries, almost every show. We launched more new shows this year than Disney or Warner’s. We’re a big player around the world in our genre; so if somebody says what’s our most important territory, I’ll say Canada. If we don’t have a show sold in Canada or if we don’t know we can find a good home for a show in Canada, we’ve got nothing. Our economic model we use to finance our shows and structure our business is based upon accessing tax credits, which requires a Canadian sale.’

And what should small and medium-sized prodcos do to assure growth, other than finding themselves a buyer? Get into a niche, Hirsh says, and then work it, work it, work it. *

-www.nelvana.com