Montreal: Telefilm Canada’s interim Canada Feature Film Fund guidelines, released March 29, officially set the stage for enhanced box-office performances on the part of this country’s theatrical movies.

The guidelines are at the top of many industry agendas, with pressure coming from companies whose films have not made the reserved or performance funding list, including the producers and distributors of two recent Golden Reel-winning films, The Art Of War and Air Bud, and from larger distribution companies which claim the new guidelines place them at a disadvantage.

The new consolidated fund, announced by Heritage Minister Sheila Copps last October, allocates an additional $50 million a year over five years, or approximately $100 million a year to the Canadian feature film industry, assuming Telefilm’s administration of the Licence Fee Program component of the Canadian Television Fund, as yet not confirmed. The fund sets a long-term goal of capturing 5% of the Canadian theatrical market and broadly doubles the resources previously administered by the federal funding agency.

The guidelines include a ‘top 20%’ provisional list of 20 English-language films and 19 French-language films, which Telefilm has used to calculate production, development and marketing monies in the newly created performance (or reserved) envelopes for producers and distributors.

The CFFF’s performance component represents 50% of all production and development funds and allocates up to $3.5 million per qualifying producer (eligible in both language categories) in reserved equity and loan advances for production and development. The cap for distributors is set at $2.5 million. Companies are eligible to receive all three performance envelopes, up to a maximum of $6 million.

The fund’s guidelines will be reviewed by a 20-member CFFF advisory committee and Telefilm’s board of directors.

To be considered eligible, films were required to have Telefilm and/or Canadian Television Fund (feature film) funding participation or be treaty coproductions, and achieve a minimum CAVCO rating, namely 6/10 for films released in ’96, 7/10 for films released in ’97 and 8/10 for movies released in ’98 or later.

The performance-based component envelopes for producers and distributors are allocated pro rata according to an adjusted box-office formula. The formula includes box-office grosses in the period 1996 to 2000, adjusted upward or downward according to the number of festival screenings and prizes, the level of Canadian content and other considerations including reduced ticket prices for children’s movies.

Francois Macerola, Telefilm executive director, says while there are complications related to the program’s start-up, major changes to the qualifying data are not anticipated. He says the box-office data used in the performance lists is sourced from producers and distributors, from reports prepared by Alex Films and validated by exhibitors in the Motion Picture Association of Canada. ‘If we’re proven wrong we’ll make changes accordingly.

‘There are no surprises in these guidelines for the department [Heritage],’ he says. ‘They were informed on almost a daily basis.’

Distribution issues

Distributors support CFFF’s performance-based goals, but Richard Paradis, president of the Canadian Association of Film Distributors and Exporters, says the time frame to introduce the new rules ‘is a little bit hasty, considering we got the proposed rules for 2001/02 two days before the new period came into being [April 2].’

Paradis says distribs were told minimum guarantees signed before March 31 would be grandfathered (i.e. pre-CFFF rules would apply).

‘They [Telefilm] will move slowly on the removal of minimum guarantees as we had asked, but what’s irritating us now is that [minimum guarantee] commitments have been made and distributors are being told they will only get 50% of what they thought they’d get.’

(Overall, distributors can only use 50% of the marketing envelope for MGs.)

Paradis says it’ll typically take producers two or three years to deliver more commercial movies.

Distributors are now obliged to pay back all of Telefilm’s marketing contribution. In the past, only half the amount was recoupable.

‘We’re just wondering what it is in this new plan that’s stimulating for distributors,’ says Paradis. He says ‘distributors are being put in a disadvantageous position at the starting gate’ despite the notion distribution and marketing is supposed to be a key element in the new policy.

‘This is almost a lose-lose situation because the MG is disappearing and the marketing is disappearing,’ says Paradis.

CAFDE members will meet in Montreal April 20 to discuss the CFFF issue and expect to meet with officials from Telefilm the same day.

Performance-based

component

Of the 20 eligible English-track movies on the performance list, the top-ranked films are The Red Violin with close to $3.4 million in box-office receipts (Red Violin Prod.); The Sweet Hereafter, $1.48 million (Speaking Parts); and $1.5 million-plus for both eXistenZ (Screenventures XXIV Prod.) and Crash (Crash Films Prod.).

Of the 19 eligible French-track movies, four have box-office totals of more than $3 million: Les Boys and Les Boys 2, $6 million and $5.8 million, respectively (Melenny Prod.); Elvis Gratton 2 – Miracle a Memphis, $3.7 million-plus (ACPAV/Films Cinepix); and La Vie Apres l’Amour, $3.1 million-pus (Max Films).

A notable omission

A notable omission from the English-language performance list is The Art of War, which grossed $4.6 million at the box office in 2000.

While the film clearly exceeds the top-grossing film on the list by more than $1 million, it fell short because, for one, it garnered only 7/10 CAVCO points.

For the purpose of the performance-based envelopes, ‘if the film was released a couple years earlier, it would’ve counted,’ says Dan Lyon, executive VP, TVA International, the distributor for The Art of War. ‘It’s an extremely artificial result and criteria.’

In a letter to Peter Katadotis, Telefilm’s director of Canadian operations, Lyon writes, ‘The exclusion of The Art of War will bring the policy into disrepute. The exclusion is unfair in light of both the high-profile success of the film and the fact that it did qualify for other Canadian government programs, including the federal tax credits.

‘The exclusion of The Art of War will have a result in direct opposition to the stated policy goals, in that the company responsible for the biggest Canadian success of the year (and the most successful English-language release in almost twenty years) will be granted an envelope smaller than other companies who have not achieved anywhere near the same level of success in marketing a Canadian feature.’

TVA International spent $2 million marketing the film. ‘We did exactly what the government is saying distributors should do – risk large sums of money to promote Canadian films and put them on equal footing with U.S. studio films,’ says Lyon.

In late fall, Lyon attended a CFFF consultation in Toronto where he says there was a consensus that all theatrically released Canadian pictures released in the five-year period should be accounted for – ‘that any other system would produce unfair and anomalous results.’

‘If I were paranoid, I would think the guidelines were specifically crafted to exclude The Art of War,’ says Lyon. ‘Some of the people within Telefilm and otherwise feel Les Boys and Sunshine are more deserving and the people behind the projects are more deserving of the assistance, but that’s more on the producers’ side.’

Another problem with the guidelines, says Lyon, is that eligible projects going forward must have a Canadian screenwriter, director and lead, with the exception of coproductions.

‘The unintended effect of the guidelines, therefore, encourages producers to do official coproductions and not fully Canadian projects.’

The lack of flexibility in this area, argue some producers, is also likely to work against the policy’s goal of fostering more marketable and commercially viable Canadian films.

‘Guidelines are clear’

From a production perspective, Bill House, executive VP, Alliance Atlantis motion picture production, says lack of flexibility with the lead actor requirement is a major concern, because ‘greater access to both the domestic and international marketplace is paramount.’

Overall, House says the draft guidelines are clear and consistent with what the government set out to do. ‘The creation of the envelopes reflects the spirit and intent of the guidelines.’

House says this year’s time constraints may also force or encourage producers to partner and/or create specific kinds of genre films, typically generating higher budgets.

Lyon says, ‘It’ll be interesting to see which distributors will pick up the low-budget projects.’

Macerola counters

CFFF spells more money for both production and distribution, says Telefilm’s Macerola.

The fund envisions average production budgets in the order of $5 million, and $500,000 for marketing budgets, more than double the current amount.

As the minimum guarantee is phased out (over three years), Macerola says Telefilm will compensate by hiking its maximum participation per film from $1.5 million to $2.5 million.

Macerola says it’s up to the distributors to build their line of credit by making returns to the marketing funds.

It’s known Heritage wanted the MG scrapped, as it tended to artificially inflate bids. Macerola says the new guidelines will oblige distributors to pay fair market value, and no more. ‘Competition will be stronger and maybe the price will be less, and so over a period of maybe three or four years, producers will have a fair price for their films,’ he says.

‘They [distributors] have been doing a good job, but we’re telling them they can access more money to bring a film to the attention of the Canadian public,’ says Macerola.

He says the tighter 2001/02 time frame doesn’t suggest many producers will return their reserved funding, which normally has to be spent in the same fiscal year. ‘I’m quite sure the money will be spent and these producers will then try to have access to the selective money after [the performance money is spent]. There are many, many projects on their desks.’

Selective funds

On the issue of diversified film portfolios, Macerola says almost half the CFFF monies (50% of approximately $85 million) is earmarked for selective-based production and marketing.

He says there’ll continue to be a ‘diversity of voices and genres. Over a five-year period I think we’ll have a very sophisticated inventory of films. In distribution we want to put the emphasis on marketing.’

Macerola says the guidelines also place important emphasis on the Screenwriting Assistance Program, which allows for applications without producer participation in the early stages, and on the role of the advisory group, ‘a kind of continuous consultation process now established, and Telefilm will be in a continuous relationship with the professionals of this industry.’

CFFF overview

For the new exercise, 2001/02, 50% of the $72.9 million in production and development funds for producers is set aside for the fund’s performance-based component – more than $36 million – while the performance portion for distributors is 75% of the $11 million in distribution and marketing funds.

Telefilm says it will review the program component split, but generally anticipates an increase in CFFF’s performance component in line with the fund’s overall objectives, primarily increasing overall theatrical market share to 5%.

While Telefilm says applicants without a performance-based envelope will be given priority to selective funds, producers with performance funding may also apply under specified conditions, namely that their reserved funds have been committed.

Financing and distribution

In exceptional instances where there is a high level of potential, the agency may make an interest-free advance to a producer, raising its de facto contribution from 49% of the budget to 64% of the budget or $2.5 million.

General limits are established for deferrals and producer commissions from cash sponsorships.

On distribution, the guidelines indicate advances from Telefilm for distributor MGs for the acquisition of rights are to be phased out over three years. Telefilm’s maximum contribution is limited to 50% of the MG this year, with reductions to 35% in 2002/03 and 20% in 2003/04, the final year for assistance. The proposed phase-out includes a review, which may exempt low-budget projects with costs of $1 million or less.

For test marketing and releases, Telefilm’s interest-free advance may go as high as 75% of the approved budget, with the agency and the distributor recouping on an equal basis until the distributor’s marketing contribution is fully recouped.

Recoupment and incentives

The guidelines tighten Telefilm’s recoupment policy with the broad consideration the agency ‘will recoup its investments no less favorably than pro rata and pari passu with all other financial contributors.’ Arrangements include the establishment of an ‘open territory’ and ‘revenue corridor,’ most likely in a major sales territory in which Telefilm holds a first recoupment position.

The recoupment guidelines also include incentives for low-budget projects produced by SMEs (‘Telefilm will forego 25% of its investment in favor of the producer’), and a privileged recoupment clause aimed at encouraging genuine private-sector investment.

On the French side, producers anticipating recoupment of their investment or provincial tax credits will directly receive 50% of all net production revenues, with the balance shared equally with other investors.

The guidelines also create a ‘box-office corridor’ for successful theatrical releases, specifically a contracted requirement on the part of a distributor to pay 10% of gross receipts to a producer on any film with Canadian theatrical receipts of $750,000 and more. The box-office corridor sums are non-recoupable by the distributor.

Incentives for SMEs

The guidelines also include incentives for small and medium-sized production companies, defined as companies with gross annual consolidated (group) revenues of less than $25 million averaged over the past three years.

Telefilm says it will also initiate a pilot program for reserved (automatic) development envelopes for a limited number of SMEs, otherwise ineligible for a performance-based envelope.

Confirmed multi-sectorial FCCC advisory committee members include the three co-chairs, producers Niv Fichman, Denise Robert and Tom Rowe. CAFDE has recommended Bryan Gliserman and Christian Larouche, but the distribs say a committee of 20 or so members will be completely unwieldy.

CFFF performance-based component

The following is the provisional list of films on which Telefilm Canada will base its calculations for the allocation of development, production and marketing assistance from the performance-based component of the Canada Feature Film Fund.

2001/02 English-language eligible films

* The Red Violin – Red Violin Productions

Box office: $3,378,835

Festival bonus: 20%

* The Sweet Hereafter – Speaking Parts Ltd.

Box office: $1,480,102

Festival bonus: 20%

* eXistenZ – Screenventures XXIV Productions

Box office: $1,566,716

Festival bonus: 10%

* Crash – Crash Films Productions

Box office: $1,554,094

Festival bonus: 10%

* Margaret’s Museum – Glace Bay Pictures (70%), Tele-Action/Glace Bay Inc. (30%)

Box office: $914,638

Festival bonus: 10%

* The Hanging Garden – Emotion Pictures (47%), Galafilm (33%), Tryptich (20%)

Box office: $801,206

Festival bonus: 20%

* Sunshine – Screenventures XXIX Productions

Box office: $996,470

Festival bonus: 20%

* Eye of the Beholder – Filmline International (73.65%), Eye of the Beholder Ltd. (26.35%)

Box office: $796,085

Festival bonus: 0%

* New Waterford Girl – Sienna Films (75%), Imagex (25%)

Box office: $847,961

Festival bonus: 10%

* Babar King of the Elephants – Nelvana Entertainment

Box office: $461,713

Festival bonus: 0%

* Grey Owl – Ajawan Productions

Box office: $723,930

Festival bonus: 0%

* Such a Long Journey – Film Works

Box office: $480,720

Festival bonus: 5%

* Pippi Longstocking – Nelvana Entertainment

Box office: $395,496

Festival bonus: 0%

* Last Night – Rhombus Media

Box office: $365,000

Festival bonus: 15%

* Grizzly Falls – Grizzly Falls Productions

Box office: $378,326

Festival bonus: 0%

* Better Than Chocolate – Rave Film

Box office: $315,448

Festival bonus: 15%

* Felicia’s Journey – Screenventures Productions XLIII

Box office: $368,683

Festival bonus: 15%

* The Assignment – Productions Coscient

Box office: $412,598

Festival bonus: 0%

* Screamers – Productions Coscient

Box office: $402,087

Festival bonus: 0%

* Stardom – Cinemaginaire (80%), Screenventures XLV Productions (20%)

Box office: $266,968

Festival bonus: 5%

2001/02 French-language eligible films

* Les Boys – Melenny Productions

Box office: $6,064,641

Festival bonus: 0%

* Les Boys II – Melenny Productions

Box office: $5,842,414

Festival bonus: 0%

* Elvis Gratton 2 – Miracle a Memphis – ACPAV (75%), Films Cinepix (25%)

Box office: $3,753,013

Festival bonus: 0%

* La Vie Apres l’Amour – Max Films Productions

Box office: $3,109,090

Festival bonus: 0%

* C’t’a ton tour Laura Cadieux – Cinemaginaire

Box office: $2,483,315

Festival bonus: 0%

* Laura Cadieux La Suite – Cinemaginaire

Box office: $1,593,940

Festival bonus: 0%

* L’Homme ideal – Films Cinepix

Box office: $1,103,708

Festival bonus: 0%

* J’en suis – Rose Films

Box office: $829,369

Festival bonus: 0%

* Hochelaga – Films Baliverna

Box office: $707,679

Festival bonus: 0%

* Le Dernier Souffle – Films Vision 4

Box office: $559,298

Festival bonus: 0%

* Maelstrom – Max Films Productions

Box office: $410,452

Festival bonus: 10%

* Karmina – Lux Films

Box office: $395,864

Festival bonus: 0%

* Matusalem II – Films Vision 4

Box office: $245,187

Festival bonus: 0%

* Matroni et moi – Max Films Productions

Box office: $341,502

Festival bonus: 0%

* Histoires d’hiver – Aska Film Productions

Box office: $279,424

Festival bonus: 0%

* 2 Secondes – Max Films Productions

Box office: $275,889

Festival bonus: 0%

* La Conciergerie – Films Cinepix

Box office: $266,319

Festival bonus: 0%

* Post Mortem – Coop Video de Montreal

Box office: $221,208

Festival bonus: 15%

* No – In Extremis Images

Box office: $222,429

Festival bonus: 5%

-www.telefilm.gc.ca