Montreal: Canadian television producers use the CRTC coventure formula to do deals with U.S. production partners and broadcasters, otherwise they quickly find themselves offside on a content basis, says International Film Financing president Laura Polley.

A wide cross section of the industry – producers and professional associations like the DGC, ACTRA and WGC – is pushing for more Canadian drama production, but there is another, smaller group of producers who believe the spectrum of CAVCO- and CRTC-supported content drama should include productions that are not identifiably Canadian and are aimed squarely at the international marketplace.

Park Ex Pictures president Kevin Tierney says the Canadian production scene can be divided into four categories: 100% Canadian, coproductions, foreign productions that access tax credits, and content productions aimed at the international marketplace that are not identifiably Canadian but qualify as Canadian with both CAVCO and the CRTC.

There are concerns the content for the export category could be on the chopping block as the Heritage Canada-sponsored content review wraps up.

The official support phase for this important category has ended. The paradigm has shifted to a perspective that sees the production industry as ‘mature.’ But while the Canadian industry has matured, so have the demands of the international marketplace.

‘A mature industry from the perspective of the authorities doesn’t necessarily address the demand of the international marketplace,’ says Heenan Blaikie lawyer Arthur Evrensel. ‘As Canadian producers become more versatile and understand [the international marketplace] better, I think the authorities should have enough versatility to allow a spectrum of productions…and not be limiting ourselves to 10 out of 10 production. Yes, I agree there should be more [public] resources to promote pure Canadian production, however, that doesn’t mean we should ignore the other spectrum in the international marketplace and even within our own country.’

Coventures stand between ‘Visibly Canadian’ 10/10-type production and the reduction of everything and everyone else to service status. If the category is not officially encouraged, producers say the industry is throwing in the towel in terms of qualified content production for export.

‘Good guy, bad guy’

CAVCO isn’t playing good guy, bad guy, even as it actively promotes the PSTC (service credit) in the U.S.

Rather, says Evrensel, the certification agency has to be vigilant with so-called borderline productions and ensure they can’t readily access the higher Canadian-content credit.

‘I have had this discussion with [CAVCO director] Robert Soucy and his staff and I think they do a great job. The only thing is I think they have to be more aware of the international marketplace and spectrum of possibilities and to adjust to that accordingly,’ says Evrensel.

The desired ‘adjustment,’ adds Evrensal, relates to ‘productions which are not necessarily Canadiana. There is demand for [strictly content drama], but there is also a demand for [product] between a production service deal and 10 out of 10. As we go forward, we find ourselves trying to define what that is because I don’t think it can be quantified very easily,’ says Evrensel.

(The difference between the labor-based service and content tax-credit benefits is approximately double, 8% to 10%, compared to 16% to 20% as a percentage of the production budget.)

The fine print on coventures is submitted to certification tests meant to gauge the actual control of a production and its ownership, including both ‘the nominal or bare possession’ of a copyright and beneficial ownership concepts such as financial benefits and exploitation rights.

‘I think when we refer to ‘control and ownership’ it’s too pure a designation, and somehow the legislation and the authorities have to take into account the fact that ownership now is typically spread over several parties. Each financier in different countries wants an ownership stake. And so how do you allow for Canadian producers to be flexible enough to work with a German fund or Australian tax credit or the English sale and leaseback?’ asks Evrensel.

Doing business in the U.S. once was a laudible, officially supported goal. But while it’s still an important precondition for sales to other markets in Europe, producers question what the future holds. Is the Canadian industry just too insecure, or is it in fact naive and too risky to open the door a little more to the powerful American industry?

A poor 10% cousin

Producers with export goals hope the Francois Macerola-chaired content review process will legitimize and strengthen the ‘industrial’ program category. The overriding fear is that the Canadian market is too small, a poor 10% cousin to the U.S., and fundamentally indefensible in the context of a more open spectrum of international and U.S. production partnerships.

‘It’s only under CRTC rules that an official coventure can exist,’ says Michael Prupas, president of Muse Entertainment Entreprises.

Among other options, CRTC coventures allow a Canadian producer to work with U.S. partners, qualify their show as Canadian content (six points and 75% expenditures in Canada in projects with the U.S.) and avoid dealing with CAVCO’s rules on producer control and back-end rights. ‘One of the things CAVCO insists upon, for example, is that the project be developed by the Canadian company,’ says Prupas.

Prupas says the content-review process committee needs to address the beneficial aspects of coventures, which as an admissible content category may be on the chopping block.

Prupas points to the lack of coherent support for Canadian producers working to access the international market.

Role of broadcasters

‘I think there is a significant lack of understanding on the part of the regulators as to the degree of involvement that broadcasters do have and should have, and we need them to have, in any television production that we are developing,’ says Prupas.

How does one finance a Canadian-content show today if one does not have the Licence Fee Program and Telefilm Canada as investors? The most one can reasonably expect out of the Canadian marketplace, taking in the tax credits and a licence with Global Television, CTV or CBC, is 35% to 40%.

On the issue of producer-broadcaster relations, Prupas says a Canadian broadcaster who ‘may put up 10% to 12% of the budget acts as if they own the show.’

‘They will tell us who they want as cast [after approving the script and the director] and they will exercise that approval. They will tell us how to change the cast, they will tell us what kind of film to use, what kind of music.’

And the licensee or buyer typically has all the leverage.

Be that as it may, the Canadian licence and credits only average 40% of the production budget, with 60% to 75% of the financing outstanding.

Prupas says the best place to find the balance of financing is the U.S.

‘We consider it to be a huge success, and I had this discussion with Robert Soucy, as is the case with our Hallmark movies, when we are able to convince a network in the U.S. to buy our Canadian-content show and accept the criteria that CAVCO imposes and which they [the American client] regard as onerous.’

‘The issue is in part, ‘Can we allow American networks to have input into the issues that concern any network the same way they concern Canadian networks?” says Prupas.

Canadian TV producers, he adds, should have the right to build up projects that are Canadian but attract American television networks. The benefits of a U.S. airdate ‘will in turn spill over in the publicity that will attract Canadian audiences to watch the shows even more [and] get us into the target audiences that make our broadcasters happy.’

The ‘cultural gap’ with European sensibilities makes the U.S. market Canada’s best export hope, he says.

Over the past five years, Park Ex’s Tierney says the certifying authorities have moved to support the creation of both ‘super Canadian programming’ and the service tax credit, ‘but my point has been that they are making it more and more difficult in many ways to maintain the kind of programming which is six, seven, eight [points].’

‘If our investment is the tax credits [around 25%], how do we justify in a market-driven economy owning 100%?’

Typically, Tierney’s deals with a major sale into the U.S. would represent a financing split of 30% from Canada, 30% from the U.S. broadcasters and 40% for the balance of international rights.

Tierney shows there is a major difference between coventures and U.S. service shows, where the key department heads are mainly American and, of course, so are all the primary actor positions.

‘On a six or seven out of 10 so-called ‘industrial’ show [losing the points for the screenplay and one of the lead actors], all the key players are Canadian,’ he says.

On shows successfully sold into the U.S. (Tales of the City, Barnum, Bonanno), Tierney says his personal choices for directors were accepted by the U.S. clients.

But the unofficial response to this spectrum of content production has been lukewarm at best, ‘because they are disguised U.S. shows.’

Tierney says the ‘politicians’ typically object when the Christian Duguay action film The Art of War (7/10) is referred to as Canadian, but at the same time under official coproduction rules, French director Claude Miller’s film Betty Fischer fully qualifies as Canadian. ‘I mean, what the hell is Canadian about that apart from [Quebec actor] Luck Mervil?’ he asks.

Tierney says Canadian producers should try to develop a range of projects, including some with a shot at international distribution. He says he’s trying to avoid the polarity that says there is nothing in between 10 on 10 Canadian and foreign service provider. ‘There is a middle ground to my mind that [producers] work on and it’s unfortunate for that to get lost in the shuffle on a discussion about Canadian content.

‘My fear is that in this reflection [of] Canadian content they are going to get more strident and it will be even harder to do that kind of project.’

Historically, coventures with a significant U.S. component have permitted Canadian talent – directors, craftspeople and actors – to work on major, big-budget TV productions, says Tierney. ‘The question is, ‘Can the system be flexible enough to recognize the inherent value of a project?”

In a recent Q&A feature in Maclean’s magazine, CRTC chair Charles Dalfen points out that Canada needs more drama production of various kinds, and is the only country in the Western world without a dramatic homegrown TV series in the top-10-rated shows.

‘We talk about Canadian movies, but let’s face it, not that many are watching Canadian TV either,’ says Tierney.