The early part of 2002 may have been about surviving, but the latter part has been about adapting to the changing marketplace. Canada’s commercial production industry emerges from one of its most difficult years, anticipating a brighter, busier 2003 with a more developed sense of the role strong homegrown talent will play in the collective future of the industry.

‘I believe the industry has finally decided it needs to advertise again,’ says Paola Lazzeri, executive producer at Toronto’s Avion Films. Since summer ended, Avion directors are seeing an increased board flow and Lazzeri says business is getting back to normal levels. ‘When directors are stressed, you know you’re doing alright,’

In January, predictions for 2002 were grim. On top of the market slowing to a crawl after 9/11, changing technologies and business models stood to threaten traditional spot production. There was the looming threat of PVRs making TV advertising obsolete and convergence saw integrated media companies like CanWest Global Communications and Corus Entertainment take more commercial production in-house, cutting into an already reduced board flow.

‘[2002] has been probably one of the most challenging years we’ve ever had,’ says Jamie Phair, head of sales at Toronto’s Radke Films. According to Phair, affiliates worldwide reported the same problems. ‘Business was very slow, regular advertisers were not advertising, and they all said it was for the same reasons. Because of Sept. 11, people were nervous about what message they should be putting out there and nervous about spending money.’

Moving into 2002, production companies continued padding their rosters with big-name international directors in an attempt to secure a portion of the decreased board flow. Budgets were continuing to shrink and by the end of the winter work for young Canadian directors was scarce. The uncertain global marketplace drove the U.S. industry to become more insular, with increased production staying south of the border.

Over the year, the Canadian industry also contracted as lower budgets made expensive imported directors less attractive to many advertisers. Now, as we move towards 2003, Canadian directors are beginning to see more work, partially as a result of the reduced budgets that have emerged over the last two years.

Phair says developing a strong Canadian industry, particularly young talent, may become increasingly important in the coming year.

‘If the world has truly changed and the budgets are not going to come back, then it’s very important [to develop a really strong homegrown industry],’ he says ‘One thing I’ve realized coming through this year is that the market has changed, budgets are tighter everywhere, which has made us look a little more carefully at our local Canadian talent.’

Lazzeri has also noticed an increased interest in local directors since September. ‘I’ve definitely seen a bigger push toward homegrown talent recently, something I haven’t seen in a long time,’ she says, adding that more people are asking for Canadian directors by name. ‘With shrinking budgets afoot everywhere, I think Canadian talent becomes more of a viable option and therefore their work gets better, their reels get better – the more they do the better they become.’

According to Phair, directors who have been in the industry for three or four years may have a hard time in the ‘new world economy’ because they are used to really big budgets and very large fees. ‘That’s going to open the doors for a whole wave of new directors,’ he says.

The winter and spring were arguably the worst time of the year, with burnout taking its hold on the industry. Towards the end of spring, business was characterized by inconsistency, and even industry pillars like Don McLean of The Partners’ Film Company considered jumping ship. And the loss of core Canadian businesses like longstanding commercial animation production company The Animation House, which closed in April, kicked the industry in its teeth.

‘The industry was just clobbered. Everyone got nailed by 9/11, but it looks like animation was hit particularly hard,’ says Animation House founder Bob Fortier, who, having survived 2002 despite the closure, points to diversification as the key to survival. ‘I found myself doing more design work and just staying diversified. With animation you can work both sides of the street [commercial and broadcast animation],’ says Fortier. He has recently emerged on the scene again, creating a 2D animation department at Toronto’s AXYZ Editing (see story, p. S-1).

But 2002 wasn’t all bad news. Young animation house Guru Animation Studio had its best year yet. Despite animation being arguably one of the hardest-hit sectors of the industry, commercial animators drew on alternate sources of revenue, diversifying into long form, CGI and narrowcasting when commercial work slowed.

Frank Falcone, creative director at Guru, says the flow of commercial work at the Toronto shop slowed a little at the beginning of the year, but was fairly steady otherwise. More than half the company’s business over the year came from commercial production. However, he also says it was good to have sources of revenue beyond commercial production work like broadcast design jobs the company did for Teletoon and YTV.

‘The biggest change to the industry has been the democratization of technology, at least in computer animation and to some degree in cel animation,’ says Falcone. ‘There’s a lot of technologies now that allow people to do animation on a much smaller scale, so some of the larger companies that ran bigger operations with older infrastructure may have found themselves outdated. Small and lean seems to be the way a lot of companies are going.’

Small and lean is also important for Toronto design and post studio Toxik Media, which opened its doors amidst the uncertainty of 2002. ‘Today, big corporations are starting to realize that small production companies are able to accommodate to their needs, offer more than they expect and also benefit them financially,’ says Toxik president Winston Lee.

Technology has played a significant role in enabling Lee to start his company amidst the slow economy. ‘To start up a small production house like Toxik three years ago, the investment would be eight times more than what it would be today,’ he says.

While technology, pared-down business strategies and above all, diversification, have helped some animation houses survive 2002, the survival of commercial production companies has been tied closely to global advertising markets.

‘The only constant thing in this business is that there is no consistency whatsoever,’ says Michel Raymond, producer at Montreal’s La Fabrique d’Images. Commercial production in Montreal is feeling the delayed effects of globalization, and Raymond says over the past year the local market has not performed well and is feeling the weight of productions lost to Toronto.

‘All in all it’s not my favorite year of my 20 years in this business. The work in Quebec, because of its local specificity, is no longer valid in terms of an international platform and much of it is being recouped by Toronto agencies,’ says Raymond. ‘There used to be a lot of national advertisers that would do a campaign for Quebec and one for English Canada; now they do one for Canada, and it is most often shot in Toronto.’

To survive, La Fabrique is expanding beyond the local market, depending on foreign markets for line production work, which Raymond says has been an important source of income for the company this year. The shop has been working primarily with commercial production companies from he U.K., including Paul Weiland Film Co. and Gorgeous Enterprises.

Unlike many prodcos, La Fabrique had its best weeks mid-year, but by the end of the summer the industry was starting to show signs of turnaround as new production companies emerged.

In Toronto, J.J Lyons, Claire Cashman and Jane Charles-Shaw left Apple Box Productions to form The Park City Film Company along with head of sales Cheryl Munroe. Evelyn Arthur’s Bedlam Films closed after a little more than a year in business, but in August she tried again, opening Wire, which like Bedlam is backed by Partners’ head McLean.

The new production companies opened just as the industry was beginning to turn around, and throughout the fall a busier market is showing little sign of another slowdown.

Phair is optimistic about the upcoming year, but is also realistic about the current upswing in the market. The industry’s traditional year-end rush of business, although entirely absent last year, has returned in 2002.

‘Our directors across the board have all been a bit busier and are now getting two or three boards thrown at them at one time, whereas before they might have seen one board in the span of weeks,’ says Phair ‘The last half of October, November and what we’re seeing for December all looks really good, much, much better than a year ago. But it is going to take some time, and I don’t think it’s going to bounce back to what it was two and a half years ago.’

Phair predicts that in the early part of 2003 things may slow down a bit again, but says having survived this very difficult year will make it easier to adapt and stay on top when the market fluctuates. ‘Even if it doesn’t get a lot better, if we’ve gotten through the toughest part then we’re going to be fine with anything else we’re faced with.’