CFTPA’S Prime Time in Ottawa, Feb. 5-7, arrives as the Canadian production industry braces for another tough year, following a harsh 2002.

With major challenges at home and internationally, many producers see government support for programs such as the federal and provincial tax credits, the Canadian Television Fund and the Canada Feature Film Fund as more important than ever.

But, like the production industry, government too has reached a major crossroads.

‘It’s a wild and wooly environment in Ottawa right now,’ says CFTPA president and CEO Elizabeth McDonald.

Thus, Prime Time has enlisted Jeffrey Simpson, The Globe and Mail national correspondent, to help decode the political scene in Ottawa.

‘Jeffrey manages to be controversial and challenging and that’s why we’ve asked him, and we expect him to be wild and wooly, as well,’ says McDonald. ‘He is honest and straightforward, but he is supportive, absolutely.’

Simpson told Playback there’s no apparent reason the government shouldn’t fully renew CTF, because there is a significant budget surplus forecast for next year.

In anticipation of Prime Time, Playback asked several prominent industry players to identify key issues in the year ahead.

Fewer resources

The production industry faces ‘a major squeeze,’ with tighter production budgets and fewer resources to finance fees, overheads and development costs, says Jim Russell, partner, Entertainment Law Group, Heenan Blaikie LLP. Russell says the sharp decline in Canadian drama production indicates a major change in the domestic consumption market, with foreign and homegrown reality shows now in favor.

Russell says the ‘rich panoply’ of Canadian tax-based incentives and regulatory programs is ‘absolutely terrific, however, the tax credits and other content incentives and the coproduction office at Telefilm Canada haven’t really found a way to integrate ‘soft money’ sources outside of Canada with Canadian projects.’

Faced with a tightening domestic market, Canada needs to revisit the role of private investment in Canadian-content production, says Russell.

Since the abolition of the CCA tax shelter in 1995, producers who raise private investment have found their production tax-credit benefits reduced. A recent PricewaterhouseCoopers study for the CFTPA points to a near-total absence (less than 10%) of private investment in CTF-funded production.

‘TV in Canada is a bit of a closed shop,’ says Russell, and because CRTC-licensed broadcasters are often the sole buyers, talk of export revenues is mostly a disconnect with market realities.

While producers figure out how to navigate funding and incentive systems, at considerable professional expense, few corporate resources are available to marshal international sales and financing, Russell says.

Tough times

Kevin DeWalt, chair and CEO of Regina-based Minds Eye Entertainment, says the current period is arguably ‘the toughest time our industry has ever faced – the international marketplace almost collapsed overnight.’ The drop in export on the heels of 9/11 has been huge (50% to 70%), he adds, and if there is a slow return to improved Canadian export sales, it’s not close to ’99/00 levels.

There are more buyers, but less money available for domestic TV licences high enough to trigger public funding and Canadian-content production.

‘Add it all up and what you have for the first time in 10 years is an industry that basically had a flat last 12 months,’ DeWalt says. ‘If you look at the past 10 years, the industry on average has grown 7% to 12% per year. It’s not absolutely horrible, especially when you look at last year’s figures, but the [latest] trend is now starting to fall off. It’s been a couple of tough years for our sector, but I think we’re probably in for a couple more pretty difficult years.’

‘Partnership in eveything we do’ is a central Minds Eye corporate slogan – a safeguard in a downturned market, says DeWalt.

‘Whether that is right or wrong the market will decide, but what it has allowed us to do is expand [our production] volume and convince institutional partners we can grow and succeed,’ he says. ‘We have to ask what is best for our industry… because I think it’s time for all of us to get through the next three to five years.’

On location issues

Patrick Whitley, president of Toronto-based Dufferin Gate Productions, one of the country’s leading service production companies, says Canada has to renew its standing in the fiercely competitive worldwide location business.

Canada set ‘a hell of an example’ in terms of drumming up foreign business, but competition has grown, and Canada has since lost some ground.

‘The main thing here is to try to increase the [admissible] percentage of the budget on a typical production, whether it be series or TV movies,’ says Whitley.

Last fall’s winding-down of the federal service tax shelter, ‘has hurt us in the feature film category, and I think a bit in the TV movie and TV series area, as well. There is now a major lobbying effort to enhance the proceeds of the federal service tax credit,’ he says.

Whitley, a CFTPA board member and vice-chair of the association’s industrial relations committee, says Ontario production has ‘levelled off,’ while B.C. was down about 30% in service terms in ’02.

Dufferin Gate serviced three series pilots in ’02, eight to 10 TV movies and the series Queer as Folk, representing approximately US$75 million in production. Showtime is the house’s principal client. Whitley’s outlook for ’03 is ‘less movies and more series’ for Vancouver, and ‘more pilots for potential series for Toronto.’

A thinner CTF

Phyllis Yaffe, CEO of Alliance Atlantis Broadcasting, says raising international production financing and partnerships has become more difficult.

‘We are certainly not optimistic about the size of the [CTF] pot,’ says Yaffe. ‘I think we all feel that it is going to be a thinner CTF envelope this year for everybody, and everybody is going to have to find other ways to make shows.’

AAB will continue to leverage its international partnerships and create new programming for multiple territories, she says. ‘Another [option] is to work closely with producers who have found ways to make programming that is more cost-effective. What we have to do is figure out ways to be more creative yet not spend more money.’

Unlike conventional TV networks, Yaffe points out that specialty channels have a built-in escalator, which increases Canadian programming expenditures as gross revenues grow. As such, the industry can generally expect more spending by the specialties, she says.

Massive signal theft

Janet Yale, CCTA president and CEO and chair of the Canadian Television Fund, says the ‘key issue’ for the cable industry and producers is U.S. satellite systems operating illegally in Canada. ‘It seems to be the single biggest threat that faces all players in this business.’

The black market represents hundreds of millions in lost revenues for the Canadian broadcasting system, BDUs, broadcasters and the producers who create the Canadian content, she says.

Yale says the industry has to get the message out to politicians and bureaucrats. ‘We have to ramp up enforcement of the legislation. The RCMP has to see it as important and seize more equipment from dealers [who are] in breach of the Radiocommunications Act.

Yale says the recent sniping between cable and DTH – which BDU harbors the most hackers? – is ‘really a sideshow because everyone agrees the single biggest [source] of theft is U.S. satellite systems.

‘At the end of the day, if it’s just too inconvenient for people to obtain and maintain pirate cards, because of electronic countermeasures [and] the need to regularly reprogram cards and dealers shutting down, people will simply say, ‘You know what, it’s not worth it,” says Yale.

The CRTC is undertaking a study of security issues and piracy of all the Canadian players.

International issues

The CFTPA’s McDonald, association EVP Guy Mayson and chair Julia Keatley were in London recently for talks on proposed changes to Canada/U.K. coproduction rules, specifically a proposal to set a 40% threshold for financial participation.

McDonald says Canada has a very tight relationship with U.K. producers in PACT and the proposed 40% rule ‘is a major concern for British producers as well.’

‘Hopefully we’re at the discovery stage,’ she says. ‘We haven’t been able to get much in the way of numbers from the U.K., and the Canadian government and the High Commission in London are really going to be pressing ‘show us what the issue is.’

‘It’s important that we have a united front, from Jean-Pierre Blais [assistant deputy minister, international, Canadian Heritage] to Richard Stursberg [executive director Telefilm] and all those other people who are certainly anxious to work together so we can be successful in not destabilizing a critical partnership.’

-www.cftpa.ca