‘We hear Canada has no money.’

Okay, it’s a hypothetical comment in a pretend negotiation between a Canadian producer and a prospective international coproducer. And to be fair, international financing markets are, with a few exceptions, desiccated. However, there is no imagining the dwindling financial resources available to Canadian content producers – both film and television – and the growing difficulty to forge viable deals with international coproducers.

Why would an international partner commit to a Canadian production – in either a majority or minority position – when the Canadian side is so iffy?

The good reasons for deal making include the provincial and federal tax credits and the attractive currency exchange for the Canadian dollar. But cash and equity are the big question marks – especially for those producers not guaranteed funding from the various performance envelopes.

Take for instance the spring 2003 round of the Canadian Television Fund, which suffered a 25% cut until the board of directors clawed some of that reduction back by approving a $12.5-million mortgage against next year’s fund. This year, only 52% of the LFP applicants and 45% of EIP applicants succeeded in getting all or partial funding. Venerable titles were threatened or left off while many new shows were overlooked.

‘We’re very clear with our international partners that there is a risk that, if we miss one of the funds, a project is sort of dead,’ says Blair Peters, partner at Vancouver’s Studio B Productions. ‘The funding has been reduced and we are competing with even more producers for less money. Yes, securing international coproductions is going to be more difficult.’

Studio B has a 70/30 minority deal with Australia for the animated series Yakkity Yak and the majority of the 70/30 Canada/Philippines copro Yvon of the Yukon. The company is the minority partner in two as-yet-unnamed 70/30 copros with France and the U.K. that are getting ready for the October round of Licence Fee Program spending.

‘We hope we have a 70% chance at success this fall,’ says Peters, whose animated projects will vie for money in the kids programming envelope. ‘The competition is stiffer in the spring. And international coproducers are giving us a shot because we are one of the more secure production companies and we’ve done it before.’

In another case, had it not already been shipped to London for post-production, Triptych Media’s $6-million romance The Republic of Love may not have been financially viable in the current international financing climate, admits producer Anna Stratton in Toronto.

The Canadian side of Republic’s funding includes, among the usual suspects, Telefilm Canada, The Harold Greenberg Fund, tax credits, distributor Seville Pictures and the CTF – more robust in 2002, before the recent cuts.

‘It’s going to affect deals,’ says Stratton, referring to Canadian production funding woes. ‘Ideally, we want more money so that we can get budgets up and meet our market-driven targets.’

Exacerbating the problem are proposed changes in the U.K.’s sale-and-leaseback program – which has already eliminated television production and now wants to boost the minimum spend in the U.K. from 20% of the budget to 40% of budget. According to Telefilm, Canada and the U.K. are in talks regarding changes to the coproduction treaty, with an announcement expected this month. (See commentary, p. 14.)

The additional spend in U.K.-based production services, which charge roughly twice the rates in Canada based on currency exchange alone, would have been difficult for Republic – a Carol Shields story adaptation directed by Deepa Mehta – to absorb, says Stratton.

The second season of I Love Mummy, Toronto-based Breakthrough Films and Television’s kids series and international coproduction, was dealt two blows this year: despite a healthy licence fee and renewal from YTV, Mummy didn’t rank high enough for CTF funding and the U.K. sale-and-leaseback program nixed television production from eligibility. The show might relocate to South Africa – switching it from a U.K. coproduction to a South African coproduction.

‘There is awareness that our funds are stretched too thin,’ says Breakthrough partner Ira Levy. ‘There may be reticence to enter into a lot of coproductions with Canada.’

The irony, he notes, is with funding dwindling in Canada, coproductions were considered viable financing alternatives.

‘What we need now are more open and flexible coproduction treaties and rules,’ he says, pointing to France, Australia and New Zealand as copro-friendly ports of call.

Toronto’s Serendipity Point Films has the relative luxury of having dedicated funds from the performance envelope, but is juggling much larger budgets and more complicated international coproduction arrangements.

Both new Serendipity features, The Statement, the Norman Jewison production starring Michael Caine, and Being Julia, directed by Istvan Szabo and starring Annette Benning, cost about US$18 million.

The Statement, in particular, is a three-way coproduction between Canada (40%), the U.K. (30%) and France (30%) and involves 15 different sources of funding – all twitchy.

‘The international film financing market is worse now than it has ever been,’ says Mark Musselman, head of Serendipity’s business and legal affairs. ‘The well is so dry that it elevates the need for domestic funding… the importance of relying on traditional Canadian financing avenues has increased. It gets much harder to close the loop on the financing when the pie in Canada is smaller. It leaves producers with two options: secure greater foreign financing or don’t produce.

‘Nurture relationships with as many potential sources of funding as you can,’ advises Musselman, ‘not only in Canada, but internationally. Only by growing these relationships can you win at the monumental task of international coproductions.’

It’s what Telefilm wants, too.

‘With more than 60 partner countries and a volume of Canadian production activity amounting to close to an average of $700 million a year for the past two years, coproductions are a key component of Canadian film and television production,’ says Richard Stursberg, Telefilm’s executive director. ‘They are an ideal method of increasing export opportunities, raising the profile of Canadian talent and cultural products as well as facilitating project financing. Canadians are valued, sought-after partners because they promote quality as well as demonstrate remarkable dynamism and understanding of markets.’