Vancouver: The Year of the Monkey means a year of concessions for Vancouver’s service production sector, bracing for a 25% downturn in volumes because of the rising Canadian dollar, declining drama volumes and international competition for locations.

‘We’re expecting a 25% drop [across the B.C. industry] in 2004,’ says Peter Leitch, GM at Lions Gate Studios in North Vancouver and vice-chair of the Motion Picture Production Industry Association of British Columbia. ‘We’re just seeing a really competitive market. The budgets are tighter. The way the Canadian dollar is makes it challenging [for U.S. producers] to get a sense of the savings.’

Leitch says unions and suppliers will be the first to drop rates. Location rates will follow once the public gets a broader understanding of the price-sensitivity of the U.S. customers. ‘It’s a real positive sign that all industry stakeholders are working together to remain competitive,’ he says.

The BC Council of Unions is making unspecified concessions to help U.S. producers cope with the recent 20% increase in the value of the Canadian dollar, now trading in the US$0.76 range.

‘Everybody has to adjust to a changed market,’ says Tom Adair, executive director of the BC Council, which represents IATSE Local 891, IATSE Local 669 and Teamsters Local 155. ‘It’s better to have 90% of something than 100% of nothing.’

A year ago, Vancouver had $500 million in feature film production on the books, sparked in part by the early ratification of the master collective agreement that began in April. Features such as I, Robot and The Chronicles of Riddick were the lifeblood of Vancouver’s production sector last year, but today the numbers of those big-ticket productions are way down, a loss of demand that has unions and other suppliers sharpening their rates.

The BC Council’s master agreement allows for a 25% reduction of rates for smaller, budget-challenged productions, says Adair, adding, ‘We are open to modifying the agreements on a case-by-case basis. It’s not cookie cutter.’

Paul Sharpe, owner of North Vancouver-based Sharpe Sound Studios, confirms business is down for production-sector suppliers.

‘We’re working just as hard as we always did, but making less money,’ he says, adding that 65% of his workload is currently U.S.-based. ‘That makes it hard to upgrade and expand. We are really going to have to keep our eye on what happens in the U.S.’

Bob Scarabelli, CEO at post-production house Rainmaker in Vancouver, agrees there is downward pressure on rates.

‘There is a lot of discussion in negotiations with clients about the Canadian dollar,’ he says. ‘They want to know with the Canadian dollar rising, what can we do for them?’

The premiums for high-definition service have shrunk, he says, so that the range between standard- and high-definition services is ‘negligible.’ Also, Rainmaker has been trying to negotiate guaranteed revenues so that the company can forecast better. Rainmaker is also implementing technology advancements that speed up some post-production processes.

‘Our rates for core services have gone down over time, while our fixed costs have increased,’ says Scarabelli. ‘We’re always looking for ways to make it cheaper.’

MPPIA-BC, meanwhile, hopes the government will drop the Provincial Sales Tax to help producers, a move that would put B.C. on a level playing field with competitive markets such as Ontario and cut budgets by about 2%.

Leitch says MPPIA-BC, which has made its case that U.S. service production should be exempt from the PST, is hopeful there will be good news in the provincial budget speech scheduled for Feb. 17.

MPPIA-BC hosted an industry forum Jan. 10 where 65 industry members convened to address the ‘new realities’ of the B.C. film industry.

The tasks assigned to various MPPIA-BC committees include finding ways to bring down the overall cost of production in Vancouver to match the lower budgets, launching an education campaign to help build the profile of the industry, encouraging a reduction in location costs and ensuring B.C. remains competitive in its tax policy.