The exchange rate has long been one of the Canadian service industry’s most attractive calling cards to Hollywood producers. But with the loonie hovering at US$0.94 on June 19 – nearing a 30-year high – that incentive has been severely diminished. And it looks to get worse, with economic predictions suggesting the Canadian dollar will be on par with the greenback by the end of the year.

Making matters worse, most U.S. states now offer competitive tax credits to keep projects south of the 49th. 

So it’s a doom-and-gloom scenario – unless you are a cross-border shopper or a Canadian broadcaster. Most networks in this country buy their U.S. shows in Canadian dollars, and, as a result, don’t face any currency risk – they may actually save a few bucks.

Playback asked decision makers in various sectors what impact the loonie has had on their businesses, and what can be done about it.

Paul Bronfman, chairman and CEO, Comweb Group
The Toronto-headquartered Comweb Group owns equipment supplier William F. White International and CinequipWhite, as well as Comweb Productions

‘It is an absolute disaster,’ says Comweb Group chairman Paul Bronfman, noting that his company’s business is down by 50% over last year.

‘This is about the scariest time I can remember in my 30 years in this business,’ he adds. ‘Everyone is very nervous. It is causing a huge amount of uncertainty. Every time the dollar goes up, you can be sure that the American producers are recalculating the budgets for Canada.’

He says the Canadian industry is also being slammed by its uncompetitive tax rebates.

‘We are facing goods and services tax rebates of 25% to 30% in many American states, and our tax credits, provincial and federal combined, are labor tax credits and they are 15%, so we’re grossly uncompetitive,’ he explains.

Bronfman notes that New York’s production business has doubled over the last five years, while Ontario’s has fallen by half in the same amount of time.

‘Right now New York is eating our lunch,’ he says. ‘They have a ‘made in New York’ 5% rebate on top of the state rebate, plus they are waiving many fees. We have to get the City of Toronto to be more aggressive in selling the city, easing red tape and waiving location fees. And unless something is done to increase the Canadian tax credits, we are heading for an unbelievable disaster.’

Rose Lam, executive producer, The L Word
The Showtime series shoots in Vancouver

For service producers, the immediate impact of a high Canadian dollar is that their budgets – in U.S. dollars – don’t go as far.

‘That affects our bottom lines,’ Lam says. ‘When you are used to getting $1.30 for your money and now you are getting $1.06, you have to make it up somewhere.’

She says there are no benefits to a strong loonie.

‘Things aren’t any cheaper in Canada because of the strong dollar, so it is really hurting the industry,’ she adds. ‘It isn’t like people are knocking at my door saying ‘Come shoot here and we will give you a break.”

While Vancouver is still busy, she notes that many of her colleagues who used to work 10 months of the year are now working five to six.

And while there are still many benefits to shooting in B.C., she notes that American producers are questioning the math.

Lam says she and others in the B.C. film industry are lobbying the provincial government to make the film industry PST-exempt.

‘It is a small incentive, but at this point everything helps,’ she says.

Jamie Brown, CEO, Frantic Films
Frantic is a Winnipeg-based production, VFX and commercial house

Visual effects houses bid on projects in U.S. dollars, and, when coming up with their quotes, typically build in a small buffer to deal with the risk of currency fluctuations.

‘So if the dollar gradually moves up one or two cents over the six months in which we complete the contract, it isn’t a problem,’ Brown explains. ‘But when the Canadian dollar goes up quite quickly – as it has – that is when we take a hit. Most of our expenses are in Canadian dollars, so when our dollar appreciates quickly, we lose some of the spread.’

A high Canadian dollar also makes it more difficult to bid competitively against U.S. and international FX companies.

Brown says he is considering foreign-exchange contracts and other currency-hedging strategies as a possible option to cushion the blow.

This involves buying U.S. dollars from a financial institution at a specified exchange rate that is locked in for a period of time.

‘When you hear [forecasts] of the dollar going above par, then locking in makes sense,’ Brown says.

Michel Trudel, president and owner of Mel’s Cité du Cinéma and Locations Michel Trudel
Mel’s is a full-service Montreal studio, housing equipment rental facility Locations Michel Trudel

According to Trudel, business is booming despite the loonie’s gains, as he notes a 25% increase in activity at his studio over last year.

However, Trudel recognizes that if the Canadian dollar continues to rise, it will spell problems for his studio and the industry overall.

‘I hope it doesn’t go any higher, but for the moment, so far, so good,’ he says. ‘If our dollars become equal, that will be dangerous, so we are keeping an eye on it.’

Trudel and others in the Quebec industry are currently pushing to increase tax incentives for foreign productions shooting in the province – in particular, he says, for blue-screen work.

Stephen Waddell, national executive director, ACTRA
ACTRA represents more than 21,000 professional English-language performers

So far this production season, overall industry activity appears to be at about the same level as the last few years, says Waddell.

However, he points out that indigenous work is making up more of the volume.

‘We are seeing increased levels of Canadian production, which may be helping to offset a decline in U.S. shoots in Canada,’ he explains.

‘We certainly would like to see the federal government consider increasing the production services tax credit significantly to help offset the rise in the Canadian dollar, particularly since jurisdictions in the U.S. have introduced tax credits similar to those in Canada.’