Darwin’s survival-of-the-fittest theory is gripping Canada’s post-production service sector.

The rising loonie has already killed off some 20% of this country’s foreign post biz, according to Toronto-based indie post coordinator Gregor Hutchison (Outlander, The Stone Angel). ‘The new loonie world is certainly eating into work coming in, especially American work,’ he says.

Post is typically affected about six to nine months after the production sector, so of course the ripple effect means this sector is also feeling the fallout from the ACTRA strike that effectively ended in February.

When the loonie is over $0.90 against the American greenback (at press time, it was at $0.95), the profitable service work looks lean, and the indigenous Canadian productions shimmer like gold. In fact, it’s the Canadian productions that keep the sector alive and healthy.

Technicolor Toronto’s VP of operations Louis Major notes: ‘The U.S. work is not yet where it was, but the strong domestic feature films, MOWs and series are in full flight. All of these are using a large number of our business units – laboratory, HD dailies, full video and audio post, as well as our digital intermediate department.’

Yet in post companies of all sizes, gravy from the foreign productions – the real profits – is thin.

In the post world, 85 is the magic number.

‘[The post shops] are still making big inroads when [the loonie is] 85 cents and below,’ Hutchison explains. ‘But at 92 cents, competition south of the border is eating into that.’ He is alluding to the added challenge of some competitive American states devising tax write-offs calculated to keep their productions home. It’s war.

Aggressive government incentives in states such as New York and Louisiana aim to undermine any remaining financial advantage of shooting or doing post outside the U.S.

Canadian post shops are covering themselves with a host of game plans that range from diversity or downsizing to minimizing geographical distances – through technology – so work can be done in several countries to take advantage of incentives in Canada, the U.S. and around the globe.

‘There are ways to still get the Toronto tax advantage sitting in L.A.,’ says Hutchison, giving credit to digital technology that makes film travel much easier.

For instance, Oscar-winning Pan’s Labyrinth was a puzzle simplified by technology.

‘The negs were scanned in Spain and the hard drives were shipped to Toronto,’ Hutchison explains. ‘Then the DI was done in Toronto, the mix was done in Mexico, and it was all combined at Deluxe.’

Toronto-based Deluxe ultimately believes that ‘diversity’ is the key ‘survival tactic’ in this new financial climate. Exec VP Dan McLellan notes the company is opening a new facility in New York in 2008 to provide front-end services, including DI, as well as media management. Front-end business is a challenge these days.

‘Dealing with the vagaries of this post-production business is the reason I have no hair at 53,’ McLellan says, laughing. ‘Our front-end business struggled because of a lack of features shooting [in Toronto] this year,’ but some of those gaps were replenished by repeat customers.

For instance, Brokeback Mountain director Ang Lee had his negs shipped to Toronto from Shanghai for processing on his new film Lust Caution. ‘We shipped back to him in Shanghai the next day,’ McLellan says. Deluxe’s relationship with Lee includes Crouching Tiger, Hidden Dragon, with the shop receiving a nod in the production’s thank-you speeches at the Oscars.

Deluxe is a global operation with a film lab in Hollywood, digital businesses in Los Angeles and Burbank, and facilities in Madrid, Barcelona, Rome, London and a joint venture in Australia. According to McLellan, its Toronto-based media management services take care of 80% of Canada’s foreign export deliverables (including episodes of the Alliance Atlantis/CBS CSI franchise), and its video and data dailies boast the newest equipment.

‘Staying state-of-the-art is what makes this business tough,’ says McLellan, pointing to the company’s EFilm DI business as the crown jewel. That state-of-the-art suite has recently seen a mix of top Canadian and American pictures, including TIFF opener Fugitive Pieces, the upcoming Nicolas Cage vehicle Bangkok Dangerous and Kari Skogland’s The Stone Angel. Upcoming work includes David Cronenberg’s Eastern Promises, Brian DePalma’s Redacted and the fourth installment of the Saw franchise.

Saw IV is also providing work for smaller shops like Toronto’s Urban Post Production, which is doing sound design and editorial on the film. Urban owner/partner Mark Gingras says his little company (five sound editors) is feeling the loonie squeeze, and is consequently using fewer freelancers.

‘It’s unfortunate that the work isn’t there any more, because these freelancers are also our colleagues and friends,’ he says.

Tattersall Sound & Picture has nine employees and also uses a large pool of freelancers. Owner Jane Tattersall agrees that it’s the freelancers who are being hardest hit. She says that picture editing for Eastern Promises was done at her shop (with DI and mixing at Deluxe) and that low-budget indie Canadian films like Serendipity Point Films’ Real Time are currently in post.

Tattersall summarizes the sentiment of the industry when she says: ‘Normally we’d have American clients in here now and they didn’t come this year. But our background is in Canadian feature films, so I’m actually not worried about the Canadian business going slightly up or down.’

And McLellan summarizes the efforts to stay afloat: ‘We’re like ducks. It looks really calm but we’re paddling madly underneath the water.’