Spending on film and TV production and development fell 8% to $1.41 billion in 2007, in part because of the departure of Alliance Atlantis, according to Playback‘s 20th annual survey on independent production in Canada.

The setback reverses the trend that saw production rise in 2005 and 2006, after bottoming out at $1.24 billion in ’04.

‘Over the last couple of years we saw a real bounce-back in terms of volume of Canadian content production, so it is reasonable to expect that in 2007 the industry might not grow to the same extent,’ says CFTPA president and CEO Guy Mayson, in reference to the new numbers.

The 8% drop works out to approximately $120 million, close to what the now-absent Alliance Atlantis Communications put into production in 2006. AAC put most of its $157 million into its 50% stake in the three CSI series in ’06, but last year sold its interest in the franchise to U.S. banking firm Goldman Sachs.

Service activity — which is not counted in the indigenous production total — saw the most significant drop in 2007, with total volume plummeting 48% to $167.4 million.

‘This isn’t surprising. It was a challenging year on the service side,’ notes Mayson

Playback‘s numbers are gathered from the calendar year spending activity of 191 Canadian independent production companies that chose to respond to the survey. That number of respondents is typical (with the exception of last year, when 257 companies participated). For some of the major companies that did not submit figures, Playback has entered an estimate.

By genre, animated programming saw the most significant increase in activity in 2007, rising 19% to $276.1 million.

‘It really is a boom time in Canada for kids animation,’ says Scott Dyer, EVP and GM of Corus Kids Television and Nelvana Studios. ‘Big American multinationals like Nickelodeon, Disney and Cartoon Network are launching in territories around the world, so there are many places to position kids animation. These 24/7 kids channels have a tremendous appetite for animation.’

Children’s live action posted an increase of 9% to $67.4 million. But based on the huge success of American shows such as Hannah Montana and Zoey 101, Decode Entertainment president Steven DeNure expects kids live action to grow even more in the coming year.

‘Other networks are trying to emulate [those shows’] success, so there is certainly an increase in demand,’ says DeNure. ‘Even channels that program primarily animation are scrambling to develop shows to compete with these live-action successes.’

Feature films were up 18% to $241.1 million, while magazine/lifestyle/reality plunged 39% to $69.7 million.

Remember, the devil is in the details. Read Playback‘s full report on the industry’s spending habits in the May 12 print edition. Plus: What do the country’s five top-performing companies have in common?