The rapidly changing media landscape has seen unprecedented consolidation in broadcaster ownership, resulting in millions of “tangible benefits” dollars for domestic production up for grabs. What has it meant for the indies, and what happens when it ends?

Continued from Part 1…

As part of its Canwest deal, Shaw Media agreed to spend $18 million on new media – $14.7 million of which is still in the kitty – that will “complement and reinforce other benefits initiatives in connection with [PNI] and news.”

Some of Shaw’s proposed usage of that money was struck down by the CRTC, which doesn’t accept expenditures on “brochure” websites that simply advertise a show. The money must be spent on “innovative projects such as story-driven video games, webisodes, mobisodes, and interactive web content.”

That is great for companies such as marble that develop transmedia projects, but others lean toward a broader definition.

“Digital media that is created as a marketing adjunct to new shows may also be a legitimate way to spend that money,” says Steven DeNure, president and COO of Halifax’s publicly traded DHX Media. “Our focus on the digital front has been on creating new ways to distribute and engage viewers with some new content, but largely existing content – especially content that is well-known.”

Degrassi

He adds that DHX will continue to focus on what has worked for it – foreign sales from its massive library of kids and animation series such as Yo Gabba Gabba! and Caillou, and now 469 half-hours from the Degrassi franchise acquired from Epitome Pictures.

While not preoccupied by available production funds at Bell and Shaw, DHX isn’t ignoring the opportunity. Its comedy Satisfaction was made for an estimated $1.1 million per episode with benefits money from the BCE-CTVglobemedia transaction, but was cancelled after one season.

“We’re not changing our strategy based on the fact there is currently additional funding [at those broadcasters],” DeNure says. “We do look at that, but if we’re going to do that, we try to figure out how we would have to expand our distribution capabilities to bring the most value from that opportunity.”

Now DHX finds itself about to pay out its own benefits package, provided the CRTC approves its $170 million purchase of Family Channel, Disney Junior (French and English) and Disney XD from Bell Media, which agreed to divest itself of those Astral pickups to satisfy the Competition Bureau. While DeNure won’t comment on DHX’s CRTC application, the benefits package should amount to $17 million.

“That will trigger a lot of activity in the kids business, and a dollar invested in the kids business – because there’s some international scope to it – gives better leverage than a dollar spent on new drama,” he says.

Closer to DHX’s core business is the $21.2 million that Corus Entertainment must spend towards onscreen initiatives over the next seven years – $5 million of which for French-language programming – following the CRTC’s December approval of its takeover of Astral’s 50% share of the Teletoon services, leaving Corus the sole owner.

There is growing wariness that broadcasters are simply using benefits dollars towards the cost of running their own businesses. But the CRTC accepts only “incremental” expenditures –  meaning, projects that normally otherwise would not have been commissioned. The commission stated that the Teletoon benefits “should be made available to a wide range of producers for broadcast on a variety of services so that they do not exclusively benefit the Teletoon services.”

Some believe a third-party organization should administer the packages, rather than the broadcasters, and things are moving in that direction. Teletoon placated the CRTC by proposing that it would administer $16.6 million of the benefits, while the remaining $4.6 million would go toward funds handled by either the Canada Media Fund or Telefilm Canada.

Orphan Black

Toronto’s Temple Street Productions, for one, is happy with the status quo. Its drama Orphan Black – a hit for Space and a Peabody Award winner south of the border – came out of the Trendsetters and Risk Takers stream in the CTVglobemedia-CHUM package. In 2012-13, it divvied up $13.3 million from that envelope with Bitten (No Equal Entertainment and Entertainment One), which Space has announced as its most popular original series, the CTV sitcom Spun Out (Project 10 Productions) and season four of CTV’s supernatural drama The Listener (Shaftesbury).

The reception to Orphan Black, which had an estimated $24 million budget for its first season’s 10 episodes, started the momentum for Temple to return to the plate with the sci-fi drama Killjoys, also to air on Space and aided by a development stream from the same transaction.

As a cautionary tale, Laura Harbin, Temple’s senior director of scripted programming, reminds of the chaotic pre-2004 days when the Canadian Television Fund (forerunner of the CMF) decided which of a broadcaster’s programs would receive its support, rather than allowing the broadcasters to choose for themselves.

“That’s a difficult business model for broadcasters – to not know which of their shows might go forward when they’re trying to fill slots,” Harbin says. “Everything got smoother once the broadcasters got their envelopes and were able to decide what they wanted to move forward with. Seeing as how they know who their audience is and what their objectives are, it’s better left in their hands.”

Alexandra Raffé, VP production at Vancouver’s Thunderbird Films, favors the opposite tack. “The point of that money is to make up for lost opportunities, so putting it in the hands of, say, Bell, to spend on their own programs strikes me as a bit nutty,” says Raffé, who also chairs the CMPA’s international business & production finance committee.

She points to the model of Telefilm Canada administering the CMF as an example of outsourcing the task. “There’s no harm in creating a different fund and putting it under the Independent Production Fund or the CMF and have Telefilm distribute and manage it. There are a lot of ways of skinning that cat without setting up another bureaucracy.”

Package Deal

Thunderbird’s multi-cam sitcom Package Deal, which has a second season upcoming on City, was made with benefits money from both CHUM’s 2004 purchase of Craig Media and the Rogers-City package. (The first season’s 13 episodes were produced for an estimated $10-$11 million.) Raffé believes Thunderbird has a greater-than-usual number of projects in development with various broadcasters because of the benefits.

So while prodcos are currently benefitting from the benefits, the funding pool will run dry shortly after the end of the decade, and then what? Can producers only sit back and hope that more consolidation – which is undesirable in itself – will trigger new packages to sustain the industry in the digital age?

“When all that benefits money disappears, there will be a correction, including a shrinking in the number of production companies,” Raffé posits. “If we haven’t gotten to the point where we’re making programming the market responds to well enough, then money doesn’t help. Will we even have a terrestrial broadcasting system the way we understand it? So many things are changing so fast that seven years from now is unimaginable. No more benefits money will not be the biggest factor.”