Indie List 2023: A rising tide of financial pressure

Canada's indie producers are facing significant costs as inflation, interest rates and other factors create financing challenges.

Canada’s independent production sector is holding its own amid a sea of challenges.

The results of Playback‘s 2023 Indie List survey reflect a duality of circumstances facing Canadian indie producers, who see opportunity in the ever-changing market, but are concerned over the amount of resources available to help take advantage of it.

Roughly 44% of survey respondents say opportunities for indie producers are the same in 2023 as they were in the previous year, while 39% say they’re worse than ever and less than 20% say they’re better than ever.

Among the concerns for the 67 indie prodcos that responded to the online survey — conducted between Feb. 2 and March 23, 2023 — were development funding, access to marketing support, budgeting for Canadian productions, and regional production incentives for smaller Canadian markets seeing a boom in service production, edging out space for indie productions.

Survey results also showed a sense of uncertainty around the future with the impact of the passage of Bill C-11, a series of amendments to the Broadcasting Act aimed to bring streaming giants such as Netflix, Prime Video and Disney+ into Canada’s regulatory framework.

However, the results also reflect a significant volume of work accomplished by Canadian indies in 2022. More than $2.1 billion in domestic production and development spend was captured in the survey, as well as more than $1.4 billion in additional service work.

Rocking the boat

Leading the Indie List this year (see chart below) is Toronto-headquartered Boat Rocker Media, coming in at more than $295 million in spend across production and development during 2022.

David Fortier and Ivan Schneeberg (pictured L-R), co-executive chairmen of Boat Rocker Media and co-chairmen of Boat Rocker Studios, tell Playback that taking the company public in 2021 allowed Boat Rocker to get out of debt and clean up their balance sheet after a string of acquisitions. The company’s subsidiaries include Insight Productions and Proper Television.

As a result, they could shift their focus to investing in content across scripted, unscripted, kids and family, and features.

Fortier says being a “well-capitalized business” allows them to “be really active when it comes to development,” and “take more risks” when commissioning scripts and refining a piece of IP before taking it out to buyers.

“Optionality is the key, because projects tend to come together in a million different ways,” he says, whether through a financing partner, solo commissioning a script, or independently financing a production.

Staying afloat

That’s not to say the path has been easy. Indie producers are facing a myriad of challenges to complete financing on projects. Nearly 60% of participants say financing and budgets are the biggest challenge to their business in 2023, followed by staffing and hiring at 38% and inflation and global economic factors close behind with 36%.

“The biggest challenge is [finding] crews at every position, studio space, equipment, locations — it’s just so competitive,” says Schneeberg, adding that it’s not uncommon for competitors to pay thousands to hold studio space between projects, reducing access for other studios and indie producers. “It can be a real impediment to getting your show off the ground.”

Blink49 Studios COO Jeff Lynas (pictured left) says labour rates “have gone up significantly” due to the increase in production in Canada — Ontario, for instance, charted a record-breaking $3.15 billion in production spending in 2022 — as well as construction costs and gas rates. Those issues, paired with the already increased budget costs due to COVID-19 measures, have led to what Lynas estimates to be a roughly 10 to 15% increase in production budgets over the last two years, creating a gap in financing for premium content.

“Producers are having to step up to the plate and try to handle this gap that is not being [fully] financed by the traditional financing models,” says Lynas.

That often results in the need to secure multiple commissioners or presales for content, which Lynas says can slow down the greenlight process, or producers covering the deficit themselves if they’re unable to secure other sources of equity.

“Inflation for crewing costs has been very real,” says Toronto-based Collective Pictures founder Jeff Chan, speaking with Playback near the end of post-production on the sequel to the 2019 film Code 8.

“We were surprised at how quickly there was a shift between the first and second Code 8 … my first project was around $3 million and even then it felt tight. I couldn’t imagine trying to make a movie at that range [now] in the same way.”

Chan also points to the spike in interest rates as a point of difficulty when it comes to interim financing. The Bank of Canada has steadily increased the interest rate since March 2022, coming to 4.5% in January, compared to 0.25% just 12 months prior.

He says higher interest rates make it more difficult for indie producers to own their IP, as more rights control means taking on more financial responsibility and risk in production. “When the value of money changes and interest rates change that quickly, it’s going to have an impact on any independently financed production,” he says.

All that is compounded with the end of the Short-Term Compensation Fund on March 31, which helped cover the cost of a production shutdown due to COVID-19. As a result, producers are facing the additional hurdle of covering the cost of future shutdowns. Telefilm Canada, which administered the fund, estimated that 22 production companies received a total of $4.1 million in compensation as of March 31, 2022, in its annual report.

Insurance broker Kevin A. Hutchison says there is no incentive for an insurance company to provide coverage in case of a shutdown, even three years into the pandemic. “The risk of loss is high and insurers want to be compensated for the risk they take,” he says.

Chan (pictured right) says larger-budget movies will likely have a support system in place from partners, but smaller, independently-owned films may face hardship without that safety net.

“On a case-by-case basis, when circumstances warrant and to the extent that funds are available, Telefilm may agree to increase its participation to share the increased and unforeseen burden with producers,” a spokesperson for Telefilm tells Playback, stating that COVID “represents a small portion of the exclusions in standard insurance policies.”

Room for optimism

The Indie List statistics aren’t all doom and gloom, however. Nearly 70% of companies say they plan to expand their business within the next year. Expansion plans include additional staffing, bigger development and production slates, breaking into new genres, and building out business affairs divisions.

Roughly 54% say coproductions and coventures are the biggest opportunities for their business, followed by international partnerships at 47% and exploiting existing IP at 38%.

“The industry’s cyclical, we’ve seen downturns before,” says Vancouver-based Thunderbird Entertainment CEO and chair Jennifer Twiner McCarron (pictured left). “I’m feeling more on the optimistic side.”

“The main buyers, the large streamers and networks, are reevaluating their strategy, but what I’m seeing emerge is a real focus on everyone wanting to keep quality as their north star and a focus on premium content,” she says.

Thunderbird has utilized a partner-managed approach as a company that does original and service production, where they “handle everything from tip to tail,” starting from the writers’ room and ending with final delivery, and thereby receive a portion of the back-end.

“There’s almost more of a need for that as the big buyers look to lessen their own overhead and outsource,” says Twiner McCarron.

Lynas says Canada is an enticing market for international coproductions because of the creative talent and the country’s reputation as a production hub, which Toronto- and L.A.-based Blink49 Studios has been leveraging through a string of partnerships and first-look deals with talent such as Lilly Singh and Sheri Elwood since it launched in 2021. “We think there’s a lot of opportunity right now in the marketplace,” says Lynas. “We’ve been growing very rapidly, obviously, so we’re excited about the future.”

As a Canadian studio, Blink49 is better positioned than smaller indie outfits to negotiate rights agreements. As an example, the studio partnered with SEVEN24 Films on Ontario/Alberta copro Ride, with Hallmark Channel licensing U.S. rights and CTV Drama Channel picking up Canadian rights. Blink49 was able to hold international distribution rights, and anchor investor Fifth Season is a sub-distributor.

Lynas says “building strong Canadian companies” is how the industry will be able to sustain itself, as they use their capital for the development and production of more Canadian programming. “That’s how we grow our business.”

Click the image below for the full Indie List 2023 chart.

This story originally appeared in Playback‘s Spring 2023 issue.