Montreal: Industry eyebrows were definitely on the rise last week when stock for Cinar Films hit the $19 mark on the Toronto Stock Exchange.

Investors have been responding to developments at the 19-year-old integrated children’s and family entertainment company.

Not the least of which is Cinar’s plan to deliver 147 half-hours in ’95, bringing its coveted library asset to over 600 half-hours. Another source of comfort has been the accuracy of financial forecasts. In its nine-month quarterly report released in October, Cinar showed a major hike in revenues, up 34% to $27.2 million, while net earnings stood at $3.1 million, up 31% over last year.

A third noteworthy development is the growth of partnering agreements with international media giants like PolyGram, Sony and Viacom.

Cinar cofounder Micheline Charest, chairman and ceo, spoke to Playback about the company’s strategy for success and issues ranging from developments in the u.s. market to the responsibilities of Canadian broadcasters in this country’s seriously underfinanced children’s program sector.

On the issue of potential children’s program quotas and anti-violence regulation in the u.s. emanating from the fcc, Charest says all the political and consumer talk won’t necessarily translate into legislative action.

‘We have the same thing with gun control but you can see that once it gets (to the stage) of legislationit’s another issue. The real question to ask is will there be legislation to support better children’s television with an education component.’

As for the trend to mergers everywhere – which includes the internationalization of u.s. cable services and the attendant strategy of acquiring more rights – Charest says fear not, cable networks will continue to do business with independent suppliers.

‘Nobody has a monopoly on creative,’ she says. ‘I believe there are very few companies in the end that will be totally self-sufficient. Look at the dynamic of large studios. They control lots of rights and projects but they continue to access independent work, and in one sense I firmly believe Cinar is in an excellent position to partner with many of those large ventures.’

Canadian is as Canadian can

‘As far as I’m concerned,’ says Charest, ‘if Canadian services have to partner with American services to access financial resources to continue to make original Canadian programsthen I think that is what’s going to have to be.

‘It’s already getting harder to finance programming through fragmentation because we are not seeing multiple-added tiers that are generating multiple-added revenues at par. What we are seeing is fragmentation of the window – as you erode the ability of the services to make money, you also erode their ability to pay.’

There’s hardly any point to a deluge of new Canadian kids services ‘if they can only pay $500 a half-hour for animation,’ says Charest. ‘There’s a danger that we’ll forget there is a need for critical mass to sustain a level of specialization.’

‘Animation is a product that is perceived by our broadcasters in a different light than the rest of Canadian programming. We have been the victim of our own success in a way. People automatically assume that animation is an international product, thus it can finance itself outside (Canada). It is also a product that is costly and people don’t necessarily identify Canadian animation as Canadiana.’

In the past five years, says Charest, broadcasters have backed off from partnering and initiating Canadian-funded animation.

‘Very unfortunate’

‘It’s a very, very unfortunate thing at a time when the crtc is addressing the issue of violence on television and we are asking where we go as a nation. We have to recognize that the bulk of animation that we see in this country is still imported, and if we don’t devote some energy and resources in creating positive, quality Canadian animation – that we are prepared to pay for – then you are giving up a very important and influential component of children’s programming. And the violence that we tend to identify as being present in (American) animation programs is something we will have a very hard time countering.’

Charest says she’s not especially enamored with the v-chip solution to tv violence ‘or anything, because I don’t think in the end it’s going to work.’

‘What I think will work is putting the appropriate resources into the right kind of programming that will be seen on-air in Canada and that Canadian kids will want to watch. We have the human and industrial resources in this country; what we no longer have is a domestic market.’

Broadcasters ‘have gone in and out’ in their commitment to children’s fare; Telefilm Canada has no real envelope and Charest says ‘the crtc has no policy for children’s programming.’

‘I don’t want to unilaterally dismiss all the broadcastersbut there is a huge difference between acquisition price and a production price. And I don’t know what level of comfort I can have when I’m told I’m being offered $2,000 more (per half-hour) than what Disney is getting in this country.’

Charest says the share of animation seen on Canadian tv screens coproduced with Canadian broadcasters is a ‘pittance.’

‘What you find is that given a choice between investing increased dollars in Canadian production, broadcasters will often choose primetime drama where you get recognition from the public.

‘In the case of the public broadcasters who don’t run advertising with their children’s blockboth Radio-Canada and cbc have been very clear about not using their Telefilm envelopes for children’s programming, particularly if they are being encouraged to make programs with international revenues.

‘You have to ask yourself what the long-term effect of this (policy) is going to be. How distinctive are we going to remain in our kids programming if everything is done for international revenues. And to go back to animation, you can acquire animation at very, very reasonable prices from the international market, especially from the Americans who are very happy to dump their shows at ridiculous costs.

Charest says the children’s sector sorely needs a better and stronger partnership between the suppliers and the broadcasters. ‘I’m not suggesting we blindly impose rules that have no basis in reality in the market. But what I’m saying is that we have to force ourselves to think of new ways to address this issue.

‘(Children’s programming) will have to be recognized in a slightly different light. It’s an industrial product but it is also a product with long-term social and cultural impact. We have just come out of an incredibly intense (referendum) debate about what we are and where the society is going. Well, the greatest resource in this country starts with our children, so let’s address it.

‘The danger we run right now is that we are strictly going to be looking at (program production) from a bottom line.’

And as public funding diminishes, the impact will be greatest on children’s programs, she says.

Charest says Cinar’s principal focus is building its library, continuing to partner with as many organizations as possible, and building production output based on properties with long shelf value.

Recent partnering highlights at Cinar include:

– A deal with Baton Broadcasting and a second Montreal production house to produce at least 13 one-hour episodes of a drama series based on Cirque de Soleil;

– A joint announcement with Boston’s wgbh at mipcom that bbc, Nickelodeon u.k. and Kirsch Group in association with Beta Film will broadcast 30 episodes of the $10.5 million Arthur series in the u.k. and various European territories. It will be the first daily animated series to air on pbs, in the fall of 1996, with Random House and Advanced Publications distributing in the u.s. home video market;

– The formation of a consortium – Canada-China Audio-visual Export Corp. – with Astral Communications, Cinepix and Productions La Fete to explore business opportunities and strategic alliances with Chinese partners;

– Agreements with PolyGram Video and Sony Wonder to release The Busy World of Richard Scarry titles in both the u.s. and Canadian home video markets.

At MIP-Asia, Nov. 29 to Dec. 2 in Hong Kong, Cinar plans to announce deals with three Korean companies, ebs, mbc and PolyGram Korea.

Louis Fournier, Cinar’s vp distribution and marketing, says the company has sold the Busy World series, 52 half-hours coproduced at a cost of $26.4 million, to Fuji TV in Japan, while Wimzie’s House, a 185 half-hour preschool puppet sitcom budgeted at $18.5 million, has been sold to Wharf Cable and Asia Television in Hong Kong, and to the Television Corporation of Singapore.

Stock rising on TSE

In March, Cinar began marketing its initial u.s. stock issue. Two months later, the company reported it had raised almost $20 million.

In the past 12 months, Cinar stock on the tse has risen from a low of just under $10 to a dizzying high last week of $19. At the beginning of the year, enthusiastic analysts predicted the share price could go as high as $11 in ’95 because, as one commentator from Marleau Lemire Securities, the underwriter of Cinar’s first public share offering in 1993, said, ‘For 1995 they’ve got a lot of stuff in the pipeline.’

Charest readily admits she’s surprised.

‘I always look at the dark side, that’s part of my nature. What can I tell you? I think it’s very rewarding and it’s also putting a lot of pressure (on us) because I take this (investor confidence) in a very personal and responsible manner. It was my intention when we went public that I would be able to look at our shareholders and know that we made some money for them. I feel good that we’ve been able to do that.’

Cinar’s listing on nasdaq in the u.s. in July 1994 has been an extremely beneficial development. ‘The market is bigger, there is more precedence,’ says Charest, ‘and they (u.s. investors) think that animation and a children’s evergreen library are going to have an upside value.

‘We have stayed the course, and delivered what we said we wouldand it is probably easier to understand what we do than other television production companies that are involved in diversified, multilayered activities,’ she adds.

Charest says her partnership with Cinar president Ron Weinberg is also a source of investor and industry confidence, ‘the complementary perspective, as far as Ron and I are concerned, has contributed to the success.

‘We have been very conservative in terms of the growth of overhead, and we prepared the company before going public in a way that was conducive to increasing production volume. So when we went public the first time around (in ’93), we didn’t have to change a whole lot.’

Expansion at Cinar will come in the form of more tv projects, a growth of peripheral revenue sources, although Charest adds the following qualification: ‘We’re not even in new media until someone can show me it’s a business.’

That said, Charest sees the children’s business as much bigger than just tv.

This year, Charest is executive producer on seven series and a feature film: Space Cases, a live-action tween series produced in association with MTV Networks (Nickelodeon) in the u.s.; Arthur; The City Mouse and the Country Mouse, a new animation series coproduced with France Animation and Ravensberger in Germany; The Whole of the Moon, a theatrical/tv movie; two minority coproductions, Babalous and Arsene Lupin; and two major program efforts, Wimzie’s House and The Little Lulu Show.

Charest says the new Canadian animation channel being developed by Cinar, Nelvana and Family Channel, owned equally by WIC Western International Communications of Vancouver and Astral Communications of Montreal, will provide ‘an outlet and a consistent partner for the production of Canadian animation. Something that is no longer available,’ she says.

Charest feels the new animation service is sure to proceed, basically because ‘there’s a demand and a lack of financing for Canadian production,’ and the collective pockets of the channel’s partners are sufficiently deep.

Charest says the service will have a ‘full range of animationit will be responsible, but at the same time diversified and entertaining. It will have a large component of material for younger audiences and it will run the gamut to the semi-adult (demographic) as well, because animation is much bigger than just what we see on Saturday mornings.’

Is there enough Canadian animation programming beyond the Cinars, Nelvanas, Lacewoods and Cine-Groupes?

‘I think there is enough,’ she says. ‘There is a huge talent in this country from coast to coast that has not been able to emerge as producers and directors of projects initiated here in Canada because there is no longer any funding available.

‘I wish maybe the crtc had been a little more open-minded in the last round (of specialty service licence hearings) because I firmly believe that a year’s delay in having an animation service operational in Canada has unfortunately delayed the ability of that service to go international,’ says Charest.

‘It’s totally viable to think of a (Canadian) animation service being implemented worldwide,’ she says. ‘There are opportunities out there. Turner is doing extremely well. Warner Bros. is probably going to do it. But there is an appeal for a Canadian service particularly if it is a softer, more responsible service. It’s multilingual and I think there will be tremendous advantages.’