with tax incentives and all manner of government funding for production going the way of the dodo, everyone is looking around for new financing scenarios. Fortunately, the corporate investment community has responded with more welcoming arms than the federal bean-countersÉ

In 1994, the Royal Bank of Canada consolidated its commanding market share of financing to the Canadian film and television production industry. But Robert Morrice, Royal’s senior manager, entertainment software, says what’s important is that the bank has less than a 10% share of the business worldwide, and less than 1% of the action from the major Hollywood studios.

Morrice says the international perspective is the best way to assess the Canadian industry, to witness firsthand the booming demand for Canadian product at major program export markets in the u.s., Europe and Asia.

In 1994, ‘mandated by the highest levels within the bank,’ the Royal expanded its entertainment software unit across the country, and named 15 managers ‘who have been so busy (the bank) has been playing catch-up all year,’ says Morrice.

On the world stage, Morrice says the Canadian industry, in terms of its export record, its potential and equity strengths, ‘is head and shoulders above all other countries, except the u.s.’

Canadian film and tv production, largely originated on film, is growing at a dizzying 30% a year, with production levels headed towards the $1.5 billion mark for 1994. This year, Toronto reported $640 million in production, with Vancouver and Montreal each coming in at $500 million.

Royal has concluded some 70 to 80 deals in the past 12 months, representing over $300 million in new loans. In the period, more than $70 million was paid back in full, with zero loan losses recorded. The 1994/95 performance doubled the volume of business from the previous year, and 1995 levels are projected to go as high as $500 million.

Demand is growing, but the banks look primarily to do business with ‘established producers’ who know the ‘sweat and blood’ it takes to put deals together, says Morrice.

‘By the time they come to us, these producers have probably worked on the deal for over a year. Everything is in placeÉthe backers, the buyers, the distribution rights, the repayment schedules.’

Successfully launched public share offerings by Canadian production companies have created renewed interest in the industry on the part of all the big banks.

And while the Toronto Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Montreal and Bank of Nova Scotia have stated their intention to move rapidly into film financing, it is estimated the Royal holds a commanding 70% to 80% of the domestic market.

The td, a major lender to the cable, cellular and broadcasting industries, is certainly the Royal’s closest competitor at this point.

Bob Marrs, manager, business development, td corporate accounts in Toronto, says the Royal’s days of monopolizing the production sector are at an end.

In 1994, td signed an important interim production financing deal with Montreal’s Telescene for Sirens, the $27.5 million syndicated lady cop series, and also worked out a financing/line of credit agreement with C.O.R.E. Digital Pictures, a Toronto special effects company.

But Morrice adds this: ‘I don’t want to mislead my competitors, because the film business really is a risky business.’

The urgency with which things have to be done in a mid-market sector such as the film industry is a real feature of the business, he says. ‘Urgency is paramount. Our ability to deliver is crucial,’ he says. ‘Deals are done when they have to be done.’

For instance, the bank recently closed a $20 million deal at 1 a.m.

‘If a producer says, `I’ve got my star and I have to pay him or her half a million dollars by tomorrow or I’ll lose him,’ in this case, it’s quite true, there is actually no tomorrow,’ says Morrice.

‘It’s risky if you don’t know what you’re doing,’ he says, adding the Royal reduces risk through its deepening knowledge of the industry, by attending program markets and meeting buyers, through the proper structuring of deals, and by knowing who and what it’s dealing with.

In 1994, the bank almost doubled its library of international buyers to 300, a resource which is expanded daily, says Morrice. Morrice attended mip-asia in Hong Kong where he met with new Asian buyers doing business with the bank’s Canadian clients.

In 1995, Royal will have representation at natpe, the American Film Market, mip-tv, mipcom, mip-asia, and possibly the Cannes Film Festival

From his Toronto office, Morrice says the bank will reap the benefits of growth in the Canadian production industry.

Canada is well positioned to continue to profit by the growing shortfall in programming budgets in the u.s. caused by fragmentation, and by our coproduction ties to Europe, which itself seeks to penetrate the North America market, he says.

Tax-shelter products will continue to be available for the industry in 1995, says Morrice.

Changes to the tax shelter in last February’s budget ‘sent everyone scurrying back to their corners to look for a new structure,’ says Malcolm Silver, president of Malcolm Silver and Company, Toronto.

He says the expansion of the grandfathering rules for the tax shelter in March created additional demand for products because investors perceived it as having been blessed by the government.

‘So we remain very positive and very confident, and we are delighted to see the industry is growing and strong,’ says Silver.

With the February 1995 budget fast approaching, what do these industry leaders see for the future?

‘As the government tries to keep its budget in order, they also have to recognize the film industry is a net contributor to the Canadian economy,’ says Morrice. ‘It’s a real money-spinner.’

He adds governments provide financial incentives to help indigenous film industries compete against Hollywood. ‘So if Canada does not offer some sort of incentives, Canadian producers would be at a disadvantage to their European counterparts.’

Silver sees things a little differently.

‘I would foresee with the current climate and with the obvious success of the industry, and the success of production companies going publicÉthat government could certainly be forgiven for wanting to take a lesser role,’ he says.

In fact, Silver thinks with the current climate and huge debt load it’s time government stepped back.

However, the number of private and public investment and funding sources continues to grow each year. In its April 1994 Investment and Finance Report, Playback identified close to 50 national and provincial funding sources for certified Canadian film and tv production.

with files from leo rice-barker in Montreal.