A wave of consolidation has changed Canada’s post-production landscape, creating bigger players that are better able to compete, both nationally and around the world.

The high-flying loonie’s performance against the floundering greenback, along with competitive tax credits in the U.S., and increased overseas post-production work triggered a spate of acquisitions in the post world at the end of 2007.

November and December saw three substantial post deals. Winnipeg’s Frantic Films sold its visual effects business to Prime Focus, one of India’s biggest post companies, while Rainmaker’s Vancouver and U.K. post and VFX shops were acquired by international conglomerate Deluxe, already well established in Toronto. Finally, creativePOST became a bigger force in the Toronto market after purchasing cross-town rival Eyes Post Group.

The volatile currency created a prime acquisition climate for large international players Deluxe and Prime Focus, offering them access to more key markets and plum relationships in those centers.

For Deluxe, the acquisition of Rainmaker’s post assets marks the multinational’s entry, finally, into the Vancouver market, and provides the company with its missing link in Canada. Deluxe’s chief rival, Technicolor, has been servicing Hollywood shoots in B.C. for years.

Deluxe has ‘completed the pieces of the puzzle,’ says Dan McLellan, EVP and GM of Deluxe Toronto. With a new facility to open in New York this spring and the Rainmaker deal in place, Deluxe believes it is now situated in all the key filmmaking markets around the world.

‘We have found it to be an effective strategy to be able to offer the same identical platform and operate in an identical fashion in every location,’ explains McLellan. ‘If a filmmaker has experienced Deluxe services in Toronto and is shooting his next movie in London, they have the confidence of knowing that we operate our business in the same fashion regardless of what market we are in.’

Rainmaker, which has worked on Hollywood blockbusters including The Da Vinci Code and Blades of Glory, was open to making a sale, and McLellan sees the two companies as a good match.

‘Rainmaker operates a competitive lab, and we know the lab business well,’ he explains. ‘Rainmaker’s visual effects operations in London and Vancouver are an ideal fit with our CIS Hollywood visual effects shop, and [it] adds to our capacity and ability to bid on bigger jobs…We will be able to lend the Vancouver operation some of our expertise with respect to attracting feature films to the facility.’

McLellan says the company is currently evaluating the feasibility of installing its EFILM digital intermediates services in Vancouver.

‘We feel it will be a worthy investment,’ McLellan explains. ‘We just haven’t had time to discuss it yet with the Vancouver employees, as the deal hasn’t closed yet.’

Rainmaker declined comment for this article because the deal, subject to Canadian Heritage approval, isn’t expected to close until mid-January.

Meanwhile, mid-sized Frantic expanded its depth of services and competitiveness with its acquisition by Prime Focus.

Prime Focus operates six post facilities in India and four in the U.K., with a total of 1,200 employees. As part of its expansion plan into the Hollywood market, the company acquired Frantic’s Winnipeg, Vancouver and L.A. VFX offices, which will remain open as separate entities. (Prime Focus also purchased Post Logic, which has facilities in Hollywood and New York.)

‘We were in this no-man’s land of not being a boutique with low overhead and a small staff, but we weren’t big enough to compete with a Digital Domain or an ILM with 1,500 employees,’ explains Frantic’s Jamie Brown, who remains CEO of Frantic’s live-action and commercial divisions, which are not part of the deal.

‘It is tough to make money in this business,’ adds Brown. ‘Margins aren’t great as it is, and they were really crushed by the loonie moving up so significantly in the last six months. That took a bite out of the business.’

Adding to the difficulties, says Brown, is the fact that some large North American FX houses are opening branches in India, where labor and other costs are cheaper. By off-shoring simpler work, these companies can bid more competitively.

Frantic has worked on numerous Hollywood movies (including Superman Returns and Mr. Magorium’s Wonder Emporium), and has developed expertise working remotely in various North American locations to service these shows, making it an ideal pickup for Prime Focus to establish a foothold in the U.S. marketplace, according to Chris Bond, Frantic cofounder and now North American creative director for Prime Focus.

With its new ownership, Frantic now has access to facilities in different cities, tax credits in numerous jurisdictions, and broader service offerings covering the full range of post and FX, adds Ken Zorniak, Frantic’s other cofounder and now head of production, North America, for Prime Focus.

‘We can be more competitive by moving work to a lower-cost area if we need to come in at a certain price,’ he explains. ‘We can optimize workflow to deal with competitive situations, and if you can achieve volume, some of your margin concerns evaporate. Being a larger operation opens up a whole new level of productivity and efficiencies that you can take advantage of, and limits the impact of things like the currency rise.’

Zorniak expects that, as part of the Prime Focus group, Frantic’s North American presence will expand, both in terms of workload and staff.

‘We will get bigger shots and more shows,’ he says. ‘In the long term, it will mean growth for our locations.’

In Toronto, creativePOST’s acquisition of Eyes Post Group effectively creates a larger mid-size player with more services to offer its clients.

CreativePOST has primarily serviced Canadian TV clients, while Eyes Post has focused on long-form work, offering film transfer and color correction to a solid U.S. client base.

‘By putting all these services together under one house, we are much more attractive to a broader range of clients, and can be more competitive on our rates,’ explains creativePOST president Ken MacNeil, noting that all of Eyes’ 18 full-time employees have been relocated to creativePOST’s 10,000-square-foot facility. ‘The more streamlined the workflow, the more cost-effective you can be.’

Izhak Hinitz, former president of Eyes, says a reduced volume of work, along with the opportunities of the combined company, led him to sell his 18-year-old shop.

‘Many things have hit us,’ says Hinitz, who is staying on for an undetermined period as a consultant to help in the transition. ‘The Norwalk [virus], SARS, the loonie, competitive tax credits in other centers have all meant a decline of work coming to Toronto, and it’s dog-eat-dog out there. But ultimately, I made the decision to sell because of the benefit that would come from the two companies working together. It means reduced overhead and servicing clients in ways we couldn’t before.’

www.bydeluxe.com

www.franticfilms.com

creativepostinc.com