As we head into the New Year, and after six months on the job at the Canadian Media Production Association, I thought—in the spirit of the season—I would offer you my top line observations of where independent film and TV production is as an industry, and where we need to focus to meet the challenges facing the business both in Canada and globally.
The quality of our film and television productions has never been greater in terms of resonance with Canadian audiences and international recognition and sales. In some genres like children’s programming and lifestyle we are now recognized as world leaders and the success of high quality drama productions has never been greater. Yet, despite this success, we still face unprecedented levels of uncertainty in our business.
We not only face a “digital revolution” that is irrevocably transforming the home entertainment experience and the business models we operate under, but we also must contend with an economic downturn that is leading to cuts in support for creative industries. This is a global challenge for independent producers but an even greater challenge in Canada given that our lack of scale makes it harder to raise financing for traditional and digital projects relative to other jurisdictions.
The “digital revolution” has enabled consumers to bypass traditional models of distribution and exhibition by using broadband networks to obtain content directly. This is as true for television programming as it is for theatrical films where the theatre in the home has replaced the theatre down the street. But for film it’s an even bigger challenge due to changes to distribution and financing, an erosion of DVD sales and a decline in theatrical audiences for independent film. So thinking broadband when it comes to project development is critical. Any business model for content distribution that does not include direct to consumer alternatives may be missing the tide that will float all boats. Moreover, increasingly, it is important to build digital elements and opportunities for audience engagement into any budget.
In Canada, unprecedented vertical integration has also changed the dynamics of the broadcasting industry. It not only limits the number of buyers, reducing bidding for shows, but it also puts increased pressure on producer margins as broadcasters become forced to show ever-increasing returns to a corporate bottom line that favors carriage over content. Simply put vertically integrated carriers operate under the presumption that a dollar of capital invested in wireless or broadband is, all other things being equal, going to deliver higher returns than a dollar invested in content. That means to get the attention of broadcasters for a show, it is essential, more than ever, to sell its value to consumers as audience. Simply put no audience, no sale. On the film side the situation is more serious because the requirement to justify spending to corporate engines driven by carriers makes broadcasters more risk averse and less inclined to invest in a product that needs to deliver success on a first TV window basis. But the upside is that with the growing amount of popular content being produced there is growing opportunity to exploit direct to consumer technologies to grow new revenues.
As fiscal pressures lead to funding cuts to key elements of the system like CBC, Canada Media Fund (CMF) and Telefilm, we are also beginning to see significant stresses on different parts of the Canadian system both in terms of regional development and support for genres like documentaries and children’s programming. This suggests the need to exploit new opportunities beyond our borders will shift from nice to have, to critical. And that shift is already underway. What we need to ensure is that the right tools are in place to facilitate trade in content as are in place to support trade in other sectors of the economy.
In 2013 a Parliamentary Committee intends to review the CMF in light of changes in digital media. This provides a great opportunity to consider how transmedia and audience engagement is impacting traditional storytelling and how to exploit this opportunity. This review will also provide a great opportunity to highlight the contribution creative industries increasingly make in terms of quality jobs, local investment, trade opportunities and in satisfying consumer demand both within and outside our borders. This will remind governments that their investment in our industry from tax credits to other instruments has paid off. And it will provide support for the premise that content should be seen not just as part of, but a critical component of the value proposition in terms of a digital economy and trade.
Digital is fuelling a shift from cultural to industrial strategy. While it goes without saying that creative industries, including TV and film, are facing unprecedented disruption, there is an upside to the challenges that the Canadian industry faces:
- The reduction in public funding combined with cuts to the CBC and competing pressures on vertically integrated broadcasters clearly signal that one of the key opportunities needed to offset decreased domestic investments will be international markets in terms of sales and co-productions. Co-productions are increasingly seen by many of our trading partners as a critical means of attracting sufficient capital to finance independent productions and create economic opportunities.
- But more emphasis on trade should not diminish the value of existing policy instruments to remain competitive to begin with. The quality of our productions across all genres suggest that, in part due to existing instruments like the CMF or tax credits, we have products consumers want not just in Canada but around the world. In fact in 2011, 85 CMF funded shows were sold internationally including 29 into the US and that represents only part of the sales abroad. In non-scripted lifestyle and co-productions that are now being made outside our borders, we have seen equal successes.
- Once you have a quality product to sell, which increasingly we do, then broadband presents an opportunity to go directly to consumers. Here digital holds the potential to better intersect and align directly with consumer demand. But it also requires new ways to increase promotion and awareness, if consumers are going to be able to navigate through vast libraries of content.
- A potential upside with vertical integration is that, because integrated players control so many elements of the distribution/exhibition chain, it may be easier to reach consensus in Canada on new ways to launch and monetize forms of digital delivery, including changing the exhibition windows for film through VOD and the home theatre screen.
- While on-demand models from VOD,TV-Anywhere and OTT are still “under-construction” the opportunities to produce new revenue streams to offset erosion in film and TV at some time in the future may be too good for producers, broadcasters and film distributors to ignore.
Perhaps we can look at 2013 as the year we put meat on the concept of a “digital economy”. Clearly, for the average consumer, the digital economy will be important because of the experience a combination of broadband and content will deliver in the home, or increasingly on the go. And that experience will be centered on the personalized consumption of entertainment and information. Access to broadband is a critical first step for enabling an inclusive digital economy, and there are gaps to fill in that regard, but the value-added to the economy depends on what goes over the pipes and who owns that content. In a digital economy the creation and exploitation of intellectual property, from software to stories, becomes central to any agenda that seeks to promote innovation, jobs and trade. The more we create, the bigger the opportunity. Promoting the value of creative industries in driving the elusive “digital economy” and fostering a future for our kids to pursue innovative careers is a good objective to drive an industrial strategy forward.
So as we move from telling stories to each other to selling our stories to the world, by increasing trade in creative products, it will be critical to examine whether we have all the right tools and incentives to support digital economy objectives like innovation, exploitation of IP, increased trade and job creation. For CMPA that is a critical job for 2013.
But in content, to remain competitive and deliver returns in terms of investment, jobs and trade opportunities we first need to always chase and satisfy consumer demand on whatever platform or in whatever country it resides. And we need to do more promoting the successes, so that our film, television and digital industry in all regions is recognized as a key element of the global digital economy and trade agenda. This is our starting point.
So you see, there is a lot of work left to do as we head into 2013 and lots of issues to resolve. And we look forward to seeing many of you at Prime Time in Ottawa 2013 in March where we will be talking about these issues and on how to make content a central pillar of the governments digital economy strategy .
Happy holidays from CMPA