Thinking Outside the Lens and Beyond Our Borders; A New Strategy for Film in Canada

Speech to the Whistler Film Festival

November 29, 2012, China Canada Gateway Luncheon

Thank you to the Whistler Film Festival for inviting me to speak today at the China Canada Gateway luncheon.

As a kid my parents and teachers always told me I couldn’t do my homework and watch TV at the same time. Now I get paid to watch TV and movies. And given that the quality of our film and TV has become so good over the past few years, I figure I may just have one of the best jobs in Canada.

And it is also wonderful that my job brings me here, to British Columbia—the fourth largest centre for film and television production in North America. According to the BC Film Commission, in 2011, 281 film and TV projects were shot here generating in excess of $1.1 billion in production spending.  And we are all looking forward to seeing some of the latest Canadian world premieres here this week.

Just how good Canadian content is, became abundantly clear to me a few weeks ago at the Hollywood Premiere of Rebelle, or War Witch (en anglais). War Witch is Canada’s nomination for Best Foreign Language film at the Oscars. And an Oscar nod would be well deserved. The ability to squeeze so much humanity and compassion from the brutal tale of a female child soldier in the Congo makes the film riveting and stands as a testament to our ability to tell stories with universal resonance.

Earlier this month I had the opportunity to attend the American Film Market in Santa Monica. What I found most interesting is the similarity in the number of challenges independent producers face around the world. These include many that are quite obvious to all of you who make a living creating film including ̶ an erosion of adult audiences going to the theatre, a cratering of the DVD market and a decline in the exhibition of new films on traditional television channels. And all of these factors make it even harder to attract financing.

While quality is not an issue when it comes to Canadian content, financing, distribution and marketing are. But quality is a great place to start from if the ultimate measure of success is the ability of our content to resonate with consumers as audience.

In fact not only is the quality of our product recognized internationally, but I would submit that because we are a country of relatively small scale, we have learned to produce great product for less cost than many countries we increasingly compete with. Our status as “Country of Honour” at the MIPCOM TV market this year underscores this success.

And this quality and recognition extends to film as well—from the B.C. feature documentary Eco-Pirate: The Story of Paul Watson, to feature length movies like Take This Waltz, Monsieur Lazhar, A Dangerous Method, and Midnight’s Children  to name a few. In 2010-11 alone Canadian films won a total of 133 prizes and mentions at festivals— including 61 at the international level.

This success did not come easy. Remember in the late 1960s there was no Canadian feature film industry to speak of. Hollywood had about a fifty year jump on us.

It required the support of the National Film Board in the late 1930s and 40s to nurture creativity. Later it required a commitment at the federal and provincial levels, particularly through vehicles like Telefilm Canada, to invest in our creative industries.  And, most importantly over time, entrepreneurial producers have invested in and sustained a talent pool that has attracted investors to shoot film and television projects in Canadian locations, and on Canadian sound stages.

As a result we now see over $5.5 billion annually in film and TV production activity and some 128,000 direct and indirect and predominantly high quality jobs.

But figuring out how to sustain that base and grow in the face of competition, funding pressures and margin squeezes is no easy task. One need look no further than this province to understand how the impact of changes to tax credits in different jurisdictions due to interjurisdictional competition can affect local investment.

Today, production budgets of Canadian feature films now total between $300 million to $350 million each year, and sustain between 7,000-9,000 high quality jobs. But it has become abundantly clear that to remain financially viable, the Canadian industry must reach beyond its borders and traditional platforms for distribution.

Make no mistake. Public financing, whether through tax credits or funders, is under huge stress. You cannot assume the existence of these incentives over the long term if governments don’t perceive value in terms of public expenditures.

I know that Telefilm’s new Success Index, and particularly how it is now applied under the Development Program and soon perhaps also in production, has met with a considerable degree of concern from some producers. But we need to recognize that the fundamental direction Telefilm is taking, in emphasizing audience success and awards, is critical to demonstrating value to government.

The principle of emphasizing audience success and awards to demonstrate value to government is not only a solid principle to articulate in a consumer-driven world, it is critical. If our products don’t resonate with consumers the chances of long term success are virtually nil.  It is also essential that when the time comes for governments to evaluate their public expenditures, our industry is clearly perceived as providing value.

And this means value not only to Canadian consumers in terms of audience success, but to Canada in terms of investment, trade, and job creation. This includes providing young Canadians with more quality job opportunities in the future.

That is why it is critical that the CMPA, on your behalf, continues to work together with our partners at Telefilm to make sure we get our priorities right.

But regardless of where we land, we need to accept that with today’s economic pressures and the announced cut to Telefilm’s Parliamentary appropriation by $10.6 million per year by 2014/15—or about 10% from what it was last year, the independent production sector will feel some pain. Simply put, public funding has become a zero sum game and every cut results in a reduction in bottom lines throughout the system.

Cuts in public financing are further compounded by a decline in the exhibition of original film on broadcast windows as broadcasters, both public and private, opt for safer bets on content which reduces financial risk.

So private equity and growing new markets becomes mission critical if we want first to simply sustain and second to grow our production capacity.

These challenges are universal, and combined with the economic downturn, have led to a reduction in financing of independent film in a number of countries. And the scary part for those of us in Canada is that when financiers at AFM focus on the difficulties of financing independent films, even with the Oscar success of movies like Slumdog Millionaire or The Hurt Locker, they are talking about the prospects of films averaging $25 million in cost.

What does this mean in a Canadian marketplace where the average cost of a film is more like $5 million rather than $25 million? The answer is we need to explore co-productions and digital markets to increase scale.

There are opportunities on the horizon, including an uptick in private equity in the U.S. and that may bode well for Canada and B.C. given our stellar record in the service industry. But what about original domestic product?

The principal message from financiers at AFM was as follows. First for financing, an independent production needs either a name star, a successful director and/or a writer with a proven track record. But that requires bigger budgets than we are used to.

That is why co-production is becoming a critical factor in this market segment to enable sufficient financing. For Canada I would submit that the co-production model is the path to prosperity. It works as we have seen with TV shows like The Borgias. And that, after all, is the reason we have a pitch session for the China Canada Gateway project.

Canada is ranked as the third largest movie-watching nation in the world, so how do we exploit this in our favour? We know that Canadians want to be able to access quality content on their preferred platform and at a time of their choosing.  And, they are increasingly doing so—whether it is on the TV screen or at a theatre at the end of the block. So we need to take a look at the convergence of film and TV in a digital world.

And we need to measure the value of the home screen as we measure success indicators for funding. Even though most film product is consumed at home, we continue to measure success by theatre attendance. That undervalues what we produce by under-representing the true audience.

Even though the federal Film Policy has focussed primarily on rating market success of a Canadian film on box office market share, we all know that audiences watch more feature films on television than they do in theatres.  A recent survey by Canadian Heritage shows that almost 8 out of 10 Canadians are interested in watching Canadian films. And, 73% want Canadian broadcasters to show more Canadian films on television. This reality is now being evaluated by Telefilm and officials at Canadian Heritage.

Where does the independent production sector need to go?

First, to reach greater scale, we need to think beyond our borders and co-production is one of the best vehicles for doing that. Over the past ten years Canada has had close to 800 official co-productions in film and TV.

Last year, three of the five movies shortlisted for the Genie Awards were international co-productions.  These include A Dangerous Method (UK, Germany, Canada and Switzerland), Café de Flore, (Canada/France) and The Whistleblower (Canadian/German).

Canadian producers need to reach out with open arms far from our borders. Because of consolidation there are now so few doors to knock on in Canada. But there is a growing appetite for Canadian drama, comedy, kids, lifestyle, documentaries, and feature film in the international market.

Second we need to attract more private investment to finance bigger budget productions. However the big problem right now is that in Canada private equity often grinds down the value of tax credits, making it more difficult to complete the financing and reach critical mass. That may have made sense when financing was intended to sustain a cultural market but as we shift industrial strategy around trade and job creation, scale is better from a public policy perspective.

Third, while international markets can present export opportunities that offset these challenges, mining these markets will require even greater reliance on distribution, even as the distribution market at home is going through radical transformation through consolidation.

With several acquisitions over the last few years, the Canadian-owned and controlled segment of the distribution sector has become very highly concentrated.  If eOne and Mongrel choose not to distribute a Canadian film, where does that producer go to obtain a Minimum Guarantee of any significance to close the financing?  We need to encourage the growth of a greater number of Canadian distribution companies that are truly capable of investing in Canadian films and then taking those films out into various markets in Canada and abroad.

It is my view that government may well turn its attention to updating its distribution policy to address many of these issues.

Fourth, we need to find effective solutions to entice Canadian television broadcasters to re-engage in supporting Canadian feature films—and this is especially true in English Canada. This includes financing, promotion and exhibition.  The same survey I mentioned earlier also underscores one of the major hurdles for the industry. 67% of Quebec respondents agree that Canadian movies are well-promoted and advertised. In contrast only 31% of residents in the rest of Canada agree. Securing screen time and ensuring that adequate promotional efforts are put behind Canadian films, particularly in English Canada, have always been big challenges. That leads to the video-on-demand alternative.

Fifth, digital has reinvented TV. Broadcasters are now owned by broadcast distributors that operate traditional cable and interactive networks. Their interest and ours in growing the VOD platform are increasingly aligned. Clearly we need to embrace new opportunities like on-demand from cable VOD to OTT services like Netflix. On-demand creates opportunities to make up for the collapse of the DVD market and reductions in the broadcast windows. VOD is a huge opportunity but it is unclear whether it can offset the declines we currently see.

The upside is, of course, that on-demand is very much central to consumer demand. But consumers want to see windows collapse so they don’t need to wait just because they choose the home screen over the theatre.

That is all well and good but obviously the owners of the screen at the end of the street have a huge investment in physical infrastructure that incents them to fight to protect their first window. And most marketing and promotion of titles is paid for in support of that theatrical release. Theatres will never collapse big tent pole windows but perhaps the nature of independent film allows experimentation and co-operation between the theatre owners and VOD providers that creates cross-promotion opportunities to the benefit of both.

However, because of vertical integration in Canada it may be easier for broadcasters and exhibitors to begin a conversation about developing a new windowing sequence for independent films.

For instance, I wonder if we can’t figure out how to initiate a theatrical release day and date with a one or two night Premium VOD release?  I suspect that there would be very little, if any, cannibalization between these markets, if we experiment first with indie films. But the extra promotion might actually drive more people to the theatre based on the initial buzz.

Sixth, making feature films transmedia needs to be more fully explored.  I note that although Canada is a signatory to 53 co-production treaties, none of those treaties covers digital content. Transmedia also needs to be explored as a way to increase audience participation in projects from development through to exhibition. Audience participation over interactive networks may be the most revolutionary way to increase promotion and awareness.

While the introduction of new windows like VOD and OTT are clearly opportunities to offset the loss of the conventional TV window they are unproven as economic engines for producers. The shelf space is there but the marketing and curation is not and without promotion revenues will be minimal.

And that leads us to my seventh and final point — the last link in our industrial chain, a link that has received very little attention, public policy and otherwise, over the years. We need to increase our focus on promotion and marketing all with a view to stimulating demand.  And, we need to also begin raising awareness of the overall value of Canadian content more generally with all Canadians.

This is critical….  It is important not only in terms of stimulating demand for the high quality content we make in Canada but proving the value of public investment in our productions. Right now we are more successful than we have ever been at creating quality works but the broader sector doesn’t do a great job marketing and promoting that success.

In conclusion, Canadian feature film production, and indeed the entire independent production sector, is a key component of Canada’s digital future.  Content production needs to be viewed from the perspective of industrial not cultural strategy. I believe that our content-based industries will anchor an economic engine built around innovation and investment, export opportunities and quality jobs and a future for our kids in a digital age—if we can both demonstrate and promote our success to date. And that success will be more than domestic as international sales and more co-production activities build new audiences both in Canada and abroad.

The key to success inevitably rests on exploiting new distribution options and on building brand and project awareness through new markets, new platforms and social media networks.

It starts however with promoting the value of our industry and its contribution by raising awareness for our success. CMPA is pleased therefore to actively support and collaborate on an initiative launched by Telefilm, the Canada Media Fund and CRTC to increase the promotion of Canadian content.

I have no doubt  that Canadian producers will continue to effectively compete with the best independent content the world has to offer as long as we can sustain and then build on the financing models we have today. We have already proven we can compete with the best. Now we need to ensure consumers and policy-makers get the news.